ANNUAL REPORT FOR THE FISCAL YEAR ENDING DECEMBER 31, 2018

As filed with the Securities and Exchange Commission on April 29, 2019

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

(Mark One)

☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2018

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

For the fiscal year ended December 31, 2018

Commission file number 001-32305

ITAÚ CORPBANCA

(Exact name of Registrant as specified in its charter)

(Translation of Registrant’s name into English)

Republic of Chile

(Jurisdiction of incorporation or organization)

Rosario Norte 660

Las Condes

Santiago, Chile

(Address of principal executive offices)

Investor Relations, Telephone: +(562) 2660-2555, Facsimile: +(562) 2660-2476,

Address: Rosario Norte 660, Las Condes, Santiago, Chile

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Title of each class	Name of each exchange on which registered
American Depositary Shares representing common shares	New York Stock Exchange
Common shares, no par value*	New York Stock Exchange*

* Not for trading purposes, but only in connection with the registration of American Depositary Shares pursuant to the requirements of the Securities and Exchange Commission.

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

(Title of Class)

Securities registered for which there is a reporting obligation pursuant Section 15(d) of the Act:

None

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

512,406,760,091

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     Yes  ☒    No  ☐

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.     Yes  ☐    No  ☒

Note — Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes  ☐    No   ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

        Large accelerated filer   ☒ Accelerated filer  ☐ Non-accelerated filer  ☐ Emerging growth company  ☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP  ☐ International Financial Reporting Standards as issued by the International Accounting Standards Board  ☒ Other   ☐ 

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.     ☐  Item    17  ☐  Item  18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes  ☐    No  ☒

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    Yes  ☐    No  ☐

INTRODUCTION

About This Report

We file our annual report on Form 20-F and other information with the U.S. Securities and Exchange Commission.

We file reports, including annual reports on Form 20-F, and other information with the SEC pursuant to the rules and regulations of the SEC that apply to foreign private issuers. The materials included in this Annual Report on Form 20-F may be downloaded at the SEC’s website: http://www.sec.gov. Any filings we make are also available to the public over the Internet at the SEC’s website at www.sec.gov and at our website at https://ir.itau.cl. (This URL is intended to be an inactive textual reference only. It is not intended to be an active hyperlink to our website. The information on our website, which might be accessible through a hyperlink resulting from this URL, is not and shall not be deemed to be incorporated into this Annual Report.)

The terms “Itaú Corpbanca,” “Itaú,” “the Bank,” “we,” “us” and “our” in this Annual Report refer to Itaú Corpbanca together with its subsidiaries unless otherwise specified.

i

CAUTIONARY LANGUAGE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 20-F contains statements that constitute forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements preceded by, followed by or that include “believes,” “expects,” “intends,” “plans,” “projects,” “estimates” or “anticipates” and similar expressions. These statements appear throughout this Annual Report, including, without limitation, under “Item 3. Key Information—D. Risk Factors,” “Item 4. Information on the Company” and “Item 5. Operating and Financial Review and Prospects,” are not based on historical facts but instead represent only our belief regarding future events, many of which, by their nature, are inherently uncertain and outside our control and include statements regarding our current intent, belief or expectations with respect to (1) our asset growth and financing plans, (2) trends affecting our financial condition or results of operations, (3) the impact of competition and regulations, (4) projected capital expenditures, and (5) liquidity. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ materially from those described in such forward-looking statements included in this Annual Report as a result of various factors (including, without limitation, the actions of competitors, future global economic conditions, market conditions, currency exchange rates and operating and financial risks), many of which are beyond our control. The occurrence of any such factors, not currently expected by us, would significantly alter the results set forth in these statements.

Factors that could cause actual results to differ materially and adversely include, but are not limited to:

• trends affecting our financial condition or results of operations;

• our dividend policy;

• changes in the participation of our shareholders or any other factor that may result in a change of control;

• the amount of our indebtedness;

• natural disasters;

• cyber-attacks, terrorism and other criminal activities;

• changes in general economic, business, regulatory, political or other conditions in the Republic of Chile, or Chile, or the Republic of Colombia, or Colombia, or changes in general economic or business conditions in Latin America or the global economy;

• changes in capital markets in general that may affect policies or attitudes towards lending to Chile or Colombia, Chilean or Colombian companies or securities issued by Chilean companies;

• the monetary and interest rate policies of the Central Bank of Chile (Banco Central de Chile), or the Central Bank of Colombia (Banco de la República de Colombia);

• inflation or deflation;

• unemployment;

• our counterparties’ failure to meet contractual obligations;

• unanticipated increases in financing and other costs or the inability to obtain additional debt or equity financing on attractive terms;

• unanticipated turbulence in interest rates;

• movements in currency exchange rates;

ii

• movements in equity prices or other rates or prices;

• changes in Chilean, Colombian and foreign laws and regulations;

• changes in Chilean or Colombian tax rates or tax regimes;

• competition, changes in competition and pricing environments;

• concentration of financial exposure;

• our inability to hedge certain risks economically;

• the adequacy of our loss allowances, provisions or reserves;

• technological changes;

• changes in consumer spending and saving habits;

• successful implementation of new technologies;

• loss of market share;

• changes in, or failure to comply with, applicable banking, insurance, securities or other regulations;

• changes in accounting standards;

• difficulties in successfully integrating recent and future acquisitions into our operations;

• our ability to successfully complete the implementation of a new information technology core banking system in Colombia, as part of the integration process in Colombia;

• consequences of the Merger of Banco Itaú Chile with and into Corpbanca on April 1, 2016 (the “Merger”) and the acquisition of the assets and liabilities of Itaú BBA Colombia S.A., Corporación Financiera (“Itaú BBA Colombia”) by us (the “Itaú Colombia Acquisition”);

• our ability to achieve revenue benefits and cost savings from the integration between former Corpbanca’s and former Banco Itaú Chile’s businesses and assets;

• our ability to address and forecast economic and social trends affecting our business, and to effectively implement the appropriate strategies; and

• the other factors identified or discussed under “Item 3. Key Information—D. Risk Factors” in this Annual Report.

You should not place undue reliance on such statements, which speak only as of the date that they were made. These cautionary statements should be considered in connection with any written or oral forward-looking statements that we may make in the future. We do not undertake any obligation to release publicly any revisions to such forward-looking statements after the date of this Annual Report to reflect later events or circumstances or to reflect the occurrence of unanticipated events.

Neither Itaú Corpbanca’s independent auditors, nor any other independent accountants, have complied with, examined, or performed any procedures with respect to the prospective financial information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and assume no responsibility for, or disclaim any association with, the prospective financial information.

iii

ENFORCEMENT OF CIVIL LIABILITIES

We are a banking corporation organized under the laws of Chile. The majority of our directors or executive officers are not residents of the United States and a substantial portion of our assets and the assets of these persons are located outside the United States. As a result, it may not be possible for you to effect service of process within the United States upon us or such persons or to enforce against them or us in the United States or other foreign courts, judgments obtained in the United States predicated upon the civil liability provisions of the federal securities laws of the United States.

No treaty exists between the United States and Chile for the reciprocal enforcement of court judgments. Chilean courts, however, have enforced final judgments rendered in the United States, subject to the review in Chile of the United States judgment in order to ascertain whether certain basic principles of due process and public policy have been respected, without reviewing the merits of the subject matter of the case. If a United States court grants a final judgment in an action based on the civil liability provisions of the federal securities laws of the United States, enforceability of this judgment in Chile will be subject to the obtaining of the relevant “exequatur” (i.e., recognition and enforcement of the foreign judgment) according to Chilean civil procedure law in force at that time, and consequently, subject to the satisfaction of certain factors. Currently, the most important of these factors are the absence of any conflict between the foreign judgment and Chilean laws (excluding for this purpose the laws of civil procedure) and public policies; the absence of a conflicting judgment by a Chilean court relating to the same parties and arising from the same facts and circumstances; the absence of any further means for appeal or review of the judgment in the jurisdiction where judgment was rendered; the Chilean courts’ determination that the United States courts had jurisdiction; that service of process was appropriately served on the defendant and that the defendant was afforded a real opportunity to appear before the court and defend its case; and that enforcement would not violate Chilean public policy.

In general, the enforceability in Chile of final judgments of United States courts does not require retrial in Chile.

iv

TABLE OF CONTENTS

PART I	1
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS	1
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE	1
ITEM 3. KEY INFORMATION	1
ITEM 4. INFORMATION ON THE COMPANY	37
ITEM 4A. UNRESOLVED STAFF COMMENTS	125
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS	125
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	159
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	169
ITEM 8. FINANCIAL INFORMATION	173
ITEM 9. OFFER AND LISTING DETAILS	176
ITEM 10. ADDITIONAL INFORMATION	176
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT FINANCIAL RISK	211
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	233
PART II	234
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	234
ITEM  14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	234
ITEM 15. CONTROLS AND PROCEDURES	234
ITEM 16. RESERVED	235
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT	235
ITEM 16B. ETHICS	235
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES	236
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES	236
ITEM  16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS	236
ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT	237
ITEM 16G. CORPORATE GOVERNANCE	237

v

ITEM 16H. MINE SAFETY DISCLOSURE	239
PART III	239
ITEM 17. FINANCIAL STATEMENTS	239
ITEM 18. FINANCIAL STATEMENTS	239
ITEM 19. EXHIBITS	239

vi

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

We are a Chilean bank and maintain our financial books and records in Chilean pesos and prepare our consolidated financial statements presented herewith in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB. As required by local regulations, our consolidated financial statements filed with the Chilean Superintendency of Banks and Financial Institutions (Superintendencia de Bancos e Instituciones Financieras), also referred to as the SBIF, and that are the basis for dividend distributions, have been prepared in accordance with Chilean accounting principles or Chilean Banking GAAP, issued by the SBIF. SBIF regulations provide that for those matters not specifically regulated by this agency, our financial statements prepared under Chilean Banking GAAP should follow the accounting principles established by IFRS. Unless otherwise indicated herein, as used hereafter IFRS refers to the standards issued by the IASB. Therefore, our consolidated financial statements filed herewith differ from the financial statements prepared in accordance with Chilean Banking GAAP. We have included herein certain information in Chilean Banking GAAP with respect to the Chilean financial system and the financial performance of the Bank. These disclosures are not considered non-GAAP measures as they are required for regulatory purposes in Chile.

The selected consolidated financial information included herein as of December 31, 2017 and 2018 and for the years ended December 31, 2016, 2017 and 2018 is derived from, and presented on the same basis as, our consolidated financial statements prepared under IFRS and should be read together with such consolidated financial statements.

Our financial statement data as of and for the years ended December 31, 2015 and 2016 are not comparable to the data as of and for the years ended December 31, 2017 and 2018 because of the Merger, which was consummated on April 1, 2016. The Merger has been accounted for as a reverse acquisition, based on guidance in IFRS 3 “Business Combinations,” with Banco Itaú Chile (the legal acquiree) considered as the accounting acquirer and Corpbanca (the legal acquirer) considered as the accounting acquiree. Accordingly, the financial statements of Itaú Corpbanca for periods prior to the acquisition date of April 1, 2016 reflect the historical financial information of Banco Itaú Chile. Before the Merger, former Banco Itaú Chile (the legal acquiree) only produced financial statements pursuant to Chilean Banking GAAP, while former Corpbanca (the legal acquirer) from 2009 to 2015 issued financial statements according to Chilean Banking GAAP and according to IFRS.

Readers should exercise caution in determining trends based on prior annual reports. See “Item 5. Operating and Financial Review and Prospects—A. Operating Results—The Economy—Critical Accounting Policies and Estimates.”

Our auditors, PricewaterhouseCoopers Consultores Auditores SpA, or PwC, an independent registered public accounting firm, have audited our consolidated financial statements included in this Annual Report.

We have adopted IFRS 9 as issued by the IASB in July 2014 with a date of transition of January 1, 2018, which resulted in changes to our accounting policies. As per the permitted transitional provisions of IFRS 9, we elected not to revise comparative figures; accordingly, some IFRS 9 disclosures presented in our consolidated financial statements and this Annual Report with respect to certain financial assets are not comparable since their classification and measurement may differ between IFRS 9 and the prior standard of IAS 39. Please see Note 1 (k) and (u) and Note 2 “Accounting Changes” to our consolidated financial statements included in this Annual Report for a description of the new accounting policies.

1

Foreign Currency Markets

In this Annual Report, references to “$,” “US$,” “U.S. dollars” and “dollars” are to United States dollars, references to “Chilean pesos,” “Ch$” or “CLP” are to Chilean pesos, references to “UF” are to Unidades de Fomento and references to “Colombian pesos” or “COP$” are to Colombian pesos. The UF is an inflation-indexed, Chilean peso-denominated unit that is linked to and adjusted daily to reflect changes in the previous month’s Chilean Consumer Price Index (CPI) of the Chilean National Statistics Institute (Instituto Nacional de Estadísticas). As of December 31, 2018, one UF equaled US$39.68, Ch$27,565.79 and COP$128,896.15 and as of March 31, 2019, one UF equaled US$40.51, Ch$27,565.76 and COP$128,816.98. See “Item 5. Operating and Financial Review and Prospects.”

This Annual Report contains translations of certain Chilean peso amounts into U.S. dollars and Colombian pesos at specified rates solely for the convenience of the reader. These translations should not be construed as representations that such Chilean peso amounts actually represent such U.S. dollar or Colombian pesos amounts, were converted from U.S. dollars or Colombian pesos amounts at the rate indicated in preparing our consolidated financial statements or could be converted into U.S. dollars or Colombian pesos amounts at the rate indicated or any particular rate at all. Unless otherwise indicated, such U.S. dollar and Colombian pesos amounts have been translated from Chilean pesos based on our own exchange rate of Ch$694.73 and Ch$0.2139, respectively, per US$1.00 or COP$1.00, as the case may be, as of December 31, 2018.

Specific Loan Information

Unless otherwise specified, all references in this Annual Report to total loans are to loans and financial leases before deduction for allowances for loan losses, and they do not include loans to banks or unfunded loan commitments. In addition, all market share data and financial indicators for the Chilean banking system when compared to Itaú Corpbanca’s financial information, presented in this Annual Report or incorporated by reference into this Annual Report are based on information published periodically by the SBIF, which is published under Chilean Banking GAAP and prepared on a consolidated basis. Non-performing loans include the principal and accrued interest on any loan with at least one installment more than 90 days overdue. Impaired loans include those loans on which there is objective evidence that customers will not meet some of their contractual payment obligations. At the end of each reporting period the Bank evaluates the impairment of the loan portfolio. For December 31, 2018 this has been assessed in accordance with IFRS 9 and for prior periods in accordance with IAS 39. Past due loans include all installments and lines of credit more than 90 days overdue, provided that the aggregate principal amount of such loans is not included. See “Item 4. Information on the Company—Business Overview—Selected Statistical Information—Classification of Banks and Loan Portfolios; Allowances for Loan Losses.”

Unless an exception applies, under Decree with Force of Law No. 3 of 1997, as amended (including, without limitation, by Law No. 21,130), also called the Ley General de Bancos or the Chilean General Banking Act, (1) a bank must have an effective net equity (Patrimonio Efectivo) of at least 8% of its risk weighted assets, net of required allowance for loan losses, as calculated in accordance with Chilean Banking GAAP; and (2) the paid-in capital and reserves, or basic capital (capital básico), shall not be lower than (y) 4.5% of its risk weighted assets and (z) 3% of its total assets, in both cases, net of required allowance for loan losses.

2

Note, however, that in any of the following events a higher effective net equity and/or a higher basic capital may be required:

(1) If at the moment in which the incorporation deed of a bank is granted (or at the moment in which the authorization of existence of a branch of a foreign bank is granted), at least 50% of the minimum paid-in capital and reserves, or basic capital (capital básico) (i.e., UF800,000 (Ch$22,052.6 million or US$31.7 million as of December 31, 2018)) has not been paid, the respective bank shall have an additional basic capital equal to 2% of its risk weighted assets, net of required allowances, above the general minimum basic capital of 4.5% plus any additional basic capital that may be applicable pursuant to number (2) below. The additional 2% requirement will be reduced to 1% once the bank’s paid basic capital reaches UF 600,000 (Ch$16,539.5 million or US$23.8 million as of December 31, 2018).

(2) Once the Chilean Commission for the Financial Market (Comisión para el Mercado Financiero or the “CMF”) replaces the SBIF (which is expected to occur on June 1, 2019), the following should occur:

a. Within 18 months from the date in which such replacement occurs, the CMF shall issue a regulation (with the affirmative consent of the Council of the Chilean Central Bank) setting forth (i) the standardized methodology for risk weighting the assets of a bank, and (ii) in the event of banks authorized to use their own methodologies, the requirements to use and implement them. Once such regulation becomes effective, a bank will be required to have an additional basic capital equal to 2.5% of its risk weighted assets, net of required allowances, above the minimum requirements. This additional requirement will come into effect progressively during a 4-year term at a ratio of 0.625% per year, starting on the date in which the CMF issues the aforementioned regulation;

b. Within 18 months from the date in which such replacement occurs, the CMF shall issue a regulation setting forth the conditions that may trigger the imposition by the Chilean Central Bank of an additional basic capital requirement of up to 2.5% of a bank’s risk weighted assets, net of required allowances, above the minimum requirements. This additional requirement may be imposed by the Chilean Central Bank on a general basis applicable to all banking institutions, as a contra-cyclical measure;

c. Within 18 months from the date in which such replacement occurs, the CMF shall issue a regulation (with the affirmative consent of the Council of the Chilean Central Bank), which shall set forth the criteria for considering a bank or group of banks of systemic importance. Further, with the affirmative vote of the Chilean Central Bank, the CMF may determine, through a grounded resolution, that a bank is of systemic importance. In such event, the CMF will be entitled to impose, among others, one or more of the following conditions: (y) an increase between 1% and 3.5% to the basic capital over risk weighted assets, net of required allowances, above the aforementioned 8% minimum effective net equity (Patrimonio Efectivo) requirement and (z) an increase of up to 2% to the basic capital over total assets, net of required allowances, above the aforementioned 3% minimum basic capital requirement. The conditions imposed on a bank qualified of systemic importance may be terminated in the event the Council of the CMF determines that a bank no longer has systemic importance; and

d. If after a review process, to the judgment of the CMF, a bank presents risks not properly protected with the equity requirements mentioned above, the CMF may impose additional equity requirements. Such additional equity requirements may consist in an additional basic capital, or one or more of the instruments listed in numbers (ii), (iii) and (iv) of the following paragraph. In any event, the additional equity requirements shall not exceed 4% of its risk weighted assets, net of required allowances. For these purposes, the CMF shall issue a regulation which shall set forth the criteria applicable in these cases.

For these purposes, the effective net equity of a bank is the sum of (i) the bank’s basic capital, (ii) bonds issued without a maturity date and preferred stock issued once the CMF issues a regulation authorizing their issuance. These instruments shall be valued at their issue price, for an amount up to one third of its basic capital, (iii) subordinated bonds issued by the bank valued at their issue price for an amount of up to 50% of its basic capital (provided that the value of the bonds shall decrease by 20% for each year that elapses during the period commencing six years prior to their maturity), (iv) its voluntary allowances for loan losses, for an amount of up to 1.25% of its risk weighted assets to the extent voluntary allowances exceed those that banks are required to maintain by law or regulation. Note that the CMF shall issue a regulation setting forth (i) the standardized methodology for risk weighting the assets of a bank, and (ii) in the event of banks authorized to use their own methodologies, the requirements to use and implement them. Once such regulations are issued, voluntary allowances shall be considered up to the following amounts (y) up to 1.25% of its credit risk weighted assets, if standard methodologies are applied, or (z) 0.625% in the event non-standard methodologies are applied, (v) minority interests of up to 20% of the basic capital (provided that if such minority interests exceed 20%, only 20% will be taken into account), minus (vi) goodwill or premiums, paid balances and investments in companies that are not consolidated and (vii) certain deductions to be made in accordance with provisions of chapter 12-1 of the regulations of the SBIF (Recopilación Actualizada de Normas) or the Regulations of the SBIF.

3

Rounding and Other Matters

Certain figures included in this Annual Report and in our consolidated financial statements as of and for the years ended December 31, 2016, 2017 and 2018 have been rounded for ease of presentation. Percentage figures included in this Annual Report have in all cases not been calculated on the basis of such rounded figures but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this Annual Report may vary slightly from those obtained by performing the same calculations using the figures in our consolidated financial statements as of and for the years ended December 31, 2016, 2017 and 2018. Certain other amounts that appear in this Annual Report may similarly not sum due to rounding.

Inflation figures relating to Chile are those reported by the Chilean National Statistics Institute (Instituto Nacional de Estadísticas) or INE, unless otherwise stated herein or required by the context. Inflation figures relating to Colombia are those reported by the Colombian National Administrative Department of Statistics (Departamento Administrativo Nacional de Estadística) or DANE, unless otherwise stated herein or required by the context. See “Item 3. Key Information—Presentation of Financial and Other Information—Exchange Rate Information” below.

In this Annual Report, all macroeconomic data related to the Chilean economy is based on information published by the Central Bank of Chile and all macroeconomic data related to the Colombian economy is based on information published by the Central Bank of Colombia or DANE. All market share and other data related to the Chilean financial system is based on information published by the SBIF as well as other publicly available information and all market share and other data related to the Colombian financial system is based on information published by the Colombian Superintendency of Finance (Superintendencia Financiera de Colombia) as well as other publicly available information. The SBIF publishes the consolidated risk index (ratio of allowance for loans losses over total loans) of the Chilean financial system on a monthly basis. The Colombian Superintendency of Finance publishes every month the consolidated data required to calculate the risk index of the Colombian banking system (loan loss allowances and total loans).

EXCHANGE RATE INFORMATION

Exchange Rates

Chile has two currency markets, the Formal Exchange Market (Mercado Cambiario Formal) and the Informal Exchange Market (Mercado Cambiario Informal). The Formal Exchange Market is comprised of banks and other entities authorized by the Central Bank of Chile. The Informal Exchange Market is comprised of entities that are not expressly authorized to operate in the Formal Exchange Market, such as certain foreign exchange houses and travel agencies, among others. The Central Bank of Chile is empowered to require that certain purchases and sales of foreign currencies be carried out on the Formal Exchange Market. Both the Formal and Informal Exchange Markets are driven by free market forces. Current regulations require that the Central Bank of Chile be informed of certain transactions and that they be effected through the Formal Exchange Market.

The U.S. dollar observed exchange rate (dólar observado), or the Observed Exchange Rate, which is reported by the Central Bank of Chile and published daily in the Official Gazette (Diario Oficial) is the weighted average exchange rate of the previous business day’s transactions in the Formal Exchange Market. Nevertheless, the Central Bank of Chile may intervene by buying or selling foreign currency on the Formal Exchange Market to attempt to maintain the Observed Exchange Rate within a desired range. Even though the Central Bank of Chile is authorized to carry out its transactions at the Observed Exchange Rate, it often uses spot rates instead. Many other banks carry out foreign exchange transactions at spot rates as well.

4

The Informal Exchange Market reflects transactions carried out at an informal exchange rate. There are no limits imposed on the extent to which the rate of exchange in the Informal Exchange Market can fluctuate above or below the Observed Exchange Rate.

The Federal Reserve Bank of New York does not report a noon buying rate for Chilean pesos.

As of December 31, 2018, the Bank’s U.S. dollar exchange rate was Ch$694.73 per US$1.00 and the Bank’s Colombian peso exchange rate was Ch$0.2139 per COP$1.00.

Exchange Controls Considerations

Investments made in our common shares and our American Depositary Shares, or ADSs, are subject to the following requirements:

• any foreign investor acquiring common shares to be deposited into an ADS facility who brought funds into Chile for that purpose must bring those funds through an entity participating in the Formal Exchange Market;

• the entity participating in the Formal Exchange Market through which the funds are brought into Chile must report such investment to the Central Bank of Chile;

• all remittances of funds from Chile to the foreign investor upon the sale of common shares underlying ADSs, or from dividends or other distributions made in connection therewith must be made through the Formal Exchange Market; and

• all remittances of funds made to the foreign investor must be reported to the Central Bank of Chile.

When funds are brought into Chile for a purpose other than to acquire common shares to convert them into ADSs and subsequently are used to acquire common shares to be deposited into the ADS facility, such investment must be reported to the Central Bank of Chile by the custodian within ten days following the end of each month within which the custodian is obligated to deliver periodic reports to the Central Bank of Chile.

All payments made within Chile in foreign currency in connection with ADSs through the Formal Exchange Market must be reported to the Central Bank of Chile by the entity participating in the transaction. In the event there are payments made outside of Chile, the foreign investor must provide the relevant information to the Central Bank of Chile directly or through an entity of the Formal Exchange Market within the first ten calendar days of the month following the date on which the payment was made.

We cannot assure you that additional Chilean restrictions applicable to the holders of the ADSs, the disposition of shares underlying ADSs or the conversion or repatriation of the proceeds from such disposition will not be imposed in the future, nor can we assess the duration or impact of such restriction if imposed.

This summary does not purport to be complete and is qualified by reference to Chapter XIV of the Central Bank Foreign Exchange Regulations, a copy of which is available in the original Spanish version at the Central Bank of Chile’s website at www.bcentral.cl.

A. SELECTED FINANCIAL DATA

The following tables present our selected financial data as of the dates and for the periods indicated. You should read the following information together with our consolidated financial statements, including the notes thereto, included in this Annual Report and the information set forth in “Item 5. Operating and Financial Review and Prospects.”

5

	For the fiscal years ended December 31,
	2015			2016			2017			2018			2018 (1)
	Ch$			Ch$			Ch$			Ch$			US$
	(in millions of Ch$ and thousands of US$, except for number of shares and per share data)(2)
Interest income		501,982			1,509,203			1,646,329			1,739,317			2,503,587
Interest expense		(278,692	)		(870,028	)		(863,347	)		(851,654	)		(1,225,878	)
Net interest income		223,290			639,175			782,982			887,663			1,277,709
Net service fee income		71,088			150,796			177,571			186,129			267,916
Trading and investment, foreign exchange gains and other operating income		50,040			83,551			95,965			181,446			261,175
Operating income before provision for loan losses		344,418			873,522			1,056,518			1,255,238			1,806,800
Provisions for loan losses		(42,929	)		(245,990	)		(315,417	)		(279,798	)		(402,744	)
Total operating income, net of provision for loan losses, interest and fees		301,489			627,532			741,101			975,440			1,404,056
Total operating expenses		(178,460	)		(616,627	)		(731,147	)		(741,527	)		(1,067,360	)
Total net operating income before income taxes		123,029			10,905			9,954			233,913			336,696
Income attributable to investment in other companies		—			—			—			—			—
Income before income taxes		123,029			10,905			9,954			233,913			336,696
Income taxes		(17,263	)		3,568			52,871			(67,059	)		(96,525	)
Income from continuing operations		105,766			14,473			62,825			166,854			240,171
Income from discontinued operations		—			(504	)		—			—			—
Net income for the year		105,766			13,969			62,825			166,854			240,171

	For the fiscal years ended December 31,
	2015		2016			2017			2018			2018(1)
	Ch$		Ch$			Ch$			Ch$			US$
	(in millions of Ch$ and thousands of US$, except for number of shares and per share data)(2)
Equity holders of the Bank		105,757		14,407			67,821			171,331			246,615
Non-controlling interest		9		(438	)		(4,996	)		(4,477	)		(6,444	)
Net income per common share(3)		0.919		0.035			0.132			0.334			0.00048
Dividend per common share(4)		18,448		36,387			0.00121			0.045			0.000065
Gross dividends per ADS(4)		n.a.		n.a.			1.80814			67.267			0.09682
Shares of common stock outstanding		115,039,690,651		512,406,760,091			512,406,760,091			512,406,760,091

⁽¹⁾  Amounts stated in U.S. dollars as of December 31, 2018 and for the year ended December 31, 2018 have been translated from Chilean pesos at our exchange rate of Ch$694.73 per US$1.00 as of December 31, 2018.

⁽²⁾ Amounts stated in millions of Chilean pesos and thousands of U.S. dollars except for net income per share, dividends per common share and dividend per ADS expressed in Chilean pesos and in U.S. dollars.

⁽³⁾  Net income per common share has been calculated on the basis of net income attributable to the equity holders of the Bank divided by the weighted average number of shares outstanding for the period. For further information on basic earnings and diluted earnings please see Notes 1(ee) and 22(d) to our consolidated financial statements.

⁽⁴⁾  Represents dividends or net dividends paid to common shareholders or to ADS holders in respect of net income earned in the prior fiscal year.

6

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

	As of December 31,
	2015		2016		2017		2018		2018(1)
	Ch$		Ch$		Ch$		Ch$		US$
	(in millions of Ch$ and thousands of US$)
Cash and deposits in banks		477,809		1,487,137		964,030		987,680		1,421,675
Cash in the process of collection		62,095		145,769		157,017		318,658		458,679
Financial instruments at fair value through profit or loss		—		—		—		96,943		139,541
Financial instruments at fair value through other comprehensive income		—		—		—		2,657,154		3,824,729
Interbank loans at amortized cost		—		—		—		341,244		491,189
Loans and accounts receivable from customers at amortized cost		—		—		—		20,714,370		29,816,432
Financial instruments at amortized cost		—		—				198,923		286,331
Trading portfolio financial assets		17,765		632,557		415,061		—		—
Investments under agreements to resell		10,293		170,242		28,524		109,467		157,568
Derivative financial instruments		227,984		1,102,769		1,248,775		1,368,957		1,970,488
Loans and receivables from banks, net		99,398		150,568		70,077		—		—
Loans and receivables from customers, net		6,705,492		20,444,648		19,764,078		—		—
Financial investments available-for-sale		514,985		2,074,077		2,663,478		—		—
Held to maturity investments		—		226,433		202,030		—		—
Intangible assets		51,809		1,614,475		1,562,654		1,570,964		2,261,258
Property, plant equipment, net		33,970		121,043		130,579		95,564		137,556
Current income taxes		8,275		164,296		238,452		123,129		177,233
Deferred income taxes		13,930		110,765		140,685		178,686		257,202
Other assets		135,742		427,394		429,025		501,797		722,291
Non-current assets held for sale		1,785		37,164		18,308		59,802		86,079
TOTAL ASSETS		8,361,332		28,909,337		28,032,773		29,323,338		42,208,251
Checking accounts and demand deposits		981,349		4,453,191		4,141,667		4,300,475		6,190,139
Transaction in the course of payment		26,377		67,413		109,496		247,165		355,771
Obligations under repurchase agreements		43,727		373,879		420,920		1,015,614		1,461,883
Time deposits and saving accounts		3,952,573		11,581,710		10,065,243		10,121,111		14,568,409
Derivative financial instruments		253,183		907,334		1,095,154		1,112,806		1,601,782
Borrowings from financial institutions		658,600		2,179,870		2,196,130		2,327,723		3,350,543
Debt issued		1,504,335		5,460,253		5,950,038		6,010,124		8,651,021
Other financial obligations		20,733		25,563		17,066		12,400		17,849
Current income tax provision		543		1,886		624		1,191		1,714
Deferred income taxes		67		57,636		26,354		471		678
Provisions		75,924		100,048		117,889		214,903		309,333
Other liabilities		52,480		269,810		463,435		521,795		751,076
Liabilities directly associated with non-current assets held for sale		—		7,032		—		—		—
TOTAL LIABILITIES		7,569,891		25,485,625		24,604,016		25,885,778		37,260,198
Equity attributable to equity holders of the Bank		791,382		3,184,743		3,211,477		3,219,478		4,634,143
Non-controlling interest		59		238,969		217,280		218,082		313,909
TOTAL EQUITY		791,441		3,423,712		3,428,757		3,437,560		4,948,052
TOTAL LIABILITIES AND EQUITY		8,361,332		28,909,337		28,032,773		29,323,338		42,208,251

⁽¹⁾  Amounts stated in U.S. dollars as of December 31, 2018 and for the year ended December 31, 2018 have been translated from Chilean pesos at our exchange rate of Ch$694.73 per US$1.00 as of December 31, 2018.

7

CONSOLIDATED RATIOS

	As of and for the Year Ended December 31,
	2015			2016			2017			2018
Profitability and Performance
Net interest margin(1)		3.0	%		3.0	%		3.2	%		3.5	%
Return on average total assets(2)		1.3	%		0.1	%		0.2	%		0.6	%
Return on average equity(3)		13.9	%		0.5	%		1.8	%		4.8	%
Efficiency ratio (consolidated)(4)		49.6	%		68.0	%		67.3	%		67.7	%
Dividend payout ratio(5)		31.0	%		50.0	%		30.0	%		40.0	%
Capital
Average equity as a percentage of average total assets		9.4	%		11.3	%		11.9	%		11.9	%
Shareholders’ equity as a percentage of total liabilities		10.5	%		12.5	%		13.1	%		12.4	%
Asset Quality
Allowances for loan losses as a percentage of non-performing loans(6)(7)		104.9	%		158.6	%		133.9	%		169.6	%
Non-performing loans as a percentage of total loans(6)		1.3	%		1.7	%		2.3	%		2.1	%
Allowances for loan losses as a percentage of total loans (Risk Index)(7)		1.4	%		2.7	%		3.0	%		3.6	%
Past due loans as a percentage of total loans(8)		0.8	%		0.5	%		0.6	%		0.8	%
Other Data
Inflation rate		4.4	%		2.7	%		2.3	%		2.6	%
Revaluation (devaluation) rate (Ch$/US$) (foreign exchange rate)		17.3	%		(5.7	)%		(8.3	)%		13.1	%
Number of employees		2,549			9,659			9,492			9,179
Number of branches and offices		97			398			375			363

⁽¹⁾  Net interest margin is defined as net interest income divided by average interest-earning assets.

⁽²⁾  Return on average total assets is defined as net income divided by average total assets.

⁽³⁾  Return on average equity is defined as net income divided by average shareholders’ equity.

⁽⁴⁾  Efficiency ratio (consolidated) is defined as total operating expenses as a percentage of operating income consisting of aggregate of net interest income, net service fee income, net gains from make-to-market and trading exchange differences (net) and other operating income (net).

⁽⁵⁾  Dividend payout ratio represents dividends divided by net income paid in each period.

⁽⁶⁾  Non-performing loans include the principal and interest on any loan with one installment more than 90 days overdue. Total loans in 2018 corresponds to loans at amortized cost. Our loan portfolio classified as stage 3, under IFRS 9, was Ch$884,977 million as of December 31, 2018, with an ECL coverage of 3.6%.

⁽⁷⁾  Allowance for loan losses as of December 31, 2018 corresponds to allowances for loans and accounts receivable from customers at amortized cost according to IFRS 9. Prior periods are in accordance with IAS 39.

⁽⁸⁾  Past due loans include all installments and lines of credit more than 90 days overdue and does not include the aggregate principal amount of such loans.

B. CAPITALIZATION AND INDEBTEDNESS

Not applicable.

C. REASONS FOR THE OFFER AND USE OF PROCEEDS

Not applicable.

D. RISK FACTORS

We wish to caution readers that the following important factors, and those important factors described in other reports submitted to, or filed with the Securities and Exchange Commission, or the SEC, among other factors, could affect our actual results and could cause our actual results to differ materially from those expressed in any forward-looking statements made by us or on our behalf. In particular, as we are a non-U.S. company, there are risks associated with investing in our ADSs that are not typical for investments in the shares of U.S. companies. Prior to making an investment decision, you should carefully consider all of the information contained in this document, including the following factors.

8

Risks Associated with our Business

The growth and composition of our loan portfolio may expose us to increased loan losses.

In 2018, our aggregate gross loan portfolio increased by 5.4% due to several positive factors in the business environment, particularly better economic conditions in the countries where we operate. Our loan portfolio performed well throughout 2018, particularly with respect to consumer loans, which have shown a consistent improved performance since the second quarter of 2017. This trend is a key indicator that we are making progress towards balancing our loan portfolio. Our business strategy is to grow profitably while increasing our loan portfolio size.

Through the further expansion of our loan portfolio in retail segments, we are seeking to decrease our corporate segment concentration and, as a result, balance our loan portfolio and strengthen our retail operation (particularly in the consumer segment), which may expose us to a higher level of loan losses and require us to establish higher levels of provisions for loan losses.

As of December 31, 2018, commercial loans represented 66.9% of our total loan portfolio compared to 67.3% as of December 31, 2017. As of December 31, 2018, mortgage loans represented 20.7% of our total loan portfolio compared to 20.4% as of December 31, 2017 and consumer loans represented 12.4% of our total loan portfolio compared to 12.3% as of December 31, 2017.

Although the consumer loans portfolio represents the single highest level of risk in our loan portfolio, the most material loan losses experienced during 2016 and 2017 came from our largest wholesale clients. As of December 31, 2018, the risk index (ratio of allowance for loans losses over total loans) of the consumer segment was 8.1% while other business units of our loan portfolio, such as mortgage loans and commercial loans, had lower risk indexes of 1.5% and 3.4% respectively.

Our consumer loan portfolio may experience loan losses due to the absence of collateral in respect of unsecured loans, insufficient collateral in collateralized loans, and risks relating to the circumstances of individual borrowers, including unemployment or incapacitation of our consumer borrowers.

We believe our total allowances for loan losses is adequate as of the date hereof to cover all known losses in our total loan portfolio. The growth of our loan portfolio may expose us to a higher level of loan losses and require us to establish proportionately higher levels of provisions for loan losses, which would offset the increased income that we can expect to receive as our loan portfolio grows.

Our loan portfolio may not continue to grow at the same or similar rate.

Past performance of our loan portfolio may not be indicative of future performance. Our loan portfolio may not continue to grow at the same or similar rates as the growth rate that we historically experienced, particularly in light of the growth in recent years attributable to the acquisitions in Colombia of Banco Santander Colombia S.A., now Itaú Corpbanca Colombia S.A. (“Itaú Corpbanca Colombia”), in May 2012 (the “Santander Colombia Acquisition”), Helm Bank in August 2013 (the “Helm Bank Acquisition”) and the Merger in Chile in April 2016. Additionally, changes in the Chilean or Colombian economies, a slowdown in the growth of customer demand, an increase in market competition or changes in governmental regulations could also adversely affect the rate of growth of our loan portfolio and our risk index.

Our allowances for loan losses may not be adequate to cover the future actual losses to our loan portfolio.

As of December 31, 2018, our allowance for loan losses was Ch$768,120 million (excluding allowances for loan losses on loans and receivable to banks) and the risk index (or allowances for loan losses to total loans) was 3.6%. The amount of allowance for loan losses is based on our current assessment and expectations concerning various factors affecting the quality of our loan portfolio. These factors include, among others, our customers’ financial condition, repayment abilities and repayment intentions, the realizable value of any collateral, the prospects for support from any guarantor, Chilean and Colombian economies, government macroeconomic policies, interest rates and the legal and regulatory environment. Many of these factors are beyond our control. In addition, as these factors evolve, the models we use to determine the appropriate level of allowance for loan losses require recalibration, which may lead to increased provision for loan losses. If our assessment of, and expectations concerning, the above mentioned factors differ from actual developments, if the quality of our loan portfolio deteriorates or if the future actual losses exceed our estimates, our provisions may not be adequate to cover actual losses and we may need to make additional reserves, which may materially and adversely affect our results of operations and financial condition.

9

If we are unable to maintain the quality of our loan portfolio, our financial condition and results of operations may be materially and adversely affected.

As of December 31, 2018, our non-performing loans were Ch$452,947 million, which resulted in a non-performing to total loans ratio of 2.1% as of December 31, 2018. Further, our loan portfolio classified as stage 3, under IFRS 9, was Ch$884,977 million with an ECL coverage of 3.6% as of December 31, 2018. We seek to continue to improve our credit risk management policies and procedures. However, we cannot assure you that our credit risk management policies, procedures and systems are free from any deficiency. Failure of credit risk management policies may result in an increase in the level of non-performing loans and adversely affect the quality of our loan portfolio. In addition, the quality of our loan portfolio may also deteriorate due to various other reasons, including factors beyond our control, such as the macroeconomic factors affecting the Chilean or Colombian economies. If such deterioration were to occur, it could materially and adversely affect our financial conditions and results of operations.

Additionally, due to limitations in the availability of information and the developing information infrastructure in Chile and Colombia, our assessment of the credit risks associated with a particular customer may not be based on complete, accurate or reliable information. In addition, although we have been improving our credit scoring systems to better assess borrowers’ credit risk profiles, we cannot assure you that our credit scoring systems collect complete or accurate information reflecting the actual behavior of customers or that their credit risk can be assessed correctly.

Furthermore, a substantial number of our customers consist of individuals and small-to-medium-sized enterprises, or SMEs. Our business results relating to our lower-income individual and SME customers are, however, more likely to be adversely affected by downturns in the Chilean and Colombian economies, including increases in unemployment, than our business from large corporations and high-income individuals. For example, unemployment directly affects the capacity of individuals to obtain and repay consumer loans. Consequently, this could materially and adversely affect the liquidity, business and financial condition of our customers, which may in turn cause us to experience higher levels of past due loans, and result in higher allowances for loan losses, which could in turn materially affect our asset quality, results of operations and financial conditions.

The value of any collateral securing our loans may not be sufficient, and we may be unable to realize the full value of the collateral securing our loan portfolio.

From time to time, we require our borrowers to collateralize their loans with guarantees, pledges of particular assets or other security. The value of any collateral securing our loan portfolio may significantly fluctuate or decline due to factors beyond our control. Such factors include market factors, environmental risks, natural disasters, macroeconomic factors and political events affecting the Chilean or Colombian economies. Any decline in the value of the collateral securing our loans may result in a reduction in the recovery from collateral realization and may have an adverse impact on our results of operations and financial condition.

In addition, we may face difficulties in perfecting our liens and enforcing our rights as a secured creditor. In particular, timing delays and procedural problems in enforcing against collateral and local protectionism in the markets in which we operate may make foreclosures on collateral and enforcement of judgments difficult, and may result in losses that could materially and adversely affect our results of operations and financial condition.

10

We may be unable to meet requirements relating to capital and liquidity adequacy.

Unless an exception applies, Chilean banks are required by the Chilean General Banking Act (as amended) to maintain (1) a regulatory capital of at least 8% of risk-weighted assets, net of required allowance for loan losses and deductions, as calculated in accordance with Chilean Bank GAAP, and a (2) basic capital not lower than (y) 4.5% of its risk weighted assets and (z) 3% of its total assets, in both cases, net of required allowance for loan losses.

Note, however, that in any of the following events a higher effective net equity and/or a higher basic capital may be required:

(1) If at the moment in which the incorporation deed of a bank is granted (or at the moment in which the authorization of existence of a branch of a foreign bank is granted), at least 50% of the minimum paid-in capital and reserves, or basic capital (capital básico) (i.e., UF800,000 (Ch$22,052.6 million or US$31.7 million as of December 31, 2018)) has not been paid, the respective bank shall have an additional basic capital equal to 2% of its risk weighted assets, net of required allowances, above the general minimum basic capital of 4.5% plus any additional basic capital that may be applicable pursuant to number (2) below. The additional 2% requirement will be reduced to 1% once the bank’s paid basic capital reaches UF 600,000 (Ch$16,539.5 million or US$23.8 million as of December 31, 2018).

(2) Once the CMF replaces the SBIF, the following should occur:

a. Within 18 months from the date in which such replacement occurs, the CMF shall issue a regulation (with the affirmative consent of the Council of the Chilean Central Bank) setting forth (i) the standardized methodology for risk weighting the assets of a bank, and (ii) in the event of banks authorized to use their own methodologies, the requirements to use and implement them. Once such regulation becomes effective, a bank will be required to have an additional basic capital equal to 2.5% of its risk weighted assets, net of required allowances, above the minimum requirements. This additional requirement will come into effect progressively during a 4-year term at a ratio of 0.625% per year, starting on the date in which the CMF issues the aforementioned regulation;

b. Within 18 months from the date in which such replacement occurs, the CMF shall issue a regulation setting forth the conditions that may trigger the imposition by the Chilean Central Bank of an additional basic capital requirement up to 2.5% of a bank’s risk weighted assets, net of required allowances, above the minimum requirements. This additional requirement may be imposed by the Chilean Central Bank on a general basis applicable to all banking institutions, as a contra-cyclical measure;

c. Within 18 months from the date in which such replacement occurs, the CMF shall issue a regulation (with the affirmative consent of the Council of the Chilean Central Bank), which shall set forth the criteria for considering a bank or group of banks of systemic importance. Further, with the affirmative vote of the Chilean Central Bank, the CMF may determine, through a grounded resolution, that a bank is of systemic importance. In such event, the CMF will be entitled to impose, among others, one or more of the following conditions: (y) an increase between 1% and 3.5% to the basic capital over risk weighted assets, net of required allowances, above the aforementioned 8% minimum effective net equity (Patrimonio Efectivo) requirement and (z) an increase of up to 2% to the basic capital over total assets, net of required allowances, above the aforementioned 3% minimum basic capital requirement. The conditions imposed on a bank qualified of systemic importance, may be terminated in the event the Council of the CMF determines that a bank no longer has systemic importance; and

d. If after a review process, to the judgment of the CMF, a bank presents risks not properly protected with the equity requirements mentioned above, the CMF may impose additional equity requirements. In any event, the additional equity requirements shall not exceed 4% of its risk weighted assets, net of required allowances. For these purposes, the CMF shall issue a regulation which shall set forth the criteria applicable in these cases.

11

Due to the Merger and considering that the market participation of the merged bank was higher than 15% and below 20%, the SBIF considered the Bank to have a material market share and therefore imposed a larger regulatory minimum capital of 10% on the Bank instead of the previous 8%. For the purposes of maintaining a high solvency classification from the SBIF and continued compliance with the SBIF’s capital requirements on us, our intention is to have the highest classification from the SBIF. As of December 31, 2018, our regulatory capital to risk weighted assets ratio was 14.65% according to the rules issued by the SBIF, which implement the Basel I capital requirements standards in Chile. See “Item 4—Information on the Company—B. Business Overview— Capital Adequacy Requirements” for more information on capital adequacy requirements in Chile.

Additionally, Colombian financial institutions are subject to capital adequacy requirements that are based on applicable Basel Committee standards. Current regulations establish four categories of assets, which are each assigned different risk weights, and require that a credit institution’s Technical Capital (as defined below) be at least 9% of that institution’s total risk-weighted assets, and that its ordinary basic capital be at least 4.5% of that institution’s total risk-weighted assets. Technical Capital for the purposes of the Colombian regulations consists of the sum of tier one capital (ordinary basic capital), additional tier one capital (additional basic capital) and tier two capital (additional capital). As of December 31, 2018, the consolidated ratio for our Colombian operations (calculated according to the Colombian Superintendency of Finance definitions for “Total Solvency” (Solvencia Total)) was 14.61%. See “Item 4. Information on the Company—B. Business Overview— Capital Adequacy Requirements” for more information on capital adequacy requirements in Colombia.

Furthermore, the Colombian government recently issued Decree No. 1477 of 2018 which provides for complementary ratio mechanisms such as (i) an additional primary solvency ratio (Relación de Solvencia Básica Adicional), (ii) a leverage ratio (Relación de Apalancamiento) and (iii) buffers (Colchones). These new complementary ratio mechanisms are in process of implementation in Colombia to adopt the recommendations set forth by Basel III. However, financial institutions shall comply with Decree No. 1477 of 2018 no later than February 6, 2020, except with respect to the matters regarding the additional primary solvency ratio and the buffers, which will have a gradual implementation for a four year term, starting after February 6, 2020. See “Item 4. Information on the Company—Colombian Banking Regulation and Supervision – Capital Adequacy Requirements Amendment.”

Certain developments could affect our ability to continue to satisfy the current capital adequacy requirements applicable to us, including:

• the increase of risk-weighted assets as a result of the expansion of our business;

• the failure to increase our capital correspondingly;

• losses resulting from a deterioration in our asset quality;

• declines in the value of our financial instruments at fair value through other comprehensive income;

• goodwill and minority interest;

• changes in accounting rules;

• changes in the guidelines regarding the calculation of the capital adequacy ratios of banks in the countries we operate; and

• fluctuations in exchange rates that could impact our loan portfolio, valuation adjustments due to the translation effects in equity or hedging strategies.

Although we have historically complied with our capital maintenance obligations in the jurisdictions where we operate, there can be no assurance that we will continue to do so in the future. We may be required to raise additional capital in the future in order to maintain our capital adequacy ratios above the minimum required levels. Our ability to raise additional capital may be limited by numerous factors, including: our future financial condition, results of operations and cash flows; any necessary government regulatory approvals; our credit ratings; general market conditions for capital raising activities by commercial banks and other financial institutions; and domestic and international economic, political and other conditions. If we require additional capital in the future, we cannot assure you that we will be able to obtain such capital on favorable terms, in a timely manner or at all. If we fail to meet the capital adequacy requirements, we may be required to take corrective actions or subject to sanctions in the jurisdictions where we operate. These measures or sanctions could materially and adversely affect our business reputation, financial condition and results of operations.

12

In 2015, the SBIF and the Central Bank published new liquidity standards and ratios to be implemented and calculated by all banks. The first stage of these new liquidity requirements, which is currently being implemented, is intended to improve the information—in quantity and quality—about the actual situation of banks without imposing specific limits, except liquidity mismatches for 30-day and 90-day periods, for which thresholds with respect to banks’ capital, are already in place. As of December 31, 2018, the liquidity coverage ratio (LCR) for our Chilean operations was 130%. Since we have no certainty regarding the limits to be imposed by the regulator to the banking industry and Itaú Corpbanca in particular, we cannot assure you that new liquidity requirements will not have a material impact on our financial condition or results of operations in the future. See “Item 4—Information on the Company—B. Business Overview— Reserve Requirements” for more information on liquidity requirements in Chile.

Liquidity adequacy requirements for Colombian financial institutions (as set forth in Resolución Externa No. 5 de 2008, as amended, issued by the board of directors of the Central Bank of Colombia) include 11% on demand and savings deposits, with the exception of time certificates of deposit under 18 months, in which case the percentage is 4.5% or 0% when they exceed that term. As of December 31, 2018, the LCR for our Colombian operations (calculated according to the Colombian Superintendency of Finance) was 253.82% (108% under our internal models based on Basel III standards). Although we have historically complied with our required liquidity ratios, there can be no assurance that we will continue to do so in the future. See “Item 4—Information on the Company—B. Business Overview— Reserve Requirements” for more information on liquidity requirements in Colombia.

We are dependent on key personnel.

Our development, operation and growth depends significantly upon the efforts and experience of our board of directors, senior management and other key executives. The loss of key personnel for any reason, including retirement or our inability to timely attract and retain qualified management personnel to replace them, could have a material adverse effect on our business, financial condition and results of operations.

We are subject to market risk.

We are affected by changes in local and global economic conditions as both domestic and international idiosyncratic factors and market structures have an impact in our activities. As a bank with regional exposure, market risk, or the risk of losses in positions arising from movements in market prices, is inherent in the products and instruments associated with our operations, including loans, deposits, securities, bonds, long-term debt, short-term borrowings, proprietary trading in assets and liabilities and derivatives. Moreover, as we operate in financially integrated economies, changes in market conditions that may affect our financial condition and results of operations include fluctuations in interest and currency exchange rates, securities prices, and changes in the implied volatility of interest rates and foreign exchange rates, among others.

Our results of operations are affected by interest rate volatility and inflation rate volatility.

Our results of operations depend to a great extent on our net interest income. In 2016, 2017 and 2018, our ratio of net interest income to total operating income before provision for loan losses was 73.2%, 74.1% and 70.7%, respectively. Changes in market interest rates in Chile or Colombia could affect the interest rates earned on our interest-earning assets differently from the interest rates paid on our interest-bearing liabilities leading to a reduction in our net interest income. Interest rates are highly sensitive to many factors beyond our control, including the monetary policies of the Central Bank of Chile and the Central Bank of Colombia, changes in regulation of the financial sector in Chile and Colombia, domestic and international economic and political conditions and other factors. Yields on the Chilean government’s 90-day benchmark rate reached a high of 3.1% and a low of 2.8% in 2015, a high of 3.6% and a low of 3.5% in 2016, a high of 3.2% and a low of 2.5% in 2017 and a high of 2.9% and a low of 2.5% in 2018. On the other hand, the Colombian government does not issue short-term bonds of 30, 60 or 90 days as the Chilean government does. Instead, every month the board of directors of the Central Bank of Colombia determines the benchmark rate in order to achieve a specific goal of inflation. Yields on the Colombian benchmark rate reached a high of 7.8% and a low of 5.8% for 2016, a high of 7.5% and a low of 4.8% for 2017 and a high of 4.8% and a low of 4.3% in 2018. As of December 31, 2016 and 2017, we had Ch$2,074 million, Ch$2,663 million, respectively, in financial investments available-for-sale and as of December 31, 2018, we had Ch$2,657 million in financial instruments at fair value through other comprehensive income. In the current global economic climate, there is a greater degree of uncertainty and unpredictability in the policy decisions and the setting of interest rates by the Central Bank of Chile and the Central Bank of Colombia and, as a result, any volatility in interest rates could adversely affect us, including our future financial performance and the market value of our securities. In addition, inflation rate volatility could adversely affect our net interest income due to fluctuations in the gap between assets and liabilities that are indexed to the UF.

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Increased competition and industry consolidation may adversely affect the results of our operations.

The Chilean and Colombian markets for financial services are highly competitive and competition is likely to increase.

In Chile, we face competition from banking and non-banking institutions with respect to the different products we offer. In the consumer and other loans businesses, we compete with other banks, credit unions and public social security funds (cajas de compensación). In some of our credit products, we face competition from department stores, large supermarket chains and leasing, factoring and automobile finance companies, and in the saving products and mortgage loans businesses we compete with mutual funds, pension funds, insurance companies and with residential mortgage loan managers (Administradoras de Mutuos Hipotecarios). Furthermore, under the Chilean General Banking Act, representative offices of non-Chilean banks are allowed to promote the credit products and services of their headquarters, which has increased, and may further increase, competition in our industry and, thus, have an adverse effect on our results of operation and financial condition.

In Colombia, we also operate in a highly competitive environment and increased competitive conditions are to be expected in the jurisdictions where we operate. Intensified merger activity in the financial services industry produces larger, better capitalized and more geographically diverse firms that are capable of offering a wider array of financial products and services at more competitive prices. Our ability to maintain our competitive position in Colombia depends mainly on our ability to fulfill new customers’ needs through the development of new products and services and offer adequate services and strengthen our customer bases through cross-selling. In addition, our efforts to offer new services and products may not succeed if product or market opportunities develop more slowly than expected or if the profitability of opportunities is undermined by competitive pressures.

Our risk management system may not be sufficient to avoid losses that could have a material adverse effect on our business, financial condition and results of operations.

In addition to granting loans, part of our financial portfolio consists of trading transactions by our treasury division. Our financial success depends on, among other factors, our ability to accurately balance the risks we take and the returns we gain from our transactions. We use various processes to identify, analyze, manage and control our risk exposure, both in favorable and adverse market conditions. However, these processes involve subjective and complex judgments and assumptions, including projections of economic conditions and assumptions on the ability of our borrowers to repay their loans. Because of the nature of these risks, we cannot guarantee that our risk management efforts will prevent us from experiencing material losses. In particular, we may experience losses that could have a material adverse effect on our business, financial condition and results of operations if, among other factors:

• we are not capable of identifying all of the risks that may affect our portfolio;

• our risk analysis or our measures taken in response to such risks are inadequate or inaccurate;

• the markets move in an unexpected and adverse way with respect to speed, direction, strength or other aspects and our ability to manage risks in such a scenario is restricted;

• our clients are affected by unforeseen events resulting in their default or losses in an amount higher than those considered in our risk analyses; or

• collateral pledged in our favor is insufficient to cover our clients’ obligations to us if they default.

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We are subject to concentration risk.

Concentration risk is the risk associated with potential high financial losses triggered by significant exposure to a particular component of risk, whether it be related to a particular counterparty, industry or geographic concentration. Examples of such risks include significant exposure to a single counterparty, counterparties operating in the same economic sector or geographic region, or financial instruments that depend on the same index or currency.

We believe that an excessive concentration with respect to a particular risk factor could have a material adverse effect on our business, financial condition and results of operations.

We make estimates and assumptions in connection with the preparation of our consolidated financial statements, and any changes to those estimates and assumptions could have a material adverse effect on our operating results.

In connection with the preparation of our consolidated financial statements, we use certain estimates and assumptions based on historical experience and other factors. While we believe that these estimates and assumptions are reasonable under the current circumstances, they are subject to significant uncertainties, some of which are beyond our control. Should any of these estimates and assumptions change or prove to have been incorrect, our reported operating results could be materially adversely affected.

Changes in accounting standards could impact reported earnings.

The accounting standard setters and other regulatory bodies periodically change the financial accounting and reporting standards that govern the preparation of our consolidated financial statements. For example, IFRS 9 was adopted as of January 1, 2018, establishing a new impairment model of expected loss and making changes to the classification and measurement requirements for financial assets and liabilities. In addition, we adopted IFRS 16 as of January 1, 2019, requiring new standards for the recognition, measurement, presentation and disclosure of leases. This led to approximately Ch$176,795 million of assets for the right of use and lease liabilities for the same amount as of the date of adoption of IFRS 16. These changes can materially impact how we record and report our financial condition and results of operations. In some cases, we could be required to apply a new or revised standard retroactively, resulting in the restatement of prior period financial statements. We cannot assure you that future changes in financial accounting and reporting standards will not substantially affect our results of operations or performance indicators, as we do not know the extent of future standards.

The preparation of our tax returns requires the use of estimates and interpretations of complex tax laws and regulations and is subject to review by taxing authorities.

We are subject to the tax laws and regulations of Chile and certain foreign countries. These tax laws are complex and subject to different interpretations by the taxpayer and relevant governmental taxing authorities, which are sometimes subject to prolonged evaluation periods until a final resolution is reached. In establishing a provision for income tax expense and filing returns, we must make judgments and interpretations about the application of these inherently complex tax laws.

If the judgment, estimates and assumptions we use in preparing our tax returns are subsequently found to be incorrect, there could be a material adverse effect on our results of operations.

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As a result of the inherent limitations in our disclosure and accounting controls, misstatements due to error or misconduct may occur and not be detected.

Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by us in reports we file with or submit to the SEC under the Exchange Act of 1934, as amended (the “Exchange Act”), is accumulated and communicated to management, recorded, processed summarized and reported within the time periods specified in SEC rules and forms. We believe that any disclosure controls and procedures or internal controls and procedures, including related accounting controls, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. In addition, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls.

Any failure by us to maintain effective internal control over financial reporting may adversely affect investor confidence and, as a result, the value of investments in our securities.

We are required under the Sarbanes-Oxley Act of 2002 to furnish a report by our management on the effectiveness of our internal control over financial reporting and to include a report by our independent auditors attesting to such effectiveness. Any failure by us to maintain effective internal control over financial reporting could adversely affect our ability to report accurately our financial condition or results of operations. If we are unable to conclude that our internal control over financial reporting is effective, or if our independent auditors determine that we have a material weakness or significant deficiency in our internal control over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports, the market prices of our shares and ADSs could decline, and we could be subject to sanctions or investigations by the SEC or other regulatory authorities. Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies subject to SEC regulation, also could restrict our future access to the capital markets.

Our reliance on short-term deposits as our principal source of funds exposes us to sudden increases in our costs of funding which could have a material adverse effect on our revenue.

Time deposits and other term deposits are our primary sources of funding, which represented 39.1% of our liabilities as of December 31, 2018. If a substantial number of our depositors withdraw their demand deposits or do not roll over their time deposits upon maturity, our liquidity position, results of operations and financial condition may be materially and adversely affected. We cannot assure you that in the event of a sudden or unexpected shortage of funds, any money markets in which we operate will be able to maintain levels of funding without incurring higher funding costs or the liquidation of certain assets. If this were to happen, our business, results of operations and financial condition may be materially and adversely affected.

Currency fluctuations could adversely affect our financial condition and results of operations and the value of our securities.

Economic policies and any future changes in the value of the Chilean peso or the Colombian peso against the U.S. dollar could affect the dollar value of our securities, since the equity value of Itaú Corpbanca is hedged against our base currency Chilean peso. The Chilean peso and the Colombian peso have been subject to significant fluctuations in their value against the U.S. dollar in the past and could be subject to similar fluctuations in the future. As of December 31, 2016, the Chilean peso appreciated against the U.S. dollar by 5.7% and the Colombian peso appreciated against the U.S. dollar by 4.2%, each as compared to December 31, 2015. As of December 31, 2017, the Chilean peso appreciated against the U.S. dollar by 8.3% and the Colombian peso appreciated against the U.S. dollar by 0.5%, each as compared to December 31, 2016. As of December 31, 2018, the Chilean peso depreciated against the U.S. dollar by 13.1% and the Colombian peso depreciated against the U.S. dollar by 8.8%, each as compared to December 31, 2017.

Our results of operations may be affected by fluctuations in exchange rates between and among the Chilean peso, the Colombian peso and the U.S. dollar despite our internal policy and Chilean and Colombian regulations relating to the general avoidance of material exchange rate gaps. As of December 31, 2016, 2017 and 2018, the gap between foreign currency denominated assets and foreign currency denominated liabilities, excluding derivatives, was Ch$(606,535) million, Ch$(571,951) million and Ch$720,224 million, respectively.

We may decide to change our policy regarding exchange rate gaps. Regulations that limit such gaps may also be amended or eliminated. Greater exchange rate gaps could increase our exposure to the devaluation of the Chilean peso and/or the Colombian peso, and any such devaluation may impair our capacity to service our foreign-currency obligations and may, therefore, materially and adversely affect our financial condition and results of operations.

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Our business is highly dependent on proper functioning and improvement of information technology systems.

Our business is highly dependent on the ability of our information technology systems to accurately process a large number of transactions across numerous and diverse markets and products in a timely manner. The proper functioning of our financial control, risk management, accounting, customer service and other data processing systems is critical to our business and our ability to compete effectively. We have backup data for our key data processing systems that could be used in the event of a catastrophe or a failure of our primary systems, and have established alternative communication networks where available. However, we cannot assure you that our business activities would not be materially disrupted if there were a partial or complete failure of any of these primary information technology systems or communication networks. Such failures could be caused by, among other things, software bugs, computer virus attacks, cyber-attacks or conversion errors due to system upgrading. In addition, a cyber-attack, including any security breach caused by unauthorized access to information or systems, intentional malfunctions or loss or corruption of data, software, hardware or other computer equipment, could have a material adverse effect on our business, results of operations and financial condition.

Our ability to remain competitive and achieve further growth will depend in part on our ability to upgrade our information technology systems and increase our capacity on a timely and cost effective basis. Any substantial failure to improve or upgrade information technology systems effectively or on a timely basis could materially and adversely affect our business, financial condition and results of operations.

A worsening of labor relations in Chile or Colombia could impact our business.

As of December 31, 2018, on a consolidated basis we had 5,685 employees in Chile (including 32 at our New York Branch), of which 61.3% were unionized, and 3,494 employees in Colombia, of which 30.3% were unionized. We are parties to collective bargaining agreements with unions representing our employees in Chile and Colombia. Itaú Corpbanca’s current labor agreements with five unions in Chile were subscribed in 2017 and expire on May 31, 2020, November 23, 2020 and December 4, 2020. Itaú Corpbanca Colombia’s current labor agreement with 23 unions in Colombia was subscribed on September 1, 2017 and expires on August 31, 2019. We generally apply the relevant terms of our collective bargaining agreement to unionized and non-unionized employees in each of the markets in which we operate. We have traditionally enjoyed good relations with our employees and their unions. However, we may not be able to renew our collective bargaining agreements on satisfactory terms or at all. This could result in strikes or work stoppages, which could result in substantial losses. The terms of existing or renewed agreements could also significantly increase our costs or negatively affect us. Also, a strengthening of cross-industry labor movements may result in increased employee or labor costs that could materially and adversely affect our business, financial condition or results of operations.

Law 20,940, which became effective on April 1, 2017, introduces significant amendments to the Chilean labor system. The principal amendments enacted by Law 20,940 to the existing labor framework in Chile include, among others:

• Collective bargaining coverage was expanded to certain employees who were prevented from exercising this right, such as apprentices, temporary workers and others. Before the amendments to the labor law, employees who could hire and dismiss employees, were not able to bargain collectible as part of the employees. After the amendments to the labor law, only employees with legal capacity to represent the employer are not able to bargain collectible, unless they do so representing the employer.

• Collective bargaining agreements currently in effect will constitute a floor for the negotiation of new conditions of employment. The financial situation of the company or business as of the date of discussions for a new agreement would not have any bearing on collective bargaining negotiations.

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• The employer’s right to replace those workers participating in a strike with current or new employees while the strike is taking place will be curtailed and replaced with an obligation from unions to provide the personnel required to comply with “minimum services” through “emergency teams.”

• Unions may annually request from large companies information regarding the remunerations and duties associated with each category of employees.

• After the amendments to the labor law, unions will have to agree in the extension of benefits to those employees who are not currently unionized.

• In case of unions that include employees from several companies of the same industry (Sindicato Interempresa) the companies will be forced to bargain with them and not only with their own employees.

The implementation of Law 20,940, as it increases the collective bargaining power of labor unions, may have adverse effects on our overall employment and operating costs and may increase the likelihood of business disruptions on our activities in Chile, which could negatively affect our financial condition and results of operations. The amendments to the labor law intend to encourage the collective bargaining and increase the unionization rates.

We are subject to counterparty risk.

We are exposed to counterparty risk in addition to credit risks associated with our lending activities. We routinely conduct transactions with counterparties in the financial services industry, including brokers and dealers, commercial banks, investment banks, mutual and hedge funds and other institutional clients. Many of the routine transactions we enter into expose us to significant credit risk in the event of default by one of our significant counterparties.

We may incur losses if any of our counterparties fail to meet their contractual obligations, due to bankruptcy, lack of liquidity, operational failure or other reasons that are exclusively attributable to our counterparties. Counterparty risk may arise from, for example, investing in securities of third parties, entering into derivative contracts under which counterparties have obligations to make payments to us or executing securities, futures, currency or commodity trades from proprietary trading activities that fail to settle at the required time due to non-delivery by the counterparty or systems failure by clearing agents, clearing houses or other financial intermediaries. Failure to meet contractual obligations by our counterparties could have a material adverse effect on our business, financial condition and results of operations.

We rely on third parties for important products and services.

Third-party vendors provide key components of our business infrastructure such as different loan servicing systems, internet connections and network access. Any problems caused by these third parties, including as a result of their not providing us their services for any reason or their performing their services poorly, could adversely affect our ability to deliver products and services to customers and otherwise to conduct business. Replacing these third-party vendors could also entail significant delays and expense and could negatively impact our business.

We may experience operational problems, errors or misconduct.

We are exposed to many types of operational risks, including the risk of misconduct by employees and outsiders, failure to obtain proper authorizations, failure to properly document transactions, equipment failures and errors by employees. Although we maintain a system of operational controls, there can be no assurances that operational problems or errors will not occur and that their occurrence will not have a material adverse effect on our business, financial condition and results of operations.

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Our anti-money laundering and anti-terrorist financing measures may not prevent third parties from using us as a conduit for those activities, which could have a material adverse effect on our business, financial condition and results of operations.

We are required to comply with applicable anti-money laundering and anti-terrorist financing laws and regulations, and we have adopted various policies and procedures, including internal controls and “know-your customer” procedures, aimed at preventing money laundering and terrorist financing. In addition, because we also rely on our correspondent banks having their own appropriate anti-money laundering and anti-terrorist financing procedures, we use what we believe are commercially reasonable procedures for monitoring our correspondent banks. However, these measures, procedures and compliance may not be entirely effective in preventing third parties from using us (and our correspondent banks) as a conduit for money laundering (including illegal cash operations) or terrorist financing without our (and our correspondent banks’) knowledge or consent. If we were to be associated with money laundering (including illegal cash operations) or terrorist financing, our reputation could be harmed and we could become subject to fines, sanctions or legal enforcement (including being added to any “blacklists” that would prohibit certain parties from engaging in transactions with us), which could have a material adverse effect on our business, financial condition and results of operation.

Banking regulations may restrict our operations and thereby adversely affect our financial condition and results of operations.

We are subject to regulation in the markets in which we operate, including by the SBIF and by the Central Bank of Chile in Chile, and by the Central Bank of Colombia, the Colombian Ministry of Finance, the Colombian Superintendency of Finance, the Superintendency of Industry and Commerce (Superintendencia de Industria y Comercio), or SIC, and the Self-Regulatory Organization (Autorregulador del Mercado de Valores-AMV, or the SRO) in Colombia.

Pursuant to the Chilean General Banking Act in Chile and the Financial System Organic Act (Estatuto Orgánico del Sistema Financiero) in Colombia, we may, subject to the necessary regulatory approvals, engage in the commercial banking business and in certain businesses in addition to traditional commercial banking. Such additional businesses may include securities brokerage, mutual fund management, securitization, insurance brokerage, leasing, factoring, financial advisory, custody and transportation of securities, loan collection and financial services. Regulators may in the future impose more restrictive limitations on the activities of banks, including us.

New capital adequacy requirements could require us to inject further capital into our business as well as in businesses we acquire, or to capitalize dividends, restrict the type or volume of transactions we enter into, or set limits on or require the change of rates or fees that we charge on certain loans or other products, any of which could lower the return on our investments, assets and equity. We may also face increased compliance costs and limitations on our ability to pursue certain business opportunities.

As a result of the 2008 global financial crisis, there has been an increase in government regulation of the financial services industry in many countries. Such regulation may also be increased in Chile and/or in Colombia, including the imposition of higher capital requirements, heightened disclosure standards and restrictions on certain types of transaction structures. In addition, numerous novel regulatory proposals have been discussed or proposed. If enacted, new regulations could require us to inject further capital into our business, restrict the type or volume of transactions we enter into, or set limits on or require the modification of rates or fees that we charge on certain loans or other products, any of which could lower the return on our investments, assets and equity. We may also face increased compliance costs and limitations on our ability to pursue certain business opportunities.

On February 23, 2017, Law No. 21,000, was published. This new law modifies, among other matters, the corporate governance and operation of the Chilean regulator for securities and insurance and establishes the CMF. For more information, see “Item 4. Information on the Company—B. Business Overview—Changes in the Governance of Our Regulators.” These changes in our regulators’ laws may result in further changes in banking regulations or other consequences that could have a material adverse effect on our financial condition or results of operations.

The banking regulatory and capital markets environment in which we operate is continually evolving and may change.

Changes in banking regulations may materially and adversely affect our business, financial condition and results of operations. Chilean laws, regulations, policies and interpretations of laws relating to the financial system are continually evolving and changing. For more information, see “Item 4. Information on the Company—B. Business Overview—Chilean Banking Regulation and Supervision—Recent Regulatory Developments in Chile.”

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In Chile, new regulations have been enacted in the past years which have, among others things, (a) increased the limit on the amount that a bank is allowed to grant as an unsecured loan to a single individual or entity (currently set at 10% of its regulatory capital and up to 30% of its regulatory capital if any loans granted in excess of the 10% are secured by certain collateral, for persons non-related to the bank and at 5% or 25% if loans in excess of 5% are secured by certain collateral, for certain groups of persons related to the bank), (b) allowed marketing and promotion activities of credit products and services by non-Chilean banks with representative offices in Chile, (c) strengthened consumers’ rights in connection with financial products and services; and (d) lowered the maximum legal interest rate that can be imposed in general loans valued at over UF 200. These amendments have affected the Chilean banking industry in several ways including by increasing competition, increasing the risks associated with the growth of loan portfolios, providing additional scrutiny regarding prices and contracts for financial products and have caused a loss of flexibility in the determination of price and product distribution strategies in the retail banking unit.

Colombia has also experienced recent changes in applicable laws, regulations and policies, such as those regarding financial inclusion and consumer protection. In order to promote financial inclusion, the Colombian Congress passed Law No. 1,735 of 2014, which created a new type of financial entity called Specialized Electronic Deposit and Payment Institutions (Sociedades Especializadas en Depósitos y Pagos Electrónicos, or SEDPEs). Previously, the only activities these entities were authorized to perform were remote cash-in and cash-out deposit operations, the allocation of customers’ funds in electronic deposit accounts and the offering of transactional services such as remittances, transfers and payments. However, SEDPES have recently been authorized to use correspondent networks and open accounts remotely, and SEDPE customers are authorized to have more than one account per SEDPE, which may further encourage the utilization of SEDPEs in the Colombian financial market. Additionally, along with the global trend to increase the use of technology for different financial services, new regulations may be issued by the Colombian government in order to facilitate the incorporation of these entities into the financial system. Such changes and trends may increase competition in the Colombian financial market and may impair our ability to expand or retain our customer base. On July 31, 2018, the Colombian Ministry of Finance issued Decree No. 1357, which permitted the creation of companies with the purpose of managing electronic systems destined for crowdfunding. The creation of these companies may have an impact on our business, given that they offer an alternative to finance projects that is different from traditional loans.

Pursuant to the objective of the Colombian government in adopting the recommendations set forth by Basel III, the Colombian Ministry of Finance issued Decree No. 1477 of 2018 which provides for complementary ratio mechanisms such as (i) an additional primary solvency ratio (Relación de Solvencia Básica Adicional), (ii) a leverage ratio (Relación de Apalancamiento), and (iii) buffers (Colchones). Financial institutions shall comply with Decree No. 1477 of 2018, no later than February 6, 2020, except on the matters regarding the additional primary solvency ratio and the buffers, which will have a gradual implementation for a four year term, starting after February 6, 2020. See “Item 4. Colombian Banking Regulation and Supervision – Capital Adequacy Requirements Amendment.”

In addition, recently, the Colombian government has expressed its intention to submit this year a bill before the Colombian Congress to change the equivalency of the Colombian Peso by removing three zeroes from current denomination, which may oblige us to incur various operational costs in order to guarantee the continuity of our daily operations.

We also have limited operations outside of Chile and Colombia, including Peru, Spain and the United States. Changes in the laws or regulations applicable to our business in the countries where we operate, or the adoption of new laws, and related regulations or their applicability or interpretation, may have an adverse effect on our operations and financial condition.

We are subject to regulatory inspections, examinations and to the imposition of fines by regulatory authorities in Chile and in Colombia.

We are also subject to various inspections, examinations, inquiries, audits and other regulatory requirements by Chilean and Colombian regulatory authorities.

We cannot assure you that we will be able to meet all of the applicable regulatory requirements and guidelines, or that we will not be subject to other sanctions, fines, restrictions on our business or other penalties in the future as a result of non-compliance. If other sanctions, fines, restrictions on our business or other penalties are imposed on us for failure to comply with applicable requirements, guidelines or regulations, our business, financial condition, results of operations and our reputation and ability to engage in business may be materially and adversely affected.

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Pursuant to letter No. 16,191, the SBIF fined the Bank for an alleged infringement to the individual lending limits provided by Article 84 No. 1, in relation to Article 85 of the Chilean General Banking Act. The total amount was Ch$21,765 million. In an extraordinary meeting on January 4, 2016, the Bank’s board of directors agreed: to communicate the letter as a material event, expressing disagreement with the alleged infringement and to instruct management to exercise each and every legal action in order to obtain the annulment of the fines.

On January 8, 2016, the Bank paid the full amount of the fines as a mandatory condition precedent to exercise its appeal rights. On January 18, 2016, the Bank brought an action before the Santiago Court of Appeals seeking the annulment of the fines. Pursuant to a final ruling by the Court of Appeals of Santiago dated August 31, 2016, the fines imposed by the SBIF pursuant to letter No.16,191 were declared illegal. In accordance with Article 22 of the General Law on Banks, the favorable ruling obtained by Itaú Corpbanca is not subject to appeal.

On September 6, 2016, the SBIF filed a complaint (Recurso de Queja) against the judges of the Court of Appeals of Santiago before the Supreme Court, which was dismissed by the Supreme Court on May 9, 2017.

On October 19, 2017, the SBIF filed a complaint against Itaú Corpbanca regarding the same alleged violations, giving rise to a new administrative procedure. On November 14, 2017, Itaú Corpbanca filed a special constitutional rights action (Acción de Protección) before the Santiago Court of Appeals that was declared inadmissible. This ruling was confirmed by the Supreme Court. On November 22, 2017, Itaú Corpbanca filed a defense arguing that it acted in full compliance with applicable law. Pursuant to resolution No. 101, dated January 4, 2019, the SBIF partially accepted the defenses of Itaú Corpbanca, imposing a fine for one of the three charges originally formulated. The total amount of the fine imposed was Ch$5,985,328,978. In an extraordinary meeting on January 14, 2019, Itaú Corpbanca’s board of directors analyzed the grounds and consequences of resolution No. 101, including potential courses of action, and reaffirmed the conviction that Itaú Corpbanca has acted in compliance with applicable law. Notwithstanding the foregoing, Itaú Corpbanca decided not to file any appeals against the SBIF’s resolution.

Security breaches, including cyber-attacks, could materially and adversely affect our business, financial condition and results of operations.

We manage and hold confidential personal information of customers in the conduct of our banking operations, and offer various internet-based services to our clients, including online banking services. We could be liable for breaches of security in our online banking services, including cybersecurity breaches. The secure transmission of confidential information over the Internet is essential to maintain our clients’ confidence in our online services. In certain cases, we are responsible for protecting customers’ proprietary information as well as their accounts with us. We have security measures and processes in place to defend against cybersecurity risks; however, cyber-attacks are rapidly evolving (including computer viruses, malicious code, phishing or other information security breaches), and we may not be able to anticipate or prevent all such attacks, which could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of our or our customers’ confidential, proprietary and other information. Individuals may also seek to intentionally disrupt our online banking services or compromise the confidentiality of customer information with criminal intent. Although we have procedures and controls to safeguard personal information in our possession, as well as systems and processes that are designed to recognize and assist in preventing security breaches, failure to protect against or mitigate breaches of security or other unauthorized disclosures remains a possibility. If such event occurs, the Bank could be in breach of privacy laws or other laws and/or regulations, which could make us subject to legal proceedings and administrative sanctions, including damages, and in turn adversely affect our ability to offer and grow our online services, cause a loss of customer relationships, negatively impact our reputation, and have an adverse effect on our business, results of operations and financial condition.

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In recent years, computer systems of companies and organizations have been targeted, not only by cyber criminals, but also by activists and rogue states. Cyber-attacks could give rise to the loss of significant amounts of customer data and other sensitive information, as well as significant levels of liquid assets (including cash). In addition, cyber-attacks could disrupt our electronic systems used to service our customers. As attempted attacks continue to evolve in scope and sophistication, we may incur significant costs in order to modify or enhance our protective measures against such attacks, or to investigate or remediate any vulnerability or resulting breach, or in communicating cyber-attacks to our customers. If we fail to effectively manage our cyber security risk, for example by failing to update our systems and processes in response to new threats, our reputation could be harmed and our operating results, financial condition and prospects could be adversely affected through the payment of customer compensation, regulatory penalties and fines and/or through the loss of assets. In addition, we may also be impacted by cyber-attacks against national critical infrastructures of the countries where we operate; for example, the telecommunications network. Our information technology systems are dependent on such national critical infrastructure and any cyber-attack against such critical infrastructure could negatively affect our ability to service our customers. As we do not operate such national critical infrastructure, we have limited ability to protect our information technology systems from the adverse effects of such a cyber-attack.

Our loan and investment portfolios are subject to risk of prepayment, which may result in reinvestment of assets on less profitable terms.

Our loan and investment portfolios are subject to prepayment risk, which results from the ability of a borrower or issuer to pay a debt obligation prior to maturity. Generally, in a declining interest rate environment, prepayment activity increases, which reduces the weighted average lives of our earning assets and adversely affects our operating results. Prepayment risk also has an adverse impact on our residential mortgage portfolio, since prepayments could shorten the weighted average life of this portfolio, which may result in a mismatch in funding or in reinvestment at lower yields. Prepayment risk is inherent to our commercial activity and an increase in prepayments could have a material adverse effect on our business, financial condition and results of operations.

Exposure to government debt could have an adverse effect on our business, financial condition and results of operations.

We invest in debt securities issued by the Chilean and Colombian governments, the Central Bank of Chile and the Chilean Ministry of Finance that, for the most part, are short-term and highly liquid instruments. As of December 31, 2018, 4.7% of our total assets comprised securities issued by the Chilean government and 3.3% of our total assets comprised securities issued by foreign governments, mostly by the Colombian government. If the Chilean or Colombian governments default on the timely payment of such securities, our business, financial condition and results of operations may be adversely affected.

A downgrade of Itaú Corpbanca’s counterparty credit rating by international or domestic credit rating agencies could materially and adversely affect our debt credit rating for domestic and international debt, our business, our future financial performance, shareholders’ equity and the value of our securities.

Following the consummation of the Merger, Standard & Poor’s and Moody’s upgraded our long and short term ratings to BBB+/A-2 and A3/Prime-2, respectively. On August 22, 2018, Standard and Poor’s confirmed the aforementioned ratings and revised our rating outlook from “Negative” to “Stable,” as concerns related to Chile’s economic imbalances have diminished.

Any adverse revision to our credit ratings in Chile or Colombia for domestic and international debt by international and domestic rating agencies may adversely affect our debt ratings, and, as a result, our cost of funding, including interest rates paid on our deposits and securities. If this were to happen, it could have a material adverse effect on our business, future financial performance, shareholders’ equity and the value of our securities.

Mismatches in the maturity of our loan portfolio and our funding sources as well as exchange rate fluctuations related to our funding sources could materially and adversely affect our business, financial condition and results of operations and our capacity to expand our loan business.

We are exposed to maturity mismatches between our loans and sources of funding. The majority of our loan portfolio consists of fixed interest rate loans, and the yield from our loans depends on our ability to balance our cost of funding with the interest rates we charge to our borrowers. An increase in market interest rates in Chile or Colombia could increase our cost of funding, especially the cost of time deposits, and could reduce the spread we earn on our loans, materially and adversely affecting our business, financial condition and results of operations.

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Any mismatch between the maturity of our loan portfolio and our sources of funding would magnify the effect of any imbalance in interest rates, also representing a liquidity risk if we fail to obtain funding on an ongoing basis. In addition, since part of our funding comes from securities denominated in U.S. dollars or other foreign currencies that we issue abroad, any devaluation of the Chilean or Colombian peso against the U.S. dollar or such other foreign currencies could increase the cost of funding in relation to these securities. An increase in our total cost of funds for any of these reasons could result in an increase in the interest rates on our loans, which could, as a result, affect our business, financial condition and results of operations and our ability to attract new customers and expand our loan business.

We are subject to financial and operational risks associated with derivative transactions.

We enter into derivative transactions primarily to deliver services to our clients, for hedging purposes and, on a limited basis, for trading purposes. These transactions are subject to market, liquidity, counterparty (the risk of insolvency or other inability of a counterparty to perform its obligations to us) and operational risks.

Market practices and documentation for derivative transactions in Chile and Colombia may differ from those in other countries. For example, documentation may not incorporate terms and conditions of derivatives transactions as commonly understood in other countries. In addition, the execution and performance of these transactions depend on our ability to develop adequate control and administration systems and to hire and retain qualified personnel. Moreover, our ability to monitor and analyze these transactions depends on our information technology systems. These factors may further increase risks associated with derivative transactions and, if they are not adequately controlled, could materially and adversely affect our results of operations and financial condition.

Our level of insurance might not be sufficient to fully cover all liabilities that may arise in the course of our business and insurance coverage might not be available in the future.

We maintain insurance for losses resulting from fire, explosions, floods and electrical shorts and outages at our various buildings and facilities. We also have civil liability insurance covering material and physical losses and damages that may be suffered by third parties. We cannot assure you that our level of insurance is sufficient to fully cover all liabilities that may arise in the course of our business or that insurance will continue to be available in the future. In addition, we may not be able to obtain insurance on comparable terms in the future. Our business and results of operations may be adversely affected if we incur liabilities that are not fully covered by our insurance policies.

The occurrence of natural disasters or terrorist events in the regions where we operate could impair our ability to conduct business effectively and could adversely affect our results of operations.

We are exposed to the risk of natural disasters such as earthquakes or tsunamis as well as floods, mudslides and volcanic eruptions in the regions where we operate. We also recognize that natural disasters could be amplified by the effects of the climate change phenomenon. In the event of a natural disaster, unanticipated problems with our disaster recovery systems could have a material adverse impact on our ability to conduct business in the affected region, particularly if those problems affect our computer-based data processing, transmission, storage and retrieval systems and destroy valuable data. In addition, if a significant number of our local employees and managers were unavailable in the event of a disaster, our ability to effectively conduct business could be severely compromised. A natural disaster, such as the earthquake and tsunami that affected Chile in 2010, could damage some of our branches and automated teller machines, or ATMs, forcing us to close damaged facilities or locations, increased recovery costs as well as cause economic harm to our clients. A natural disaster or multiple catastrophic events could have a material adverse effect on local businesses in the affected region and could result in substantial volatility or adverse harm in our business, financial condition and results of operations for any fiscal quarter or year. Furthermore, we are exposed to terrorist events resulting in physical damage to our buildings (including our headquarters, offices, branches and ATMs) and/or injury to customers, employees and others. Although we maintain comprehensive contingency plans and security procedures, there can be no assurance that terrorist events will not occur and that their occurrence will not have a material adverse impact on our business and results of operations for any fiscal quarter or year.

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Other businesses controlled by Itaú Unibanco may face difficulties from a business or reputational standpoint and affect us.

We are currently controlled by Itaú Unibanco, which as of March 31, 2019 had a 38.14% beneficial ownership stake in us. Since we are part of a larger conglomerate of companies owned by Itaú Unibanco, if other businesses controlled by Itaú Unibanco face difficulties from a business or reputational standpoint, we may suffer adverse consequences. If we were to be associated with these events, our reputation could be harmed, which could have a material adverse effect on our business, financial condition and results of operations.

We are subject to arbitration and litigation proceedings that could materially adversely affect our business, financial position and results of operations if an unfavorable ruling were to occur.

As described in “Item 8. Financial Information—A. Consolidated Statements and other Financial Information—Legal Proceedings,” we are currently subject to legal proceedings. Litigation is subject to inherent uncertainties, and unfavorable rulings may occur. From time to time, we may become involved in arbitration, litigation and other legal proceedings relating to claims arising from our operations in the normal course of business. We cannot assure you that the current or other legal proceedings will not materially affect our ability to conduct our business in the manner that we expect or otherwise have a material adverse effect on our business, financial condition and results of operations should an unfavorable ruling occur. See “Item 8. Financial Information—A. Consolidated Statements and other Financial Information—Legal Proceedings.”

In December 2016, Helm LLC (“Helm”) initiated an arbitration proceeding before the ICC International Court of Arbitration (the “ICC”) against Corp Group Holding Inversiones Ltda. (“Corp Group”) and Itaú Corpbanca (collectively, “Respondents”). Helm alleged that the Respondents had breached (i) the Amended and Restated Shareholders Agreement of HB Acquisition S.A.S., dated July 31, 2013, which governs Itaú Corpbanca’s subsidiary Itaú Corpbanca Colombia (formerly Banco Santander Colombia S.A.), and (ii) the Transaction Agreement, dated January 29, 2014, as amended and restated, which governs the merger between Itaú Chile S.A. and Corpbanca, by which Itaú Corpbanca was formed, and the potential acquisition by Itaú Corpbanca of certain shares of Itaú Corpbanca Colombia from Corp Group.

During the course of the proceedings, Helm demanded that Itaú Corpbanca and Corp Group effect the acquisition of its shares of Itaú Corpbanca Colombia at a price in excess of the price agreed with Corp Group in the Transaction Agreement, which would have totaled approximately $850 million (with interest at 9% per year from January 29, 2014 onwards). On February 28, 2019, a three-member Tribunal of the ICC rejected Helm’s demand and ordered Helm to sell its shares of Itaú Corpbanca Colombia, which represent 19.44% of the equity in Itaú Corpbanca Colombia, to Respondents at approximately $299 million (including interest at LIBOR plus 2.7% per year from April 1, 2016 onwards). Itaú Corpbanca intends to purchase the shares from Helm. This price of $299 million implies a valuation multiple of 1.36 times the book value of Itaú Corpbanca Colombia as of December 31, 2018 and is consistent with the valuations of Itaú Corpbanca Colombia in Itaú Corpbanca’s financial statements. The acquisition, when completed, will result in an estimated impact of 0.82% on Itaú Corpbanca’s Common Equity Tier 1 capital, as if we were applying the new regulatory capital requirements on a fully loaded basis, under the Basel III standards (using exchange rates as of February 28, 2019). The purchase of shares of Itaú Corpbanca Colombia by Itaú Corpbanca will be subject to regulatory approvals in Colombia, Chile and Brazil.

We may incur financial losses and damages to our reputation from environmental and social risks.

In recent years, environmental and social risks have been recognized as increasingly relevant, since they can affect the creation of shared value in the short, medium and long terms from the standpoint of the organization and its main stakeholders.

Environmental and social issues may affect our activities and the revenue of our clients, causing reputational damage, delays in payments or default, especially in the case of significant environmental and social incidents. Environmental and social risks become more evident when we finance projects, where should there be environmental damage caused by projects in which we were involved with respect to the financing thereof, we could be deemed to be indirectly responsible for such damage and could consequently be held liable for certain damages.

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We may not effectively manage risks associated with the replacement of benchmark indices.

A significant portion of our income, expenses and liabilities is directly tied to interest rates. Therefore, our results of operations and financial condition are significantly affected by inflation, interest rate fluctuations and related government monetary policies. In addition, interest rate, equity, foreign exchange rate and other types of indices which are deemed to be “benchmarks” are the subject of increased regulatory scrutiny. Some of these reforms are already effective while others are yet to be implemented, including the majority of the provisions of the EU Benchmark Regulation (Regulation (EU) 2016/1011). In 2017, the Chief Executive of the U.K. Financial Conduct Authority (the “FCA) announced that the FCA will no longer persuade or compel banks to submit rates for the calculation of LIBOR after 2021. This announcement indicates that the continuation of LIBOR on the current basis cannot and will not be guaranteed after 2021, and it appears likely that LIBOR will be discontinued or modified by 2021. This and other reforms may cause benchmarks to perform differently than in the past, or to disappear entirely, or have other consequences, which cannot be fully anticipated, which introduce a number of risks for us including legal risks arising from potential changes required to document new and existing transactions, financial risks arising from any changes in the valuation of financial instruments linked to benchmark rates, pricing risks arising from how changes to benchmark indices could impact pricing mechanisms on some instruments, operational risks arising from the potential requirement to adapt information technology systems, trade reporting infrastructure and operational processes, and conduct risks arising from the potential impact of communication with customers and engagement during the transition period. The replacement benchmarks, and the timing of and mechanisms for implementation have not yet been confirmed by central banks. Accordingly, it is not currently possible to determine whether, or to what extent, any such changes would affect us. However, the implementation of alternative benchmark rates may have a material adverse effect on our business, results of operations, financial condition and prospects.

Risks Relating to Chile, Colombia and Other Countries in Which We Operate

Chile has different corporate disclosure and accounting standards than those you may be familiar with in the United States.

As a regulated financial institution, we are required to submit to the SBIF unaudited consolidated and unconsolidated balance sheets and income statements on a monthly basis. These statements have to be prepared in accordance with the Compendium of Accounting Standards (Compendio de Normas Contables y Manual del Sistema de Información), or the “Compendium,” and the rules of the SBIF. Certain exceptions introduced by the SBIF prevent banks from achieving full convergence, for example loan loss provisions, assets received in lieu of payment among others. Also, the SBIF is vested with the authority to issue specific orders to banks, including on accounting matters. In situations not addressed by the guidance issued by the SBIF, institutions must follow IFRS. However, our consolidated financial statements as of and for the three years ended December 31, 2018 have been prepared in accordance with IFRS in order to comply with SEC requirements.

Our consolidated financial statements include the necessary adjustments and reclassifications to the incorporated financial statements of each of Itaú Corpbanca’s subsidiaries and the New York Branch to bring their accounting policies and valuation criteria into line with those applied by the Bank, in accordance with IFRS.

The securities laws of Chile, which govern open or publicly listed companies such as ours, have as one of their principal objectives promoting disclosure of all material corporate information to the public. Chilean disclosure requirements, however, differ from those in the United States in some important respects. Although Chilean law imposes restrictions on insider trading and price manipulation, applicable Chilean laws are different from those in the United States and in certain respects the Chilean securities markets are not as highly regulated and supervised as the United States securities markets.

Chile may impose controls on foreign investment and repatriation of investments that may affect our investors’ investment in, and earnings from, our ADSs.

Investors who are not Chilean residents are required to provide the Central Bank of Chile with information related to equity investments and conduct such operations within the Formal Exchange Market. See “Item 10. Additional Information—D. Exchange Controls” for a discussion of the types of information required to be provided.

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Owners of ADSs are entitled to receive dividends on the underlying shares to the same extent as the holders of shares. Dividends received by holders of ADSs will be converted into U.S. dollars and distributed net of foreign currency exchange fees and fees of the depositary and will be subject to Chilean withholding tax, currently imposed at a rate of 35% (subject to credits in certain cases). If for any reason, including changes in Chilean laws or regulations, the depositary were unable to convert Chilean pesos to U.S. dollars, investors in our ADSs may receive dividends and other distributions, if any, in Chilean pesos.

Additional Chilean restrictions applicable to holders of our ADSs, the disposition of the shares underlying them or the repatriation of the proceeds from such disposition or the payment of dividends could be imposed in the future and we cannot advise you as to the duration or impact of such restrictions, if imposed.

The legal restrictions on the exposure of Chilean pension funds may adversely affect our access to funding.

Chilean regulations impose restrictions on the share of assets that a Chilean pension fund management company (Administradora de Fondos de Pensiones, or AFP) may allocate: (i) per fund (considering all sub-funds within an AFP (A, B, C, D or E)), to deposits in checking accounts and term deposit accounts and in debt securities issued by a single banking institution (or guaranteed by such bank); (ii) per type of sub-fund, to shares, deposits, derivatives and debt securities of a single banking institution (or guaranteed by such bank); and (iii) per fund (considering all sub-funds), to shares issued by a single banking institution. Additionally, each fund managed by an AFP is permitted to make deposits with a bank for an amount not to exceed the equivalent of such bank’s equity. If the exposure of a pension fund managed by an AFP to a single bank exceeds such limit for investments in securities, the AFP for such pension fund is required to reduce the fund’s exposure below the limit within three years.

As of December 31, 2018, the aggregate exposure of AFPs to us was US$5,928 million or 3.1% of their total assets. If the exposure of any AFP to us exceeds the regulatory limits, we would need to seek alternative sources of funding, which could be more expensive and, as a consequence, may have a material adverse effect on our business, financial condition and results of operations.

Future increases in the corporate tax rate or additional modifications to the tax systems of the countries in which we operate may have a material adverse effect on us.

On September 29, 2014, Law No. 20,780 (the “Tax Reform”) went into effect, introducing significant changes to the Chilean tax system and strengthening the powers of the Chilean IRS (Servicio de Impuestos Internos) to control and prevent tax avoidance. One of the main purposes of this reform was to finance major educational reforms under discussion in the Chilean Congress. Subsequently, on February 8, 2016, Law No. 20,899, which simplifies the income tax system and modifies other legal tax provisions, went into effect.

As a corporation (sociedad anónima), we are subject to the partially-integrated tax regime (corporate tax of 25.5% for 2017 and 27% beginning in 2018). Under this system, when the income is actually withdrawn from a company, non-Chilean resident shareholders would be subject to a 35% withholding tax, while Chilean resident shareholders would be required to pay the progressive Complementary Global Tax, with rates ranging between 0% and 35%, against which only a 65% of the corporate tax will be allowed to be used as a credit against the withholding tax or the Complementary Global Tax (which could raise the final tax burden up to 44.45%); provided that, the deduction available to shareholders resident in a country with which Chile maintains a tax treaty in force would be 100%, with the tax burden then remaining at 35%. See “Item 4—Information on the Company—B. Business Overview—Recent Regulatory Developments in Chile—Tax Reform.”

It should be noted that on August 21, 2018, a bill was submitted to the Chilean National Congress aimed at reforming the tax legislation. Among other modifications, such bill proposes to unify the tax regime applicable to taxpayers subject to corporate tax, under which a general corporate tax rate of 27% would apply, which would be fully creditable against final taxes. To date, this bill is still under discussion by the Chilean National Congress.

In addition, on December 29, 2016, the Colombian Government approved a tax reform under Law No. 1,819 and subsequently, on December 18, 2018, Law No. 1,943 came into force on January 1, 2019. See “Item 4—Information on the Company—B. Business Overview— Recent Regulatory Developments in Colombia — Tax Reform.”

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Changes in legislation, regulation and jurisprudence can affect tax burdens by increasing tax rates and fees, creating new taxes, limiting stated expenses and deductions, and eliminating incentives and non-taxed income. We cannot assure you that the manner in which corporate taxes are interpreted and applied in the jurisdictions where we operate will not change in the future. In addition, governments may decide to levy additional taxes in the jurisdictions where we operate. The current tax reforms and any further changes to taxes in the jurisdictions where we operate could have a material adverse effect on our business, financial condition and results of operations. Furthermore, uncertainty relating to tax legislation in the jurisdictions where we operate poses a constant risk to Itaú Corpbanca.

Potential changes to the pension system in Chile may impose an increase in our labor costs and therefore have a material adverse effect on our financial results.

On November 6, 2018, President Sebastián Piñera submitted Bill No. 12212-13 with the purpose of introducing changes to the existing Chilean pension funds system, specifically related to solidary pensions, the individual capitalization pension system and new schemes of pensions for the middle class and women.

Under this proposal, companies would have to contribute to the system with 4% contribution to be exclusively funded by employers. This amendment would have a gradual implementation during a period of five years. Additionally, the employer would be obliged to contribute 0.2% of the gross salary of its employees to fund disability insurance. This insurance would be applicable to all elderly employees with a serious physical or mental disability.

Further, the bill states that the solidarity fund (Pilar Solidario) will increase approximately 40% given that the Chilean government is expected to contribute 1.12% of the GDP to the fund.

Should this bill come into effect, it may cause a relevant increase in our labor costs and, therefore, have a material adverse effect on our financial and operational results.

Colombian tax haven regulation could adversely affect our business and financial results.

Decree No. 1,966 of 2014 amended by Decree No. 2,095 of 2014 designates 37 jurisdictions as tax havens for Colombian tax purposes. In October 2014, Panama and Colombia signed a memorandum of understanding by which they agreed to execute a double taxation treaty. Therefore, Panama is currently not considered a tax haven for Colombian tax purposes. However, if in the future Panama is considered a tax haven under Colombian tax regulations, the clients of our Colombian subsidiaries in Panama who are residents in such jurisdiction would be subject to the following regulations: (i) higher withholding tax rates including a higher withholding rates over financial yields derived from investments in the Colombian securities market, (ii) the Colombian transfer pricing regime and its reporting duties, (iii) an assumption for Colombian authorities of residency for the purposes of qualifying a conduct as abusive under tax regulations, (iv) the disallowance of payments made to residents or entities located in tax havens as costs or deductions, unless the respective withholding tax has been applied and (v) other additional information disclosure requirements.

Any downgrading of Chile’s or Colombia’s debt credit rating for domestic and international debt by international credit rating agencies may also affect our business and future financial performance.

Any adverse revisions to Chile’s or Colombia’s credit ratings for domestic and international debt by international rating agencies may adversely affect our ratings, and, as a result, our cost of funding, including interest rates paid on our deposits and securities. In December 2017, S&P downgraded the rating of its long-term foreign currency sovereign credit ratings on Colombia from “BBB” to “BBB-,” on the grounds of Colombia’s weakened fiscal and external profiles generating diminished policy flexibility. Additionally, in February 2018 Moody’s changed Colombia’s rating outlook from stable to negative. This was driven by (i) expectation of a slower pace of fiscal consolidation and weakening fiscal metrics and (ii) the risk that new government, post the 2018 presidential elections, will not have an effective mandate to pass additional fiscal measures to preserve Colombia’s fiscal strength. In December 2018, S&P maintained the previous 2017 rating of Colombia’s long-term foreign currency sovereign credit rating at a “BBB-” given the volatile global economy and oil prices raise risks to what has been a moderate economic recovery, following the tentative nature of the approach due to the 2018 elections as well as risks to the pace of improvement in the country’s external indebtedness and liquidity indicators. Currently,

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Colombia’s long-term debt denominated in foreign currency is rated “BBB-” by S&P, “Baa2” with negative outlook by Moody’s and “BBB” by Fitch. We cannot assure you that Colombia’s credit rating or rating outlook will not be further downgraded in the future. In July 2017, S&P downgraded Chile’s long-term foreign currency rating to “A+” from “AA-”, with a stable outlook. Also, Fitch Ratings downgraded Chile’s long-term foreign-currency issuer default rating (IDR) to “A” from “A+”, and long-term local-currency IDR to “A+” from “AA-” with a stable outlook. Finally, Moody’s changed outlook on Chile’s ratings to negative. We cannot assure you that Chile’s credit rating or rating outlook will not be further downgraded in the future. If further adverse revisions to Chile’s or Colombia’s credit ratings or rating outlook were to occur, it could have a material adverse effect on our business, future financial performance, shareholders’ equity and the value of our securities.

Chilean and Colombian authorities exercise influence on the Chilean and Colombian economies. Changes in monetary, fiscal and foreign exchange policies or in the Chilean and Colombian governments’ structures may adversely affect us.

Chilean and Colombian authorities intervene from time to time in the Chilean and Colombian economies, through changes in fiscal, monetary, and foreign exchange policies, which may adversely affect us. These changes may impact variables that are crucial for our growth strategy (such as foreign exchange and interest rates, liquidity in the currency market, tax burden, and economic growth), thus limiting our operations in certain markets, affecting our liquidity and our clients’ ability to pay and, consequently, affecting us.

In addition, changes in the Chilean and Colombian governments’ structure may result in changes in government policies, which may affect us. This uncertainty may, in the future, contribute to an increase in the volatility of the Chilean and Colombian capital markets, which, in turn, may have an adverse impact on us. Other political, diplomatic, social and economic developments in Chile, Colombia or other countries that affect Chile and Colombia may also affect us.

Our growth and profitability depend on the level of economic activity in Chile, Colombia and other emerging markets.

Substantially all of our loans are to borrowers doing business in Chile or Colombia. Accordingly, the recoverability of these loans in particular, our ability to increase the amount of loans outstanding and our results of operations and financial condition in general, are dependent to a significant extent on the level of economic activity in Chile and Colombia. The Chilean and Colombian economies have been influenced, to varying degrees, by economic conditions in other emerging market countries. Future developments in or affecting the Chilean or Colombian economies, including consequences of economic difficulties in emerging and developed markets, including some of our neighbor countries, or a deceleration in the economic growth of Asian or other developed nations to which Chile and Colombia export a majority of their respective goods, could materially and adversely affect our business, financial condition or results of operations. In this regard, with close to one third of exports, of which approximately 75.9% is copper, sent to China, developments in the Chinese economy have relevant implications in the investment, growth and exchange valuation in Chile. Additionally, changes in the economic and political outlook in the United States, Europe and Latin America influence our growth prospects, with 16.8%, 11.6% and 15.2 of exports sent to these regions, respectively.

Our results of operations and financial condition could also be affected by changes in economic or other policies of the Chilean or Colombian governments, which have each exercised and continue to exercise a substantial influence over many aspects of the private sector, or other political or economic developments in Chile. In addition, our financial condition and results of operations could also be affected by regulatory changes in administrative practices or other political or economic developments in or affecting Chile or Colombia, over which we have no control.

Inflation and government measures to curb inflation could adversely affect our financial condition and results of operations.

Although Chilean and Colombian inflation have been low in recent years, Chile and Colombia have experienced high inflation in the double-digit levels in the past. Such high levels of inflation in Chile or Colombia could adversely affect the Chilean and Colombian economies and have an adverse effect on our results of operations if such inflation is not accompanied by a matching devaluation of the local currency. We cannot make any assurances that Chilean or Colombian inflation will not revert to prior levels in the future.

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We may be unsuccessful in addressing the challenges and risks presented by our operations in countries outside Chile.

We now operate a banking business in Colombia through Itaú Corpbanca Colombia and in Panama through subsidiaries of Itaú Corpbanca Colombia. Our operations are focused on retail banking, as well as wholesale and commercial banking and providing financing and deposit services to SMEs and individuals with medium-high income levels. Itaú Corpbanca Colombia provides a broad range of commercial and retail banking services to its customers, operating principally in the cities of Bogotá, Medellín, Cali, Bucaramanga, Cartagena and Barranquilla.

We have limited experience conducting credit card and consumer finance businesses in countries outside Chile. Accordingly, we may not be successful in managing credit card and consumer finance operations outside of our traditional domestic market in Chile. We may face delays in payments by customers and higher delinquency rates in any market we enter into, which could necessitate higher provisions for loan losses and, consequently, have an adverse effect on our financial performance.

Colombia continues to experience internal security issues that have had or could have in the future a negative effect on the Colombian economy.

Colombia continues to experience internal security issues, primarily due to the activities of guerrilla groups such as non-demobilized groups within the Revolutionary Armed Forces of Colombia (Fuerzas Armadas Revolucionarias de Colombia, or the FARC), National Liberation Army (Ejército de Liberación Nacional, or the ELN), paramilitary groups drug cartels and criminal gangs (Bacrim). In remote regions of the country with minimal governmental presence, these groups have exerted influence over the local population and funded their activities by protecting, and rendering services to drug traffickers.

A peace agreement with the FARC was reached in September 2016 and the government submitted the agreement to approval via referendum, but the agreement was not approved. However, the Colombian Congress subsequently approved a revised peace agreement, and in December 2016 the agreement implementation process began. The final agreement is expected to provide the FARC with several benefits including: (i) changes in legislation concerning access to credit and financial services; (ii) tax benefits; and (iii) more favorable labor regulations. The implementation of such agreements and other legislative changes arising therefrom could have unpredicted effects and a negative impact on the Colombian economy and on our operations in Colombia.

Notwithstanding the peace agreement with the FARC, terrorist attacks, homicides, kidnappings and extortion persist in Colombia. Recent terrorist attacks by the ELN resulted in the Colombian government announcing the termination of any peace negotiations with such group. The possible escalation of such activities and the effects associated with them have had and may have in the future a negative impact on the Colombian economy and on our operations in Colombia, including on our customers, employees, results of operations, financial condition, and physical assets. Since the ELN, paramilitary groups and drug cartels were not part of the peace negotiations, it is expected that their activities will continue.

In addition, the peace agreement reached with the FARC may be modified or implemented deficiently by the current Colombian government. Although the Colombian Congress has enacted certain regulations to implement the peace agreement with the FARC, such as the law governing the Peace Special Justice System (Juridiscción Especial para la Paz), certain congressmen have expressed their intention to make amendments to the peace agreement and its related regulations. Likewise, the Colombian president has recently objected to portions of the law regulating the Peace Special Justice System (Juridiscción Especial para la Paz). If there are deviations from the peace agreement or the peace agreement is implemented deficiently, there can be no assurance that criminal actions will not escalate in Colombia.

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The peace agreement signed with FARC may result in the enactment of new laws and regulations, whose potential impact cannot be predicted.

The implementation of the peace agreement between the Colombian government and FARC will require the enactment of new laws and regulations, which may impact our activity in ways we cannot anticipate. Recently, legislation was enacted in connection with the implementation of the Rural Reform (Reforma Rural Integral) as provided under the peace agreement, such legislation included the creation of a Land Fund for the Rural Reform (Fondo de Tierras para la Reforma Rural Integral), and set forth the parameters to grant land to certain benefited populations and which properties are subject to be granted. Additionally, on April 2, 2018, the Colombian Superintendency of Finance issued External Circular No. 005, which sets forth rules governing the integration of former FARC members into the financial system. The impact of such new legislation is still unknown, and further regulations may be required for such legislation to be implemented. New laws or regulations enacted in connection with the implementation of the peace agreement may impact our activity and may have a negative effect on our financial condition and results of operations in Colombia.

Tensions with Venezuela and Ecuador may affect the Colombian economy and, consequently, our results of operations and financial condition.

Diplomatic relations with Venezuela and Ecuador, two of Colombia’s historical main trading partners, have from time to time been tense and affected by events surrounding the Colombian armed forces combat of the FARC throughout Colombia, particularly on Colombia’s borders with Venezuela and Ecuador.

Additionally, further deterioration in relations with Venezuela and Ecuador may result in the closing of borders, the imposition of trade barriers or a breakdown of diplomatic ties, any of which could have a negative impact on Colombia’s trade balance, economy and general security situation, which may adversely affect our results of operations and financial condition Since 2013, trade with Venezuela has constantly decrease; exports have decreased by 87.8%. The Venezuelan government has abruptly closed the Venezuelan border. There could be further closures of the border, which may result in further deterioration of trade relations with Venezuela and could have a negative impact in the Colombian economy, especially with respect to private consumption. Recently, diplomatic tension between the two governments has increased: Venezuela broke relations with Colombia after Colombia assisted the Venezuelan opposition’s efforts to bring humanitarian aid into Venezuela.

Colombia has recently faced an increase in migration from Venezuela. It is estimated that since 2015 approximately 1.23 million Venezuelans have entered Colombian territory with the intention to stay. The unprecedented migration wave is putting strains on Colombia. Mass migration threatens to increase political instability and social conflict in Colombia. Additionally, mass migration of Venezuelans into Colombia has created tense diplomatic relations which will likely hinder regional cooperation in reaching a solution to the migration crisis.

Constitutional collective actions (Acciones Populares), class actions (Acciones de Grupo) and other similar legal actions in Chile and Colombia involving claims for significant monetary awards against financial institutions may have an adverse effect on our business and results of operations.

Under the Chilean Consumer Protection Act and under the Colombian Constitution and Law 472 of 1998, individuals may initiate collective or class actions to protect their collective or class rights, as applicable. See “Item 4—Information on the Company—B. Business Overview— Recent Regulatory Developments in Chile—Amendment to the Consumer Protection Act.” In the past few years, Chilean financial institutions have experienced limited numbers of collective and class actions mostly relating to abusive clauses in standard contracts.

In the past few years, Colombian financial institutions, including Itaú Corpbanca Colombia, have experienced a substantial increase in the aggregate number of these actions. The great majority of such actions have been related to fees, financial services and interest rates, and their outcome is uncertain. Pursuant to Law No. 1,425 of 2010, monetary incentives for plaintiffs in constitutional collective actions were eliminated as of January 1, 2011. Nevertheless, individuals continue to have the right to initiate constitutional or class actions against Itaú Corpbanca Colombia.

Future restrictions on interest rates or banking fees could negatively affect our profitability.

In the future, additional regulations in the jurisdictions where we operate could impose limitations regarding interest rates or fees charged by Itaú Corpbanca. Any such limitations could materially and adversely affect our results of operations and financial situation.

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The Colombian Commerce Code limits the amount of interest that may be charged in commercial transactions. In the future, regulations could impose limitations regarding interest rates or fees we charge. Any such limitations could materially and adversely affect our results of operations and financial position. In the past, there have been disputes in Colombia among merchants, payment services and banks regarding interchange fees. Although such disputes have been resolved, the SIC, may initiate new investigations relating to the interchange fees. This possibility may lead to additional decreases in such fees, which in turn could adversely our operations in Colombia and our consolidated financial results.

Furthermore, the Colombian government has the authority to establish and define criteria and formulas applicable to the calculation of banking fees and other charges and to establish caps on the banking fees, credit card fees, and other charges that we impose on our customers. The Colombian government has established a cap on the fees banks can charge on withdrawals from ATMs outside their own networks. Additionally, under Colombian regulation, other than in connection with mortgage loans, banks are prohibited from charging prepayment penalties or fees on loans, other than in mortgage loans, except when the outstanding amount of a loan is more than the equivalent of 880 monthly minimum wages, or SMMLV (approximately US$230,000). In other loans in which the outstanding amount is greater than 880 SMMLV, prepayment penalties or fees may be charged but only when expressly contemplated under the governing loan agreement. With respect to mortgage long-term loans granted in connection with the acquisition of homes, banks are prohibited from charging prepayment penalties. Further limits or regulations regarding banking fees, and uncertainties with respect thereto could have a negative effect on Itaú Corpbanca Colombia and our results of operations and financial condition.

Insolvency laws may limit our monetary collection and ability to enforce our rights.

Colombian insolvency laws provide that creditors of an insolvent debtor in default are prohibited from initiating collection proceedings outside the bankruptcy or reorganization process of such debtor. In addition, all collection proceedings outstanding at the beginning of any bankruptcy or reorganization process of any insolvent debtor must be suspended and creditors are prevented from enforcing their rights against the collateral and other assets of the debtor until the reorganization has been agreed (in which case the collection proceeding is resolved within the reorganization agreement) or it is declared that no reorganization was agreed. Additionally, Colombian laws provide insolvency protection for non-merchant individuals. This insolvency protection entails that, once a non-merchant individual has ceased paying his or her debts, such individual can initiate a voluntary insolvency proceeding before a notary public or mediator to reach an agreement with its creditors. The terms of any agreement reached with a group (two or more) of creditors that represent more than 50% of the total amount of the claims will be mandatorily applicable to all relevant creditors. There are other protections such as an automatic stay for 80 days, which could be extended by 30 additional days. These legal limitations make it difficult to recover on defaulted loans, and as a result, may cause Itaú Corpbanca Colombia to enhance its credit requirements which would result in decreased lending to individuals by making it more expensive. In addition, increased difficulties in enforcing debt and other monetary obligations due to this insolvency law could have an adverse effect on Itaú Corpbanca Colombia and our results of operations and financial condition.

Insolvency proceedings may Adversely Affect our Foreclosure Rights in Respect to Security Registered as Garantía Mobiliaria.

Pursuant to Article 50 of Law No. 1676 of 2013, secured creditors in Colombia with collateral registered as personal property collateral (Garantía Mobiliaria) (i) may be allowed to foreclose the respective collateral owned by the debtor subject to a reorganization proceeding, provided that the assets under the security do not constitute essential assets for the economic activity of the debtors or such assets are at risk of being destroyed and the competent judge authorizes such foreclosure, and (ii) once the reorganization agreement is confirmed, each secured creditor may have priority over the other creditors that are part of the agreement. However, in accordance with recent judicial precedents, such rights will only be available to the secured creditors to the extent that the other assets of the debtor are sufficient to ensure the payment of the salary and benefits derived from the employment contracts as well as alimony, if any. Any inability to enforce our foreclosure rights under this Law could have a material adverse effect on our results of operations and financial condition.

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The Central Bank of Colombia may impose requirements on our (and other Colombian residents’) ability to obtain loans in foreign currency.

The Central Bank of Colombia may impose certain mandatory deposit requirements in connection with foreign currency denominated loans obtained by Colombian residents, including Itaú Corpbanca Colombia, although no such mandatory deposit requirement is currently in effect. We cannot predict or control future actions by the Central Bank of Colombia in respect of deposit requirements, which may involve the establishment of a mandatory deposit percentage, and the use of such measures by the Central Bank of Colombia may raise our cost of raising funds and reduce our financial flexibility.

Risks Relating to Expansion and Integration of Acquired Businesses

We may not be able to manage our growth successfully.

We have been expanding the scope of our operations over the past few years, and we expect that this expansion will continue. As we continue to grow, we must improve our operational, technical and managerial knowledge and compliance systems in order to effectively manage our operations across the expanded group. Failure to integrate, monitor and manage expanded operations could have a material adverse effect on our business, reputation and financial results. Our future growth will also depend on our access to internal and external financing sources. We may be unable to access such financing on commercially acceptable terms or at all.

Integration of acquired or merged businesses involves certain risks that may have a material adverse effect on us.

We have engaged in a number of mergers and acquisitions in the past, including the Merger, the Santander Colombia Acquisition, the Helm Bank Acquisition and the subsequent merger of Helm Bank with and into Itaú Corpbanca Colombia, consummated on June 1, 2014, that may make further mergers and acquisitions in the future as part of our growth strategy. We believe that these transactions will contribute to our continued growth and competitiveness in the Chilean, Colombian, and international banking sectors.

These acquisitions and mergers and the integration of such institutions and assets involve certain risks, which as of the current stage of such transactions may still include remaining risks such as:

• integrating new networks, information systems, financial and accounting systems, risk and other management systems, financial planning and reporting, products and customer bases into our existing business may run into difficulties, cause us to incur unexpected costs and operating expenses and place additional demands on management time; and

• the expected operation and financial synergies and other benefits from such mergers or acquisitions may not be fully achieved.

If we fail to achieve the business growth opportunities, cost savings and other benefits we anticipate from mergers and acquisition transactions, or incur greater integration costs than we have estimated, our results of operations and financial condition may be materially and adversely affected.

Acquisitions and strategic partnerships may not perform in accordance with expectations or may disrupt our operations and adversely affect our business financial condition and results of operations.

A component of our strategy is to identify and pursue growth-enhancing strategic opportunities. As part of that strategy we have consummated (i) the Santander Colombia Acquisition in 2012 (now “Itaú Corpbanca Colombia”); (ii) the Helm Bank Acquisition in 2013 (Helm Bank was merged with and into Itaú Corpbanca Colombia on June 1, 2014); and (iii) the Merger in 2016. We will continue to consider additional strategic acquisitions and alliances from time to time, inside and outside of Chile and Colombia. Strategic acquisitions and alliances, could expose us to risks with which we have limited or no experience. Future acquisitions may also be subject to regulatory approval, which we may not receive, particularly in view of our increasing market share in the Colombian banking industry.

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We must necessarily base any assessment of potential acquisitions and alliances on assumptions with respect to operations, profitability and other matters that may subsequently prove to be incorrect. Future acquisitions and alliances may not produce anticipated synergies or perform in accordance with our expectations and could adversely affect our business, financial condition and results of operations.

In addition, new demands on our existing organization, management and employees resulting from the integration of new acquisitions could disrupt our operations and adversely affect our business, financial condition and results of operations.

Itaú Corpbanca may be unable to fully realize the anticipated benefits of the combination of Corpbanca and Banco Itaú Chile.

On April 1, 2016, Corpbanca and Banco Itaú Chile completed a business combination, which was consummated through the Merger. The Merger brought together two large financial institutions that had previously operated as independent companies. Significant management attention and resources have been and will continue to be required to integrate certain aspects of the business practices and operations of Corpbanca and Banco Itaú Chile. The success of the Merger will depend, in part, on the ability of Itaú Corpbanca to realize anticipated revenue synergies, cost savings and growth opportunities resulting from the combination of the businesses of former Corpbanca and former Banco Itaú Chile. We expect to generate synergies resulting from optimization of organizational structures, scalable IT systems, savings related to the branch network and reductions in administrative expenses. There is a risk, however, that Itaú Corpbanca may not be able to combine the businesses of Corpbanca and Banco Itaú Chile in a manner that permits Itaú Corpbanca to realize these revenue synergies, cost savings and growth opportunities in the time, manner or amounts it expects or at all. Potential difficulties Itaú Corpbanca may encounter as part of the Merger process include, among other things:

• complexities associated with managing the combined companies;

• the need to implement, integrate and harmonize various business-specific operating procedures and systems, as well as the financial, accounting, information and other systems of Corpbanca and Banco Itaú Chile;

• the need to coordinate the existing products and customer bases of Corpbanca and Banco Itaú Chile; and

• potential unknown liabilities and unforeseen increased expenses or delays associated with the Merger and the other transactions described in the Transaction Agreement (as defined below).

• In addition, it is possible that the integration process could result in:

• diversion of management’s attention from their normal areas of responsibility to address integration issues; and

• the disruption of Itaú Corpbanca’s ongoing businesses or inconsistencies in its standards, controls, procedures and policies,

each of which could adversely affect Itaú Corpbanca’s ability to maintain good relationships with its customers, suppliers, employees and other constituencies, or to achieve the anticipated benefits of the Merger, and could increase costs or reduce its earnings or otherwise adversely affect the business, financial condition, results of operations and/or prospects of Itaú Corpbanca. Actual revenue synergies, cost savings, growth opportunities and efficiency and operational benefits resulting from the Merger may be lower and may take longer than Itaú Corpbanca currently expects. Therefore if the benefits from the Merger are not as expected, we may be required to record impairment losses on the carrying amount (including goodwill) of the acquired business, which may have a material adverse effect on our financial condition and results of operations. See “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Critical Accounting Policies and Estimates – Estimate of Impairment of Goodwill.”

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The integration of two large companies also presents significant management challenges. In order to achieve the anticipated benefits of the Merger, the operations of the two companies are being reorganized and their resources will need to be combined in a timely and flexible manner. There can be no assurance that Itaú Corpbanca will be able to implement these steps as anticipated or at all. If Itaú Corpbanca fails to achieve the planned restructuring within the time frame that is currently contemplated or to the extent that is currently planned, or if for any other reason the expected revenue synergies, cost savings and growth opportunities fail to materialize, the Merger may not produce the benefits that Itaú Corpbanca currently anticipates.

Itaú Corpbanca’s future results will suffer if it cannot effectively manage its expanded operations following completion of the Merger.

The size of Itaú Corpbanca’s combined business following the completion of the Merger is significantly larger and more complex than the previous businesses of former Corpbanca or former Banco Itaú Chile individually. Itaú Corpbanca’s future success will depend, in part, on its ability to manage this expanded business, posing substantial challenges for management. There can be no assurances that Itaú Corpbanca will be successful or that it will fully realize the expected operating efficiencies, cost savings, revenue synergies and other benefits currently anticipated from the Merger.

Risks Relating to Our Securities

Our controlling shareholder is able to exercise significant control over us which could result in conflicts of interest.

Itaú Unibanco is the sole controlling shareholder of Itaú Corpbanca. As of March 31, 2019 Itaú Unibanco beneficially owned 38.14% of our voting common shares. In addition, (i) Itaú Unibanco and (ii) Inversiones Gasa Limitada, CorpGroup Holding Inversiones Limitada, CorpGroup Banking S.A., Compañía Inmobiliaria y de Inversiones Saga SpA and CorpGroup Interhold SpA (together, “CorpGroup”) have signed a shareholders’ agreement to determine certain aspects related to corporate governance, dividend policy, transfer of shares, liquidity and other matters (the “Itaú CorpGroup Shareholders’ Agreement”). Itaú Unibanco and CorpGroup are in position to elect 11 of the 13 members of our board of directors. The Itaú CorpGroup Shareholders’ Agreement provides that the directors appointed by Itaú Unibanco and CorpGroup will vote, to the extent permitted by the law, in a block and in accordance with the recommendation of Itaú Unibanco, subject to certain exceptions. Accordingly, Itaú Unibanco is able to control the actions taken by the board of directors of Itaú Corpbanca on most matters, which could result in conflicts of interest.

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U.S. securities laws do not require us to disclose as much information to investors as a U.S. issuer is required to disclose.

The corporate disclosure requirements applicable to us may not be equivalent to the requirements applicable to a U.S. company and, as a result, you may receive less information about us than you might otherwise receive in connection with a comparable U.S. company. We are subject to the periodic reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, that apply to “foreign private issuers.” The periodic disclosure required of foreign private issuers under the Exchange Act is more limited than the periodic disclosure required of U.S. issuers.

We are required to file an annual report on Form 20-F, but we are not required to file any quarterly reports. A U.S. registrant must file an annual report on Form 10-K and three quarterly reports on Form 10-Q.

We are required to furnish current reports on Form 6-K, but the information that we must disclose in those reports is governed primarily by Chilean law disclosure requirements and may differ from Form 8-K’s current reporting requirements imposed on a U.S. issuer.

We are not subject to the proxy requirements of Section 14 of the Exchange Act and our officers, directors and principal shareholders are not subject to the short swing insider trading reporting and recovery requirements under Section 16 of the Exchange Act.

Our status as a controlled company and a foreign private issuer exempts us from certain of the corporate governance standards of the New York Stock Exchange.

We are a “controlled company” and a “foreign private issuer” within the meaning of the New York Stock Exchange (NYSE) corporate governance standards, which exempts us from certain NYSE corporate governance requirements. In addition, a foreign private issuer may elect to comply with the practice of its home country and not to comply with certain NYSE corporate governance requirements, including the requirements that (i) a majority of our board of directors (Directorio), consist of independent directors, (ii) a nominating and corporate governance committee be established that is composed entirely of independent directors and has a written charter addressing the committee’s purpose and responsibilities, (iii) a compensation committee be established that is composed entirely of independent directors and has a written charter addressing the committee’s purpose and responsibilities, (iv) an annual performance evaluation of the nominating and corporate governance and compensation committees be undertaken, and (v) the members of the audit committee meet the Exchange Act Rule 10A-3(b)(1) independence requirements. We currently use these exemptions and intend to continue using these exemptions. Accordingly, you will not have the same protections afforded to investors in companies that are subject to all NYSE corporate governance requirements. See “Item 16G. Corporate Governance” for a comparison of the corporate governance standards of the New York Stock Exchange and Chilean practice.

Investors may find it difficult to enforce civil liabilities against us or our directors, officers and controlling persons.

We are organized under the laws of Chile and our principal place of business (domicilio social) is in Santiago, Chile. Most of our directors, officers and controlling persons reside outside of the United States. In addition, all or a substantial portion of our assets are located outside of the United States. As a result, it may be difficult for investors to effect service of process within the United States on such persons or to enforce judgments against them, including in any action based on civil liabilities under the United States federal securities laws.

Risks Relating to Our ADSs and Common Shares

There may be a lack of liquidity and market for our ADSs and common shares.

A lack of liquidity in the markets may develop for our ADSs, which would negatively affect the ability of the holders to sell our ADSs or the price at which holders of our ADSs desire to sell them. Future trading prices of our ADSs will depend on many factors including, among other things, prevailing interest rates, our operating results and the market for similar securities.

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Our common shares underlying the ADSs are listed and traded on the Santiago Stock Exchange and the Chilean Electronic Exchange, although the trading market for the common shares is small by international standards.

In addition, according to Article 14 of the Ley No. 18,045 de Mercado de Valores (the “Chilean Securities Market Act”), the CMF –formerly Superintendencia de Valores y Seguros or Chilean Superintendency of Securities and Insurance– may suspend the offer, quotation or trading of shares of any company listed on the Chilean stock exchanges for up to 30 days if, in its opinion, such suspension is necessary to protect investors or is justified for reasons of public interest. Such suspension may be extended for up to 120 days. If, at the expiration of the extension, the circumstances giving rise to the original suspension have not changed, the CMF will then cancel the relevant listing in the registry of securities. These and other factors may substantially limit your ability to sell the common shares underlying your ADSs at a price and time at which you wish to do so.

You may be unable to exercise preemptive rights.

The Ley 18,046 sobre Sociedades Anónimas and the Reglamento de Sociedades Anónimas, which we refer to collectively as the Chilean Corporations Act, and applicable regulations establish that whenever we issue new common shares for cash, we are obligated by law to grant preemptive rights to all of our shareholders (including the depositary on behalf of the holders of ADSs), giving them the right to purchase a sufficient number of shares to maintain their existing ownership percentage. However, we may not be able to offer shares to United States holders of ADSs pursuant to preemptive rights granted to our shareholders in connection with any future issuance of common shares unless a registration statement under the U.S. Securities Act of 1933, as amended, or the Act, is effective with respect to such rights and common shares, or an exemption from the registration requirements of the Act is available.

Our existing shareholders who do not participate in any future preemptive rights offering will suffer an immediate dilution of their percentage equity participation in us. In addition, investors who purchase ADSs or common shares may be subject to dilution of their equity participation in us upon the completion of any future preemptive rights offering. Investors will not know the extent to which they will be diluted until the expiration of any future preemptive rights offering in Chile.

You may have fewer and less well defined shareholders’ rights than with shares of a company in the United States.

Our corporate affairs are governed by our Estatutos Sociales, or By-laws, and the laws of Chile. Under such laws, our shareholders may have fewer or less well-defined rights than they might have as shareholders of a corporation incorporated in a U.S. jurisdiction. For example, under legislation applicable to Chilean banks, our shareholders would not be entitled to appraisal rights in the event of a merger or other business combination undertaken by us.

Holders of ADSs are not entitled to attend shareholders’ meetings, and they may only vote through the depositary.

Under Chilean law, a shareholder is required to be registered in our shareholders’ registry at least five business days before a shareholders’ meeting in order to vote at such meeting. A holder of ADSs will not be able to meet this requirement, and accordingly is not entitled to vote at shareholders’ meetings, because the shares underlying the ADSs will be registered in the name of the depositary. While a holder of ADSs is entitled to instruct the depositary as to how to vote the shares represented by ADSs in accordance with the procedures provided for in the deposit agreement, a holder of ADSs will not be able to vote its shares directly at a shareholders’ meeting or to appoint a proxy to do so. In certain instances, a discretionary proxy may vote our shares underlying the ADSs if a holder of ADSs does not instruct the depositary with respect to voting. In addition, the vote of a holder of ADSs may not be necessary to approve certain matters since under Chilean law, substantially all of the forms of corporate action can be approved with the votes of our controlling shareholder, Itaú Unibanco, in a duly summoned shareholders’ meeting, except for certain matters requiring supermajority approval according to Chilean law.

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U.S. holders of our ADSs or common shares could suffer adverse tax consequences if we are characterized as a passive foreign investment company.

If you are a U.S. holder (as defined in “Item 10. Additional Information—E. Taxation—U.S. federal income tax considerations”) and we are a passive foreign investment company, or PFIC, for any taxable year during which you own our ADSs or common shares, you could be subject to adverse U.S. tax consequences. As of the date of this Annual Report, we do not expect to be classified as a PFIC for U.S. federal income tax purposes for our current taxable year or for any taxable year in the foreseeable future. However, the determination of whether we are a PFIC is made on an annual basis and will depend on the composition and nature of our income and the composition, nature and value of our assets from time to time, and therefore no assurance can be provided regarding our PFIC status. You should consult your tax advisor regarding the U.S. federal, state and local and other tax consequences of owning and disposing of the ADSs or common shares in your particular circumstances. See “Item 10. Additional Information—E. Taxation—U.S. federal income tax considerations” for additional information related to the PFIC rules and their application to the Bank.

Holders of the ADSs or our common shares could be subject to a 30% U.S. withholding tax.

Pursuant to Sections 1471 through 1474 of the Internal Revenue Code of 1986, as amended, or the Code, and U.S. Treasury Regulations promulgated thereunder, a 30% withholding tax may, in the future, be imposed on all or some of the payments on the ADSs or our common shares to holders and non-U.S. financial institutions receiving payments on behalf of holders that, in each case, fail to comply with information reporting, certification and related requirements. This withholding tax, if it applies, could apply to any payment made with respect to the ADSs or our common shares, and ADSs or shares of our common shares held through a non-compliant institution may be subject to withholding even if the holder otherwise would not be subject to withholding. U.S. holders are urged to consult their tax advisers regarding the application of these rules to their ownership of the ADSs or our common shares. See “Item 10. Additional Information—E. Taxation—U.S. federal income tax considerations” for additional information related to these rules and their application to holders of ADSs or our common shares.

Exchange controls and withholding taxes in Chile may limit repatriation of your investment.

Equity investments in Chile by persons who are not Chilean residents may be subject to exchange control regulations that govern the repatriation of investments and earnings.

Dividends received by holders of ADSs are paid net of foreign currency exchange fees and fees and expenses of the depositary and are subject to Chilean withholding tax, currently imposed at a rate of 35%, subject to credits in certain cases as described under “Item 10. Additional Information—E. Taxation—Chilean Tax Considerations.” In order to facilitate capital movements from and into Chile and to encourage foreign investment, the Central Bank of Chile eliminated many foreign exchange restrictions and adopted the Compendium of Foreign Exchange Regulations (Compendio de Normas de Cambios Internacionales) effective April 19, 2001.

We cannot assure you that additional Chilean restrictions applicable to the holders of ADSs, the disposition of the shares underlying the ADSs or the repatriation of the proceeds from such disposition or the payment of dividends will not be imposed in the future, nor can we advise as to the duration or impact of such restrictions, if imposed. If for any reason, including changes in the Foreign Investment Agreement or Chilean law, the depositary is not able to convert Chilean pesos to U.S. dollars, investors would receive dividends or other distributions, if any, in Chilean pesos.

ITEM 4. INFORMATION ON THE COMPANY

A. HISTORY AND DEVELOPMENT OF THE COMPANY

We are a publicly traded company (sociedad anónima) organized under the laws of Chile and licensed by the SBIF to operate as a commercial bank. Our legal name is Itaú Corpbanca, and our commercial name is Banco Itaú and/or Itaú. Our principal executive offices are located at Rosario Norte 660, Las Condes, Santiago, Chile. Our telephone number is 56-2-2660-8000 and our website is www.itau.cl. Our agent in the United States is Itaú Corpbanca New York Branch, Attention: Joaquín Rojas Walbaum, located at 885 Third Avenue, 33rd Floor, New York, NY 10022. Information set forth on our website does not constitute a part of this Annual Report. Itaú Corpbanca is organized under the laws of Chile and its subsidiaries are organized under the laws of Chile and Colombia.

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History

The Bank’s history has been extensive and with a challenging road that has led us to become the oldest private operating bank in Chile, incorporated as Banco de Concepción by Decree No. 180 of the Chilean Ministry of Finance on October 3, 1871, and legally began operations as a bank on October 16 of the same year. We were founded by a group of residents of the city of Concepción, Chile, led by Aníbal Pinto, who would later become President of Chile.

In 1971, Banco de Concepción was transferred to a government agency, Corporación de Fomento de la Producción (the Chilean Corporation for the Development of Production, or CORFO). Also in 1971, Banco de Concepción acquired Banco Francés e Italiano in Chile, which provided for the expansion of Banco de Concepción into Santiago. In 1972 and 1975, the Bank acquired Banco de Chillán and Banco de Valdivia, respectively. In November 1975, CORFO sold its shares of the Bank to private business persons, who took control of the Bank in 1976. In 1980, the name of the Bank was changed to Banco Concepción. In 1983, control of Banco Concepción was assumed by the SBIF. The bank remained under the control of the SBIF through 1986, when it was acquired by Sociedad Nacional de Minería (the Chilean National Mining Society, or SONAMI). Under SONAMI’s control, Banco Concepción focused on providing financing to small- and medium-sized mining interests, increased its capital and sold a portion of its high-risk portfolio to the Central Bank of Chile.

Investors led by Mr. Alvaro Saieh Bendeck purchased a majority interest of Banco Concepción from SONAMI in 1996. Following the acquisition by Mr. Alvaro Saieh Bendeck in 1996, the brand name changed to Corpbanca, hired a management team with substantial experience in the Chilean financial services industry and commenced a period of significant growth fueled by organic expansion and acquisitions. Our first significant transactions were the acquisition of the assets of the consumer loan division of Corfinsa and the finance company Financiera Condell S.A. in 1998. Both combined created the Bank’s Consumer Division, Banco Condell, focused on the middle-low income segment of the population in Chile.

With a view to its internationalization in November 2004, the Bank completed the listing process that enabled it to trade its ADSs on the New York Stock Exchange. Five years later, the New York Branch was opened as a support for clients who can see their possibilities of financing in the United States expanded. Two years later, Corpbanca opened its representative office in Spain, whose role is to inform and promote the Bank with foreign companies and serve as a liaison with bank clients in Chile and Colombia.

In June 2012, former Corpbanca finalized the acquisition of Banco Santander Colombia S.A. (now Itaú Corpbanca Colombia). With this acquisition, we became the first Chilean bank to have a banking subsidiary outside the country. In 2013, we acquired Helm Bank S.A., and the following year, merged it with and into Itaú Corpbanca Colombia, maintaining the networks of branches separately: Itaú Corpbanca Colombia and Helm.

Becoming a large bank with a regional presence prompted our former controlling shareholder to enter, in early 2014, into a merger agreement with Itaú Unibanco and Banco Itaú Chile.

Itaú financial group expanded into Chile in September 2006 after the acquisition of BankBoston (Chile). On February 28, 2007, BankBoston (Chile) was named Banco Itaú Chile, after the Superintendency of Banks and Financial Institutions approved the acquisition.

In June 2015, the Extraordinary Shareholders Meetings of Corpbanca and Banco Itaú Chile agreed to the Merger, which was approved by the Superintendency of Banks and Financial Institutions in September of the same year. The Merger was consummated on April 1, 2016, the date on which the Bank was renamed “Itaú Corpbanca.”

As of December 31, 2018, the Bank is the fifth largest private bank in Chile with approximately 10.2% market share in the local credit market.

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In this way, the stories of Banco Itaú Chile and Corpbanca were merged into a single one, with Corpbanca contributing a long and successful business trajectory which, since its beginning in 1871 in the city of Concepción, has had a clear goal: offering clients a service of excellence being faithful to what inspired its founders. On the other hand, Itaú Unibanco, with more than 90 years of history in Brazil, contributed all its experience as the largest private bank in Latin America and one of the largest banks in the world measured in market capitalization with a leading presence in the Brazilian market.

Our business model is the result of the combination of the local banks’ strengths and local knowledge, which will allow us to reach more clients, with an extended range of products and financial solutions.

A summary of the main milestones in the history of the Bank is set forth in the following chart:

The Merger

On January 29, 2014, Corpbanca and Itaú Chile agreed to merge (the “Transaction Agreement”). The shareholders of former Corpbanca approved the Merger in an extraordinary shareholders’ meeting held on June 26, 2015, and the shareholders of former Banco Itaú Chile gave their consent to the merger in an extraordinary shareholders’ meeting held on June 30, 2015.

On April 1, 2016 the Merger was consummated and Banco Itaú Chile was merged with and into Corpbanca. As of March 31, 2019, Itaú Unibanco and CorpGroup beneficially own 38.14% and 28.57% of our outstanding common shares, respectively. Itaú Unibanco and CorpGroup also entered into the Itaú CorpGroup Shareholders’ Agreement. Upon the consummation of the Merger, Itaú Unibanco became the controlling shareholder of the merged bank. For a description of the Itaú CorpGroup Shareholders’ Agreement and the Transaction Agreement, see “Item 10. Additional Information—C. Material Contracts.”

Immediately following the Merger, the corresponding subsidiaries of Banco Itaú Chile and Corpbanca continued to operate independently and their respective clients were served by their current executives. In January 2017, December 2017, and April 2018, respectively, each of our securities brokerage (Corredoras de Bolsa) subsidiaries, our general fund managers’ (Administradoras Generales de Fondos) subsidiaries, and our insurance broker’s subsidiaries, were consolidated, leaving one entity for each business.

By consolidating operations in Chile and Colombia, the new bank became one of Chile’s largest private financial institutions, ranking fifth in the industry with a market share by loans of 10.2% in Chile at the end of 2018. The Merger and combination of the strengths of both banks has translated into an expansion in the offer of products and services for our clients, with a large branch platform in Chile (we operate 201 branch offices in Chile and one branch in New York) and Colombia (161, including one office in Panama).

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Platform Integration

After the Merger, we started to integrate the processes and systems of Corpbanca and Banco Itaú Chile, which contemplated the following three stages in order to achieve the Target Operational Model, or TOM:

• TOM LD1: This stage included integrating all the financial statements, balance sheets and regulatory reports (SBIF, SII, Central Bank of Brazil) of both banks. It also included delivering a single credit position (credit, financial and market risk) of customers from both of the merged banks, and having one single trading desk. This stage was completed with the first filing of financial information of Itaú Corpbanca with the SBIF in early May 2016.

• TOM Migration: This stage included migrating customers, developing functional gaps for customers of both banks to enjoy the functionalities offered by each bank separately, and building the necessary drivers of coexistence of both bank’s systems. This stage was completed by the end of 2017.

• TOM Technology and Operations: This stage refers to the technological integration and implementation of improvements of both banks supported in a single core banking. The implementation of these improvements to capture additional synergies is expected to be completed by the end of 2019.

The Itaú Colombia Acquisition

The obligation of the parties to the Transaction Agreement to cause Itaú Corpbanca to acquire all of the outstanding shares of Itaú BBA Colombia or to carry out a merger of Itaú Corpbanca Colombia, formerly Banco Corpbanca Colombia, with Itaú BBA Colombia was amended on January 20, 2017 and replaced with the obligation of the parties to cause Itaú Corpbanca Colombia to acquire the assets and liabilities of Itaú BBA Colombia at their book value in accordance with the terms and conditions agreed by Itaú Corpbanca Colombia and Itaú BBA Colombia on November 1, 2016 (the “Itaú Colombian Asset & Liabilities Acquisition”). The Itaú Colombian Asset & Liabilities Acquisition was approved by the shareholders of Itaú Corpbanca Colombia and the Colombian Superintendency of Finance (the “CFS”) and completed on June 16, 2017, as established in the agreement signed on June 1, 2017 between Itaú Corpbanca Colombia, as assignee, and Itaú BBA Colombia S.A. Corporación Financiera, as assignor. Pursuant to the Itaú Colombian Asset & Liabilities Acquisition transaction, Itaú Corpbanca Colombia paid to Itaú BBA Colombia S.A. Corporación Financiera Ch$33,205 million. This agreement also contemplated the rendering of certain services by Itaú Corpbanca Colombia in favor of Itaú BBA Colombia and the hiring of the senior management of Itaú BBA Colombia by Itaú Corpbanca Colombia.

Additionally, the amendment to the Transaction Agreement also included the postponement of the date for Itaú Corpbanca to purchase the shares that CorpGroup holds in Itaú Corpbanca Colombia. The purchase of those shares of Itaú Corpbanca Colombia held by CorpGroup (currently representing 12.36% of shares outstanding), which was previously agreed to be carried out no later than January 29, 2017, was postponed until January 28, 2022, subject to receipt of the applicable regulatory approvals. The purchase price for the shares has not changed and will be US$3.5367 per share plus (i) interest from (and including) August 4, 2015 until (but excluding) the payment date at an annual interest rate equal to Libor plus 2.7% minus (ii) the sum of (x) the aggregate amount of dividends paid by Itaú Corpbanca Colombia to CorpGroup since the date of the Transaction Agreement, plus (y) the accrued interest with respect to the amount of such dividends since the date of their payment until the payment date of the purchase price, at an annual interest rate equal to Libor plus 2.7%.

Capital Expenditures

The following table reflects our capital expenditures in the years ended December 31, 2016, 2017 and 2018:

	For the Year Ended December 31,
	2016		2017		2018
	(in millions of Ch$)
Land and buildings		11,002		27,125		6,207
Machinery and equipment		87,600		50,756		74,449
Furniture and fixtures		—		—		—
Vehicle		—		—		—
Other		6,555		9,274		2,296
Total		105,157		87,155		82,952

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Total capital expenditures in 2018 of Ch$82,952 million consisted mainly of Ch$58,085 million in expenses relating to the purchase of software and computer equipment. For further details relating to these results and related divestitures, see Notes 1(m) and 13 of our consolidated financial statements included herein.

B. BUSINESS OVERVIEW

COMPETITIVE STRENGTHS

We believe that the Merger will enable us to emerge as a leading banking platform in Chile and Colombia as a result of the following strengths:

Banking Platform with Larger Scale

We believe that as a result of the Merger, we have greater scale and resources to grow and compete more effectively in Chile and Colombia. The merged bank has become the fifth largest private bank in Chile and will result in a banking platform for future expansion in the Andean Region. According to the SBIF, as of December 31, 2018, we ranked fifth among private banks in total loans with 10.2% market share on an unconsolidated basis (taking into account only our operations in Chile). Additionally, as of the same date, the SBIF ranked us fifth in total deposits with 8.5% market share among private banks in the Chilean market.

In 2018, our operations in Chile and Colombia reached an aggregate net income of Ch$166,854 million. From a macroeconomic perspective, the events with the greatest impact on our results were: (i) an acceleration of economic activity in both Chile and Colombia, which favored the generation of new business and an improvement of the credit risk of part of the our loan portfolio; (ii) the drop in the monetary policy interest rate in Colombia, which went from 4.75% at the beginning of the year to 4.25% at the end of December, which positively impacted our cost of funding; and (iii) the higher inflation observed in Chile of 2.8% in 2018 compared to 2.3% in 2017, which improved our financial margin as further discussed below in “Item 5—Operating and Financial Review and Prospects—A. Operating Results—The Economy—Results of Operations for the Years Ended December 31, 2016, 2017 and 2018—Net Income.”

Unique Control and Support from a Leading Institution

We believe that the Merger has provided us with a competitive advantage over our competitors. Since Itaú Unibanco is the largest private financial institution in Brazil and a premier Latin American franchise, the Merger provides us with an opportunity to leverage Itaú Unibanco’s strong global client relationships in the markets the Bank operates while enhancing opportunities for growth abroad.

We expect that Itaú Corpbanca will be able to expand its offering of banking products through a successful managing model, segmentation and digitalization, all based on Itaú Unibanco’s strategy. Our balance sheet provides us with cross-selling opportunities and allows us to benefit from additional synergies through: (i) the optimization of cost structures; (ii) savings derived from an enhanced branch network; (iii) savings derived from scalable IT systems; and (iv) improvements in the cost of funding.

Diversified Footprint in Chile and Colombia

We believe that the enhanced footprint that Itaú Corpbanca has in Chile and Colombia gives us an increased ability to grow and compete more effectively within those countries, further consolidating our market position in Chile and Colombia.

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We believe that our acquisitions in Colombia give us a distinct advantage over our competitors in Chile and Colombia. We are the first, and until September 30, 2015 we were the only, Chilean-based bank to acquire a universal bank outside Chile. As of today, we remain the only Chilean-based bank to have a footprint in Colombia through a universal bank. As of December 31, 2018, according to the SBIF, Itaú Corpbanca was the fifth largest private bank in Chile by loans and deposits and according to the Colombian Superintendency of Finance, Itaú Corpbanca Colombia was the seventh largest bank in Colombia in terms of loans and the eighth largest in terms of deposits.

Experienced Management Team

The chairman of our board of directors, Mr. Jorge Andrés Saieh Guzmán, became chairman in February 2012. He has over 18 years of experience as a member of our board of directors. On August 1, 2018, the Board of Directors of Itaú Corpbanca agreed to appoint Mr. Manuel Olivares Rossetti as the new chief executive officer (CEO) of the Bank, commencing January 1, 2019. Mr. Olivares shall continue leading the Bank, consolidating all the work and progress attained so far. Mr. Manuel Olivares was most recently the CEO of Banco Bilbao Vizcaya Argentaria, Chile since 2013, after holding various positions at BBVA. Previously, he worked for 12 years in different positions at Citibank in Chile. Mr. Olivares received a B.A. in Business and Administration from the Universidad de Chile and possesses more than 30 years of experience in the banking industry, both locally and internationally. Since August 2018, Mr. Olivares has been participating in a process of immersion and understanding of the business, policies, standards and culture of Itaú Corpbanca and of Itaú Unibanco, in coordination with our former CEO, Milton Maluhy. Mr. Milton Maluhy was in his position of chief executive officer of Itaú Corpbanca between April 1, 2016 and December 31, 2018. After accomplishing the most relevant milestones of the merger, Mr. Maluhy has returned to Itaú Unibanco in Brazil to a new position of Chief Financial Officer/Chief Risk Officer.

Our chief financial officer (CFO), Gabriel Moura, has over 22 years of experience in the banking and financial industry. He is part of Itaú Unibanco since 2000 and a partner since 2010. The CEO of Itaú Corpbanca Colombia, Alvaro Pimentel, has over 21 years of experience in Itaú Unibanco. He has a degree in economics from the Universidade Estadual de Campinas—Unicamp in Brazil and an Executive M.B.A. in finance from Insper in Brazil. A number of the members of the board of directors of Itaú Corpbanca Colombia also have a wealth of experience in the Colombian market and the banking and financial services industry.

Sound Risk Management

After the Merger, we revised our risk policies to align credit criteria to Itaú’s internal risk policies. This risk management philosophy enables us to identify risks and resolve potential problems on a timely basis. We believe that our asset quality is superior to the market average in terms of credit risk metrics. As of December 2018, our non-performing loan to total loans and our write-offs to average outstanding loans ratios were 2.1% and 0.6%, respectively.

Operating in a Stable Economic Environment Within Latin America

We conduct a majority of our business in Chile and a significant amount in Colombia. The Chilean and Colombian economies have generally demonstrated a stable macroeconomic environment in terms of growth and inflation. The Chilean economy is generally recognized as among the most stable in Latin America, as evidenced by its investment grade ratings of A1 by Moody’s, A+ by Standard & Poor’s and A by Fitch Ratings, the highest ratings in the region. Chile has consistently received investment-grade credit ratings since Standard & Poor’s and Moody’s started coverage in 1992 and 1994, respectively. Moody’s and Fitch Ratings have an investment grade rating of Colombia of Baa2 and BBB, respectively, with a “negative” and “stable” outlook, respectively. Standard & Poor’s has an investment grade rating of Colombia of BBB-, with a “stable” outlook.

STRATEGY

Our strategy aims at being a leading bank in terms of sustainable performance and customer satisfaction. The key strategic drivers of our strategy are:

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Continue to Grow our Operations Profitably as a Universal Bank

We seek to achieve organic growth in all of our lines of business in Chile and Colombia by offering competitive products and services to our clients. We believe that we have developed a successful wholesale banking business model, which allows us to realize high margins on the cross-selling of our products to our large corporate clients. Our intention is to continue to expand the wholesale banking business model to our operations in Colombia. We are focusing our marketing and sales efforts on adapting this business model to apply to our SME clients in Chile and Colombia. Additionally, we believe that our strong franchise in the retail banking unit offers us the potential for significant growth in our loan portfolio, in the low-, mid- and high-income segments. In particular, we believe that there is significant opportunity to expand our wealth management business through the offering of unique investment products and opportunities. We believe that the Merger has given us a complementary banking operations and an improved market position, which enhances our client servicing models. In addition, we seek to identify and pursue growth throughout enhancing strategic opportunities. We will continue to evaluate additional strategic acquisitions and alliances from time to time, inside and outside of Chile and Colombia.

Actively Pursue Cross-Selling Opportunities

We intend to increase our market share and profitability by continuing to cross-sell services and products to our existing clients. We have instituted processes that facilitate our ability to offer additional financial services to our clients, which we believe will increase our revenue from high-value-added services. In addition, we cross-sell loan products to our checking and savings account customers that are tailored to their individual needs and financial situation. We believe that the Merger has provided us with further opportunities to offer our clients an improved product menu leveraging the strong position of Itaú Unibanco in both wholesale and retail business.

Efficiency

We are committed to continuing to improve our operating efficiency and profitability. We are working to increase use of internet and mobile banking by our customers, by offering them better technology solutions. Our senior management is focused on implementing technological solutions aimed to identify means of improving our overall profitability and to optimize our cost structure, such as online time deposits which have been an innovative product of great success in Chile. Through these initiatives, we will continue to strive to improve our efficiency ratio. As of December 31, 2018, we had a consolidated efficiency ratio of 67.7% (defined as operating expenses as a percentage of operating income consisting of aggregate of net interest income, net service fee income, net gains from mark-to-market and trading, exchange differences (net) and other operating income (net)).

After the Merger, we have started to enjoy several benefits, including a greater scale and resources to compete more effectively and more efficiently. We believe the merged bank has the potential to continue to generate synergies in Chile which will result in efficiency improvements.

Focus on Building Customer Satisfaction

The quality of service that we provide to our customers is key to our growth strategy. We not only focus on gaining new customers, but on strengthening and establishing long-term relationships. We believe this is done through a constant effort to identify and understand our clients’ needs and to measure their satisfaction. We also continue to develop new processes and technological solutions to improve our customer service. This is a key component of our strategy to continuously create value.

Digital Transformation

Our digital banking strategy is one of the pillars we plan to use to boost, not only our retail banking, but also to further improve our efficiency. In our journey to being digital, since 2017 we have progressively started to make progress. Our digital strategy is not only focused on improvements in our mobile offerings, but also transforming our process in order to become a digital bank from back office to the front office. Therefore, it is an end-to-end strategy. To accomplish that, we currently have over 20 multidisciplinary teams which are fully dedicated and looking into opportunities to digitalize product and process with a disciplined and focused approach. Finally, we are advancing in terms of our digital offerings. This translates in more than 150 new releases and functionalities by the end of 2018 in our online channels.

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Our transformation process continually increases the productivity of our IT department and fosters a digital mindset throughout the bank, so as to gain efficiency and improve user experience and client satisfaction. In this context, we are concerned about delivering the best experience to our customers and a key element for this is to develop the best standards in cybersecurity, which is currently a country issue, and has generated various instances of discussion at the level of industry, customer and regulator levels. The world is experiencing a digital revolution that expands the possibilities of people and gives them a unique experience, linked to immediacy, speed and efficiency. However, this becomes a challenge for the industry and for us, so we work continuously so that customers are protected from various attacks on our network, such as, for example, phishing.

We continue to operate in an increasingly hostile cyber threat environment, which requires ongoing investment in business and technical controls to defend against these threats. Key threats include computer viruses, malicious code, phishing or other information security breaches, which could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of our or our customers’ confidential, proprietary and other information. Although there can be no assurance that the measures implemented will be fully effective to prevent or mitigate future attacks or breaches, the consequences of which could be significant to the Bank, we continue to strengthen and invest in both business and technical controls in order to prevent, detect and respond to an increasingly hostile cyber threat environment. We continually evaluate the threat environment for the most prevalent attack types and their potential outcomes to determine the most effective controls to mitigate those threats.

As part of the efforts to improve our cybersecurity risk management, our IT security team has been working on a security roadmap to improve all security layers, perimeter, network, endpoint, data and application, always considering the best alternatives for a security environment. Cyber risk is a priority area for the board of directors and is routinely reported to our board of directors to ensure appropriate visibility, governance and executive support for our ongoing cybersecurity management.

Further Penetrate the Colombian Financial Services Market

We intend to capitalize on the growth of the Colombian market given that we believe that our Colombian operation will offer us significant opportunities for growth. Specifically, we benefit from comparable lower banking penetration rates in terms of GDP per capita in Colombia. The strategic acquisitions in Colombia and Itaú Corpbanca’s mandate to expand businesses in the Andean Region demonstrate our commitment to the Colombian financial market. With respect to our current operations in Colombia, in order to improve our operational efficiency and increase our market share in key sectors, we are putting in place our commercial and operational standards and best practices, while capitalizing on the local management expertise, customer base, services and products. As a result of the Itaú Colombian Asset & Liabilities Acquisition, we expect to achieve a stronger penetration of the wholesale market. We also expect to leverage on Itaú Unibanco’s retail banking best practices, our controlling shareholder.

OWNERSHIP STRUCTURE

Itaú Corpbanca capital stock is comprised of 512,406,760,091 common shares traded on the Santiago Stock Exchange and the Chilean Electronic Stock Exchange. Shares are also traded as depositary receipts on the New York Stock Exchange in the form of ADSs.

Since the consummation of the Merger on April 1, 2016, Itaú Corpbanca has been controlled by Itaú Unibanco. After the Merger, Itaú Unibanco indirectly acquired an additional 2.13%, 0.35% and 2.08% share capital of Itaú Corpbanca from the Saieh Family, on October 26, 2016, September 15, 2017 and on October 13, 2018, respectively. As a result of these acquisitions, the current shareholder structure is as follows:

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PRINCIPAL BUSINESS ACTIVITIES

We provide a broad range of wholesale and retail banking services to our customers in Chile and Colombia. In addition, we provide financial advisory services, mutual fund management, insurance brokerage and securities brokerage services through our subsidiaries, and banking services through our New York Branch.

We operate in two main geographic areas: Chile and Colombia. The Chile segment also includes operations carried out by Itaú Corpbanca New York Branch and the Colombia segment also includes the operations carried out by Itaú S.A. (Panama) and Itaú Casa de Valores S.A. The following table sets forth a breakdown of our revenue by geographic market for the years ended December 31, 2016 and 2017 in accordance with IAS 39 and for the year ended December 31, 2018 in accordance with IFR 9:

	Net Interest Income by Geographic Market
	2016									2017									2018
	Chile			Colombia			Total			Chile			Colombia			Total			Chile			Colombia			Total
	(in millions of Ch$)
Interest income		1,013,951			495,252			1,509,203			1,067,124			579,205			1,646,329			1,208,481			530,836			1,739,317
Interest expense		(554,246	)		(315,782	)		(870,028	)		(529,584	)		(333,763	)		(863,347	)		(593,796	)		(257,858	)		(851,654	)
Net interest income		459,705			179,470			639,175			537,540			245,442			782,982			614,685			272,978			887,663

The following table provides information on the composition of our loan portfolio net of allowances as of December 31, 2016 and 2017:

	As of December 31,
	2016		2017		Variation			Variation
	(in millions of constant Ch$)							(%)
Commercial loans
Commercial loans		11,625,087		10,734,858		(890,229	)		(7.7	)%
Foreign trade loans		720,792		671,478		(49,314	)		(6.8	)%
Current account debtors		125,996		134,597		8,601			6.8	%
Factoring operations		74,433		140,375		65,942			88.6	%
Student loans		597,946		640,209		42,263			7.1	%
Leasing transactions		1,043,046		923,507		(119,539	)		(11.5	)%
Other loans and receivables		28,243		24,608		(3,635	)		(12.9	)%
Subtotals		14,215,543		13,269,632		(945,911	)		(6.7	)%
Mortgage loans
Letters of credit loans		57,589		47,260		(10,329	)		(17.9	)%
Endorsable mutual mortgage loans		151,167		134,103		(17,064	)		(11.3	)%
Other mutual mortgage loans		3,344,285		3,637,164		292,879			8.8	%
Leasing transactions		283,084		273,175		(9,909	)		(3.5	)%
Other loans and receivables		28,920		26,032		(2,888	)		(10.0	)%
Subtotal		3,865,045		4,117,734		252,689			6.5	%

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Consumer loans
Consumer loans	1,703,973	1,709,981	6,008		0.4	%
Current account debtors	172,938	195,661	22,723		13.1	%
Credit card debtors	396,514	401,505	4,991		1.3	%
Consumer leasing transactions	16,519	10,778	(5,741	)	(34.8	)%
Other loans and receivables	74,116	58,787	(15,329	)	(20.7	)%
Subtotal	2,364,060	2,376,712	12,652		0.5	%
Total	20,444,648	19,764,078	(680,570	)	(3.3	)%

The following table provides information on the composition of our loan portfolio net of allowances as of December 31, 2017 and our loan portfolio at amortized cost net of allowances as of December 31, 2018:

	As of December 31,(1)
	2017		2018		Variation(2)			Variation(2)
	(in millions of constant Ch$)							(%)
Commercial loans
Commercial loans		10,734,858		11,065,601		330,743			3.1	%
Foreign trade loans		671,478		920,479		249,001			37.1	%
Current account debtors		134,597		124,299		(10,298	)		(7.7	)%
Factoring operations		140,375		210,558		70,183			50.0	%
Student loans		640,209		625,598		(14,611	)		(2.3	)%
Leasing transactions		923,507		903,047		(20,460	)		(2.2	)%
Other loans and receivables		24,608		32,611		8,003			32.5	%
Subtotals
		13,269,632		13,882,193		612,561			4.6	%
Mortgage loans
Letters of credit loans		47,260		37,892		(9,368	)		(19.8	)%
Endorsable mutual mortgage loans		134,103		110,652		(23,451	)		(17.5	)%
Other mutual mortgage loans		3,637,164		3,901,107		263,943			7.3	%
Leasing transactions		273,175		307,723		34,548			12.6	%
Other loans and receivables		26,032		22,336		(3,696	)		(14.2	)%
Subtotal		4,117,734		4,379,710		261,976			6.4	%
Consumer loans
Consumer loans		1,709,981		1,766,313		56,332			3.3	%
Current account debtors		195,661		191,913		(3,748	)		(1.9	)%
Credit card debtors		401,505		443,141		41,636			10.4	%
Consumer leasing transactions		10,778		5,727		(5,051	)		(46.9	)%
Other loans and receivables		58,787		45,373		(13,414	)		(22.8	)%
Subtotal		2,376,712		2,452,467		75,755			3.2	%
Total		19,764,078		20,714,370		950,292			4.8	%

⁽¹⁾  Allowance for loan losses as of December 31, 2018 corresponds to allowances for loans and accounts receivable from customers at amortized cost according to IFRS 9. Prior periods are in accordance with IAS 39.

⁽²⁾ As described in footnote (1) above, variations between 2018 and 2017 are not comparable due to our transition to IFRS 9.

Business activities in Chile have been strategically aligned onto three commercial business units directly related not only to our medium term strategy but to our customers’ needs: 1) Wholesale Banking (a. Corporate, b. Large Companies and c. Real Estate); 2) Retail Banking (a. Itaú Personal Bank, b. Itaú, c. Itaú Private Bank, d. Midsize Companies, e. SMEs and f. Banco Condell, our Consumer Finance Division); and 3) Treasury.

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A description of each of the business units in Chile and of our Colombian banking subsidiary as well as of our New York branch is presented below:

Wholesale Banking

Wholesale Banking serves large economic groups, state-owned and private companies, mining companies, utilities, energy, seaports, airports, public hospitals or any business. Wholesale Banking also serves our real estate and project finance customers. It focuses on offering clients a broad range of services tailored to fit their specific needs. These services include deposit-taking and lending in both Chilean pesos and foreign currencies, trade financing, general commercial loans, working capital loans, letters of credit, interest rate, foreign exchange derivatives (including foreign exchange options) and cash flow management.

Corporate Banking. This business unit specializes in institutional customers and customers with annual sales in excess of US$100 million.

Large Companies. This business unit includes a wide range of products and financial services to companies with annual sales between US$8 million to US$100 million.

Real Estate Companies. This business unit is focused on companies or economic groups in the real estate or construction industry with annual sales in excess of US$100,000.

Retail Banking

Retail Banking serves retail individuals customers in Chile across all income levels, from low-income to high-income individuals, and also targets midsize companies and small and very small companies (SMEs), the latter two grouped under “Itaú Companies.” Retail Banking is organized into the following four business units:

Itaú Personal Bank. In 2017 we launched a new business unit for high-income individuals, with a monthly income between Ch$2.5 million and Ch$8.0 million. The business model for Itaú Personal Bank is based in our relationship with the customers. This is the first high-income individuals segment in Chile with differentiated branches at ground floor to be access directly from the street, and additionally with differentiated mobile and web channels. Currently, we have 22 premium branches and 34 traditional branches with a space for Personal Bank.

Private Banking. Within our Private Banking Division, we provide private banking services to our high-income and high net worth customers in Chile. We consider high-income individuals to be customers with a monthly income in excess of Ch$8.0 million. Each client under our private banking or “Private Banking” program is provided with a liaison officer who oversees the client’s entire relationship with us across all product lines. In addition to the products and services we provide to private banking customers, we offer tailored lending products designed to help keep their businesses growing.

Itaú (Traditional Banking). Our Traditional Banking Division is mainly oriented toward individuals in Chile with medium-high income levels (focused on clients between Ch$600,000 and Ch$2.5 million monthly income). Our traditional banking services are marketed and operated under the Itaú and Corpbanca brand names. We offer our traditional and private banking clients products in Chile such as checking accounts, credit lines, credit and debit cards, personal installment loans, mortgage loans, insurance banking, time deposits and savings accounts in Chilean pesos, Euros, UF and U.S. dollars, among others. In addition, we provide mutual fund and securities brokerage services. This segment is served under 123 branches.

Banco Condell (Consumer Finance). Our Consumer Finance Division operates under the trade name Banco Condell and is focused on clients in Chile with an annual income between Ch$2.4 million and Ch$7.2 million. Products and services we offer focus on the traditionally underserved low-to-middle income segments of the Chilean population, where the consumer loans represent the core of the business. Banco Condell has 56 branches and its own brand identity.

Treasury

Our Treasury specializes in financial management and is largely responsible for our funding and liquidity as well as management of any gap on our balance sheet. In addition, through our Treasury we manage proprietary trading functions, market making and distribution and sales of flow and non-flow instruments for our corporate clients. This area is responsible for obtaining foreign currency-denominated credit lines from financial institutions outside of Chile.

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As of December 31, 2018, the outstanding loans from foreign banks to Itaú Corpbanca were US$1,613 million with approximately 21 financial institutions from the U.S., Canada, Germany, France , Japan, Switzerland and other countries, including Latin America. The international global risk assets outstanding as of December 31, 2018 were US$2,505 million.

Itaú Corpbanca Colombia

Itaú Corpbanca Colombia provides a broad range of commercial and retail banking services to its customers in Colombia, operating principally in the cities of Bogotá, Medellín, Cali, Bucaramanga, Cartagena and Barranquilla. As of December 2018, according to the Colombian Superintendency of Finance, Itaú Corpbanca Colombia was the seventh largest bank in Colombia in terms of total assets, the seventh largest bank in Colombia in terms of total loans and the eighth largest bank in Colombia, in terms of total deposits as reported under local regulatory and accounting principles.

As of December 31, 2018, Itaú Corpbanca Colombia had total assets of Ch$6,605,000 million (US$9,507 million), including total loans of Ch$4,439,256 million (US$6,390 million), and total shareholders’ equity of Ch$613,243 million (US$883 million). As of December 31, 2018, Itaú Corpbanca Colombia had total net interest income of Ch$296,088 million (US$426.2 million) and loss of Ch$13,161 million (US$18.9 million). As of December 31, 2018, Itaú Corpbanca Colombia had 161 branches, 174 ATMs and 3,494 employees in Colombia and Panama.

New York Branch

Our New York Branch, which supports the commercial needs of Chilean and other Latin American companies that conduct business overseas, was established in 2009. Operating with an offshore foreign branch of a Chilean bank is especially attractive to clients abroad as it provides a sense of proximity and it allows us to accompany our customers as they operate overseas, responding to their needs and service requirements. Our target market consists of medium and large Chilean companies, other Latin American companies, and Chilean and other Latin American banks without offshore branch offices, among others.

Our New York Branch has a Yankee Certificate of Deposits program that is placed directly to clients or through U.S. dealers. The New York Branch participates in syndicated loans, together with other international institutions, to finance a variety of investment projects. As of December 31, 2018, the branch had US$1,590 million in assets and had a net income of US$32 million for the year ended December 31, 2018.

Financial Services Offered Through Subsidiaries

We have made several strategic long-term investments in financial services companies in Chile (each of which are regulated and supervised by either the SBIF or the CMF), which are engaged in activities complementary to our core banking activities. Through wholly-owned subsidiaries, we intend to continue to develop a comprehensive financial services group able to meet the diverse financial needs of our current and potential clients. As of December 31, 2018, assets of our subsidiaries represented 1.1% of total consolidated. For the year ended December 31, 2018, net income of our subsidiaries totaled Ch$39,696 million (US$57 million).

The following table sets forth certain financial information with respect to our financial services subsidiaries as of December 31, 2016, 2017 and 2018, in millions of Chilean pesos. Amounts relating to inter-company transactions have not been removed for purposes of this table.

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	As of and for the Year Ended December 31,
	2016					2017							2018
	Assets	Equity		Net Income		Assets		Equity		Net Income			Assets		Equity		Net Income
	(in millions of Ch$)
Itaú Corredores de Bolsa S.A.(1)	56,121		39,482		365		118,651		42,567		(515	)		200,158		40,998		546
Itaú Adm. General de Fondos S.A.(2)	14,823		11,628		5,263		15,870		11,084		4,951			15,195		12,922		6,790
Itaú Asesorías Financieras S.A.(3)	4,473		3,207		3,031		2,865		1,773		1,590			11,798		6,803		8,321
Itaú Corredores de Seguros S.A.(4)	19,792		14,681		8,056		20,589		13,666		7,421			43,025		27,043		19,630
Itaú Chile Corredora de Seguros Limitada(4)	18,168		13,093		10,499		18,965		12,389		9,796			—		—		—
Corp Legal S.A.(5)	2,654		2,306		(277)		1,819		1,815		(491	)		125		125		(229	)
Recaudaciones y Cobranzas S.A.(6)	2,473		1,098		447		3,833		1,211		91			3,842		1,316		105
Itaú Corredor de Seguros Colombia S.A.	3,534		1,692		388		3,826		1,898		(25	)		3,468		2,047		73
Itaú Securities Services Colombia S.A. Sociedad Fiduciaria	13,888		13,484		600		12,652		12,268		945			13,119		12,906		189
Itaú Asset Management Colombia S.A. Sociedad Fiduciaria	18,771		15,530		2,392		19,188		15,807		2,916			17,941		16,137		2,495
Itaú Comisionista de Bolsa S.A.	11,267		10,012		890		12,303		7,214		352			17,748		9,174		1,685
Itaú Bank (Panamá) S.A.	538,240		62,032		(171)		355,330		61,570		5,026			416,786		71,548		2,449
Itaú Casa de Valores S.A.	616		501		43		570		450		(12	)		679		556		92
Corpbanca Securities Inc.(7)	481		467		(259)		—		—		—			—		—		—

₍₁₎ On January 1, 2017, Itaú BBA Corredor de Bolsa Limitada merged into Itaú Corpbanca Corredores de Bolsa S.A. The legal name of the merged entity was changed to “Itaú Corpbanca Corredores de Bolsa S.A.” and the commercial name was changed to “Itaú Corredores de Bolsa.” On August 1, 2018 “Itaú CorpBanca Corredores de Bolsa S.A.” changed its legal name to “Itaú Corredores de Bolsa Ltda.”

⁽²⁾  On December 29, 2017, Itaú Chile Administradora General de Fondos S.A. merged into Corpbanca Administradora General de Fondos S.A. The legal name of the merged entity was changed to “Itaú Administradora General de Fondos S.A.” and the commercial name was changed to “Itaú Asset Management.”

⁽³⁾  On April 21, 2016, the legal name of Corpbanca Asesorías Financieras S.A. was changed to Itaú Asesorías Financieras S.A.

⁽⁴⁾  On April 1, 2018, Itaú Chile Corredora de Seguros Limitada merged into Corpbanca Corredores de Seguros S.A. The legal name of the merged entity was changed to “Itaú Corredores de Seguros S.A.” and the commercial name was changed to “Itaú Corredores de Seguros.”

⁽⁵⁾  On January 8, 2019, Itaú Corpbanca filed with the SBIF a request to buy the one share of CorpLegal S.A. that Itaú Corredores de Bolsa Ltda. owns in CorpLegal S.A. Once we acquire that share, we will have 100% ownership, which consequently will immediately terminate CorpLegal S.A. by absorption.

⁽⁶⁾  On October 25, 2017, the legal name of “Recaudaciones y Cobranzas S.A.” was changed to “Itaú Corpbanca Recaudaciones y Cobranzas S.A.” On November 5, 2018 “Itaú CorpBanca Recaudaciones y Cobranzas S.A.” changed its legal name to “Recaudaciones y Cobranzas Ltda.”

⁽⁷⁾  Corpbanca Securities Inc., the broker-dealer in the United States, was dissolved on December 18, 2017.

Itaú Corredores de Bolsa Ltda. (formerly Itaú Corpbanca Corredores de Bolsa S.A.)

Our subsidiary Itaú Corredores de Bolsa S.A., or ICB, is a member of the Santiago Stock Exchange and is registered with the CMF as a security broker. ICB’s primary activities are providing brokerage services in equities, fixed income, and foreign currency exchange. ICB’s net income was Ch$546 million for the year ended December 31, 2018. ICB had assets under custody of Ch$450 billion as of December 31, 2018. For the year ended December 31, 2018, ICB’s net income was driven by an increase in our local and foreign institutional customers’ investments volumes and fees, partially offset by lower revenues from retail customers that were impacted by higher volatility in the local equity markets. Our retail customer base has historically shown a higher risk aversion compared to other customer business segments.

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On January 1, 2017, Itaú BBA Corredor de Bolsa Limitada merged into Corpbanca Corredores de Bolsa S.A. Itaú BBA Corredor de Bolsa Limitada was also a member of the Santiago Stock Exchange and was registered with former Superintendencia de Valores y Seguros (the CMF currently) as a security broker. Itaú BBA Corredor de Bolsa’s primary activities were providing brokerage services in equities, fixed income, and foreign currency exchange.

Itaú Administradora General de Fondos S.A.

Itaú Administradora General de Fondos S.A., or IAGF complements our banking services offered to our individual and corporate clients. IAGF’s currently provides asset management services to individual, corporate and institutional clients. For the years ended December 31, 2016, 2017 and 2018, IAGF had net income of Ch$5,263 million, Ch$4,951 million and Ch$6,790 million, respectively. IAGF had total assets of Ch$14,823 million, Ch$15,870 million and Ch$15,195 million as of December 31, 2016, 2017 and 2018, respectively. As of December 31, 2018, IAGF managed 23 mutual funds, including fixed income funds and ETFs and had total assets under management amounting to Ch$2,225,6 billion, an increase of Ch$300 billion as compared to December 31, 2017. During 2018, IAGF experienced an increase of 37.1% in net income, explained primarily by an increase in volume driven by a simpler commercial offer focused on our competitive advantages.

On December 29, 2017, Corpbanca Administradora General de Fondos S.A., or CAGF, merged into Itaú Chile Administradora General de Fondos S.A. CAGF’s, primary activities were providing asset management services to individual, corporate and institutional clients. For the year ended December 31, 2016, CAGF had net income of Ch$3,067 million. CAGF had total assets of Ch$6,363 million as of December 31, 2016. As of December 31, 2016, CAGF managed 24 mutual funds, including fixed income funds and six private investment funds, and had total assets under management amounting to Ch$1,013,732 million. In 2016, CAGF’s assets under management were impacted mostly by the withdrawals observed in the last quarter of 2016, due to a higher volatility environment observed in local and international markets.

The legal name of the merged entity was changed to “Itaú Administradora General de Fondos S.A.” and the commercial name was changed to “Itaú Asset Management.”

Itaú Asesorías Financieras S.A.

Itaú Asesorías Financieras S.A., or ICAF, provides a broad range of financial advisory services to a variety of corporations and government agencies, including those services related to debt restructurings, syndicated loans, structured loans, structured investment funds, bilateral grants, mergers and acquisitions, privatizations and company valuations. For the year ended December 31, 2018, ICAF had net income of Ch$8,321 million. ICAF had total assets of Ch$11,789 million as of December 31, 2018.

Itaú Corredores de Seguros S.A.

In accordance with our strategy of expanding the breadth of financial services that we offer, our subsidiary Itaú Corredores de Seguros S.A., or ICS, offers a full line of insurance products. Many of these products complement our banking services by offering clients unemployment and life insurance related to personal loans, as well as insurances in connection with mortgage loans. Through ICS, we also provide non-credit-related insurance to existing clients and the general public. For the year ended December 31, 2018, ICS had net income of Ch$16,630 million. ICS had total assets of Ch$42,833 million as of December 31, 2018.

On April 1, 2018, Itaú Chile Corredora de Seguros Limitada, or ICCS, merged into Corpbanca Corredores de Seguros S.A. ICCS’s primary activities were providing a full line of insurance products to our clients. For the years ended December 31, 2015, 2016 and 2017, ICCS had net income of Ch$8,049 million, Ch$10,499 million and Ch$9,796 million, respectively. ICCS had total assets of Ch$51,998 million, Ch$18,168 million and Ch$18,695 million as of December 31, 2015, 2016 and 2017, respectively.

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The legal name of the merged entity was changed to “Itaú Corredores de Seguros S.A.” and the commercial name was changed to “Itaú Corredores de Seguros.”

Corp Legal S.A.

Corp Legal S.A. was created in 2007 and is regulated by the SBIF. It provides standard legal services to Itaú Corpbanca, its subsidiaries and its clients.

On January 8, 2019, Itaú Corpbanca filed with the SBIF a request to buy the one share of CorpLegal S.A. that Itaú Corredores de Bolsa Ltda. owns in CorpLegal S.A. Once we acquire that share, we will have 100% ownership, which consequently will immediately terminate CorpLegal S.A. by absorption.

Recaudaciones y Cobranzas Ltda. (formerly Itaú Corpbanca Recaudaciones y Cobranzas S.A.)

On February 25, 2015, former Corpbanca, directly and indirectly, acquired all of the issued and outstanding shares of Recaudaciones y Cobranzas S.A, or Instacob, a debt collection company providing court and out-of-court collections services for loans. As a result of this transaction, Instacob became a wholly owned subsidiary of ours.

On November 5, 2018 Itaú CorpBanca Recaudaciones y Cobranzas S.A. changed its legal name to Recaudaciones y Cobranzas Ltda.

Itaú Securities Services Colombia S.A. Sociedad Fiduciaria

We acquired a 91.9% equity interest in Corpbanca Investment Trust Colombia S.A. Sociedad Fiduciaria, now Itaú Securities Services Colombia S.A. Sociedad Fiduciaria, or ISS Colombia, in 2012 as part of the acquisition of Banco Santander Colombia. ISS Colombia is a financial services company operating in Colombia that specializes in trust and custodial services.

During 2015, ISS Colombia completed the implementation of new custody software and became the first custodian to be certified with the Colombia Stock Exchange for the automation of processes for the development of the custodian activities. Its operations have grown from a value of assets under custody of COP$1.6 billion (Ch$342 million) in July 2015, to COP$5.2 billion (Ch$1,112 million) as of December 31, 2016, to COP$6.8 billion (Ch$1,455 million) as of December 31, 2017, and to COP $9.4 billion (Ch$2,011 million) as of December 31, 2018. The value of assets under local and global custody were COP $4.9 billion (Ch$1,048 million) and COP $4.5 billion (Ch$963 million) as of December 31, 2018. ISS has contracts with entities in Panama, Mexico, Brazil and Luxembourg for global custody arrangements.

Itaú Asset Management Colombia S.A. Sociedad Fiduciaria

Itaú Asset Management Colombia S.A. Sociedad Fiduciaria, is a Colombian corporation (sociedad anónima), which is engaged in trust portfolio management, including investment trust management, administration, security, real estate trusts and fund administration. It has its main domicile in the city of Bogota, D.C., Colombia and is regulated by the Colombian Superintendency of Finance.

Itaú Comisionista de Bolsa S.A.

Itaú Comisionista de Bolsa S.A. is a licensed securities broker dealer operating in Colombia that is the result of the consolidation of two previously separate subsidiaries of Itaú Corpbanca Colombia, Corpbanca Investment Valores Colombia S.A. and Helm Comisionista de Bolsa S.A.

Itaú Comisionista de Bolsa S.A. offers and maintains a complete portfolio of products and services dedicated especially to the distribution of investments, and it complements its value proposition with financial advisory services.

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Itaú Casa de Valores S.A.

Itaú Casa de Valores (Panamá) S.A. is a Panamanian corporation (sociedad anónima) that acts as a brokerage firm. It has its main domicile in Panama City and is regulated by the Panamanian Superintendency of Securities Market.

Itaú Corredor de Seguros S.A.

Itaú Corredor de Seguros S.A. is a Colombian corporation (sociedad anónima), which acts as an insurance broker. It has its main domicile in the city of Bogota, D.C., Colombia, and the Colombian Superintendency of Finance regulates it.

SEASONALITY

Our business is not materially affected by seasonality.

RAW MATERIALS

On a consolidated basis, Itaú Corpbanca is not dependent on sources or availability of raw materials.

DISTRIBUTION CHANNELS, ELECTRONIC BANKING AND TECHNOLOGY

Itaú Corpbanca

Our distribution network provides integrated financial services and products to our customers through diverse channels, including ATMs, traditional branches, mobile banking, internet banking and telephone banking. As of December 31, 2018, we operated 202 branch offices in Chile and New York, which includes 145 branches operating as Itaú, 56 branches operating as Banco Condell, our consumer finance division and our New York Branch. In addition, as of December 31, 2018, we owned and operated 464 ATMs in Chile, and our customers have access to over 7,490 ATMs (including Banco del Estado de Chile’s ATMs) in Chile through our agreement with Redbanc. We utilize a number of different sales channels including account executives, telemarketing and the internet to attract new clients. Our branch system serves as the main distribution network for our full range of products and services.

We offer internet and mobile banking to our customers 24 hours a day through our password-protected internet site, www.itau.cl. Our internet site offers a broad range of services, including up-to-date information on balances in deposit, checking, loan, credit card and other accounts and transactional capabilities such as transfers and payments. As of December 31, 2018, we had 246,232 customers with checking accounts who have activated internet or mobile application passwords in Chile, allowing them to access our internet banking services. We are a member of the Sociedad Interbancaria de Transferencias Electrónicas S.A., an organization that facilitates electronic banking transactions on behalf of our customers as well as other Chilean banks. We also provide our customers with access to a 24-hour phone-banking call center that grants them access to account information and allows them to effect certain payments by telephone.

As part of the Merger process, during 2017 we conducted an operational and brand integration in Chile. For the activities of former Corpbanca, we maintain several service and lease agreements with IBM de Chile S.A.C., which provides us with the computer hardware and network build-out that we use in our headquarters and branch offices, the recovery data center is in NetGlobalis. Our main platform is Altamira. For the activities of former Corpbanca, our platform uses IBS (Integrated Banking System) with additional internal developments. We also have our own main data centers as well as a recovery data centers.

Itaú Corpbanca Colombia

Itaú Corpbanca Colombia’s distribution channels provide integrated financial services and products to its customers in Colombia through several mechanisms, including ATMs, branches, internet banking, mobile app, and telephone banking.

As of December 31, 2018, Itaú Corpbanca Colombia operated 161 branch offices in Colombia and Panama and owned and operated 174 ATMs in Colombia, also providing its customers with access to 15,828 additional ATMs through Colombia’s other financial institutions as of June 2018. Itaú Corpbanca Colombia utilizes a number of different sales channels including account executives, telemarketing and the internet to attract new clients. Itaú Corpbanca Colombia’s branch system serves as the main distribution network for its full range of products and services.

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Itaú Corpbanca Colombia offers internet banking to its customers 24 hours a day through its password-protected internet site, www.itau.co. Itaú Corpbanca Colombia’s internet site offers a broad range of services, including up-to-date information on balances in deposit, checking, loan, credit card and other accounts and transactional capabilities such as transfers and payments. As of December 31, 2018, Itaú Corpbanca Colombia had 96,758 customers with activated internet passwords who used the electronic banking service at least once during the last month, allowing them to access Itaú Corpbanca Colombia’s internet banking services. Itaú Corpbanca Colombia is a member of ACH Colombia S.A. and Cenit S.A., organizations that facilitate electronic banking transactions on behalf of its customers as well as other Colombian banks. Itaú Corpbanca Colombia also provides its customers with access to a 24-hour phone-banking call center that grants them access to account information and allows them to effect certain payments by telephone.

During 2018 Itaú Corpbanca Colombia successfully completed the migration of former Corpbanca Colombia’s platform to the proprietary platform, now having all of its customers in the same technological platform. The Bank offers on-line banking for individuals and commercial customers, and an app targeted for the consumer banking clients.

PATENTS, LICENSES AND CONTRACTS

Itaú Corpbanca is not dependent on patents or licenses, nor is it substantially dependent on any industrial, commercial or financial contracts (including contracts with customers or suppliers).

COMPETITION

Competition in Chile

Description of the Chilean Financial System. The Chilean financial services market consists of a variety of largely distinct sectors. The most significant sector, commercial banking, includes 18 privately-owned banks and one state-owned bank, Banco del Estado de Chile (which operates within the same legal and regulatory framework as the private sector banks). The private sector banks include those that are Chilean-owned, i.e., controlled by a Chilean entity, as well as a number of foreign-owned banks which are operated in Chile but controlled by a foreign entity. In 2018, five private sector banks along with the state-owned bank together accounted for 88% of all outstanding loans by Chilean financial institutions as of December 31, 2018: Banco Santander-Chile (18.3%), Banco de Chile (16.9%), Banco de Crédito e Inversiones, or Bci (13.9%), Scotiabank Chile (13.8%), Itaú Corpbanca (10.2%), and Banco del Estado de Chile (14.5%). All market share statistics in this paragraph are presented as reported to the SBIF calculated under local regulatory and accounting principles on an unconsolidated basis.

Financial System Evolution in Chile. The Chilean banking system has experienced a consolidation process in the past decades with mergers and acquisitions of banking entities in line with global trends.

Following rapid consolidation among Chilean banks commencing in the late 1990s through today, the market has become characterized by fewer larger players. Our principal competitors in Chile are Banco de Chile, Banco Santander-Chile, Bci and Scotiabank Chile. The recent acquisitions of non-banking credit card businesses such as Promotora CMR by Bank of Falabella and Walmart Servicios Financieros by Bci have recently increased competition in the credit card business. As compared to other Chilean banks, we believe our position in the Chilean banking industry after the Merger enables us to compete with international banks seeking to provide loans to companies operating in Chile, especially since we have scale and resources to grow and compete more effectively. Additionally, we have a unique control and support from a leading institution such as Itaú Unibanco. Itaú Corpbanca will be able to expand its banking products’ offering through proven segmentation and digitalization models.

Commercial banks, such as us, face increasing competition from other financial intermediaries who can provide larger companies with access to the capital markets as an alternative to bank loans. To the extent permitted by the Chilean General Banking Act, we seek to maintain a competitive position in this respect through the investment banking activities of our subsidiary Itaú Asesorías Financieras.

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We face competition in our mortgage and consumer loans businesses from insurance companies, which have been permitted to grant mortgage loans. In addition to the other banks that operate in Chile, our main competitors in the credit card business are department stores and other non-banking businesses involved in the issuance of private-label credit cards. We intend to remain competitive in the mortgage loan services and credit card markets through product innovation.

We also experience competition from banks that provide international private banking services such as JPMorgan Chase and BNP Paribas, among others. We believe our main competitive advantage in our Private Banking business unit has been our ability to provide our customers with tailored lending products and responses to their needs as soon as possible. Our lower income retail banking business unit, Banco Condell, competes with consumer divisions of other banks such as Banefe, CrediChile and Banco Nova, among others, as well as certain consumer credit providers, including department stores. We believe that the main competitive advantage of our Banco Condell business unit is our ability to provide responses as soon as possible, know our customers’ needs and provide a fair price structure.

Competition in Colombia

Description of the Colombian Financial System. In recent years, the Colombian banking system has been undergoing a period of consolidation given a series of mergers and acquisitions that have taken place within the sector. Between 2010 and 2015 the number of commercial banks increased from 19 to 25 as a result of: (a) five financing companies and two financial cooperatives converting their licenses to operate as banks; (b) Banco Mundo Mujer S.A. becoming a bank after acting as a microloan originator; (c) the creation of Banco Santander de Negocios Colombia S.A. in 2013; (d) Scotiabank acquiring a majority stake in Banco Colpatria, which in turn dissolved former Scotiabank Colombia S.A.; (e) the merger of Helm Bank S.A. with and into Banco Corpbanca Colombia S.A., after the latter entered the market by acquiring Banco Santander Colombia S.A.; and (f) the merger of Banco GNB Colombia S.A. (previously known as Banco HSBC Colombia S.A.) with and into Banco GNB Sudameris S.A. Since 2016 the number of commercial banks has remained stable.

One of the recent changes in the Colombian banking system has been the arrival of the Itaú brand. On April 1, 2016, Corpbanca in Chile (at the time, the parent company of Banco Corpbanca Colombia) and Itaú Chile merged, resulting in the bank Itaú Corpbanca. Such operation changed the controlling shareholder of the Banco Corpbanca Colombia. As part of the integration and technological migration plan, Banco Corpbanca Colombia introduced the Itaú brand in the previous Helm-branded branches and changed its corporate name to Itaú Corpbanca Colombia S.A. For the Corpbanca-branded branches the migration towards Itaú was completed in stages beginning in the second half of 2017 and ending in the first quarter of 2018. In addition, according to the Transaction Agreement with Itaú Unibanco, and its amendment dated January 20, 2017, Itaú Corpbanca Colombia acquired the assets and liabilities of Itaú BBA Colombia S.A. Corporación Financiera on June 16, 2017. The transaction was approved by the shareholders of Itaú Corpbanca Colombia on December 21, 2016, by the shareholders of Itaú BBA Colombia on November 15, 2016, by Helm LLC (in its capacity of minority shareholder of Itaú Corpbanca Colombia), and by the Colombian Financial Superintendency (the “CFS”) on April 7, 2017.

The latest change in the composition of the Colombian banking system was the decision by Citibank Colombia to sell its retail business, including individual and small enterprises to Scotiabank Colpatria. Such sale was approved by the CFS on June 18, 2018.

In addition, Colombian banks have been expanding abroad over the last decade, mostly in Central America. One example is the acquisition of BAC-Credomatic (which has operations in several countries in Central America) by Banco de Bogotá, with Davivienda and Bancolombia also having made similar investment aiming to grow their businesses.

As of December, 2018, and according to the Colombian Superintendency of Finance, the main actors in the local financial system were the Colombian Central Bank, 25 commercial banks (14 domestic private banks, 10 foreign banks, and one domestic state-owned bank), five finance corporations and 15 financing companies (three leasing companies and 12 traditional financing companies). In addition, trust companies, cooperatives, insurance companies, insurance brokerage firms, bonded warehouse, special state-owned institutions, pension and severance pay funds also participate in the Colombian financial system.

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Regulatory matters. On August 6, 2018, the Colombian Ministry of Finance issued Decree 1477, regulating the standards of capital for credit institutions under by Basel III. Its content covers the following areas: (a) alignment in the definitions of capital ratio; (b) an update in the measurements of the Risk-Weighted Assets (RWA); (c) implementation of buffers; and (d) leverage ratio. The CFS is expected to publish the new instructions and methodology for the calculations of the capital ratio by May 2019. The transition towards the new regulation will have two phases: a 9-month period for the credit institutions to comply with the alignment in the definitions of capital ratio and measurement of RWA and a 4-year period starting on February 2020, in which banks will have to meet the new limits and buffers for the capital ratios. See “Item 4. Information on the Company—B. Business Overview—Colombian Banking Regulation and Supervision—Regulatory Developments in Colombia.”

Financial System Evolution in Colombia during 2017 and 2018. 2018 was a year of moderate growth for the Colombian financial services sector. The inflation rate decreased throughout the year ended at 3.18% as of December 31, 2018, within the Central Bank’s target range of 2% to 4%. The reference interest rate decreased by 50 basis points in 2018. The Central Bank’s rate was 4.75% as of January 1, 2018 and 4.25% as of December 31, 2018. As of December 2018, banks increased their gross loans by 6.0% as compared to growths of 6.1% in 2017 and 12.2 in 2016. Similarly, deposits grew 5.1% as compared to December 31, 2017.

The Colombian banking system’s level of past-due loans as a percentage of the system’s total loan portfolio continued increasing over the first half of 2018, peaking at 5.0% in July 2018. The second half of the year showed signs of recovery and the ratio decreased to 4.5% as of December 2018, slightly higher than the 4.3% registered for December 2017. The growth rate of past due loans above 30 days was 12.3% as of December 2018, after reaching 45.5% for the year 2017. Coverage, measured as the ratio of allowances to past-due loans, ended December 2018 at 137.3%, compared to 134.0% at the end of 2017.

As of December 2018 the demand for business, small business and consumer loans slowed down as compared to December 2017. Business loans grew 3.3% after registering 3.6% the previous year, small business loans grew 3.4%, after a growth of 7.6% in 2017, and consumer loans increased by 8.8% after an increase rate of 9.1% the previous year. On the other hand, the gross amount of mortgage loans increased 12.2%, compared to 11.2% in 2017.

During 2018, lending decreased in the Colombian banks system’s structure. Net loans decreased from 67.9% of total assets at the end of 2017 to 66.4% as of December 2018. Investment portfolio and derivatives, as a percentage of total assets, increased from 17.8% at the end of 2017 to 18.5% at the end of 2018.

As of December 31, 2018, the Colombian financial sector recorded COP$659,310,049 million in total assets, representing a 8.4% increase as compared to December 31, 2017. The Colombian financial system’s total composition of assets shows banks hold a market share of 95.1%, followed by financial corporations at 2.3%, financing companies at 2.0% and financial cooperatives at 0.5%.

As of December 31, 2018, the capital adequacy ratio (Tier 1 + Tier 2) for credit institutions was 16.34% (including banks, finance corporations, financing companies and cooperative entities), decreasing 24 basis points when compared to December 2017, well above the minimum legal requirement of 9%.

Loans

As of December 31, 2017 and 2018, our gross consolidated loan portfolio was Ch$20,439,448 million and Ch$21,548,899 million, respectively, as reported to the SBIF calculated under local regulatory and accounting principles. This placed us as the fifth largest financial institution among private Chilean banks and sixth place among all banks operating in Chile. Our gross consolidated loan portfolio represented 10.2% of the market for loans in the Chilean financial system (comprising all commercial banks) as of December 31, 2018. In 2016, due to the Merger and the consolidation of the loan portfolios of former Corpbanca and former Banco Itaú Chile, our aggregate gross loan portfolio grew by 42.1%. However, due to the decline investment activity in Chile and a more challenging economic scenario in 2017, when compared to the combined loan portfolios in 2016, our consolidated loan portfolio decreased in 2017 by 2.9%. In 2018, our loan portfolio increased 5.4% driven primarily by (i) a positive trend in our consumer loans, particularly in installment loans, due to our strategy to grow our retail banking segment; and (ii) the growth of our commercial and mortgages loans.

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The following table sets forth the aggregate outstanding loans for us and the five other private sector banks with the largest market shares in Chile as of December 31, 2017 and 2018, based on information as reported to the SBIF calculated under local regulatory and accounting principles:

	Bank Loans(1)
	As of December 31,
	2016		2017		2018
	(in millions of Ch$)
Banco Santander-Chile		26,933,624		27,563,229		30,266,929
Banco de Chile		25,385,534		25,439,535		27,914,322
Banco de Crédito e Inversiones (Bci)		22,324,012		24,531,460		30,099,862
Itaú Corpbanca(2)		21,048,484		20,439,448		21,548,899
Banco Bilbao Vizcaya Argentaria, BBVA(3)		9,252,921		9,702,467		—
Scotiabank Chile(3)		8,840,341		10,448,203		22,823,339
Others		35,771,491		38,352,083		44,375,257
Total		149,556,407		156,476,425		177,028,608

Source: SBIF monthly consolidated financial information

⁽¹⁾  Excludes interbank loans.

⁽²⁾  The amounts under IFRS for 2016, 2017 and 2018 are Ch$21,003,952 million, Ch$20,382,605 million and Ch$21,482,490 million, respectively.

⁽³⁾  Figures for 2018 only attributed to Scotiabank Chile after the merger with Banco Bilbao Vizcaya Argentaria.

Deposits

We had consolidated deposits of Ch$14,421,586 million as of December 31, 2018, as reported under local regulatory and accounting principles, which consisted of our checking accounts, bankers’ drafts, savings accounts, time deposits and other commitments. Our market share of 10.2% for deposits and other obligations as of such date ranks us in fifth place among private sector banks in Chile.

The following table sets forth the aggregate deposits for us and the five other private sector banks with the largest market share as of December 31, 2016, 2017 and 2018, based on information as reported to the SBIF calculated under local regulatory and accounting principles:

	Bank Deposits and Other Obligations(1)
	As of December 31,
	2016		2017		2018
	(in millions of Ch$)
Banco Santander-Chile		20,691,024		19,682,111		21,809,236
Banco de Chile		18,874,049		18,983,484		20,240,662
Banco de Crédito e Inversiones (BCI)		18,151,951		20,226,470		24,551,315
Itaú Corpbanca		16,034,901		14,206,910		14,421,586
Banco Bilbao Vizcaya Argentaria Chile (BBVA)(2)		6,876,369		6,810,027		—
Scotiabank Chile(2)		6,144,361		7,024,759		14,927,861
Others		36,739,147		40,206,196		42,974,991
Total		123,511,802		127,139,957		138,925,651

Source: SBIF monthly consolidated financial information

⁽¹⁾  Our aggregate deposits as calculated under IFRS for the years ended December 31, 2016, 2017 and 2018 were Ch$16,034,901 million, Ch$14,206,910 million and Ch$14,421,586 million, respectively.

⁽²⁾  Figures for 2018 only attributed to Scotiabank Chile after the merger with Banco Bilbao Vizcaya Argentaria.

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Shareholders’ Equity

We were the second largest among private sector banks in Chile with Ch$3,324,531 million in shareholders’ equity (excluding net income and provision for mandatory dividends) as of December 31, 2018, as reported to the SBIF calculated under local regulatory and accounting principles.

The following table sets forth the level of shareholders’ equity for us and the five largest private sector banks in Chile (measured by shareholders’ equity) as of December 31, 2016, 2017 and 2018, based on information as reported to the SBIF calculated under local regulatory and accounting principles:

	Shareholders’ Equity(1)(2)
	As of December 31,
	2016		2017		2018
	(in millions of Ch$)
Banco Santander-Chile		2,538,055		2,670,809		3,239,546
Banco de Chile		2,620,394		2,842,609		3,304,152
Banco de Crédito e Inversiones (BCI)		2,280,185		2,467,862		3,457,509
Itaú Corpbanca(3)		3,172,486		3,149,663		3,324,531
Banco Bilbao Vizcaya Argentaria Chile (BBVA)(4)		768,215		844,129		—
Scotiabank Chile(4)		772,684		827,611		2,013,539
Others		4,129,791		4,083,895		3,185,318
Total		16,281,810		16,886,578		20,228,785

Source: SBIF monthly consolidated financial information

⁽¹⁾ Shareholders equity = Equity attributable to shareholders excluding net income and provision for mandatory dividend.

⁽²⁾  For comparison purposes with other banks, the information is presented under standards issued by the SBIF.

⁽³⁾  The amounts under IFRS, excluding net income and provision for mandatory dividends, for the years ended December 31, 2016, 2017 and 2018 were Ch$3,171,365 million, Ch$3,160,890 million and Ch$3,099,761 million, respectively.

⁽⁴⁾  Figures for 2018 only attributed to Scotiabank Chile after the merger with Banco Bilbao Vizcaya Argentaria.

CHILEAN BANKING REGULATION AND SUPERVISION

General

In Chile, only banks may maintain checking accounts for their customers and accept time deposits. The principal financial institutions regulators in Chile are the SBIF and the Central Bank of Chile. Chilean banks are primarily subject to the Chilean General Banking Act and secondarily, to the extent not inconsistent with such statute, the provisions of the Ley 18.046 sobre Sociedades Anónimas or the Chilean Corporations Act governing public corporations, except for certain provisions which are expressly excluded.

The modern Chilean banking system dates from 1925 and has been characterized by periods of substantial regulation and state intervention, as well as periods of deregulation. The most recent period of deregulation commenced in 1975 and culminated in the adoption of a series of amendments to the Chilean General Banking Act. The Chilean General Banking Act sets forth the regulatory framework to which banks are subject outlining the activities that a bank may and may not carry out in Chile and their attributions -in addition to traditional banking activities- including general underwriting powers for new issuances of certain debt and equity securities and the power to create subsidiaries to engage in activities related to banking, such as brokerage, investment advisory, mutual fund services, administration of investment funds, factoring, securitization products and financial leasing services.

Following the Chilean banking crisis of 1982 and 1983, the SBIF assumed control of 21 financial institutions representing approximately 51% of the total loans in the banking system. As part of the solution to this crisis, the Central Bank of Chile acquired from financial institutions a certain portion of their distressed loan portfolios, at the book value of such loan portfolios. Each institution then repurchased such loans at their economic value (which, in most cases, was much lower than the book value at which the Central Bank of Chile had acquired the loans) and the difference was to be repaid to the Central Bank of Chile out of future income. Pursuant to Law No. 18,818, which was passed in 1989, this difference was converted into a subordinated obligation with no fixed term, known as deuda subordinada or subordinated debt, which in the event of liquidation of the institution, would be paid after the institution’s other debts had been paid in full.

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Central Bank of Chile

The Central Bank of Chile is an autonomous legal entity created by the Chilean Constitution. It is subject to the Chilean Constitution and its own ley orgánica constitucional, or Constitutional Act. To the extent not inconsistent with the Chilean Constitution or the Central Bank of Chile’s Constitutional Act, the Central Bank of Chile is also subject to private sector laws (but in no event it is subject to the laws applicable to the public sector). It is directed and administered by a council composed of five members designated by the President of Chile, subject to the approval of the Senate.

The legal purpose of the Central Bank of Chile is to maintain the stability of the Chilean peso and the orderly functioning of Chile’s internal and external payment system. The Central Bank of Chile’s powers include setting reserve requirements, regulating the amount of money and credit in circulation, establishing regulations and guidelines regarding finance companies, foreign exchange (including the Formal Exchange Market) and banks’ deposit-taking activities.

SBIF

Banks in Chile are currently supervised by the SBIF, an independent Chilean governmental agency. The main responsibilities of the SBIF are to authorize the incorporation of new banks and to interpret and enforce, with broad powers, legal and regulatory requirements applicable to Chilean banks and other entities. Furthermore, in case of non-compliance with such legal and regulatory requirements, the SBIF may impose sanctions, including fines payable by the directors, managers and employees of a bank as well as the bank itself. In extreme cases it can appoint, by special resolution with the prior approval of the board of directors of the Central Bank of Chile, a provisional administrator to manage a bank. It must also approve any amendment to a bank’s by-laws (including, increase in its capital).

The SBIF examines all banks from time to time, generally at least once a year. Banks are also required to submit monthly unaudited consolidated and unconsolidated financial statements to the SBIF and publish their quarterly and annual financial statements in a newspaper with countrywide coverage. In addition, banks are required to provide extensive information regarding their operations at various periodic intervals to the SBIF. Financial statements as of December 31 of any given year must be audited. A bank’s annual financial statements and the opinion of its independent auditors must also be submitted to the SBIF for review.

The SBIF must approve in advance any direct or indirect acquisition of more than 10% of the share capital of a bank. The absence of such approval will cause the acquirer to lose the voting rights of such shares. The SBIF may only refuse to grant its approval based on specific grounds set forth in the Chilean General Banking Act and its regulations.

On January 12, 2019, Law No. 21,130 was enacted, which modified the Chilean General Banking Act for purposes of adopting Basel III and replacing the SBIF with the CMF. According to Transitory Article Ninth of such law, the President of the Republic of Chile shall issue a Decree with Force of Law through the Ministry of Finance, which among other matters, shall determine the date in which the CMF shall replace the SBIF. In this regard, it has been publicly announced by the Ministry of Finance that the CMF would replace the SBIF effective as of June 1, 2019.

CMF

The CMF is the public entity responsible for overseeing the correct functioning, development and stability of the financial market, facilitating the participation of market agents and promoting the protection of the public interest. It is in charge of regulating and supervising the entities part of the securities and insurance market and, pursuant to Law No. 21,130, will replace the SBIF and will be vested with the authority to supervise banks. As indicated above, pursuant to Transitory Article Ninth of such law, the President of the Republic of Chile shall issue a Decree with Force of Law through the Ministry of Finance, which among other matters, shall determine the date in which the CMF shall replace the SBIF. In this regard, it has been publicly announced by the Ministry of Finance that the CMF would replace the SBIF effective as of June 1, 2019.

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Limitations on Types of Activities

Chilean banks can only conduct those activities allowed by the Chilean General Banking Act: making loans, accepting deposits, issuing bonds, engaging in certain international operations, performing specially entrusted activities (Comisiones de Confianza) and, subject to limitations, making investments and performing financial services related to banking. Investments are restricted to real estate and physical asset for the bank’s own use, gold, foreign exchange and debt securities. In addition, local banks are allowed to engage in certain derivatives such as options, swaps and forward contracts over certain underlying assets. Through subsidiaries, banks may also engage in other specific financial service activities such as securities brokerage services, mutual fund management, investment fund management, factoring, securitization, financial advisory and leasing activities. Subject to specific limitations and the prior approval of the SBIF and the Central Bank of Chile, Chilean banks may own majority or minority interests in foreign banks.

Deposit Insurance

In Chile, the government guarantees up to 90% of the aggregate amount of certain time deposits held by individuals in the Chilean banking system. The government guarantee covers those obligations with a maximum value of UF120 per person (Ch$3.2 million or US$5,233 as of December 31, 2017) in each calendar year.

Reserve Requirements

Deposits are subject to a reserve requirement (Encaje) of 9% for all demand deposits and obligations that are payable on demand, and 3.6% for time deposits and deposits in savings accounts in any currency of any term, judicially ordained deposits, and any other deposit (Captación) for a term of up to one year. For purposes of calculating this reserve requirement, banks are authorized to make certain daily deductions from their liabilities in Chilean pesos, the most relevant of which include:

• cash clearance account, which should be deducted from demand deposits for calculating reserve requirements;

• certain payment orders issued by pension providers; and

• the amount subject to “technical reserve” (as described below), which can be deducted from reserve requirements.

In the case of liabilities in foreign currency, banks are authorized to deduct for this purpose the amounts mentioned in the first and third bullet above.

The Central Bank of Chile has statutory authority to require banks to maintain reserves of up to an average of 40% for demand deposits and up to 20% for time deposits (irrespective, in each case, of the currency in which they are denominated) to implement monetary policy. In addition, according to the Chilean General Banking Act and the regulations issued by the SBIF and the Central Bank of Chile, Chilean banks must maintain a technical reserve (Reserva Técnica) of 100% of all deposits and obligations a bank has acquired in its financial business that are payable on demand, except for obligations with other banks, whenever such deposits and obligations exceed 2.5 times their basic capital capital net equity (Patrimonio Efectivo). This technical reserve must be calculated daily, and must be kept in deposits in the Central Bank of Chile or documents issued by the Central Bank of Chile or the Chilean Treasury with a maturity date of no more than 90 days of any term. If the technical reserve is breached, the bank is sanctioned with a fine calculated by applying the maximum conventional interest rate (Interés Máximo Convencional) for non-adjustable transactions (Operaciones no Reajustables) to the daily deficit; provided, however, that the SBIF may decide not to apply this fine if the deficit lasts up to three business days and the bank has not incurred in further deficits during the same calendar month.

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During 2015, the Chilean Central Bank published a final version of new liquidity standards for local banks, based on Basel III guidelines. The SBIF is the institution empowered to put these guidelines into practice and monitor them on an ongoing basis. Accordingly, the SBIF released a set of new liquidity requirements for banks (Circular No. 3,585) on July 31, 2015. These guidelines established reporting requirements for local banks with respect to management and measurement of banks’ liquidity positions, compelling banks to share financial information with the regulator and the general public regarding liquid assets, liabilities, concentration of financial instruments by type of liability and counterparty and weighted maturity by type of liability, among other metrics. The most significant liquidity ratios that will eventually be adopted by Chilean banks are:

• Liability concentration per institutional and wholesale counterparty. Banks will have to calculate the percentage of their liabilities coming from institutional and wholesale counterparties, including ratios regarding renovation, renewals, restructurings, maturity and product concentration of these counterparties.

• Liquidity coverage ratio (LCR), which measures the percentage of liquid assets over net cash outflows. The new guidelines also define liquid assets and the formulas for calculating net cash outflows.

• Net Stable Funding Ratio (NSFR) which will measure a bank’s available stable funding relative to its required stable funding. Both concepts are also defined in the new regulations.

The first stage of these new liquidity requirements was implemented to improve the information relating to the actual situation of banks without imposing specific limits, except liquidity mismatches for 30 and 90-day periods, for which thresholds with respect to the capital of banks are already in place. On December 28, 2018, the SBIF released an update on the liquidity requirements (Circular No. 3,644), which established a limit of 60% for the LCR as of January 1, 2019. The LCR limit will increase 10% per year until it reaches 100% in 2023.

Minimum Capital

Under the Chilean General Banking Act, a bank must have a minimum paid-in capital and reserves of UF800,000 (Ch$22,052.6 million or US$31.7 million as of December 31, 2018).

Capital Adequacy Requirements

According to the Chilean General Banking Act (as amended from time to time, including without limitation, by Law No. 21,130) and the Regulations of the SBIF, as a general rule, the capital and reserves of a bank, or basic capital, cannot be less than (y) 4.5% of its risk weighted assets and (z) 3% of its total assets, in both cases, net of allowances, and its “effective net equity” cannot be less than 8% of its risk-weighted assets net of required loan loss allowances, as calculated in accordance with Chilean Bank GAAP. Note, however, that in any of the following events a higher effective net equity and/or a higher basic capital may be required:

(1) If at the moment in which the incorporation deed of a bank is granted (or at the moment in which the authorization of existence of a branch of a foreign bank is granted), at least 50% of the minimum paid-in capital and reserves, or basic capital (capital básico) (i.e., UF800,000 (Ch$22,052.6 million or US$31.7 million as of December 31, 2018)) has not been paid, the respective bank shall have an additional basic capital equal to 2% of its risk weighted assets, net of required allowances, above the general minimum basic capital of 4.5% plus any additional basic capital that may be applicable pursuant to number (2) below. The additional 2% requirement will be reduced to 1% once the bank’s paid basic capital reaches UF 600,000 (Ch$16,539.5 million or US$23.8 million as of December 31, 2018).

(2) Once the CMF replaces the SBIF, the following shall occur:

a. Within 18 months from the date in which such replacement occurs, the CMF shall issue a regulation (with the affirmative consent of the Council of the Chilean Central Bank) setting forth (i) the standardized methodology for risk weighting the assets of a bank and, (ii) in the event of banks authorized to use their own methodologies, the requirements to use and implement them. Once such regulation becomes effective, a bank will be required to have an additional basic capital equal to 2.5% of its risk weighted assets, net of required allowances, above the minimum requirements. This additional requirement will come into effect progressively during a 4-year term at a ratio of 0.625% per year, starting on the date in which the CMF issues the aforementioned regulation;

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b. Within 18 months from the date in which such replacement occurs, the CMF shall issue a regulation setting forth the conditions that may trigger the imposition by the Chilean Central Bank of an additional basic capital requirement up to 2.5% of a bank’s risk weighted assets, net of required allowances, above the minimum requirements. This additional requirement may be imposed by the Chilean Central Bank on a general basis applicable to all banking institutions, as a contra-cyclical measure;

c. Within 18 months from the date in which such replacement occurs, the CMF shall issue a regulation (with the affirmative consent of the Council of the Chilean Central Bank), which shall set forth the criteria for considering a bank or group of banks of systemic importance. Further, with the affirmative vote of the Chilean Central Bank, the CMF may determine, through a grounded resolution, that a bank is of systemic importance. In such event, the CMF will be entitled to impose, among others, one or more of the following conditions: (y) an increase between 1% and 3.5% to the basic capital over risk weighted assets, net of required allowances, above the aforementioned 8% minimum effective net equity (Patrimonio Efectivo) requirement and (z) an increase of up to 2% to the basic capital over total assets, net of required allowances, above the aforementioned 3% minimum basic capital requirement. The conditions imposed on a bank qualified of systemic importance, may be terminated in the event the Council of the CMF determines that a bank no longer has systemic importance; and

d. If after a review process, to the judgment of the CMF, a bank presents risks not properly protected with the equity requirements mentioned above, the CMF may impose additional equity requirements. In any event, the additional equity requirements shall not exceed 4% of its risk weighted assets, net of required allowances. For these purposes, the CMF shall issue a regulation which shall set forth the criteria applicable in these cases.

Basic capital is defined as a bank’s paid-in capital and reserves and is similar to Tier 1 capital except that it does not deduct goodwill or intangible assets.

Regulatory capital or “effective net equity” is defined as the aggregate of:

• a bank’s paid-in capital and reserves;

• bonds issued without a maturity date and preferred stock issued once the CMF issues a regulation authorizing their issuance. These instruments shall be valued at their issue price, for an amount up to one third of its basic capital;

• its subordinated bonds, valued at their placement price (but decreasing by 20% for each year during the period commencing six years prior to maturity), for an amount up to 50% of its basic capital;

• goodwill or premiums, paid balances and investments in companies that are not part of the consolidation, which shall be deducted;

• its voluntary allowances for loan losses for an amount of up to 1.25% of risk-weighted assets. Note that the CMF shall issue regulations setting forth (i) the standardized methodology for calculating risk-weighted assets, and (ii) in the event of banks authorized to use their own methodologies, the requirements to use and implement them. Once such regulation is issued, voluntary allowances shall be considered up to the following amounts: (y) up to 1.25% of its credit risk weighted assets, if standard methodologies are applied or (z) 0.625% in the event non-standard methodologies are applied;

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• minority interests of up to 20% of the basic capital (provided that if such minority interests exceed 20%, only 20% will be taken into account); and

• other adjustments as instructed by the SBIF.

In cases where a limit is required to be applied on an unconsolidated basis, capital attributable to subsidiaries and foreign branches shall be excluded.

Pursuant to Transitory Article First of Law No. 21,130, until the date in which the CMF issues the regulations that shall set forth (i) the standardized methodology for calculating risk-weighted assets and (ii) in the event of banks authorized to use their own methodologies, the requirements to use and implement them, a five-category risk classification system will be applied to bank assets that is based on the Basel Committee recommendations.

As provided in Article 68 of the Chilean General Banking Act, if a bank fails at any time to meet the legal requirements relating to the maintenance of regulatory capital (which is comprised of effective net worth and basic capital, as both concepts are defined in Article 66 of the Chilean General Banking Act and Chapter 12-1 of the Regulations of the SBIF), the bank would have to comply with such legal requirements within a period of 60 days. Further, for each day in which the bank it fails to comply with such legal requirements, it would be subject to a daily penalty equal to one thousandth of the deficit of the effective net worth or basic capital, as the case may be.

Note that once the CMF replaces the SBIF, the aforementioned sanction will be replaced by those set forth in Title III of Law No. 21,000 which created the CMF (i.e., the CMF may impose one or more of the following sanctions (i) censure; (ii) fines up to the following amounts: (x) UF 15,000 (approximately US$595,000 as of December 31, 2018), but in the event the entity is sanctioned for breaches of similar nature before, the amount of the fine could be up to five times the aforementioned amount, (y) 30% of the irregular operation or (z) double of the benefits realized as a result of the irregular operation; and/or (iii) revocation of its authorization of existence.

Lending Limits

Under the Chilean General Banking Act, Chilean banks are subject to certain lending limits, including the following:

• a bank cannot extend to any entity or individual, directly or indirectly, unsecured credit in an amount that exceeds 10% of the bank’s effective net equity, or in an amount up to 30% of its effective net equity if the excess over 10% is secured by certain assets with a value equal to or higher than such excess. In the case of foreign currency export trade financing, the ceiling for secured credits is also established at 30%. In the case of financing infrastructure projects built through the concession mechanism, the 10% ceiling for unsecured credits is 15% if secured by a pledge over the concession, or if granted by two or more banks or finance companies which have executed a credit agreement with the builder or holder of the concession, while the ceiling for secured credits remains at 30%;

• a bank cannot extend loans to another bank subject to the Chilean General Banking Act in an aggregate amount exceeding 30% of the effective net equity of the lender bank;

• the total amount of loans granted by a bank to a group of persons or entities belonging to the same business group (grupo empresarial) as this term is defined in Title XV of the Chilean Securities Market Act, cannot exceed 30% of the actual equity of the lending bank. For these purposes, the loans mentioned in the preceding bullet shall not be considered;

• a bank cannot directly or indirectly grant a loan whose purpose is to allow an individual or entity to acquire shares of the lender bank;

• a bank cannot lend, directly or indirectly, to a director or any other person who has the power to act on behalf of such bank; and

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• a bank cannot grant loans to related parties (which relation can arise from management or for ownership reasons, including holders of more than 1% of its shares, except in the case of companies which are actively traded on the Santiago Stock Exchange, like Itaú Corpbanca, in which case the limit is 5%) on more favorable terms than those generally offered to non-related parties. In addition, the aggregate amount of loans to a single group of related parties cannot exceed 5% of the bank’s effective net equity or 25% if the excess thereof is secured by certain assets with a value equal to or greater than such excess, or by certain other collateral specified in the Chilean General Banking Act. The definitions of “related” and “group” for these purposes are determined by the SBIF. The aggregate amount of all credits granted to related parties of the bank cannot exceed its effective net equity.

To determine the lending limits with respect to a particular person, the obligations undertaken by partnerships in which the relevant person is an unlimited partner or by companies of any nature in which such person has more than 50% of their capital or more than 50% of their profits, will be accounted as obligations of such person. Likewise, if the participation of the relevant person in a company is higher than 2% but not higher than 50% of its capital or profits, then the obligations of such company will be accounted for as obligations of such person in proportion to its actual participation. Finally, when there is a plurality of debtors of the same obligation, then the obligation will be deemed joint and several with respect to each and all of the debtors, unless expressly undertaken in other terms.

Any breach of the lending limits set forth in clauses a), b) and c) above, will be subject to a fine equivalent to 10% of the excess amount. In case of breach of the rules set forth in clause f) above, it will be subject to a fine equivalent to 20% of the loan granted.

Allowance for Loan Losses

Chilean banks are required to provide to the SBIF detailed information regarding their loan portfolio on a monthly basis. The SBIF examines and evaluates each financial institution’s credit management process, including its compliance with the loan classification guidelines. Banks must classify and evaluate their credits portfolio pursuant to the rules issued by the SBIF. However, a bank may request the authorization of the SBIF to use its own internal evaluation model for groups, to the extent they comply with certain requirements.

Classification of Banks and Loan Portfolios

Solvency and Management. Chilean banks are classified into categories I through V based on their solvency and management ratings. The classification of each bank is confidential.

• Category I: This category is reserved for financial institutions that have been rated level A in terms of solvency and management.

• Category II: This category is reserved for financial institutions that have been rated (1) level A in terms of solvency and level B in terms of management, (2) level B in terms of solvency and level A in terms of management, or (3) level B in terms of solvency and level B in terms of management.

• Category III: This category is reserved for financial institutions that have been rated (1) level B in terms of solvency and level B in terms of management for two or more consecutive review periods, (2) level A in terms of solvency and level C in terms of management, or (3) level B in terms of solvency and level C in terms of management.

• Category IV: This category is reserved for financial institutions that are rated level A or B in terms of solvency and have been rated level C in terms of management for two or more consecutive review periods.

• Category V: This category is reserved for financial institutions that have been rated level C in terms of solvency, irrespective of their management rating level.

With respect to solvency, banks are qualified as level A, B and C.

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A bank fits within level A if (y) it complies with the general minimum effective net equity and basic capital requirements and (z) with the following additional requirements (if applicable), once they come into effect:

1. An additional basic capital equal to 2.5% of its risk weighted assets, net of required allowances, above the minimum requirements. This additional requirement will come into effect progressively during a four year term at a ratio of 0.625% per year, starting on the date in which the CMF issues the regulations concerning the methodologies for risk weighting the assets; and

2. An additional basic capital up to 2.5% of its risk weighted assets, net of required allowances, above the minimum requirements. This additional requirement may be imposed by the Chilean Central Bank on a general basis applicable to all banking institutions, as a contra-cyclical measure. The CMF shall issue a regulation setting forth the conditions that may trigger the application of this additional capital requirement.

A bank fits within level B, if it complies with the general minimum effective net equity and basic capital requirements, but not with the additional requirements outlined in the preceding paragraph, once they come into effect.

A bank fits within level C if it does not comply with the general minimum effective net equity and basic capital requirements. With respect to a bank’s management rating, level A banks are those that are not rated as level B or C. Level B banks display some weakness in their corporate governance, internal controls, security in their networks, information systems, response to risk, private risk rating or ability to manage contingency scenarios, which must be corrected within the period preceding the next evaluation, considering also the penalties imposed to the bank (except for those with a pending claim). Level C banks display significant deficiencies in internal controls, information systems, response to risk, private risk rating or ability to manage contingency scenarios. The CMF shall issue a regulation setting forth the terms and conditions necessary to implement the aforementioned management rating, which shall consider, among others, compliance by the bank of the regulations to be issued by the CMF governing critical information infrastructure in cyber security.

Main Differences Between the Accounting Policies under IFRS and Chilean Banking GAAP

The financial information included herein is prepared and presented in accordance with IFRS. Certain differences exist between Chilean Banking GAAP and IFRS which might be material to the financial information contained herein. The matters described below summarize certain differences between Chilean Banking GAAP and IFRS that may be material. We are responsible for preparing the summary below. We have not prepared a comprehensive reconciliation of our consolidated financial statements and related footnote disclosures between Chilean Banking GAAP and IFRS and have not quantified such differences. Accordingly, no assurance is provided that the following summary of differences between Chilean Banking GAAP and IFRS is complete.

Effective interest rate. Under Chilean Banking GAAP, the Bank recognizes the interest of some loans on a contractual basis. Under IFRS, this situation it is not permitted and interest must be recognized based on the effective interest rate.

Loan loss allowances. Prior to the adoption of IFRS 9 on January 1, 2018, we calculated loan loss allowances in accordance with IAS 39. The main difference between Chilean GAAP and IFRS 9 and IAS 39 regarding loan loss allowances is that loan loss allowances under Chilean GAAP are calculated using expected loss models based on specific guidelines set by the SBIF, which in turn are based on an expected losses approach while IAS 39 used an incurred loss approach. According to both Chilean Bank GAAP and IFRS, loan loss allowances are calculated using expected loss models. The models adopted with IFRS 9 used an expected loss approach, however these are not in accordance with specific guidelines under Chilean Bank GAAP given by the SBIF. The SBIF has not yet adopted IFRS 9 and therefore we have adjusted the consolidated financial statements to fully comply with IFRS standards. The most significant impact of IFRS 9 on our financial statements arises from the new impairment requirements. Impairment losses will increase and become more volatile for financial instruments in the scope of the IFRS 9 impairment model. Based on the assessment made, the total impact (net of tax) of the adoption of IFRS 9 on the opening balance of our equity on January 1, 2018 is Ch$129,025 million (net of tax).

Suspension of recognition of income on an accrual basis. Under Chilean Banking GAAP, the Bank does not recognize income on an accrual basis in the Statement of Income for certain loans included in the impaired portfolio. Under IFRS, this situation it is not permitted and interest must be recognized based on the effective interest rate.

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Loan write-offs. Under Chilean Banking GAAP, write-offs of loans and accounts receivable are based on due, past due and current installments, and the term begins at the moment of default, i.e., when the default time of an installment or a portion of a loan reaches the write-off term established by the SBIF. The term corresponds to the time elapsed since the date on which payment of all or part of the obligation in default became due. IFRS does not require any such deadline for charge-offs. A charge-off due to impairment would be recorded, if and only if, all efforts at collection of the loan or account receivable had been exhausted. Accordingly, this difference does not materially impact our consolidated financial statements.

Under IFRS, it is not required to establish a charge-off date.

Investments in other companies. Investments in other companies in which the Bank does not exercise significant influence (ownership interest less than 20%) were reclassified and presented as available-for-sale financial investment in accordance with IAS 39. Under IFRS 9 these investments are reclassified according to the Bank’s intention either as financial instruments at fair value through profit or loss (FVTPL) or fair value through other comprehensive income (FVTOCI).

Other assets. Assets in lieu of payment were reclassified and recognized in accordance with IFRS 5.

Country risk provision and contingent loans. Under Chilean Banking GAAP, the Bank recognizes provisions for country risk and allowances related to the undrawn available credit lines and contingence loans in accordance with the local regulations. IFRS only permits the recognition of allowances based on the incurred loss model until December 31, 2017. Since January 1, 2018, in accordance with IFRS 9, expected credit losses for contingent loans are recorded in our consolidated financial statements.

Deferred taxes. Correspond to the deferred tax effects of all differences between Chilean Banking GAAP mentioned above.

Capital Markets

Under the Chilean General Banking Act, banks in Chile may purchase, sell, place, underwrite and act as paying agents with respect to certain debt securities. In addition, banks in Chile may place and underwrite certain equity securities. Bank subsidiaries may also engage in debt placement and dealing, equity issuance advisory services and securities brokerage, as well as in financial leasing, mutual fund and investment fund administration, investment advisory services and merger and acquisition services. These subsidiaries are regulated by the SBIF and, in some cases, by the CMF, the regulator of the Chilean securities market and of open-stock (public) corporations.

Subsidiaries and Affiliated Companies

Chilean banks are authorized to create subsidiaries to engage in (1) brokerage of securities, (2) management of mutual funds, investment funds, offshore funds, housing funds or all the foregoing, (3) insurance brokerage, (4) leasing operations, (5) factoring operations, (6) securitization, (7) financial advisory, (8) custody and transportation of funds, (9) provision of other financial services as authorized by the SBIF, (10) real estate leasing, and (11) social security advice. These subsidiaries are regulated by the SBIF except for the cases referred to in (1), (2), (3) and (6) above in which the SBIF may request information but the entities are regulated by the CMF or, with respect to social security, by the Superintendency of Pensions (Superintendencia de Pensiones) or SAFP. Currently, banks are not authorized to create or engage in the business of insurance companies (other than as insurance brokers) and pension funds or health insurance administrators.

Banks may also, with the prior authorization of the SBIF, create and participate in companies exclusively destined to the carrying out of activities in support of the main banking operations, such as payment card operators.

Legal Provisions Regarding Banking Institutions with Financial Instability or Poor Management

Liquidation of Chilean banks may not be ordered in bankruptcy procedures, except when undergoing voluntary liquidation. The Chilean General Banking Act sets forth that if a bank is under certain specific adverse circumstances that are indicative of financial instability or poor management, the bank must (i) immediately inform the SBIF of the occurrence of any such circumstance, and (ii) submit to the SBIF within five days (extendable up to 10 days), a remediation plan approved by its board of directors. The remediation plan must include concrete measures towards the remediation of the situation affecting the bank and secure its normal operation. The SBIF is also authorized to request such remediation plan in the event it becomes aware that a bank has been affected by any such circumstances without having received timely notice thereof from the affected bank. The SBIF shall communicate, on a confidential basis, to the Financial Stability Council the bank’s submission of a remediation plan, as well as its approval, rejection and/or comments made by the SBIF. The remediation plan submitted by the bank must be approved by the SBIF and shall set forth a maximum six-month term from the date of its approval by the SBIF for its satisfaction, unless otherwise expressly authorized by the SBIF.

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Additionally, the bank must provide the SBIF with periodic reports as to the implementation of the remediation plan. If the remediation plan includes, as one of its remediation measures, a capital increase, with the prior approval of the SBIF, the board of directors of the bank must summon a shareholders meeting to approve such increase. If the shareholders reject the capital increase, or if approved, it is not paid within the approved term, or if the SBIF rejects for a second time the conditions to summon the shareholders meeting, the SBIF may prohibit the bank for a maximum term of six months, renewable once for the same period, among others, from granting new loans, extending any loans beyond 180 days and releasing or limiting the collateral on existing loans. The Chilean General Banking Act provides that the remediation plan can include a three-year term loan from another bank which will be subordinated to other liabilities of the bank. The terms and conditions of such a loan must be approved by the directors of both banks, as well as by the SBIF, but need not be submitted to the borrowing bank’s shareholders for their approval. In any event, a creditor bank cannot grant interbank loans to an insolvent bank in an amount exceeding 25% of the creditor bank’s effective net equity.

If a bank does not submit a remediation plan, or if the remediation plan is rejected by the SBIF, or if the bank breaches any of the measures set forth therein, or has incurred in repeated breaches or fines, or is reluctant to comply with the SBIF’s orders or has incurred in any material fact that threatens its financial stability, or if the SBIF does not approve the remediation plan, or if such plan is not timely submitted by the bank or the terms of such plan are breached by the bank, or if the capital increase included in the remediation plan is approved by the shareholders of the bank but not paid within the approved term, or if the SBIF rejects for the second time the conditions to summon the shareholders meeting that shall approve the capital increase, the SBIF is authorized to appoint a delegated inspector and/or, with the prior consent of the Council of the Central Bank of Chile, to appoint a provisional administrator who will be in charge of the bank’s administration. The appointment of a delegated inspector or provisional administrator shall be for a period no longer than one year, renewable for one additional year in case of the delegated inspector, and indefinitely in the case of the provisional administrator.

Dissolution and Liquidation of Banks

The SBIF may provide that a bank must be liquidated if the safety of its depositors or other creditors so demands it, or when such bank does not have the necessary solvency to continue its operations. In such case, the SBIF must revoke such bank’s authorization of existence and mandate its liquidation, subject to approval by the Central Bank of Chile. The SBIF’s resolution must state the reason for ordering the liquidation and must appoint a liquidator, unless the Superintendent of Banks assumes this responsibility. Once the CMF replaces the SBIF, the CMF shall appoint a liquidator, who shall be a person that meets the suitability and technical capacity requirements to be determined by the CMF pursuant to a regulation to be issued by the CMF. Upon a liquidation order, all checking accounts deposits and obligations payable on demand from the ordinary course of business are required to be paid by using the bank’s existing funds, its deposits with the Central Bank of Chile or its investments in instruments that represent its reserves.

If these funds are insufficient to pay these obligations, the liquidator may seize the rest of the bank’s assets, as needed. If necessary and in specified circumstances, the Central Bank of Chile will lend the bank the funds necessary to pay these obligations. Any such on demand obligations are preferential to any claims of other creditors of the liquidated bank.

Investments in Foreign Securities

Under current Chilean banking regulations, banks in Chile may grant loans to foreign individuals and entities and invest in certain foreign currency securities. Chilean banks may only invest in equity securities of foreign banks and certain other foreign companies which may be affiliates of the bank or which would support the bank’s business if such companies were incorporated in Chile. Banks in Chile may also invest in debt securities traded in formal secondary markets. Within certain limits, banks in Chile may invest in such debt securities, in the event such debt securities qualify as securities issued or guaranteed by (1) foreign sovereign states or their central banks or (2) other foreign or international financial institutions of which Chile is a member or bonds issued by foreign corporations. Such foreign currency securities must have a minimum rating as follows:

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Rating Agency	Short Term	Long Term
Moody’s	P-2	Baa3
Standard and Poor’s	A-2	BBB-
Fitch Rating Service	F2	BBB-
Dominion Bond Rating Service (DBRS)	R-2	BBB (low)

A Chilean bank may invest in securities having a minimum rating as follows, provided that in case the total amount of these investments, together with the loans granted to certain classes of foreign debtors, exceeds 20% (or 30% for banks with a BIS ratio equal or exceeding 10%) of the effective net equity of the bank, a provision of 100% of the excess shall be established by the bank:

Rating Agency	Short Term	Long Term
Moody’s	P-2	Ba3
Standard and Poor’s	A-2	BB-
Fitch Rating Service	F2	BB-
Rating Agency	Short Term	Long Term
Dominion Bond Rating Service	R-2	BB (low)

If investments in these securities and certain loans referred to below exceed 70% of the effective net equity of the bank, a provision for 100% of the excess shall be established, unless the excess, up to 70% of the bank’s effective net equity, is invested in securities having a minimum rating as follows:

Rating Agency	Short Term	Long Term
Moody’s	P-1	Aa3
Standard and Poor’s	A-1+	AA-
Fitch Rating Service	F1+	AA-
Dominion Bond Rating Service	R-1 (high)	AA (low)

Additionally, a Chilean bank may invest in foreign securities, with ratings equal to or exceeding those set forth in the table above, in: (1) overnight and term deposits with foreign banks, subject to a limit of up to 30% of the effective net equity of the Chilean bank that makes the investment (or limit of 25% of its effective net equity regarding deposits with certain related parties); and (2) securities issued or guaranteed by sovereign states or their central banks or those securities issued or guaranteed by international institutions of which Chile is a part, subject to a limit of up to 50% of the effective net equity of the Chilean bank.

Subject to specific conditions, a bank may grant loans in dollars to subsidiaries or branches of Chilean companies located abroad, to companies listed on foreign stock exchanges authorized by the Central Bank of Chile and, in general, to individuals and entities domiciled abroad, as long as the Central Bank of Chile is kept informed of such activities. A bank may also grant loans in dollars to finance exports to or from Chile.

In the event that the sum of the investments of a bank in foreign currency and of the commercial and foreign trade loans granted to foreign individuals and entities exceeds 70% of the effective net equity of such bank, the excess is subject to a mandatory reserve of 100%.

Changes in the Governance of Our Regulators

On February 23, 2017, Law No. 21,000, which establishes the CMF, was published. This new law modifies, among other matters, the corporate governance and operation of the Chilean regulator for securities and insurance, a role that has historically been performed by the Chilean Superintendency of Securities and Insurance. This law came into effect in March 2017. The main features of this new law are the following:

• The Chilean Superintendency of Securities and Insurance was replaced by a new body, which is the Commission for the Financial Market which became operational on December 14, 2017. The direction of the Commission for the Financial Market corresponds to the Council of the Commission for the Financial Market, which is composed of five members. This commission continues to supervise the entities that formerly were under the supervision of the Chilean Superintendency of Securities and Insurance.

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• The new law required the President of Chile to submit to the Chilean Congress, within one year of the publication of the law, a bill to amend the Chilean General Banking Law in order to subject banks and financial institutions to the supervision of the Commission for the Financial Market. This bill was submitted to the Chilean Congress in June 2017. Law No. 21, 130 was enacted to modify the Chilean General Banking Act for purposes of adopting Basel III.

• The new law established the separation of responsibility for (i) the issuance of regulations, (ii) compliance enforcement, and (iii) investigation and the imposition of sanctions. All three activities are conducted by different divisions within the Commission for the Financial Market. While the issuance of regulations and the imposition of sanctions corresponds to the Council of the Commission for the Financial Market, the Investigation Unit (Unidad de Investigación) is in charge of the investigation of breaches of regulations of competence of such commission, of the initiation of sanctioning procedures and of the surveillance of the compliance of the sanctions imposed by the commission.

• In addition to the former powers of the Chilean Superintendency of Securities and Insurance, the Commission for the Financial Market has other powers, such as the authority to seize documents, intercept communications and obtain information on banking operations (including those subject to bank secrecy).

• The sanctioning process has two different procedures: (i) a simplified procedure for cases where no crimes are involved and for cases of less materiality; and (ii) a general procedure for cases involving potential crimes and for cases which even though do not involve potential crimes, are material. The new law also established plea bargain procedures (Delación Compensada) and the imposition of prohibitions to be eligible for election as director or main executive to those charged with criminal conducts.

The new law also encourages the self-regulation of entities subject to the supervision of the Commission for the Financial Market through the creation of the Financial Self-Regulation Committee.

Financial Stability Council

Law No. 20,789 created the Financial Stability Council, composed by the Minister of Finance (Ministro de Hacienda), the chairman of the CMF and the Superintendent of Pensions. The purpose of this council is to facilitate the technical coordination and the exchange of information by these market regulators in all matters related to the prevention and management of situations which may involve a risk for the financial system.

This law also expanded the authority of the SBIF to request information regarding controlling shareholders of banks and entities which are part of their corporate group.

Anti-Money Laundering, Anti-Terrorist Financing and Foreign Corrupt Practices Act Regulations

United States

We, as a foreign private issuer whose securities are registered under the U.S. Securities Exchange Act of 1934, are subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended, or the FCPA. The FCPA generally prohibits issuers and their directors, officers, employees and agents from using any means or instrumentality of U.S. interstate commerce in furtherance of any offer or payment of money to any foreign official or political party for the purpose of influencing a decision of such person in order to obtain or retain business. The accounting provisions of the FCPA require an issuer to maintain books and records and have a system of internal accounting controls sufficient to, among other things, provide reasonable assurances that transactions are executed and assets are accessed and accounted for in accordance with management’s authorization. Significant penalties and fines may be imposed against us, and/or our officers, directors, employees, and agents, for violations of the FCPA. Furthermore, we may be subject to a variety of U.S. anti-money laundering and anti-terrorist financing laws and regulations, including, but not limited to, the Bank Secrecy Act of 1970, as amended, and the USA PATRIOT Act of 2001, as amended. A violation of such laws and regulations may result in substantial penalties, fines and imprisonment of our officers and/or directors.

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Chile

The Anti-Money Laundering Act, or the AML Act, requires banks, among others, to report any “suspicious transactions or activities” that they may become aware of in the ordinary course of business to the Chilean Financial Analysis Unit (Unidad de Análisis Financiero), or FAU. “Suspicious activities or transactions” are defined by the AML Act as any act, operation or transaction that, in accordance with the uses and customs of the relevant activity, is considered unusual or devoid of apparent economic or legal justification or that may constitute any of the actions described in Article 8 of Law No, 18,314 (terrorist actions), or entered into by an individual or a legal entity included in any resolution issued by the United Nations Security Council, whether carried out in an isolated or recurrent basis.

In accordance with the AML Act, banks must keep special records for any transaction in cash for amounts exceeding US$10,000, and report them to the FAU if so required by the latter authority.

In addition, the entities subject to the AML Act are also subject to Circular No. 49 and other regulations issued by the FAU, which provides additional guidelines for the prevention of money laundering.

With regard to Chilean banks the SBIF has also provided rules and guidelines for banks to set up an AML and Combating Financing of Terrorism, or CFT, prevention system applicable in their ordinary course of business, which must take into consideration the volume and complexity of their transactions, including their affiliates and supporting entities, and their international presence. In case of non-compliance of these rules and guidelines, the SBIF may impose administrative sanctions upon the infringing bank such as fines and warnings. Among other requirements, such system shall include at least (1) ”know your customer” policies, (2) a manual of policies and procedures, (3) the appointment of a compliance officer, and (4) all necessary technological tools to develop red-flag systems to identify and detect unusual operations. For more information on our Anti-Money Laundering Committee, see “Item 6. Directors, Senior Management and Employees—C. Board Practices—Other Committees—Anti-money laundering and anti-terrorism finance prevention committee.”

On December 2, 2009, Chilean Law 20,393 came into effect. Law 20,393 regulates and provides for the criminal liability of legal entities for certain crimes, such as money laundering, financing of terrorism, bribery, misappropriation (Apropiación Indebida), unfair administration (Administración Desleal), incompatible negotiation (Negociación Incompatible), and corruption between private parties (Corrupción entre Particulares). Pursuant to Law 20,393, a legal entity will be exempted from criminal liability if it has adopted and implemented a crime prevention model (Modelo de Prevención de Delitos) which shall include at a minimum (i) the appointment of a compliance officer, who shall be given enough powers and resources to exercise its duties and (ii) a system to prevent the commission of crimes which must be certified by external auditors, the respective risk classification entities and other specialized entities registered with the CMF. In this regard, Itaú Corpbanca and its subsidiaries have adopted and implemented a Crime Prevention Model which has been certified by BH Compliance Limitada.

Colombia

The regulatory framework to prevent and control money laundering is contained in, among others, Decree 663 of 1993 and External Circular No. 029 of 2014 (Basic Legal Circular), Title IV, Chapter IV, “Instructions Related to Risk Management of Laundering and Terrorist Financing,” issued by the Colombian Superintendency of Finance, as well as Law 599 of 2000 (Colombian Criminal Code, as amended).

Colombian laws adopt the latest guidelines related to anti-money laundering and other terrorist activities established by the Financial Action Task Force on Money Laundering, or FATF. Colombia, as a member of the GAFI-SUD (Grupo de Acción Financiera de Sudamérica) (a FATF style regional body), follows all of FATF’s 40 recommendations. Finally, the Colombian criminal code introduced criminal rules and regulations to prevent, control, detect, eliminate and adjudicate all matters related to financing terrorism and money laundering. The criminal rules and regulations cover the omission of reports on cash transactions, mobilization or storage of cash, and the lack of controls.

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Anti-money laundering provisions have been complemented with provisions aimed at deterring terrorism financing. For that purpose, by means of External Circular 26 of 2008, the Colombian Superintendency of Finance has issued regulations requiring the implementation by financial institutions of a risk management system for money laundering and terrorism financing. These regulations emphasize “know your customer” policies and knowledge of customers and markets. They also establish processes and parameters to identify and monitor a financial institution’s customers. According to these regulations, financial institutions must cooperate with the appropriate authorities to prevent and control money laundering and terrorism.

Regarding foreign corrupt practices regulations, the Colombian Congress enacted Law 1778 of 2016 pursuant to which rules on liability of legal entities related with the commission of acts of transnational corruption were established (the “Law 1778”). Law 1778 grants authority to the Colombian Superintendence of Companies regarding the possibility to investigate and sanction legal entities whose employees, contractors, directors or partners (of their own or any subordinate entity) give, offer or promise to give to a foreign public official sums of money, any object of monetary value or any other kind of benefit or value in exchange for the latter to perform, omit or delay acts related with their duties and in connection with a business or international transaction. Additionally, according to Law 1778, the parent companies may also be responsible, along with their subordinate entities when, with the latter’s acknowledgement or tolerance, such subordinate entities (employees, contractors, directors or partners) perform acts of transnational bribery.

Finally, the Colombian Criminal Code includes rules and regulations to prevent, control, detect, eliminate and adjudicate all matters related to financing terrorism and money laundering. The criminal rules and regulations cover the omission of reports on cash transactions, and the lack of controls.

Recent Regulatory Developments in Chile

Capital Adequacy Requirements

As noted above, on January 12, 2019, Law No. 21,130, which modified the Chilean General Banking Act, was enacted. Such law has adopted the capital adequacy requirements applicable to banks under Basel III. As of the date hereof, not all the provisions of Law No. 21,130 are in effect. Some capital adequacy provisions will come into effect once the CMF issues certain regulations to be issued according to such law. See “Item 4—Information on the Company—B. Business Overview—Chilean Banking Regulation and Supervision—SBIF.”

Commission for the Financial Market

On February 23, 2017, Law No. 21,000, which establishes the CMF, was published. This new law modifies, among other matters, the corporate governance and operation of the Chilean regulator for securities and insurance, a role that has historically been performed by the Chilean Superintendency of Securities and Insurance. This law came into effect in March 2017. See “Item 4. Information on the Company—Changes in the Governance of Our Regulators.”

Further, on January 12, 2019, Law No. 21,130, which modified the Chilean General Banking Act for purposes of adopting Basel III, was published. According to a Transitory Article Ninth of such law, the President of the Republic of Chile shall issue a Decree with Force of Law through the Ministry of Finance, which among other matters, shall determine the date in which the Chilean Commission for the Financial Market shall replace the SBIF. In respect of this, it has been announced that the Chilean Commission for the Financial Market will replace the SBIF effective as of June 1, 2019.

Modification to the AML Act

The AML Act has been recently amended as follows:

On February 18, 2015 Law No. 20,818 was enacted, amending certain provisions of the AML Act by: (i) increasing the authority of the FAU; (ii) increasing the scope of entities that are subject to the AML Act; (iii) amending the definition of “suspicious activities or transactions”; (iv) reducing the minimum amounts of the cash transactions to be registered and potentially reported to the FAU; (v) amending the sanctions applicable to any breach to the AML Act; (vi) adding new base crimes for the crime of money laundering; (vii) requiring entities subject to the AML Act to report to the FAU any transaction entered into by any individual or entity contained in any resolution issued by the United Nations Security Council; and (viii) establishing the obligation of the entities subject to the AML Act to register with the FAU, among other things.

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On November 20, 2018 Law No. 21,121 was enacted amending, among others, the AML Act by including misappropriation (Apropiación Indebida) and unfair administration (Administración Desleal) as crimes of money laundering.

Tax Reform

On September 29, 2014, the Tax Reform was published in the Chilean Official Gazette, introducing the most significant amendments to the Chilean tax system over the last 30 years and strengthening the powers of the Servicio de Impuestos Internos, or the Chilean IRS to control and prevent tax avoidance. One of the main purposes of this reform was to finance major educational reforms. Thereafter the Tax Reform was modified by Law No. 20,899, published on February 8, 2016.

• Due to the Tax Reform, the Bank is now subject to the partially integrated system where companies are subject to a corporate tax of 27%. Then, when the income is actually withdrawn from a company, non-Chilean resident shareholders would be subject to a 35% withholding tax, while Chilean resident shareholders would be required to pay the progressive Complementary Global Tax, with rates ranging between 0% and 35%, against which only a 65% of the corporate tax will be allowed to be used as a credit against the withholding tax or the Complementary Global Tax. Nevertheless, the foreign holder shall be entitled full corporate tax credit, if such holder is established on, domiciled in, or resident of a country with which Chile has a double taxation treaty in force or, until December 31, 2021, Chile has signed a double taxation treaty with such country, although not in force, given that the foreign holder credits his tax residency under the Chilean IRS’s Resolution No. 11, which was issued on January 20, 2019. This Resolution provides the requirements that must be met by foreign investors and their tax certificates in order to be eligible for this benefit.

Law No. 20,899 introduced changes to both systems in order to simplify them. Other amendments included in this Law are related to the accuracy of the general anti-avoidance rules and the implementation of Value Added Tax (VAT) for certain operations, mainly to the sale of real estate and leases with purchase option.

On August 21, 2018, a bill was submitted to the Chilean National Congress aimed at reforming the tax legislation. This bill proposes to unify the tax regimes referred to above, abolishing the current attributed income system, and providing for a general regime under which the corporate tax would apply as a general rule with a 27% rate, which would be fully creditable against the withholding tax or Global Complimentary Tax. To date, such bill is still under discussion by the Chilean National Congress.

Foreign source income obtained by taxpayers domiciled or resident in Chile is generally subject to taxes in Chile on a cash basis. However, in the case of branches or other permanent establishments located abroad, both accrual and received income are considered in Chile for tax purposes. Also, taxpayers who obtain passive income from foreign companies, in which they have control, as defined by law, will have to pay taxes on accrual and cash basis, for the passive income accrued or perceived by those controlled entities.

Bonds and other debt instruments issued in Chile by Chilean companies are deemed to be located in Chile for capital gains purposes. However, bonds issued outside of Chile by Chilean companies are not deemed located in Chile for capital gain purposes and, consequently, the sale of such bonds by a non-Chilean resident is not subject to capital gains tax in Chile (according to section 11 of the Ley Sobre Impuesto a la Renta, or the Chilean Income Tax Law, it would be considered a foreign source income obtained by a non-Chilean resident).

Law No. 20,855

On September 25, 2015 the Consumer Protection Act and the Pledge Without Conveyance Act were amended in order to include several provisions regarding the release and cancellation of mortgages and certain pledges. According to this law, once an obligation secured with any of the said security interests has been extinguished, the relevant creditor ex officio shall grant and afford the corresponding release and cancellation public deed, and its record cancellation. Furthermore, the relevant creditor shall inform such proceedings to the debtor within the term established by law.

New Securities Brokerage Regulation

On March 9, 2015, the Chilean Superintendency of Securities and Insurance issued its General Rule No. 380, which came into effect on September 9, 2016. This new rule replaced the rules regarding the relationship of Chilean securities brokers with their customers by setting forth new regulations on matters such as suitability, contracts with clients, conflicts of interest, execution of orders and registration and recording of orders, among others. Based on this new rule, Chilean securities brokers are required to execute contracts with clients that shall include the information set forth in this rule (i.e., communications to the client of the existence of conflicts of interest, procedures to deal with such conflicts, communications between the securities broker and the client, granting of security interest, fees, etc.). Also, the Chilean stock exchanges changed their internal regulations to adopt the new regulations set forth by General Rule No. 380, including providing forms of the contracts required to be executed with clients.

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Amendment to the Consumer Protection Act

On September 13, 2019, Law No. 21,081 was published in the Official Gazette. This law, which enters into effect pursuant to a schedule that ranges between March 14, 2019 and September 13, 2020, amends the Consumer Protection Act in the following manner: (i) strengthens consumer organizations; (ii) substantially increases the fines applicable for breaching the Chilean Consumer Protection Act; (iii) increases the period of the statute of limitations for liability; (iv) amends procedures in several respects in order to make them more consumer-friendly; and (v) increases the inspection powers of the National Consumer Service (SERNAC).

Bill Regarding the Limitation of Liability of Users of Payment Methods in Loss, Theft, Robbery or Fraud Cases

Since April 2005, Law No. 20,009 has provided the Chilean legal framework governing the liability of cardholders in case of thefts, losses and robbery of his or her credit or debit cards. Under Law No. 20,009, to the extent a cardholder notifies the issuer of the loss, theft or robbery of its credit or debit cards, they will be exempt from liability in respect of transactions made after such notification; further the issuer of the card must provide evidence that the transactions were made by the cardholder. Although it is generally considered that this mechanism has worked adequately, there is currently a bill of law under discussion in the Chilean Congress to amend certain aspects of Law No. 20,009 that is aimed at the establishment of a new liability regime in cases of loss, theft, robbery or fraud of payment cards or other similar payment methods, as well as in cases of fraud in electronic transactions (collectively, the “Payment Methods”). Pursuant to such bill of law, users of a Payment Method may limit their responsibility in cases of loss, theft, robbery or fraud by providing notice thereof to the issuer of the applicable Payment Method. Upon such notice, the issuer of the applicable Payment Method shall be liable for all operations occurring thereafter. Further, with respect to operations that took place prior to the corresponding notice by a user and that a user denies to have approved or performed, the user shall make a claim in respect thereof concurrently with the notice mentioned above, or within five business days thereafter. Upon such claim, the issuer of the Payment Method shall cancel the charges or reimburse the funds within seven business days. If the issuer of a Payment Methods desires to contest the claim of a user, the issuer shall bear the burden of proof.

COLOMBIAN BANKING REGULATION AND SUPERVISION

Colombian Banking Regulators

Pursuant to the Colombian Constitution, the Colombian Congress has the power to prescribe the general legal framework within which the government may regulate the financial system. The agencies vested with the authority to regulate the financial system are the board of directors of the Central Bank of Colombia, the Colombian Ministry of Finance, the Colombian Superintendency of Finance, the SIC, and the SRO.

Central Bank of Colombia

The Central Bank of Colombia exercises the customary functions of a central bank, including price stabilization, monetary policy, regulation of currency circulation, regulation of credit, exchange rate monitoring and management of international reserves. Its board of directors is the regulatory authority for monetary, currency exchange and credit policies, and is responsible for the direction of the Central Bank of Colombia’s duties. The Central Bank of Colombia also acts as lender of last resort to financial institutions.

Colombian Ministry of Finance and Public Credit

One of the functions of the Colombian Ministry of Finance is to regulate all aspects of finance and insurance activities. As part of its duties, the Colombian Ministry of Finance issues decrees relating to financial matters that may affect banking operations in Colombia. In particular, the Colombian Ministry of Finance is responsible for regulations relating to capital adequacy, risk limitations, authorized operations, disclosure of information and accounting of financial institutions.

Colombian Superintendency of Finance

The Colombian Superintendency of Finance is the authority responsible for supervising and regulating financial institutions, including commercial banks such as Itaú Corpbanca Colombia, finance companies, financial services companies and insurance companies. The Colombian Superintendency of Finance has broad discretionary powers to supervise financial institutions, including the authority to impose fines on financial institutions and their directors and officers for violations of applicable regulations and certain judicial attributions regarding controversies among customers and banks. The Colombian Superintendency of Finance can also conduct on-site inspections of Colombian financial institutions.

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The Colombian Superintendency of Finance is also responsible for monitoring and regulating the market for publicly traded securities in Colombia and for monitoring and supervising securities market participants, including the Colombian Stock Exchange, brokers, dealers, mutual funds and issuers.

Financial institutions must obtain the prior authorization of the Colombian Superintendency of Finance before commencing operations.

Violations of the financial system rules and regulations are subject to administrative, and in some cases, criminal sanctions.

Self-Regulatory Organization

The SRO is a private entity responsible for the regulation of intermediaries participating in the Colombian capital markets. The SRO may issue mandatory instructions to its members and supervise its members’ compliance and impose sanctions for violations.

All capital market intermediaries, including Itaú Corpbanca Colombia and its subsidiaries, must become members of the SRO and are subject to its regulations.

Superintendency of Industry and Commerce

The SIC is the authority responsible for supervising and regulating competition in several industrial sectors, including financial institutions. The SIC is authorized to initiate administrative proceedings and impose sanctions on banks, including Itaú Corpbanca Colombia, whenever the financial entity behaves in a manner considered to be anti-competitive.

The Colombian Superintendency of Finance is the authority responsible for approving mergers, acquisitions and integrations between financial institutions such as Itaú Corpbanca Colombia. For such approvals, the Colombian Superintendency of Finance must obtain a non-binding prior written opinion by the SIC.

Capital Adequacy Requirements

Capital adequacy requirements for Colombian financial institutions (as set forth in Decree 2555 of 2010, as amended, or Decree 2555) are based on applicable Basel Committee standards. Decree 2555 establishes four categories of assets, which are each assigned different risk weights, and require that a credit institution’s Technical Capital (as defined below) be at least 9% of that institution’s total risk-weighted assets.

Currently, Decree 2555 sets forth, among other things:

• that Technical Capital is the sum of ordinary primary capital (Patrimonio Básico Ordinario or Common Equity Tier One), additional primary capital (Patrimonio Básico Adicional or Additional Tier One), and secondary capital (Patrimonio Adicional or tier two capital);

• the criteria for debt and equity instruments to be considered ordinary primary capital, additional primary capital and secondary capital. The Colombian Superintendency of Finance will review whether a given instrument adequately complies with these criteria in order for an instrument to be considered tier one, additional tier one or tier two capital, upon request of the issuer. Debt and equity instruments that have not been classified by the SFC as ordinary primary capital or secondary capital, will not be considered tier one, additional tier one or tier two capital for purposes of capital adequacy requirements;

• the minimum total solvency ratio of 9% of the financial institution’s technical capital divided by total risk-weighted assets; however, each entity must also comply with a minimum basic solvency ratio of 4.5%, which is defined as the ordinary primary capital after deductions divided by the financial institution’s total risk-weighted assets. In addition, solvency ratios must be met individually, by each credit institution, and must be met and monitored on a consolidated basis;

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• that the calculation of the total solvency ratio will take into account operational risk; however the Colombian Superintendency of Finance has not yet defined the methodology to be used to estimate such effect; and

• that credit institutions are able to include hybrids instruments designed to have characteristics of a fixed income and characteristics of equity market security, as part of its basic additional capital.

When the solvency ratio of a financial institution is below 10%, the Colombian Superintendency of Finance implements a closer supervision on banking activities of the entity based on the supervision policy implemented by the Colombian Superintendency of Finance. If a bank fails to comply with the capital adequacy requirements applicable to Colombian financial institutions, it may be subject to certain penalties and sanctions that are graduated depending on the level of compliance failure, and which may include an administrative take-over by the government with the purpose of administration or liquidation.

Minimum Capital Requirements

The minimum capital requirement for banks on an unconsolidated basis set forth in the Financial System Organic Act was COP$79,835 million (Ch$17,813 million) for 2015, COP$85,240 million (Ch$19,019 million) for 2016, COP$90,142 (Ch$20,715 million) for 2017, COP$93,829 million (Ch$19,310 million) for 2018 and COP$96,813 million for 2019. Failure to meet such requirement can result in the relevant financial institution take over (Toma de Posesión) by the Colombian Superintendency of Finance. Minimum capital requirements are adjusted in January each year based on the inflation percentage for the precedent year. The capital requirements for each type of financial institution (financial corporations, financing companies, trust companies, etc.) are different, with banks having the highest minimum amount. Additionally, there are capital requirements above this minimum for the purposes of credit exposure and derivatives transactions.

Capital Investment Limit

All investments in subsidiaries and other authorized capital investments, other than those made in order to abide by legal requirements, may not exceed 100% of the total aggregate of capital, equity reserves and the equity re-adjustment account of the respective bank, financial corporation or commercial finance company, excluding unadjusted fixed assets and including deductions for accumulated losses.

Mandatory Investments

The Central Bank of Colombia’s regulations require financial institutions, including Itaú Corpbanca Colombia, to make mandatory investments in securities issued by Finagro, a Colombian public financial institution that finances production and rural activities, to support the agricultural sector. The amount of these mandatory investments is calculated based on the current Colombian peso-denominated obligations of the relevant financial institution.

Foreign Currency Position Requirements

According to Resolution 1, issued by the Central Bank of Colombia issued in 2018, as amended, a financial institution’s foreign currency position (Posición Propia en Moneda Extranjera) is the difference between such institution’s foreign-currency-denominated assets and liabilities (including any off-balance sheet items), made or contingent, including those that may be sold in Colombian legal currency.

Resolution 1 provides that the average of a bank’s foreign currency position for three business days cannot exceed the equivalent in Colombian pesos of 20% of the bank’s Technical Capital. Currency exchange intermediaries such as Itaú Corpbanca Colombia are permitted to hold a three-business-days average negative foreign currency position not exceeding the equivalent in foreign currency of 5% of its Technical Capital (with penalties being payable after the first business day).

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Resolution 1 also defines foreign currency position in cash (Posición Propia de Contado en Moneda Extranjera), as the difference between all foreign-currency-denominated assets and liabilities. A bank’s three business days average foreign currency position has no limit.

Finally, Resolution 1 requires banks to comply with a gross position of leverage (Posición Bruta de Apalancamiento). Gross position of leverage is defined as the sum of (i) the rights and obligations of term and future contracts denominated in foreign currency, excluding obligations of a transaction that imply either the right or an obligation on foreign currency, plus (ii) foreign currency cash operations with settlement higher or equal to one banking day, excluding obligations of a transaction that imply either the right or an obligation on foreign currency plus (iii) the exchange rate risk exposure associated with debtor and creditor contingencies acquired in the trading of exchange rate options and derivatives. Resolution 1 sets no limit on the gross position of leverage with respect to the currency position in cash.

Deposit Insurance

In Colombia, the deposit insurance fund, FOGAFIN (Fondo de Garantías de Instituciones Financieras), guarantees up to COP$50 million (US$15,385.79 as of December 31, 2018) per person, for each institution calculated as the aggregate amount of time, savings and demand deposits held by individuals in a Colombian financial institution. Payment will be made in case of an administrative compulsory liquidation of the financial institution.

Reserve Requirements

Commercial banks are required by the board of directors of the Central Bank of Colombia to satisfy reserve requirements with respect to deposits and other cash demands. Such reserves are held by the Central Bank of Colombia in the form of cash deposits. According to Resolutions 5 and 11 of 2008 issued by the board of directors of the Central Bank of Colombia, as amended, the reserve requirements for Colombian banks are measured bi-weekly and the amounts depend on the class of deposits.

Credit institutions must maintain reserves of 11% over the following deposits, cash demands and other passive obligations:

• Private demand deposits;

• Government demand deposits;

• Other deposits and liabilities; and

• Savings deposits.

In addition, credit institutions must maintain reserves of 4.5% for term deposits with maturities fewer than 18 months and 0% for term deposits with maturities of more than 18 months.

Credit institutions may maintain these reserves in their accounts at the Central Bank of Colombia, or cash.

Marginal reserve requirements were eliminated by the Central Bank of Colombia in 2008. Since 2009, the reserve requirements have no remuneration.

Also, pursuant to the Circular Básica Contable y Financiera (Basic Accounting and Financial Circular) , to measure liquidity risk exposure on internal models, banks are required to calculate a liquidity risk indicator (LRI) accumulated for the band periods of 7, 15 and 30 days, as established by the Colombian Superintendency of Finance’s standard model.

Foreign Currency Loans

Residents of Colombia may obtain foreign currency loans from foreign residents and from Colombian currency exchange intermediaries or by placing debt securities abroad. Foreign currency loans must be either disbursed through a foreign exchange intermediary or deposited in offshore compensation accounts.

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According to regulations issued by the Central Bank of Colombia, every Colombian resident and institution borrowing funds in foreign currency is generally required to post with the Central Bank of Colombia non-interest bearing deposits for a specified term, although the size of the required deposit is currently zero.

Notwithstanding the foregoing, such deposits would not be required in certain cases set forth in the External Resolution 1, including in the case of foreign currency loans aimed at financing Colombian investments abroad. Moreover, Resolution 1 sets forth a number of restrictions and limitations as to the use of proceeds in the case of foreign currency loans obtained by Colombian currency exchange intermediaries (including Itaú Corpbanca Colombia) and also provides that deposits would not be required in the event such restrictions and limitations are observed. Such foreign currency loans may be used, among others, for lending activities in a foreign currency with a tenor equal to, or shorter than, the tenor of the foreign financing.

As a general rule, interest payments to foreign currency loans granted by foreign banks to Colombian residents are currently subject to a withholding tax at: (i) the general tax rate applicable to entities that are not Colombian residents for tax purposes (33% in 2019, 32 % in 2020, 31% in 2021 and in 2022 and onward 30%), when such payments are made to entities located in a preferential tax regime jurisdiction, non-cooperative jurisdiction or low-tax jurisdiction, according to paragraph of section 408 of the Colombian Tax Code; (ii) 5% when those interest payments are (a) derived from loans with an eight-year or longer term and (b) related to infrastructure projects under Law 1508 of 2012; (iii) 15% when interest payments are related to a loan with a term of more than one year; and (iv) 15% in 2018 and 20% in 2019 and onward as a general rule (i.e. in other cases different than (i), (ii) and (iii) above) according to section 408 of the Colombian Tax Code.

Finally, pursuant to Law 9 of 1991, the board of directors of the Central Bank of Colombia is entitled to impose conditions and limitations on the incurrence of foreign currency indebtedness, as an exchange control policy, in order to avoid pressure in the currency exchange market.

Non-Performing Loan Allowance

The Colombian Superintendency of Finance maintains guidelines on non-performing loan allowances for financial institutions. This information has been provided in order to provide the reader with a more in-depth analysis. Notwithstanding, our allowance and provision for loan losses as recorded in our consolidated financial statements included herein have been determined in accordance with IFRS.

Recent Regulatory Developments in Colombia

Tax Reform

On December 28, 2018, the Colombian Government approved a tax reform under Law No. 1.943. The most relevant features of this reform are:

• General income tax rate will be reduced from 37% in 2018 down to 30% in 2022 as follows:

	2018			2019			2020			2021			2022 and following years
General tax rate		33	%		33	%		32	%		31	%		30	%
Surcharge(*)		4	%		—			—			—			—
Total		37	%		33	%		32	%		31	%		30	%

(*) To be paid only by taxpayers whose income surpasses COP$800 million.

• Financial entities will be subject to a corporate income tax rate of 37% in 2019, 35% in 2020 and 34% in 2021.

• The percentage of liquid equity to calculate “assumed income” (Renta Presuntiva) is expected to decrease from 3.5% in 2018 down to: (i) 1.5% in 2019 and 2020; and (ii) 0% in 2021.

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• As of 2019, input VAT in the acquisition of fixed assets may be treated as a tax credit and may be offset against the income tax due.

• In fiscal year 2018, the thin capitalization rule applied to all kinds of indebtedness and the debt-to-equity ratio was 3:1.

• As of 2019, the thin capitalization rule will apply only to indebtedness between related parties. In order to determine the non-deductible interest, the debt-to-equity is to 2:1. For the deductibility of interest, taxpayers will have to prove to the Colombian Tax Administration, upon request, that there is no indebtedness between related parties through back-to-back operations or any other kind of operation in which the creditor is a substantially related party. In such case, the parties involved in the operation may be jointly liable for the taxes, sanctions and interest.

• The tax rate on dividends distributed to foreign companies, out of profits that were taxed at the corporate level is: (i) 5% in 2018; and (ii) 7.5% in 2019.

• As of 2019, the dividends distributed between Colombian companies may be subject to a 7.5% withholding tax rate, which may be offset as a tax credit by the beneficial owner (either an individual tax resident or a foreign investor). Dividends distributed among Colombian entities duly registered as a corporate group before the Chamber of Commerce would not subject to withholding tax. In fiscal year 2018, dividends distributed among Colombian companies, out of profits that were taxed at the corporate level, were not subject to withholding tax.

• A new wealth tax (Impuesto al Patrimonio) will apply to individuals and certain foreign investors in 2019, 2020 and 2021.

• As of 2019, Colombia may levy a capital gains tax on the sale of shares of a non-Colombian entity when such non-Colombian entity owns assets/shares in Colombia. (Enajenaciones Indirectas.)

• Entities and individuals involved in operations considered as tax abuse or tax fraud by the Colombian Tax Administration may be jointly liable for the taxes, sanctions and interest, pursuant to Section 793 of the Colombian Tax Code.

• Private equity funds and collective investment funds remain as non-taxpayers and its beneficiaries may defer the realization of the income when certain conditions are met.

Abandoned Accounts

On February 1, 2016, Law No. 1777 was enacted. Abandoned accounts are regulated in order to establish a public use for funds in these accounts. Funds are considered abandoned in bank accounts after three consecutive years without any account movement. Such abandoned funds may be invested in the creation and administration of a fund in the public financial institute that finances educational credit (Crédito Educativo y Becas en el Exterior or ICETEX).

Costs of Financial Services

On July 7, 2016, Law No. 1793 was enacted in order to regulate the costs of financial services. Among other things, this new law establishes that clients of entities authorized to collect funds from the public may access all of the funds deposited in their savings accounts or electronic deposits, without having the obligation to maintain a minimum balance. The entities must provide mechanisms for this purpose without charging additional fees to clients. This new law also establishes that: (i) for savings accounts, entities authorized to raise funds from the public may only charge financial and/or transactional costs for the first 60 days of inactivity and/or absence of financial movements by the user, and in no case may such entities make retroactive charges when the account becomes active again; (ii) for savings accounts that are inactive at the time of entry into force of the new law, the period of 60 days for the suspension of collections will start from the date of effectiveness of the law; and (iii) entities authorized to raise funds from the public are obligated to recognize users with a minimum interest rate in all savings accounts for any level of deposit. In addition, the receiving entities must inform the consumers about these changes in law.

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Abusive Contract Clauses and Practices

On May 26, 2016, the Colombian Superintendence of Finance issued its Circular No. 18, which modified the then-current instructions related to abusive contract clauses and practices. The circular forbids certain practices that were considered abusive by the Colombian Superintendence of Finance, as well as those practices informed by the Financial Consumer Defenders. Financial institutions were given a maximum term of six months from the entry into force of the circular to adjust their contracts and practices to its instructions.

Total Unified Value (Valor Total Unificado or VTU)

On July 12, 2016, the Colombian Superintendence of Finance issued its External Circular Letter No. 23, setting forth instructions related to the obligation of banking entities to report to their clients a “Total Unified Value” (Valor Total Unificado or VTU) of active and passive operations, when offering basic services and an “Annual Report of Total Costs” (Reporte Annual de Costos Totales or RACT). The purpose of this circular was to: (i) update and harmonize the instructions related to the scope, content and form of delivery of the RACT, and the basic services package; (ii) incorporate the components to be taken into account for the calculation and reporting of “Total Unified Value in Active Transactions” (Valor Total Unificado de Operaciones Activas or VTUA) and “Total Unified Value in Passive Transactions” (Valor Total Unificado de Operaciones Pasivas or VTUP); and (iii) establish the method of calculation of the VTUA and VTUP.

Interruptions of Services

On August 3, 2016, the Colombian Superintendence of Finance issued its External Circular No. 28, setting forth instructions applicable to all financial sector companies in connection with events that generate interruptions of services and that prevent operations from being carried out by clients. The circular aimed to guarantee that clients are informed of these interruptions and have mechanisms to guarantee the effective exercise of their rights. The circular also includes instructions related to: (i) the information that credit institutions must provide to clients when encountering interruptions in the provision of services; and (ii) the general requirements regarding security and quality of information.

Requirements for Trust Products

On July 27, 2016, the Colombian Superintendence of Finance issued its Circular No. 024, which established the minimum requirements for trust products linked to the development of real estate projects, accountability and the process of commercialization of the participation in any trust fund. The circular also sets forth the information that must be provided to financial consumers of trust products of any kind. For this purpose, the Colombian Superintendence of Finance published an ABC on business trust about real estate projects providing general guidance to those interested in this class of investment.

Reversal of Payments

On April 11, 2016, the Colombian Ministry of Industry and Commerce issued its Decree No. 587, which added a chapter to the Unique Decree of the Commerce, Industry and Tourism Sector, Decree 1074 of 2015, and regulated Article 51 of Law 1,480 of 2011. The decree establishes the conditions and procedures for reversals of payments requested by consumers, when the purchase of the goods or services was made through electronic commerce mechanisms with an electronic payment instrument such as a credit or debit card.

Accessibility for People with Disabilities

On March 31, 2018, the Colombian Superintendency of Finance issued External Circular No. 008, which amended the Basic Legal Circular regarding the system of attention to financial consumers in situation of disability.

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Securities Custodian

On January 26, 2017, the Colombian Ministry of Finance issued its Decree No. 119, which amended Decree No. 1068 of 2015 in relation to the general regime of foreign capital investment in Colombia and of Colombian investments abroad and other provisions regarding foreign exchange. The decree establishes that only entities such as trustee companies, broker companies and investment management companies can act as representatives of foreign portfolio investments.

Specialized Electronic Deposit and Payment Institutions (Sociedades Especializadas en Depósitos y Pagos Electrónicos or SEDPE)

On December 7, 2017, the Colombian Ministry of Finance issued its Decree No. 2076, which amended Decree No. 2555 to, among other things: (i) provide that SEDPEs shall establish a consumer advocate to protect consumers’ rights, (ii) authorize SEDPEs the use of correspondent networks and establish rules regarding cash payments through the correspondent network, (iii) authorize SEDPEs the opening of accounts through non-presential means, and (iv) authorize SEDPEs customers to have more than one account per SEDPE.

Publication of the Current Banking Interest Rate

Beginning on September 1, 2017, the Colombian Superintendency of Finance started publishing the current banking interest rate (Interés Bancario Corriente) on a monthly basis, and not on a quarterly basis as previously.

Financial Conglomerates

On September 21, 2017, Law 1870 was enacted. This law establishes that financial holdings will be subject to the inspection and oversight of the Colombian Superintendency of Finance under the terms of said law and of the decrees issued in the future for this regulation. A financial holding is understood as any legal person or investment vehicle that exercises the first level of control or significant influence over the entities that make up the financial conglomerate. Furthermore this law gives the Colombian Superintendency of Finance the faculty to request information regarding the members of the financial conglomerate to verify if they meet requirements regarding: (i) the appropriate levels of capital; (ii) solvency margins; (iii) with exposure limits; and (iv) concentration risks. Also this law permits the Colombian Superintendency of Finance to verify if each member entity of the conglomerate complies with applicable regulations in relation to: (i) risk management; (ii) internal control; (iii) disclosure of information; (iv) conflicts of interest; and (v) corporate governance. Such requirements will not be applicable if the foreign financial holding proves to the Colombian Superintendency of Finance that is already subject to an equivalent regime of prudential regulation and consolidated supervision.

Modification of the Initial Conditions of Credits

On September 29, 2017 the Colombian Superintendency of Finance issued External Circular No. 026, which provides guidelines for the management of credits of which the initial conditions have been modified, based on potential or real deterioration in the debtor’s payment capacity, in order to standardize the existing policies regarding this type of credit.

Mutual Funds Portfolio Investments

On December 20, 2017, the Colombian Superintendency of Finance issued its external Circular No. 037 which sets forth instructions with the objective of updating the existing valuation methodologies for the valuation of the assets that make up the portfolios of mutual funds.

Properties and Investments of Financial Institutions

On November 30, 2017, the Colombian Superintendency issued its external Circular No. 33 which amends Chapter V, Title I, Part I of the Basic Legal Circular, with the purpose of updating the accounts that compute the calculation of fixed assets and investments.

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Withdrawal of Money

On June 9, 2017 Law 1836 was enacted. The law obliges financial institutions to provide a free form of withdrawal of money to the beneficiaries in the deposit agreements. The Colombian Superintendency of Finance will be in charge of ensuring compliance with this legal duty.

Liquidation Formula for Public-Private Association Agreements

On January 15, 2018, the Colombian president signed Law 1882 of 2018, which incorporates a liquidation formula for public-private association agreements and transport infrastructure concessions, providing that if an agreement is declared void, the state-owned entity will still pay for the costs, investments and expenses actually incurred by the concessionaire. This means that the credits associated with those contracts will be entitled to receive such payments, and that the concessionaire will only have a right to receive payments after such credits are paid, but no more than the total amount of equity contributions made by its shareholders less the total amount of dividends paid to them.

Purchase of Assets and Assumption of Liabilities in the Liquidation of a Credit Establishment

On March 15, 2018, the Colombian Ministry of Finance issued Decree No. 521, amending Decree No. 2555, which incorporates a chapter regulating the purchase of assets and assumption of liabilities from credit establishments (Establecimientos de Crédito) under a forced liquidation process.

Access to the Financial System for Former Members of FARC

On April 2, 2018 the Colombian Superintendency of Finance issued External Circular No. 005, which sets forth rules governing the integration into the financial system of former FARC members who have taken part in a process of reincorporation into civil life, and of any legal entity in which they may be part as shareholders, contributors or members.

Electronic Savings Accounts

On April 26, 2018 the Colombian Ministry of Finance issued Decree No. 720, amending Decree No. 2555, regarding the characteristics of the electronic savings accounts.

Capital Adequacy levels for Financial Conglomarates

On May 8, 2018 the Colombian Ministry of Finance issued Decree No. 774, amending Decree No. 2555, which incorporates a chapter regulating the adequate capital levels that must be complied by financial conglomerates, for which such financial institutions will have an 18 month term to comply with Decree No. 774.

Foreign Exchange

On May 25, 2018 the Colombian Central Bank issued External Resolution 1, which repeals the previous resolutions on foreign exchange, compiling and amending different matters on this subject that where established on External Resolutions (i) 8 of 2000, (ii) 3 of 2006, (iii) 1 of 2012, (iv) 9 of 2013, (v) 6 of 2015, and (vi) 3 of 2016.

Resolution Plans and Coordination Mechanisms

On May 28, 2018 the Colombian Ministry of Finance issued Decree No. 923, amending Decree No. 2555, which incorporates a chapter implementing the resolution plans and coordination mechanisms, which must be presented by the entities supervised by the Colombian Superintendency of Finance to foresee the strategy, resources, action guide processes and procedures adopted by these entities, in order to deal with situations of financial stress that are considered material in a timely and adequate manner.

Cybersecurity

On, June 5, 2018, the Colombian Superintendency of Finance issued External Circular No. 007, which sets the minimum requirements that must be set by entities supervised by the Colombian Superintendency of Finance, manage their systems of cybersecurity risks.

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Capital Adequacy Requirements Amendment

On August 6, 2018 the Colombian Ministry of Finance issued Decree No. 1477, amending Decree No. 2555, regarding the capital adequacy requirements for financial institutions. Decree No. 1477 creates two complementary ratio mechanisms called (i) additional primary solvency ratio (Relación de Solvencia Básica Adicional) and (ii) leverage ratio (Relación de Apalancamiento). Additional primary solvency ratio is defined as the sum of the ordinary primary capital net of deductions and the additional primary capital, divided by the value of the weighted assets by their level of credit and market risk. The additional primary solvency of a financial institution must be at least 6%. In the case of the leverage ratio, this term is defined as the sum of the ordinary primary capital net of deductions and the additional primary capital, divided by the leverage value. This leverage ratio must be at least 3%.

Furthermore, Decree No. 1477 added the following buffers (Colchones), in order to increase both the quality and the amount of capital, to provide greater coverage to the risks assumed by the entity:

• Conservation Buffer (Colchón de Conservación);

• Buffer for entities with systemic importance (Colchón para las Entidades con Importancia Sistémica); and

• Combined Buffer (Colchón Combinado).

Financial institutions shall comply with Decree No 1477 no later than February 6, 2020, except on the matters regarding the additional primary solvency ratio and the buffers, which will have a gradual implementation in a four year term, starting after February 6, 2020.

Investments in Companies of Innovation and Financial Technology

On December 27, 2018, the Colombian Ministry of Finance issued Decree No. 2443, amending Decree No. 2555, authorizing credit establishments to invest in companies, which sole purpose is to develop and /or apply innovations and technology related to the corporate purpose of the investing credit establishment.

SELECTED STATISTICAL INFORMATION

The following information is included for analytical purposes and should be read in conjunction with our consolidated financial statements as well as “Item 5. Operating and Financial Review and Prospects.” Unless otherwise indicated, financial data in the following tables as of December 31, 2016, 2017 and 2018 has been expressed in Chilean pesos as of December 31, 2018. The UF is linked to, and is adjusted daily to reflect changes in, the previous month’s CPI.

Average Balance Sheets, Income Earned From Interest-Earning Assets and Interest Paid on Interest Bearing Liabilities

The average balances for interest-earning assets and interest bearing liabilities, including interest and readjustments received and paid, have been calculated on the basis of monthly balances on an unconsolidated basis. Unless otherwise set forth herein, such average balances as they apply to the operations of our subsidiaries were calculated on the basis of month-end balances. Such average balances are presented in Chilean pesos, in UFs and in foreign currencies (principally US$).

The nominal interest rate has been calculated by dividing the amount of interest and principal readjustment due to changes in the UF index (gain or loss) during the period by the related average balance, both amounts expressed in Chilean pesos. The nominal rates calculated for each period have been converted into real rates using the following formulas:

Rp=	1 + Np	-1	Rd=	(1 + Nd)(1 + D)	-1
	1 + I			1+I

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Where:

Rp= real average interest rate for Chilean peso-denominated assets and liabilities (in Ch$ and UF) for the period,

Rd= real average interest rate for foreign currency denominated assets and liabilities for the period,

Np= average nominal interest rate for Chilean peso-denominated assets and liabilities for the period,

Nd= average nominal interest rate for foreign currency denominated assets and liabilities for the period,

D= devaluation rate of the Chilean peso to the U.S. dollar for the period, and

I= inflation rate in Chile for the period (based on the variation of the Chilean consumer price index).

The real interest rate can be negative for a portfolio of Chilean peso-denominated loans when the inflation rate for the period is higher than the average nominal rate of the loan portfolio for the same period. A similar effect could occur for a portfolio of foreign currency denominated loans when the inflation rate for the period is higher than the sum of the devaluation rate for the period and the corresponding average nominal rate of the portfolio. The formula for the average real rate for foreign currency denominated assets and liabilities (Rd) reflects a gain or loss in purchasing power caused by the difference between the devaluation rate of the Chilean peso and the inflation rate in Chile during the period.

The following example illustrates the calculation of the real interest rate for a dollar-denominated asset bearing a nominal annual interest rate of 10% (Nd = 0.10), assuming a 5% annual devaluation rate (D = 0.05) and a 12% annual inflation rate (I = 0.12):

Rd=	(1 + 0.10)(1 + 0.05)	-1=	3.125% per year
	1 + 0.12

In the example, since the inflation rate was higher than the devaluation rate, the real rate is lower than the nominal rate in dollars. If, for example, the annual devaluation rate were 15%, using the same numbers, the real rate in Chilean pesos would be 12.9%, which is higher than the nominal rate in U.S. dollars. Using the initial example, if the annual inflation rate were greater than 15.5%, the real rate would be negative.

Interest and average balances have been calculated by taking into consideration the following:

• Foreign exchange gains or losses on foreign currency denominated assets and liabilities have not been included in interest income or expense;

• Interest on financial investments does not include trading gains or losses on these investments;

• Past due loans only include the payments that are 90 or more days overdue, and do not include the portion of such loan that is not overdue (principal amount) or those payments which are less than 90 days overdue, unless legal proceedings have been commenced for the entire outstanding balance according to the terms of the loan. This practice differs from that normally followed in the United States where the amount classified as past due would include the total principal, payments and interest on all loans which have any portion overdue;

• Penalty interest is not recognized on past due payments (loans with more than one payment) or past due loans (one payment);

• The interest earned from past due loans is only the proportion of interest earned on each of these payments. We do not accrue penalty interest on these payments;

• Loans that are not yet 90 days or more overdue have been included in each of the various categories of loans, and affect the various averages;

82

• Non-performing commercial loans (those loans which do not accrue interest) consist of loans included in Categories C4-C6 and loans (or portions thereof) that are overdue;

• Included in loans and receivables to banks are interbank deposits maintained in the Central Bank of Chile and foreign banks. Such assets have a distorting effect on the average interest rate earned on total interest-earning assets because currently balances maintained in Chilean peso amounts do not earn interest, and the only balances held in a foreign currency that earn interest are those maintained in U.S. dollars, but those only earn interest on the amounts that are legally required to be held for liquidity purposes. Additionally, this account includes interest earned by overnight investments. Consequently, the average interest earned on such assets is comparatively low. We maintain these deposits in these accounts to comply with statutory requirements and to facilitate international business, rather than to earn income; and

• The monetary gain or loss on interest-earning assets and interest bearing liabilities is not included as a component of interest income or interest expense because inflation effects are taken into account in the calculation of real interest rates.

The following tables show, by currency of denomination, average balances and, where applicable, interest amounts, nominal rates and rates for our assets and liabilities for the years ended December 31, 2016, 2017 and 2018.

For presentation purposes only, we have grouped certain information set forth in the tables below as follows:

• Financial investments: (i) for 2018, such investments refer to (x) financial instruments at fair value through profit or loss, (y) financial instruments at fair value through other comprehensive income and (z) financial instruments at amortized cost; and (ii) for periods prior to 2018, such investments refer to (x) trading investments, (y) available for sale investments and (z) held to maturity investments.

• Total loans: (i) for 2018, such loans refer to loans and accounts receivable from customers at amortized cost; and (ii) for periods prior to 2018, such loans refer to accounts receivable from customers, net.

• Interbank loans: (i) for 2018, such loans refer to interbank loans at amortized cost; (ii) for periods prior to 2018, such loans refer to interbank loans, net.

Because of these differences, the information for the year ended December 31, 2016 and 2017 is not comparable to the information for the year ended December 31, 2018.

	Year Ended December 31,
	2016										2017										2018
	Average Balance		Interest Earned		Average Nominal Rate			Average Real Rate			Average Balance		Interest Earned		Average Nominal Rate			Average Real Rate			Average Balance		Interest Earned		Average Nominal Rate			Average Real Rate
	(in millions of Ch$ except for percentages)
INTEREST EARNING ASSETS
Deposits in Central Bank
Ch$		218,522		1,689		0.8	%		(1.9	)%		76,032		1,736		2.3	%		—			127,534		1,778		1.4	%		(1.2	)%
UF		—		—		—			—			—		—		—			—			—		—		0.0	%		—
Foreign currency		58,713				—			(9.7	)%		27,145		—		—			(10.3	)%		8,528		—		0.0	%		10.2	%
Total		277,235		1,689		0.6	%		(3.5	)%		103,178		1,736		1.7	%		(2.7	)%		136,062		1,778		1.3	%		(0.5	)%
Financial investments
Ch$		535,413		31,750		5.9	%		3.1	%		878,088		33,938		3.9	%		1.5	%		821,238		29,658		3.6	%		1.0	%
UF		409,993		2,112		0.5	%		(2.1	)%		489,972		8,273		1.7	%		(0.6	)%		704,707		26,354		3.7	%		1.1	%
Foreign currency		665,262		44,852		6.7	%		(2.0	)%		798,837		36,618		4.6	%		(6.2	)%		1,460,155		64,321		4.4	%		15.0	%
Total		1,610,668		78,715		4.9	%		(0.3	)%		2,166,896		78,830		3.6	%		(1.8	)%		2,986,100		120,333		4.0	%		7.9	%
Total loans
Ch$		5,138,512		703,514		13.7	%		10.7	%		5,913,408		671,628		11.4	%		8.9	%		5,977,972		572,181		9.6	%		6.8	%
UF		6,527,551		222,864		3.4	%		0.7	%		7,593,051		255,641		3.4	%		1.0	%		7,778,882		453,513		5.8	%		3.1	%
Foreign currency		6,135,822		464,499		7.6	%		(1.2	)%		7,351,083		621,450		8.5	%		(2.7	)%		7,226,952		582,271		8.1	%		19.1	%
Total		17,801,885		1,390,877		7.8	%		2.9	%		20,857,542		1,548,719		7.4	%		1.9	%		20,983,806		1,607,965		7.7	%		9.7	%
Interbank loans
Ch$		166,307		6,485		3.9	%		1.2	%		170,086		3,581		2.1	%		(0.2	)%		116,340		3,372		2.9	%		0.3	%
UF		—		—		—			—			—		—		—			—			—		—		0.0	%		—
Foreign currency		196,185		1,696		0.9	%		(7.4	)%		191,538		1,880		1.0	%		(9.4	)%		87,332		1,642		1.9	%		12.3	%
Total		362,492		8,180		2.3	%		(3.5	)%		361,624		5,460		1.5	%		(5.1	)%		203,672		5,014		2.5	%		5.4	%
Investment under resale agreements
Ch$		34,876		1,696		4.9	%		2.1	%		82,555		2,317		2.8	%		0.5	%		103,654		2,782		2.7	%		0.1	%
UF		—		—		—			—			—		—		—			—			—		—		0.0	%		—
Foreign currency		102,096		23,854		23.4	%		38.6	%		45,721		4,328		9.5	%		(1.8	)%		42,789		2,206		5.2	%		15.9	%
Total		136,972		25,550		18.7	%		29.3	%		128,275		6,645		5.2	%		(0.3	)%		146,443		4,988		3.4	%		4.7	%
Other interest earning assets

83

	Year Ended December 31,
	2016										2017										2018
	Average Balance		Interest Earned		Average Nominal Rate			Average Real Rate			Average Balance		Interest Earned		Average Nominal Rate			Average Real Rate			Average Balance		Interest Earned			Average Nominal Rate			Average Real Rate
	(in millions of Ch$ except for percentages)
Ch$		122		—		—			(8.2	)%		180		—		—			(10.3	)%		113		—			0.0	%		10.2
UF		—		—		—			—			—		—		—			—			—		—			0.0	%		—
Foreign currency		993,168		4,192		0.4	%		12.8	%		820,215		4,939		0.6	%		(9.8	)%		579,539		(761	)		-0.1	%		10.1
Total		993,289		4,192		0.4	%		12.8	%		820,395		4,939		0.6	%		(9.8	)%		579,652		(761	)		-0.1	%		10.1
Total interest earning assets
Ch$		6,093,752		745,134		12.2	%		9.3	%		7,120,348		713,200		10.0	%		7.5	%		7,146,851		609,771			8.5	%		5.8	%
UF		6,937,544		224,977		3.2	%		0.5	%		8,083,023		263,915		3.3	%		0.9	%		8,483,589		479,867			5.7	%		3.0
Foreign currency		8,151,245		539,093		6.6	%		(2.1	)%		9,234,538		669,215		7.2	%		(3.8	)%		9,405,295		649,679			6.9	%		17.8
Total		21,182,541		1,509,203		7.1	%		2.0	%		24,437,909		1,646,329		6.7	%		1.1	%		25,035,735		1,739,317			6.9	%		9.4	%
	Year Ended December 31,
	2016										2017										2018
	Average Balance		Interest Earned		Average Nominal Rate			Average Real Rate			Average Balance		Interest Earned		Average Nominal Rate			Average Real Rate			Average Balance		Interest Earned			Average Nominal Rate			Average Real Rate
	(in millions of Ch$)
NON-INTEREST EARNING ASSETS
Cash
Ch$		341,023										406,738										474,207
UF		—										—										—
Foreign currency		192,603										261,998										445,823
Total		533,626										668,736										920,030
Allowance for loan losses(1)
Ch$		234,582										334,571										482,567
UF		—										—										—
Foreign currency		222,365										291,170										271,780
Total		456,948										625,741										754,347
Property, plant and equipment
Ch$		64,522										85,675										73,524
UF		—										—										—
Foreign currency		36,006										44,105										37,100
Total		100,528										129,780										110,624
Derivatives
Ch$		773,393										945,341										892,914
UF		47,967										80,983										71,759
Foreign currency		192,707										219,709										311,364
Total		1,014,067										1,246,032										1,276,037
Other assets
Ch$		1,565,969										2,095,283										2,098,272
UF		15,665										6,920										13,324
Foreign currency		790,266										1,027,684										521,334
Total		2,371,900										3,129,887										2,632,930
Total non-interest earning assets
Ch$		2,510,325										3,198,466										3,056,349
UF		63,632										87,902										85,083
Foreign currency		989,216										1,262,327										1,043,840
Total		3,563,173										4,548,696										4,185,272
Total assets(2)
Ch$		8,604,077		745,134								10,318,814		713,200								10,203,200		609,771
UF		7,001,176		224,977								8,170,925		263,915								8,568,672		479,867
Foreign currency		9,140,462		539,093								10,496,866		669,215								10,449,134		649,679
Total		24,745,715		1,509,203								28,986,605		1,646,329								29,221,006		1,739,317

⁽¹⁾ Allowance for loan losses as of December 31, 2018 corresponds to allowances for loans and accounts receivable from customers at amortized cost according to IFRS 9. Prior periods are in accordance with IAS 39.

⁽²⁾ Represents total of interest paying and non-interest earning assets.

	Year Ended December 31,
	2016										2017										2018
	Average Balance		Interest Paid		Average Nominal Rate			Average Real Rate			Average Balance		Interest Paid		Average Nominal Rate			Average Real Rate			Average Balance		Interest Paid		Average Nominal Rate			Average Real Rate
	(in millions of Ch$ except for percentages)
LIABILITIES AND EQUITY
INTEREST BEARING LIABILITIES
Time Deposits
Ch$		5,244,385		238,587		4.5	%		1.8	%		5,657,825		205,639		3.6	%		1.3	%		6,171,595		184,021		3.0	%		0.4
UF		1,480,525		55,293		3.7	%		1.0	%		1,009,946		31,833		3.2	%		0.8	%		639,980		40,755		6.4	%		3.7
Foreign currency		3,159,182		165,501		5.2	%		20.2	%		3,476,788		195,765		5.6	%		(5.3	)%		3,285,676		160,958		4.9	%		15.6
Total		9,884,092		459,381		4.6	%		7.6	%		10,144,559		433,237		4.3	%		(1.0	)%		10,097,251		385,734		3.8	%		5.5
Central Bank borrowings
Ch$		—		—		—			—			—		—		—			—			—		—		—			—

84

	Year Ended December 31,
	2016										2017										2018
	Average Balance		Interest Paid		Average Nominal Rate			Average Real Rate			Average Balance		Interest Paid		Average Nominal Rate			Average Real Rate			Average Balance		Interest Paid		Average Nominal Rate			Average Real Rate
	(in millions of Ch$ except for percentages)
UF		—		—		—			—			—		—		—			—			—		—		—			—
Foreign currency		—		—		—			—			—		—		—			—			—		—		—			—
Total		—		—		—			—			—		—		—			—			—		—		—			—
Repurchase agreements
Ch$		105,389		4,528		4.3	%		1.6	%		192,502		6,103		3.2	%		0.9	%		281,691		7,546		2.7	%		0.1
UF		—		—		—			—			—		—		—			—			—		4		0.0	%		0.0
Foreign currency		294,863		43,558		14.8	%		42.8	%		403,849		26,574		6.6	%		(4.4	)%		524,532		22,114		4.2	%		14.8
Total		400,252		48,086		12.0	%		31.9	%		596,351		32,677		5.5	%		(2.7	)%		806,223		29,664		3.7	%		9.7
Mortgage finance bonds
Ch$		210		2,839		1,351.9	%		1,313.7	%		1,021		1,452		142.2	%		136.8	%		—		—		0.0	%		0.0
UF		71,532		1,402		2.0	%		(0.7	)%		71,879		1,797		2.5	%		0.2	%		58,939		2,963		5.0	%		2.4
Foreign currency		—		—		—			—			—		—		—			—			—		—		—			0.0
Total		71,742		4,241		5.9	%		3.1	%		72,900		3,249		4.5	%		2.1	%		58,939		2,963		5.0	%		2.4
Bonds
Ch$		140,587		82,121		58.4	%		54.2	%		1,052,950		88,288		8.4	%		5.9	%		567,496		61,589		10.9	%		8.0
UF		2,954,380		97,588		3.3	%		0.6	%		3,469,207		124,215		3.6	%		1.3	%		4,232,986		209,261		4.9	%		2.3
Foreign currency		1,111,030		51,344		4.6	%		(3.9	)%		1,523,771		67,132		4.4	%		(6.4	)%		989,060		48,439		4.9	%		15.6
Total		4,205,997		231,053		5.5	%		1.2	%		6,045,928		279,635		4.6	%		0.1	%		5,789,542		319,289		5.5	%		5.1
Other interest bearing liabilities
Ch$		1,236,698		24,576		2.0	%		(0.7	)%		1,555,940		7,879		0.5	%		(1.8	)%		1,623,176		7,596		0.5	%		(2.1	)
UF		11,946		2,122		17.8	%		14.7	%		27,495		6,321		23.0	%		20.2	%		15,607		4,833		31.0	%		27.6
Foreign currency		2,780,526		100,569		3.6	%		(4.9	)%		3,068,671		100,349		3.3	%		(7.4	)%		3,130,676		101,575		3.2	%		13.8
Total		4,029,170		127,267		3.2	%		(3.5	)%		4,652,106		114,549		2.5	%		(5.3	)%		4,769,459		114,004		2.4	%		8.4
Total interest bearing liabilities
Ch$		6,727,269		352,651		5.2	%		2.5	%		8,460,238		309,361		3.7	%		1.3	%		8,643,958		260,752		3.0	%		0.4
UF		4,518,383		156,405		3.5	%		0.7	%		4,578,529		164,166		3.6	%		1.3	%		4,947,511		257,816		5.2	%		2.5
Foreign currency		7,345,601		360,972		4.9	%		(3.7	)%		8,473,079		389,820		4.6	%		(6.2	)%		7,929,943		333,086		4.2	%		14.8
Total		18,591,253		870,028		4.7	%		(0.4	)%		21,511,846		863,347		4.0	%		(1.7	)%		21,521,412		851,654		4.0	%		6.2
	Year Ended December 31,
	2016										2017										2018
	Average Balance		Interest Paid		Average Nominal Rate			Average Real Rate			Average Balance		Interest Paid		Average Nominal Rate			Average Real Rate			Average Balance		Interest Paid		Average Nominal Rate			Average Real Rate
	(in millions of Ch$)
NON-INTEREST EARNING LIABILITIES
Non-interest-bearing demand deposits
Ch$		445,473										524,668										657,388
UF		6,754										9,080										6,053
Foreign currency		1,446,241										1,662,949										1,670,808
Total		1,898,468										2,196,697										2,334,249
Derivatives
Ch$		641,346										769,775										755,182
UF		73,255										104,225										91,479
Foreign currency		131,319										147,662										241,447
Total		845,920										1,021,662										1,088,108
Other non-interest-bearing
Ch$		422,558										430,626										381,290
UF		66										77,431										145,879
Foreign currency		180,758										309,898										259,246
Total		603,382										817,955										786,415
Equity
Ch$		2,758,990										3,394,866										3,340,551
UF		47,688										37,177										117,620
Foreign currency		13										6,402										32,650
Total		2,806,690										3,438,445										3,490,821
Total non-interest-bearing liabilities and shareholders’ equity
Ch$		4,268,367										5,119,935										5,134,412
UF		127,763										227,913										361,030
Foreign currency		1,758,331										2,126,911										2,204,151
Total		6,154,461										7,474,759										7,699,594
Total liabilities and equity(1)
Ch$		10,995,636		352,651								13,580,173		309,361								13,778,370		260,752
UF		4,646,147		156,405								4,806,442		164,166								5,308,542		257,816

85

	Year Ended December 31,
	2016						2017						2018
	Average Balance		Interest Paid		Average Nominal Rate	Average Real Rate	Average Balance		Interest Paid		Average Nominal Rate	Average Real Rate	Average Balance		Interest Paid		Average Nominal Rate	Average Real Rate
	(in millions of Ch$)
Foreign currency		9,103,931		360,972				10,599,990		389,820				10,134,094		333,086
Total		24,745,714		870,028				28,986,605		863,347				29,221,006		851,654

⁽¹⁾ Represents total of interest bearing and non-interest bearing liabilities and shareholders’ equity.

Interest-earning Assets—Net Interest Margin

The following tables analyze, by currency of denomination, our levels of average interest-earning assets and net interest, and illustrate the comparative margins obtained, for each of the periods indicated:

	Year Ended December 31,
	2016			2017			2018
	(in millions of constant Ch$ except for percentages)
Total average interest earning assets
Ch$		6,093,752			7,120,348			7,146,851
UF		6,937,544			8,083,023			8,483,589
Foreign currency		8,151,245			9,234,538			9,405,295
Total		21,182,541			24,437,909			25,035,735
Net interest earned(1)
Ch$		393,041			403,839			349,019
UF		68,014			99,749			222,051
Foreign currency		178,120			279,394			316,593
Total		639,175			782,982			887,663
Net interest margin, nominal basis(2)
Ch$		6.4	%		5.7	%		4.9	%
UF		1.0	%		1.2	%		2.6	%
Foreign currency		2.2	%		3.0	%		3.4	%
Total		3.0	%		3.2	%		3.5	%

⁽¹⁾ Net interest earned is defined as interest revenue earned less interest expense incurred.

⁽²⁾ Net interest margin is defined as net interest earned divided by average interest earning assets.

Changes in Net Interest Income and Interest Expense—Volume and Rate Analysis

The following tables allocate, by currency of denomination, changes in our net interest income between changes in the average volume of interest-earning assets and interest bearing liabilities and changes in their respective nominal interest rates from 2016 to 2017 and 2017 to 2018.

For presentation purposes only, we have grouped certain information set forth in the tables below as follows:

• Financial investment: (i) for 2018, such investments refer to (x) financial instruments at fair value through profit or loss, (y) financial instruments at fair value through other comprehensive income and (z) financial instruments at amortized cost; and (ii) for periods prior to 2018, such investments refer to (x) trading investments, (y) available for sale investments and (z) held to maturity investments.

• Total loans: (i) for 2018, such loans refer to loans and accounts receivable from customers at amortized cost; and (ii) for periods prior to 2018, such loans refer to accounts receivable from customers, net.

• Interbank loans: (i) for 2018, such loans refer to Interbank loans at amortized cost; and (ii) for periods prior to 2018, such loans refer to Interbank loans.

Because of these differences, the information for the year ended December 31, 2016 and 2017 is not comparable to the information for the year ended December 31, 2018.

Volume and rate variances have been calculated based on movements in average balances over the year and changes in nominal interest rates, average interest-earning assets and average interest bearing liabilities. The net change attributable to changes in both volume and rate has been allocated proportionately to the change due to volume and the change due to rate.

86

	Increase (Decrease) from 2016 to 2017 due to changes in
	Volume			Rate			Net Change from 2016 to 2017
	(in millions of Ch$)
ASSETS
INTEREST EARNING ASSETS
Deposits in Central Bank
Ch$		4,387			(4,340	)		47
UF		—			—			—
Foreign currency		—			—			—
Total		4,387			4,340			47
Financial Investments
Ch$		(16,647	)		18,835			2,188
UF		396			5,765			6,161
Foreign currency		9,264			(17,498	)		(8,234	)
Total		(6,987	)		7,102			115
Total Loans
Ch$		104,644			(136,530	)		(31,886	)
UF		35,230			(2,453	)		32,777
Foreign currency		93,445			63,506			156,951
Total		233,320			(75,478	)		157,842
Interbank Loans
Ch$		147			(3,051	)		(2,904	)
UF		—			—			—
Foreign currency		(67	)		251			184
Total		80			(2,800	)		(2,720	)
Investment under resale agreements
Ch$		2,386			(1,765			621
UF		—			—			—
Foreign currency		(13,167	)		(6,359	)		(19,526	)
Total		(10,781	)		(8,124	)		(18,905	)
Other interest earning assets
Ch$		—			—			—
UF		—			—			—
Foreign currency		(535	)		1,282			747
Total		(535	)		1,282			747
Total interest earning assets
Ch$		94,917			(126,852	)		(31,934	)
UF		35,626			3,312			38,938
Foreign currency		88,940			41,182			130,122
Total		219,484			(82,358	)		137,126

87

	Increase (Decrease) from 2016 to 2017 due to changes in
	Volume			Rate			Net Change from 2016 to 2017
	(in millions of Ch$)
LIABILITIES AND SHAREHOLDERS’ EQUITY
INTEREST BEARING LIABILITIES
Time deposits
Ch$		20,192			(53,140	)		(32,948	)
UF		(17,801	)		(5,659	)		(23,460	)
Foreign currency		15,874			14,390			30,264
Total		18,264			(44,408	)		(26,144	)
Central Bank borrowings
Ch$		—			—			—
UF		—			—			—
Foreign currency		—			—			—
Total		—			—			—
Repurchase agreements
Ch$		3,755			(2,180	)		1,575
UF
Foreign currency		16,053			(33,037	)		(16,984	)
Total		19,807			(35,216	)		(15,409	)
Mortgage finance bonds
Ch$		10,964			(12,351	)		(1,387	)
UF		7			388			395
Foreign currency		—			—			—
Total		10,971			(11,963	)		(992	)
Bonds
Ch$		531,253			(525,086	)		6,167
UF		16,930			9,697			26,627
Foreign currency		18,706			(2,918	)		15,788
Total		566,888			(518,306	)		48,582
Other interest bearing liabilities
Ch$		6,325			(23,022	)		(16,697	)
UF		2,771			1,428			4,199
Foreign currency		(9,126	)		8,906			(220	)
Total		(30	)		(12,688	)		(12,718	)
Total interest bearing liabilities
Ch$		572,488			(615,778	)		(43,290	)
UF		1,907			5,854			7,761
Foreign currency		41,506			(12,658	)		28,848
Total		615,901			(622,582	)		(6,681	)
	Increase (Decrease) from 2017 to 2018 due to changes in
	Volume			Rate			Net Change from 2017 to 2018
	(in millions of Ch$)
ASSETS
INTEREST EARNING ASSETS
Deposits in Central Bank
Ch$		1,176			(1,134	)		42
UF		—			—			—
Foreign currency		—			—			—
Total		1,176			(1,134	)		42

88

Financial Investments
Ch$		(2,197	)		(2,083	)		(4,280	)
UF		3,626			14,455			18,081
Foreign currency		30,314			(2,611	)		27,703
Total		31,743			9,761			41,504
Total Loans
Ch$		7,333			(106,780	)		(99,447	)
UF		6,257			191,615			197,872
Foreign currency		(10,494	)		(28,685	)		(39,179	)
Total		3,096			56,150			59,246
Interbank Loans
Ch$		(1,132	)		923			(209	)
UF		—			—			—
Foreign currency		(1,023	)		785			(238	)
Total		(2,155	)		1,708			(447	)
Investment under resale agreements
Ch$		592			(127	)		465
UF		—			—			—
Foreign currency		(277	)		(1,845	)		(2,122	)
Total		315			(1,972	)		(1,657	)
Other interest earning assets
Ch$		—			—			—
UF		—			—			—
Foreign currency		(1,449	)		(4,251	)		(5,700	)
Total		(1,449	)		(4,251	)		(5,700	)
Total interest earning assets
Ch$		5,772			(109,201	)		(103,429	)
UF		9,882			206,071			215,953
Foreign currency		17,071			(36,607	)		(19,536	)
Total		32,725			60,263			92,988
	Increase (Decrease) from 2017 to 2018 due to changes in
	Volume			Rate			Net change from 2017 to 2018
	(in millions of Ch$)
LIABILITIES AND SHAREHOLDERS’ EQUITY INTEREST BEARING LIABILITIES
Time deposits
Ch$		18,673			(40,287	)		(21,614	)
UF		(11,661	)		20,583			8,922
Foreign currency		(10,761	)		(24,046	)		(34,807	)
Total		(3,749	)		(43,750	)		(47,499	)
Central Bank borrowings
Ch$		—			—			—
UF		—			—			—
Foreign currency		—			—			—
Total		—			—			—
Repurchase agreements
Ch$		2,828			(1,385	)		1,443
UF		—			—			—
Foreign currency		7,941			(12,401	)		(4,460	)

89

	Increase (Decrease) from 2017 to 2018 due to changes in
	Volume			Rate			Net change from 2017 to 2018
	(in millions of Ch$)
Total		10,769			(13,786	)		(3,017	)
Mortgage finance bonds
Ch$		(1,452	)		—			(1,452	)
UF		(324	)		1,490			1,166
Foreign currency		—			—			—
Total		(1,776	)		1,490			(286	)
Bonds
Ch$		(40,704	)		14,005			(26,699	)
UF		27,347			57,699			85,046
Foreign currency		(23,557	)		4,864			(18,693	)
Total		(36,914	)		76,568			39,654
Other interest bearing liabilities
Ch$		340			(623	)		(283	)
UF		(2,733	)		1,245			(1,488	)
Foreign currency		2,028			(802	)		1,226
Total		(365	)		(180	)		(545	)
Total interest bearing liabilities
Ch$		(20,315	)		(28,290	)		(48,605	)
UF		12,629			81,017			93,646
Foreign currency		(24,349	)		(32,385	)		(56,734	)
Total		(32,035	)		20,342			(11,693	)

Return on Equity and Assets

The following tables set forth our return on average shareholders’ equity and average total assets and related information for each of the periods indicated.

	Years ended December 31,
	2016			2017			2018
	(in millions of Ch$, except for percentages)
Net income		13,969			62,825			166,854
Net income attributable to equity holders of the Bank		14,407			67,821			171,331
Average total assets		24,745,715			28,986,605			29,221,006
Average equity		2,806,690			3,438,445			3,490,821
Net income as a percentage of:
Average total assets		0.06	%		0.22	%		0.57	%
Average equity		0.50	%		1.83	%		4.78	%
Average equity as a percentage of:
Average total assets		11.34	%		11.86	%		11.95	%
Annual cash dividend		52,168			618			22,979
Dividend payout ratio, based on net income attributable to shareholders under local GAAP		50.00	%		30.00	%		40.00	%

90

Investment Portfolio

Since 2018, our financial investments are classified into measurement categories based on both our business model for managing the financial asset and the contractual cash flow characteristics of the financial asset. For periods prior to 2018, our financial investments are classified at the time of purchase, based on our management’s determination, as trading or investment instruments, the latter being categorized as available-for-sale or held to maturity.

Financial investments as of December 31, 2016 and 2017 and 2018 are as follows:

	As of December 31,
	2016		2017		2018
	(in millions of Ch$)
Held-for-trading (2016 and 2017) | Financial Instruments at Fair Value Through Profit or Loss (2018)
Chilean Central Bank and Government securities:
Chilean Central Bank securities		8,349		3,963		21,736
Other Chilean Central Bank and Government securities		17,855		3,163		14,872
Other national institution securities:
Bonds		786		5		3
Notes		—		—		—
Other securities		12,608		—		4,014
Foreign institution securities:
Bonds		547,499		381,262		23,276
Notes		—		—		—
Other securities		11,727		8,147		19,505
Mutual funds investments
Funds managed by related organizations		33,733		18,521		3,532
Funds managed by third parties		—		—		10,005
Total		632,557		415,061		96,943

	As of December 31,
	2016		2017		2018
	(in millions of Ch$)
Available-for-sale (2016 and 2017)| Financial Instruments at Fair Value Through Other Comprehensive Income (2018)
Chilean Central Bank and Government securities
Chilean Central Bank and Government securities		901,239		687,945		411,431
Chilean Treasury bonds		272,734		1,081,879		913,041
Other Government securities		—		14,053		27,612
Other financial instruments
Promissory notes related to deposits in local banks		397,898		114,038		185,501
Chilean mortgage finance bonds		76		64		50
Chilean financial institutions bonds		2,607		9,032		—
Other local investments		32,230		6,159		5,979
Financial instruments issued abroad
Foreign government and central banks instruments		284,444		420,687		769,693
Other foreign investments		162,882		300,740		332,560
Impairment provision		—		—		—
Unquoted securities in active markets
Chilean corporate bonds		—		18,469		4,909
Other investments		19,967		10,412		6,378
Impairment provision		—		—		—
Total		2,074,077		2,663,478		2,657,154

91

	As of December 31,
	2016		2017		2018
	(in millions of Ch$)
Held to Maturity | Financial Instruments at Amortized Cost (2018)
Central Bank and Government securities
Chilean Central Bank securities		—		—		—
Chilean treasury bonds		—		—		—
Other Government securities		—		—		—
Other financial securities
Promissory notes related to deposits in local banks		—		—		—
Chilean mortgage finance bonds		—		—		—
Chilean financial institution bonds		—		—		—
Other local investments		—		—		—
Financial instruments issued abroad
Foreign government and central banks instruments		226,433		—		—
Other foreign investments		—		202,030		198,923
Impairment provision		—		—		—
Unquoted securities in active markets
Chilean corporate bonds		—		—		—
Other investments		—		—		—
Impairment provision		—		—		—
Total		226,433		202,030		198,923

We do not hold securities of any issuer other than the Central Bank of Chile, the Chilean Treasury, and the Colombian Ministry of Finance, in which the aggregate book value of the investment in such securities exceeds 10% of our shareholders’ equity as of the end of the latest reported period.

92

The following table sets forth an analysis of our investments, by time remaining to maturity and the weighted average nominal rates of such investments, as of December 31, 2018:

	In one year or less		Weighted average Nominal Rate		After one year through five years		Weighted average Nominal Rate		After five years through ten years		Weighted average Nominal Rate		After ten years		Weighted average Nominal Rate		Total
	Ch$		%		Ch$		%		Ch$		%		Ch$		%		Ch$
	(in millions of Ch$, except for percentages)
Financial Instruments at Fair Value Through Profit or Loss
Central Bank and Government securities:
Chilean Central Bank securities		16,377		0.54		5,359		7.89		—		—		—		—		21,736
Chilean Central Bank notes		—		—		—		—		—		—		—		—		—
Others Government securities		—		—		14,014		0.07		858		4.54		—		—		14,872
Other national institution securities:
Bonds		—		—		—		—		—		—		3		6.69		3
Notes		—		—		—		—		—		—		—		—		—
Other securities		4,014		0.06		—		—		—		—		—		—		4,014
Other local investments		—		—		—		—		—		—		—		—		—
Foreign institution securities:
Bonds		14,143		0.05		7,236		0.05		1,897		0.06		—		—		23,276
Notes		—		—		—		—		—		—		—		—		—
Other securities		17,654		0.04		—		—		—		—		1,851		—		19,505
Mutual fund investments:
Funds managed by related organizations		3,532		—		—		—		—		—		—		—		3,532
Funds managed by third parties		—		—		—		—		—		—		—		—		—
Other investments:				—		—		—		—		—		—		—
Other trading investments		10,005		—		—		—		—		—		—		—		10,005
Total		65,725		0.16		26,609		1.64		2,755		1.45		1,854		0.01		96,943

	In one year or less		Weighted average Nominal Rate		After one year through five years		Weighted average Nominal Rate		After five years through ten years		Weighted average Nominal Rate		After ten years		Weighted average Nominal Rate		Total
	Ch$		%		Ch$		%		Ch$		%		Ch$		%		Ch$
	(in millions of Ch$, except for percentages)
Financial Instruments at Fair Value Through Other Comprehensive Income
Chilean Central Bank and Government securities:
Chilean Central Bank securities		—		—		411,431		3.15		—		—		—		—		411,431
Chilean Treasury bonds		14,225		0.66		785,070		2.26		102,958		2.10		10,788		2.22		913,041
Others Government securities		—		—		9,182		3.09		18,430		3.70		—		—		27,612

93

	In one year or less		Weighted average Nominal Rate		After one year through five years		Weighted average Nominal Rate		After five years through ten years		Weighted average Nominal Rate		After ten years		Weighted average Nominal Rate		Total
	Ch$		%		Ch$		%		Ch$		%		Ch$		%		Ch$
	(in millions of Ch$, except for percentages)
Other financial instruments:
Promissory notes related to deposits in local banks		185,501		0.27		—		—		—		—		—		—		185,501
Chilean mortgage finance bonds		—		—		—		—		50		3.37		—		—		50
Chilean financial institution bonds		—		—		—		—		—		—		—		—		0
Other local investments		5,979		—		—		—		—		—		—		—		5,979
Financial instruments issued abroad:
Foreign Government and central bank instruments		437,265		2.47		262,270		5.12		70,158		0.06		—		—		769,693
Other foreign investments		152,836		0.04		152,952		0.05		15,779		0.05		10,993		0.06		332,560
Impairment provision		—		—		—		—		—		—		—		—		0
Unquoted securities in active markets
Chilean corporate bonds		—		—		46		5.30		4,863		5.95		—		—		4,909
Other foreign investments		—		—		—		—		—		—		—		—		0
Impairment provision		—		—		—		—		—		—		—		—		0
Other investment		6,378																6,378
Total		795,806		1.4		1,620,950		2.7		212,238		1.5		21,781		1.1		2,657,154

Within one year

Weighted average Nominal Rate

After one year through five years

Weighted average Nominal Rate

After five years through ten years

Weighted average Nominal Rate

After ten years

Weighted average Nominal Rate

Total

Ch$

%

Ch$

%

Ch$

%

Ch$

%

Ch$

(in millions of Ch$, except for percentages)

Financial Instruments at Amortized Cost

Chilean Central Bank and Government securities:

Chilean Central Bank securities

—

—

—

—

—

—

—

—

—

Chilean treasury bonds

—

—

—

—

—

—

—

—

—

Other Government securities

—

—

—

—

—

—

—

—

—

Other financial instruments:

Promissory notes related to deposits in local banks

—

—

—

—

—

—

—

—

—

Chilean mortgage finance bonds

—

—

—

—

—

—

—

—

—

Chilean financial institution bonds

—

—

—

—

—

—

—

—

—

Other local investments

—

—

—

—

—

—

—

—

—

94

	Within one year		Weighted average Nominal Rate		After one year through five years		Weighted average Nominal Rate		After five years through ten years		Weighted average Nominal Rate		After ten years		Weighted average Nominal Rate		Total
	Ch$		%		Ch$		%		Ch$		%		Ch$		%		Ch$
	(in millions of Ch$, except for percentages)
Financial instruments issued abroad:
Foreign government and central bank instruments		198,923		3.21		—		—		—		—		—		—		198,923
Other foreign investments		—		—		—		—		—		—		—		—		—
Impairment provision		—		—		—		—		—		—		—		—		—
Unquoted securities in active markets
Chilean corporate bonds		—		—		—		—		—		—		—		—		—
Other foreign investments				—		—		—		—		—		—		—		—
Other investment		—																—
Impairment provision		—		—		—		—		—		—		—		—		—
Total		198,923		3.21		—		—		—		—		—		—		198,923

Loan Portfolio

The following table presents our loans by type of loan. Except where otherwise specified, all loan amounts stated below are before deduction for the allowance for loan losses. Total loans reflect our loan portfolio, including past due principal amounts. For 2018, our loan portfolio refers to loans and accounts receivable from customers at amortized cost; and for periods prior to 2018, our loan portfolio refers to loans and accounts receivable from customers, net.

	As of December 31,
	2016		2017		2018
Commercial loans:
Commercial loans		11,956,364		11,116,076		11,457,388
Foreign trade loans		754,144		700,733		928,443
Checking account debtors		133,701		139,348		131,100
Factoring operations		76,141		140,738		210,567
Student loans		610,315		653,003		676,689
Leasing transactions		1,073,506		940,789		928,160
Other loans and receivables		30,300		25,859		34,553
Subtotals		14,634,471		13,716,546		14,366,900
Mortgage loans:
Letters of credit loans		57,708		47,400		38,364
Endorsable mutual mortgage loans		152,320		135,919		118,668
Other mutual mortgage loans		3,360,950		3,660,900		3,953,245
Leasing transactions		288,329		282,135		312,118
Other loans and receivables		29,210		26,399		23,432
Subtotals		3,888,517		4,152,753		4,445,827
Consumer loans:
Consumer loans		1,786,004		1,810,049		1,921,785
Checking account debtors		182,832		207,501		209,492
Credit card debtors		414,903		421,169		481,567
Consumer leasing transactions		17,091		11,176		6,203
Other loans and receivables		80,134		63,411		50,716
Subtotals		2,480,964		2,513,306		2,669,763
Loans		21,003,952		20,382,605		21,482,490
Loans and receivables from Banks		150,780		36,281		341,707
Total		21,154,732		20,418,886		21,824,197

95

The loan categories are as follows:

Commercial Loans

Commercial loans: Commercial loans are long- and short-term loans granted to companies, including checking overdraft lines for companies, in Chilean pesos, inflation-linked UF, US$ or Colombian pesos on an adjustable or fixed rate basis, primarily to finance working capital or investments. Commercial loans represent the largest portion of our loan portfolio. Interest accrues daily on a 30-day or 360-day basis. Loan payments are scheduled monthly, biannually or yearly, depending on the terms of the loan.

Foreign trade loans: Foreign trade loans are fixed rate, short-term loans made in foreign currency (principally US$) to finance imports or exports.

Current account debtors: The term “current account debtors” refers to our customers that receive short-term operating loans with a pre-approved credit limit. This category includes overdrafts loans.

Factoring operations: Factoring operations refer to the transactions in which our customers assign their accounts receivable (invoices, bills, among others) to us, which allows them to convert their sales into cash regardless the original terms agreed for payment, improving their liquidity, financial indices and also delegating the collection management efforts to us and/or our subsidiaries.

Student loans: Loans with a government guarantee for college education, known as Créditos con Aval del Estado (“CAE”), established by law No. 20,027.

Leasing transactions: Leasing transactions are agreements for the financial lease of capital equipment and other property of our clients.

Other loans and receivables: Other loans and receivables refer to outstanding loans including commercial loans not classified in any of the categories described above.

Mortgage Loans

Mortgage loans: This category includes mortgage loans granted to individuals in order to acquire, expand, repair or build residential houses or apartments. Mortgage loans are granted in the form of endorsable or non-endorsable instruments/credit operations and letters of credit, with the former being the most frequently used in the market. This category also includes liaison credits granted before the mortgage loans are perfected; bilateral loans for purposes ancillary to the ones mentioned above; housing leasing operations and other receivables. Any loan granted to repay or restructure all or part of the credits described above belongs in this category.

Mortgage loans include the following sub-categories:

Endorsable mutual mortgage loans: This sub-category includes outstanding balances due from housing loans with mortgage loans which funding was obtained by the placement of mortgage bonds.

Mortgage bonds backed loans: This sub-category includes long-term inflation-indexed mortgage loans (fixed and variable rate) with monthly payments of principal and interest secured by a real property mortgage that are financed by mortgage bonds.

Other mutual mortgage loans: This sub-category includes inflation-indexed long-term mortgage loans (fixed and variable rate) with monthly payments of principal and interest secured by a real property mortgage that are financed by our general borrowings.

Housing Leasing transactions: This sub-category includes outstanding balances owed by tenants in financial leases transactions

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Letters of credit loans: This sub-category includes inflation-indexed, fixed or variable rate, long-term loans with monthly payments of principal and interest secured by a real property mortgage that are financed with mortgage notes.

Other loans and receivables: This sub-category includes loans that are ancillary or that complement mutual mortgage loans.

The balances of the renegotiated mortgage loans as of December 31 2016, 2017 and 2018 were as follows:

	As of December 31,
	2016			2017			2018
	(in millions of Ch$)
Opening balance(1)		1,360			15,660			10,933
Integration Itaú Corpbanca		13,315			—			—
Renegotiated(2)		4,584			1,519			2,779
Recovery(3)		(2,279	)		(5,248	)		(2,567	)
Write-offs(4)		(1,320	)		(998	)		(33	)
Final balance		15,660			10,933			11,112

⁽¹⁾  Corresponds to the renegotiated portfolio opening balance.

₍₂₎ Corresponds to the additions to the renegotiated loans portfolio during each respective period.

⁽³⁾  Corresponds to the recovery (which may include payments, or settlements by judicial action) obtained from renegotiated loans during each respective period.

⁽⁴⁾  Corresponds to write-offs of renegotiated loans during each respective period.

Consumer Loans

Consumer loans. This category includes all loans granted to individuals for the purpose of acquiring consumer goods or services, except for student loans. It includes different types of loans (such as loans payable in installments or revolving loans) and outstanding balances arising from the use of credit cards by individuals or overdrafts on checking accounts. In addition, this category includes leasing operations for consumer purposes and other receivables. Any loan granted to repay or restructure all or part of the credits described above belongs in this category.

Consumer loans include the following sub-categories:

Consumer loans: This sub-category is comprised by loans granted to individuals in Chilean pesos, generally on a fixed rate nominal basis, to finance the purchase of consumer goods or to pay for services. This loans are generally paid in monthly installments which include principal amortization and interest payments.

Current account debtors: This sub-category includes checking overdraft lines granted to individuals, in Chilean pesos, generally on a fixed rate nominal basis and linked to an individual’s checking account.

Credit card debtors: This sub-category includes outstanding balances arising from the use of credit cards by individuals.

Consumer leasing transactions: This sub-category includes outstanding balances owed by tenants of consumer goods under financial leasing transactions.

Other loans and receivables: This sub-category includes other revolving consumer loans and other accounts receivable granted to individuals not included in the above categories.

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The balances of the renegotiated consumer loans as of December 31, 2016, 2017 and 2018 were as follows:

	As of December 31,
	2016			2017			2018
	(in millions of Ch$)
Opening balance(1)		25,996			128,722			150,706
Integration Itaú Corpbanca		93,542			—			—
Renegotiated(2)		78,496			91,837			48,318
Recovery(3)		(44,485	)		(33,778	)		(14,937	)
Write-offs(4)		(24,827	)		(36,074	)		2,232
Final balance		128,722			150,706			186,319

⁽¹⁾ Corresponds to the renegotiated portfolio opening balance.

⁽²⁾  Corresponds to the additions to the renegotiated loans portfolio during each respective period.

⁽³⁾  Corresponds to the recovery (which may include payments, or settlements by judicial action) obtained from renegotiated loans during each respective period.

⁽⁴⁾  Corresponds to write-offs of renegotiated loans during each respective period.

As part of our business model we seek to be able to assist our customers when they are experiencing financial problems that cause them to fall behind on their payments. As a result, we make certain concessions when we renegotiate a loan, which may include the following: (i) extension of payment period; (ii) modifications to the interest rate based on each customer’s ability to pay; and (iii) forgiveness of interest payments.

The above-mentioned concessions are considered on a case-by-case basis. The grant of any concessions will depend on the situation of each customer and pursuant to the analysis by our collection department.

Furthermore, we offer a range of products to renegotiate loans, such as payment extensions or new operations to reduce the probability of write-offs.

Regarding the renegotiated loan portfolio, most of the loans are classified as impaired (i.e., those loans with installments over 60 days past due) and therefore, the associated allowance for loan losses is based on a probability of default of 100%. To reclassify a renegotiated loan out of the impaired classification, we used the criteria defined by the SBIF, i.e. the delinquency of such loans must be for at least four consecutive months with less than 90 days past due.

Remedial Management Portfolio

The remedial portfolio table set forth below represents the commercial loan portfolio and leasing portfolio managed by the remedial portfolio management unit (internally named Normalización Mayorista or “Wholesale Remedial”) which is part of the credit risk structure. This portfolio includes renegotiated commercial loans and leasing operations, commercial loans paid regularly but with certain delay, and commercial loans undergoing legal collection process.

The wholesale remedial management unit (Normalización Mayorista) managed a deteriorated exposure (internal classification of B3 or worse) of over Ch$500 million in 2018.

	As of December 31,
	2016		2017		2018
	(in millions of Ch$)
Opening balance(1)		75,600		237,197		492,534
Integration Itaú Corpbanca		189,709		—		—
Additions to normalization portfolio(2)		69,454		392,476		57,184
Recovery(3)		(44,455		(103,061		(61,078	)
Write-offs(4)		(53,111		(34,077		(45,599	)
Final balance(5)		237,197		492,534		443,041

⁽¹⁾  Opening balance of the remedial portfolio.

⁽²⁾  Additions to remedial portfolio during each respective period.

⁽³⁾  Recovery (which may include payments, or settlements by judicial action) obtained during each respective period.

⁽⁴⁾ Loans and leasing operations write-offs of remedial management portfolio during each respective period.

⁽⁵⁾ Ending balance of the remedial management portfolio (outstanding and contingent exposures)

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Currently, our remedial management portfolio is handled by a designated and specialized team (internally named Normalización Mayorista or “Wholesale Remedial”). The team has activities such as:

• Analyzing borrowers’ status and viability and to assess the chances of recovery;

• Establishing strategies and action plans in order to manage debtors’ portfolio;

• Negotiating new payment schedules;

• Transferring debtors to collection — legal proceedings;

• Supervising and monitoring legal collection progress; and

• Assuring appropriate internal classification.

During 2018, remedial management processes were reinforced, introducing two mayor changes:

• To improve our recovery opportunities, the Remedial Management Unit has worked more closely with the Early Warning Unit, providing a deeper analysis of the cases as compared to previous years.

• To monitor the cases with pending judicial proceedings more closely, we changed the committee’s frequency of review from six months to two months.

As established in our remedial management process, customers with a deteriorated economic situation will be transferred to the Remedial Management Unit (Normalization team), under the following conditions:

• Customers with an internal classification of B3 or worse (note that we will transfer the relationship as a whole);

• Defaulted customers (for 89 days or more);

• Customers involved in judicial proceedings;

• Customers that experience a sudden and severe deterioration in their financial position; and

• Any customer that could result in a loss to the bank.

The remedial portfolio management team is responsible for determining any action that will be taken related to the customer (renegotiation of the exposure or collection), within a period not exceeding 30 days.

Risk Index of Our Loan Portfolio

The risk index is calculated as ratio of the allowance for loan losses over total loans. Allowance for loan losses as of December 31, 2018 refers to allowances for loans at amortized cost according to IFRS 9 and allowance for loan losses for periods are in accordance with IAS 39. Our risk index for commercial loans is calculated by including commercial current account debtors, foreign trade loans, commercial leases, factoring and other commercial loans. Mortgage loans include mortgage leasing arrangements and consumer mortgage loans, which include consumer leasing.

Commercial loans. Our risk index as of December 31, 2016, 2017 and 2018 was 2.9%, 3.3% and 3.4%, respectively. The quality of our commercial loans depends on Chilean GDP growth, interest rates, changes in regulations, the general level of indebtedness and other economic conditions. Commercial loans include foreign trade loans, leasing contracts and factored receivables.

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The main objective of our credit risk division is to maintain an adequate risk-return ratio for our assets, providing balance between commercial business goals and sound risk acceptance criteria, in accordance with our strategic objectives. This division’s work is based on its associates’ experience in evaluating credit risk using specialized, segmented management techniques, which has enabled it to build a sound, risk-conscious culture aligned with our strategy.

Such division helps define credit processes for the companies’ business unit, including approval, monitoring and collections practices, using a regulatory and preventive outlook on credit risk. It also actively participates in loan approval and monitoring processes, which has helped us spread a risk-focused culture, reinforced by ongoing training for sales and risk executives. The division also directly manages higher risk loans in order to maximize recovery using a specialized approach.

Finally, the division’s assets quality ratios developed less favorably in comparison to 2015. Nevertheless, our asset quality ratios, including the risk index, the non-performing loans and the past-due loans, continued to outperform the financial system.

Mortgage loans. The risk index of our residential mortgage loans as of December 31, 2016, 2017 and 2018 was 0.6%, 0.8% and 1.5%, respectively.

Consumer loans. The risk index of our consumer loans as of December 31, 2016, 2017 and 2018 was 4.7%, 5.4% and 8.1%, respectively.

The division also created a risk committee, or the Risk Committee, comprised of directors and senior executives that continuously monitor division activities based on the objectives of the Bank and the business unit.

We consider Itaú Corpbanca’s Risk Index to be an important indicator of the quality of Itaú Corpbanca’s loan portfolio.

Our Risk Index as of December 31, 2016 and 2017 (calculated using general ledger balances and using the IAS 39 standard for allowance for loan losses) was:

RISK INDEX

	as of December 31,						% Change from
	2016			2017			2017/2016
	(in millions of constant Ch$ as of December 31, 2017 except for percentages)
Total loans		21,003,952			20,382,605			(3.0	)%
Commercial loans		14,634,471			13,716,546			(6.3	)%
Mortgage loans		3,888,517			4,152,753			6.8	%
Consumer loans		2,480,964			2,513,306			1.3	%
Allowances for loan losses		559,304			618,527			10.6	%
Commercial loans		418,928			446,914			6.7	%
Mortgage loans		23,472			35,019			49.2	%
Consumer loans		116,904			136,594			16.8	%
Allowances for loan losses as a percentage of total loans		2.7	%		3.0	%		14.0	%
Commercial loans		2.9	%		3.3	%		13.8	%
Mortgage loans		0.6	%		0.8	%		39.7	%
Consumer loans		4.7	%		5.4	%		15.3	%

During 2017, our loan portfolio and, consequently, our allowances for loan losses, were negatively impacted by (i) lower credit demand from companies for investment purposes limiting our commercial loan portfolio expansion in Chile, and (ii) a downward trajectory of the economic activity in Colombia also impacting our loan portfolio growth.

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Our loan portfolio decreased 3.0% and was mainly impacted by the decrease in our commercial loans from Ch$14,634,471 million to Ch$13,716,546 million. On the other hand, both our mortgage loan portfolio, and our consumer loan portfolio increased (6.8% and 1.3%, respectively). Our mortgage loans, which is the business unit with the lowest level of risk, increased from Ch$3,888,517 million in 2016 to Ch$4,152,753 million in 2017 and our consumer loans, the business unit with the highest level of risk, increased from Ch$2,480,964 million in 2016 to Ch$2,513,306 million in 2017. As of December 31, 2017, commercial loans, mortgage loans and consumer loans represented 67.3%, 20.4% and 12.3% of our total loan portfolio.

Our Risk Index (calculated using general ledger balances) presented below as of December 31, 2017 is not comparable to the data as of December 31, 2018 due to the differences between the IFRS 9 standard we applied in 2018 and the IAS 39 standard we applied in 2017.

RISK INDEX

	as of December 31,						% Change from
	2017			2018			2018/2017
	(in millions of constant Ch$ as of December 31, 2018 except for percentages)
Total loans		20,382,605			21,482,490			5.4	%
Commercial loans		13,716,546			14,366,900			4.7	%
Mortgage loans		4,152,753			4,445,827			7.1	%
Consumer loans		2,513,306			2,669,763			6.2	%
Allowances for loan losses(1)		618,527			768,120			24.2	%
Commercial loans		446,914			484,707			8.5	%
Mortgage loans		35,019			66,117			88.8	%
Consumer loans		136,594			217,296			59.1	%
Allowances for loan losses as a percentage of total loans(1)		3.0	%		3.6	%		20.0	%
Commercial loans		3.3	%		3.4	%		3.0	%
Mortgage loans		0.8	%		1.5	%		76.4	%
Consumer loans		5.4	%		8.1	%		49.8	%

(1) Allowance for loan losses as of December 31, 2018 corresponds to allowances for loans and accounts receivable from customers at amortized cost according to IFRS 9. Prior periods are in accordance with IAS 39.

During 2018, our loan portfolio and, consequently, our allowances for loan losses, were positively impacted by (i) an acceleration of economic activity in both Chile and Colombia, which led to a partial improvement in the credit risk of our loan portfolio and (ii) a decrease in exposure to major corporate single-names made after the merger, producing favourable credit risk adjustments. Higher allowances for loan losses in 2018 resulted primarily from the effects of our first time adoption of IFRS 9.

Our loan portfolio increased by 5.4% in 2018 as compared to 2017 as a result of the different dynamics we saw in our business segments. We continued to see a good performance throughout the year in our retail portfolio, particularly our consumer loans led by our strategy that began in the second quarter of 2017, to grow our retail segment in order to produce a more balanced portfolio in terms of retail and wholesale loans. Thus our mortgage loan portfolio, and our consumer loan portfolio increased (7.1% and 6.2%, respectively). Our mortgage loans, which is the business unit with the lowest level of risk, increased from Ch$4,152,753 million in 2017 to Ch$4,445,827 million in 2018 and our consumer loans, the business unit with the highest level of risk, increased from Ch$2,513,306 million in 2017 to Ch$2,669,763 million in 2018. When looking at our commercial loan portfolio, which still was a drag on overall growth in 2018, we did see a stronger performance in terms of margins. As of December 31, 2018, commercial loans, mortgage loans and consumer loans represented 66.9%, 20.7% and 12.4% of our total loan portfolio.

Consumer loans represent the single highest level of risk in our loan portfolio. As of December 31, 2018, the risk index of this business unit was 8.1%, while our commercial loans had a risk index of 3.4%. Our mortgage loans had the lowest risk index of 1.5%.

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Our consumer loan portfolio may experience loan losses due to the absence of collateral in respect of unsecured loans, insufficient collateral in collateralized loans, and risks relating to the circumstances of individual borrowers, including unemployment or incapacitation of our consumer borrowers.

Maturity and Interest Rate Sensitivity of Loans

The following table sets forth an analysis of our loans by type and time remaining to maturity as of December 31, 2018:

	Due in 1 year		Due after 1 year through 5 years		Due after 5 years		Balance as of December 31, 2018
	(in millions of constant Ch$ as of December 31, 2018)
Commercial loans		4,011,492		3,150,844		4,295,052		11,457,388
Foreign trade loans		909,499		12,054		6,890		928,443
Checking account debtors		131,100		—		—		131,100
Factoring operations		210,131		436		—		210,567
Student loans		221		8,343		668,125		676,689
Leasing transactions		50,370		339,882		537,908		928,160
Other loans and receivables		32,090		2,328		135		34,553
Subtotals		5,344,903		3,513,887		5,508,110		14,366,900
Letters of credit loans		1,313		6,606		30,445		38,364
Endorsable mutual mortgage loans		240		6,839		111,589		118,668
Other mutual mortgage loans		4,543		51,867		3,896,835		3,953,245
Leasing transactions		1,477		13,155		297,486		312,118
Other loans and receivables		21		587		22,824		23,432
Subtotals		7,594		79,054		4,359,179		4,445,827
Consumer loans		88,045		1,490,536		343,204		1,921,785
Checking account debtors		209,492		—		—		209,492
Credit card debtors		407,067		72,708		1,792		481,567
Consumer leasing transactions		546		5,525		132		6,203
Other loans and receivables		50,716		—		—		50,716
Subtotals		755,866		1,568,769		345,128		2,669,763
Subtotal loans								21,482,490
Loans and receivables to banks								341,707
Total loans								21,824,197

The following table presents the interest rate analysis of our outstanding loans due after one year as of December 31, 2018.

	As of December 31, 2018
Variable interest rate
Ch$		943,349
UF		389,645
Ch$ indexed to US$		13,824
Foreign currency		2,781,384
Subtotal		4,128,202
Fixed interest rate
Ch$		2,608,633
UF		5,796,355
Ch$ indexed to US$		803

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	As of December 31, 2018
Foreign currency		2,840,134
Subtotal		11,245,925
Total		15,374,127

The following table sets forth an analysis of our foreign loans by type and time remaining to maturity as of December 31, 2018:

2018	Due in 1 year or less		Due after 1 year through 5 years		Due after 5 year		Total
	(in millions of constant Ch$ as of December 31, 2018)
Commercial loans		119,044		6,062		107,613		232,719
Foreign loans (*)		1,445,603		1,716,136		2,240,323		5,402,063
Total		1,564,647		1,722,198		2,347,936		5,634,781

^(*)  Includes commercial, mortgage and consumer loans.

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Loans by Economic Activity

The following table sets forth as of the dates indicated, an analysis of our gross loan portfolio based on the borrower’s principal business activity. Loans for 2018 refer to loans and accounts receivable from customers at amortized cost; and for prior periods, loans refer to loans and accounts receivable from customers, net:

Loans by Economic Activity

	Domestic Loans as of December 31,						Foreign Loans as of December 31,						Total Loans as of December 31,						Distribution percentage as of December 31,
	2016		2017		2018		2016		2017		2018		2016		2017		2018		2016			2017			2018
Loans by Economic Activity
Manufacturing		1,065,647		987,900		982,497		155,749		52,591		114,714		1,221,396		1,040,491		1,097,211		5.81	%		5.11	%		5.11	%
Mining and Petroleum		428,384		445,907		424,883		275,056		198,154		252,894		703,440		644,061		677,777		3.35	%		3.16	%		3.16	%
Electricity, Gas and Water		720,818		531,474		600,667		414,511		405,009		356,706		1,135,329		936,483		957,373		5.41	%		4.59	%		4.46	%
Agriculture and Livestock		262,449		298,517		207,271		165,296		117,413		139,098		427,745		415,930		346,369		2.04	%		2.04	%		1.61	%
Forestry and wood extraction		28,853		8,213		24,511		6,494		30,594		5,172		35,347		38,807		29,683		0.17	%		0.19	%		0.14	%
Fishing		58,770		13,912		1,945		—		—		1,530		58,770		13,912		3,475		0.28	%		0.07	%		0.02	%
Transport and storage		442,468		424,223		509,354		251,885		244,254		191,047		694,353		668,477		700,401		3.31	%		3.28	%		3.26	%
Communications		31,712		29,377		23,886		48,448		65,062		62,191		80,160		94,439		86,077		0.38	%		0.46	%		0.40	%
Construction		1,359,125		1,368,244		1,436,096		265,669		269,876		310,530		1,624,794		1,638,120		1,746,626		7.74	%		8.04	%		8.13	%
Commerce		912,877		999,639		861,291		801,712		713,211		758,817		1,714,589		1,712,850		1,620,108		8.16	%		8.40	%		7.54	%
Services		2,869,113		2,619,520		2,735,023		1,418,260		1,161,213		1,137,037		4,287,373		3,780,733		3,872,060		20.41	%		18.55	%		18.02	%
Others		2,465,332		2,384,400		2,436,337		185,843		347,843		793,403		2,651,175		2,732,243		3,229,740		12.62	%		13.41	%		15.03	%
Subtotal Commercial Loans		10,645,548		10,111,327		10,243,761		3,988,923		3,605,219		4,123,139		14,634,471		13,716,546		14,366,900		69.68	%		67.30	%		66.88	%
Mortgage Loans(1)		3,360,930		3,635,993		3,852,962		527,587		516,760		592,865		3,888,517		4,152,753		4,445,827		18.51	%		20.37	%		20.70	%
Consumer Loans(1)		1,353,422		1,544,062		1,750,986		1,127,542		969,244		918,777		2,480,964		2,513,306		2,669,763		11.81	%		12.33	%		12.43	%
Total		15,359,900		15,291,382		15,847,709		5,644,052		5,091,223		5,634,781		21,003,952		20,382,605		21,482,490		100	%		100	%		100	%

⁽¹⁾ Figures prepared according to IFRS. We have classified our loan portfolio taking into account the debtor that receives the loan.

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Foreign Country Outstanding Loans

Our cross-border outstanding loans are principally trade-related. The table below lists our total amounts outstanding to borrowers in foreign countries as of December 31, 2016, 2017 and 2018. This table does not include foreign trade-related loans to Chilean borrowers.

	As of December 31
	2016		2017		2018
	(in millions of constant Ch$)
Argentina		107		3,028		30,939
Bahamas		—		—		—
Brazil		7,128		4,386		—
British Virgin Islands		6,725		6,154		—
Colombia		5,199,713		4,807,040		5,087,740
Costa Rica		1,683		—		—
France		—		923		1,046
Luxembourg		1,677		—		—
Mexico		47,923		29,199		43,327
Netherlands		47,701		22,974		—
Panama		16,509		7,047		2,983
Peru		198,428		182,712		262,023
Switzerland		40,179		—		—
United States		76,278		27,761		206,722
Total		5,644,052		5,091,223		5,634,781

We also maintain deposits abroad (primarily demand deposits) in foreign banks, as needed to conduct our foreign trade transactions. The table below lists the amounts of foreign deposits by country as of December 31, 2016, 2017 and 2018.

	As of December 31
	2016		2017		2018
	(in millions of constant Ch$)
Australia		173		523		147
Belgium		2,045		1,593		25
Canada		166		186		315
China		5		3		9
Colombia		278,098		125,597		158,787
Denmark		362		939		—
England		—		69		60
Germany		11,971		2,940		8,715
Italy		18		132		—
Japan		887		69		634
London		—		3,337		—
Mexico		44		31		1
New Zealand		—		20		—
Norway		39		2		1
Panama		270		755		242
Peru		—		32		24
South Korea		—		—		22
Spain		4,620		3,713		27
Sweden		269		56		3
Switzerland		163		113		770
United Kingdom		2,012		1,051		2,988
United States		701,819		505,462		484,595
Venezuela		7		7		—
Total		1,002,968		646,630		657,365

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Credit Risk Governance

Credit risk management is the responsibility of the Corporate Risk Management Unit, which reports to the CEO. Its objective is to ensure that risk management is a competitive advantage for the Bank, through an integral management that allows the business areas to achieve their objectives, in an environment of adequate control and alignment with the risk strategy of the Bank.

To accomplish this goal, the Corporate Risk Management Unit combines, among others, a well-defined credit process in terms of approval, monitoring and collection procedures, a strong supervision of all stages of the credit cycle, monitoring the quality and performance of our loan portfolio and taking promptly measures over potentially non-performing loans, while ensuring strong compliance of the legal, regulatory and normative framework.

The Credit Risk Management and Control structure is segregated in Wholesale Credit Risk, Retail Credit Risk, Credit Risk Control, Operational Risk and Compliance, Retail Collection and Risk Architecture.

Wholesale Credit Risk is accountable for the credit process of the wholesale banking business segments comprised of Corporate, Real Estate Companies, Large Enterprises, Financial Institutions, Representative Office in Peru, Risk Countries, Subsidiaries and Wholesale Remedial Unit.

Retail Credit Risk is responsible for the credit acceptance process of the Bank’s retail segments, comprised of Retail Companies, SME’s, Private Bank, Personal Bank, Itaú Branches and Banco Condell.

Credit Risk Control has a transversal function focused on monitoring the performance of the credit portfolio, assets classification and models development. Additionally, it verifies the consistency of credit policies and procedures and also generates information and analysis related to credit risk for the decision making of the different units.

Retail Collection is responsible for the full collection process, including the strategy and operations of the Bank’s retail segments, composed of Retail Companies, Private Banking, Personal Bank, Itau Branches and Banco Condell. The collection strategy is designed based on the products, business segmentation, days past due, channels, legal actions, geographic cover and collection operations, using an internal collections group and vendors.

Risk Architecture has a transversal function, focused on the analysis and coordination of technological projects that involve the improvement of our business processes. Additionally, Risk Architecture controls the efficiency of our resources, using technological or robotics tools, in addition to the development of analytics and machine learning.

Credit Review Process

Credit risk and the exposure to be assumed with regard to our clients are evaluated in accordance with the credit policies and the risk appetite that have been approved by the Board of Directors.

Risk analysis, both of our Wholesale and Retail Banking customers, is periodically performed. In Wholesale Banking, customers’ credit exposure is reviewed at least once a year, and credit limits can be reduced if potential weaknesses in loan repayment capability are detected.

A wholesale borrower’s assessment focuses on the credit history and on the reputation and management capacity of its owners, on their market position and on the demand for their products or services, on their current and projected cash, their solvency and, when applicable, on the guarantees offered in connection with the loan.

In the case of Retail Banking customers, we mainly use a centralized evaluation and decision-making process, but also a case-by-case assessment when the applicant does not fit the standard model. The credit approval process is based on an assessment of the customer’s credit behavior in the financial system, taking into account current debt, credit history, income and expense level, ability to pay, personal assets and previous experience (if any) with the Bank.

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Wholesale Credit Risk

The credit evaluation process is carried out on a case-by-case assessment of each of our customers. Our internal approval governance structure ensures that credit decisions are adjusted to the risk acceptance parameters, identifying potential risks while keeping a healthy composition of our loan portfolio, aligned with our strategy, commercial objectives and risk’s appetite.

Before granting credits to a wholesale customer, we perform an analysis to assign an internal credit risk rating to each client. This internal credit risk rating is based on information such as: the client’s financial situation, cash generating capabilities and the current and projected situation on the economic sector in which it operates.

Credit decisions are made on the basis of the precedents indicated in the procedures manual of each business segment, with at least the following elements of analysis: market and competition, current and projected financial situation and cash flow, customer experience, relationship with the Bank and collateral.

Credit committees are structured according to the customer’s credit risk rating and the credit limit submitted to the committee’s decision. Any rejection by the committee of a credit proposal may be raised to be evaluated by the upper committee instance.

Retail Credit Risk

In Retail Banking, credit risk management is responsible for the credit evaluation of all the segments that are part of the Retail Business Unit.

The credit risk management process for customers of the different segments of Retail Banking is composed of the following stages:

Credit Initiation.

Our credit initiation process consists of:

• Admission Scores, using internal and external information. Risk cuts are applied according to each customer segment. Credit requests collect socio-demographic information that supports our risk analysis and our control of compliance with credit policies.

• Accountability and Responsibility (tied to incentive plans). Branch managers know their customers and they are responsible for credit decisions but they must first seek approval with a credit risk officer.

• Analytical Driven Sales Process. We know the customers that we want and we guide the search for prospects, according to this definition. We permanently offer pre-approved offers of consumer loans, credit cards and revolving credit lines to our current customers, whose risk profile is within the cut-off threshold and the parameters established under our credit policy. Additionally, we use traditional credit review processes, where credit proposals are evaluated and authorized by a credit expert.

• Control Environment. To assess the loan authorization ability (approving credit worthy customers and declining non-credit worthy customers), early delinquency rates are periodically monitored and the sales mix is controlled frequently, according with risk categories.

Maintenance.

We strive to have high market share in the most profitable business units (low-medium risk and medium-high usage) and low market share in the lowest profitable business units (high risk or low usage). The maintenance process is composed of:

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• Renewals/Non-Renewals (Revolving Products). Renewals and non-renewals are based on customer payment behavior and profitability.

• Campaigns. Top-up and cross-selling offers are implemented. Credits are offered permanently to our current customers, such as pre-approved installments credits, revolving credit lines and credit cards. Our goal is maximize the share of client base in our most profitable business units.

Collection.

We focus on having a high quality collection process, with a consistent strategy in terms of products, policies, suppliers, means of payment and specialized vendors. The collection process is composed of:

• Collection Strategy. Our collection strategy is currently based on our products, business segments, delinquency lines, collection channels, geographic coverage, and applied test policies (champions and challengers). Delinquent debtors are reported to credit bureaus.

• Collection Operations. Our collection operations strategy is based on internal teams and suppliers. The collection operations teams provide coverage through different channels (e.g., digital collection, telephone collection, property collection, collection in branches and judicial collection) and operate under a performance model and merit considerations. In addition, our continuity plan requires the use of external collection emergencies in cases of emergency or union instability, among others.

• Policies and Products. Rewrites, standardization offers and payments agreements are made as necessary. Our objective is to maximize the recovery of capital.

• Control Environment and Support. Reliable information management systems are used, which allow us to have a controlled process. We have a collection system and predictive dialers for telephony.

Write-off Policy, Recovery and Planning.

The write-off policy, recovery and planning process consists of:

• Write-off Policy. As a general rule, charge-offs should be done when all collection efforts have been exhausted. These charge-offs consisted of derecognition from the consolidated statements of financial position of the corresponding loans transactions in their entirety, and, therefore, included portions of loans that were not past due in the case of installments loans or leasing transactions (no partial charge-offs exist). For portfolios without guarantees (consumer loans in installments), the write-off is made at 180 days of delinquency; for commercial loans, the write-off is made at 24 to 36 months of delinquency (depending on the type of guarantees); and for the mortgage portfolio, the write-off is made at four years of delinquency.

• Loan Loss Reserve. History of defaults, recoveries, write-offs and collection expenses are used to calculate the allowances of each portfolio. Back Testing Analyses are periodically performed in order to ensure the right coverage, as well as the correct models performance.

Classification of Loan Portfolio

Loan Portfolio is divided into: (1) consumer loans (including loans granted to individuals for the purpose of financing the acquisition of consumer goods or payment of services); (2) residential mortgage loans (including loans granted to individuals for the acquisition, construction or repair of residential real estate, in which the value of the property covers at least 125% of the amount of the loan); and (3) commercial loans (including all loans other than consumer loans and residential mortgage loans).

Impairment Assessment as of January 1, 2018 (Under IFRS 9)

Starting from January 1, 2018, we replaced the “incurred loss” model of IAS 39 with an “expected credit loss” (“ECL”) model established by IFRS 9. The new impairment model applies to all financial assets measured at amortized cost and debt securities measured at fair value through other comprehensive income (FVOCI), including commitment and contingent loans. Investments in equity are outside of the scope of the new impairment requirements.

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We accounted for ECL related to financial assets measured at amortized cost as a loss allowance in the statements of financial position, but the carrying amount of these assets is stated net of the loss allowance. ECL related to contingent loans is accounted for as a provision in the statements of financial position. We recognize in profit or loss, as an impairment gain or loss, the amount of ECL (or reversal) that was required to adjust the loss allowance at the reporting date to the amount that is required to be recognized in accordance IFRS 9 for financial assets measured at amortized cost and contingent loans.

The new model uses a dual measurement approach, under which the loss allowance is measured as either:

• 12-month ECL

• Lifetime ECL

We have defined default on an individual or collective basis as follows:

• Individual: when exposure is more than 89 days past due, it has been restructured, it is in judicial collection, or it has been written-off.

• Collective: when exposure is more than 89 days past due, it has been restructured, or has been identified as impaired by an internal risk committee.

For collective assessment purposes, financial assets are grouped based on characteristics of shared credit risk, considering the type of instrument, credit risk classifications, initial recognition date, remaining term, industry, geographical location of the counterparty, among other significant factors.

The ECL measurement basis depends on whether there has been a significant increase in credit risk (“SICR”) since initial recognition. Based on changes in credit quality since initial recognition, IFRS 9 outlines a “three-stage” model impairment in accordance with the following diagram:

Change in credit quality since initial recognition

Stage 1	Stage 2	Stage 3
Initial recognition	SICR since initial recognition	Credit impaired assets
12-month ECL	Lifetime ECL	Lifetime ECL

We, at the end of each reporting period, evaluates whether a financial instrument’s credit risk has significantly increased since initial recognition or whether an asset is considered to be credit-impaired, and consequently classify financial instruments into the respective stage:

• Stage 1: When loans are first recognized, the Bank recognizes an allowance based on 12-month ECL. Stage 1 loans also include facilities where the credit risk has improved and the loan has been returned to Stage 1.

• Stage 2: When a loan has shown a significant increase in credit risk since origination, we record an allowance based on lifetime ECL. Stage 2 loans also include facilities where the credit risk has improved and the loan has been returned to stage 2.

• Stage 3: Loans considered credit-impaired. The Bank records an allowance based on lifetime ECL, setting the probability of default (“PD”) at 100%.

Our assessment of a SICR and the calculation of ECL incorporate forward-looking information. We perform historical analysis and identify the key economic variables that impact credit risk and ECL for each portfolio. These can include GDP, inflation, interest rates and unemployment, among others. Where applicable, we incorporate these economic variables and their associated impacts into our models.

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Credit risk assessment and forward looking information (including macro-economic factors), includes quantitative and qualitative information based on our historical experience, some examples are:

a. Financial or economic conditions that are expected to cause a significant change in the borrower’s ability to meet its debt obligations.

b. An actual or expected internal credit rating downgrade for the borrower or decrease in behavioral scoring.

c. An actual or expected significant change in the operating results of the borrower.

d. Significant increases in credit risk on other financial instruments of the same borrower.

e. Significant changes in the value of the collateral supporting the obligation or in the quality of third-party guarantees or credit enhancements.

f. Reductions in financial support from a parent entity or other affiliate.

g. Expected changes in the loan documentation including an expected breach of contract that may lead to covenant waivers or amendments, interest payment holidays, interest rate step-ups, requiring additional collateral or guarantees, or other changes to the contractual framework of the instrument.

We have considered that if contractual payments are more than 30 days past due, the credit risk is deemed to have increased significantly since initial credit recognition, but is not an absolute indicator. We did not rebut the backstop presumption of IFRS 9 relating to SICR or default.

Expected Credit loss Measurement

The ECL are the probability-weighted estimate of credit losses, i.e. the present value of all cash shortfalls. A cash shortfall is the difference between the cash flows that are due to an entity in accordance with the contract and the cash flows that the entity expects to receive. The three main components to measure the ECL are:

• PD: The probability of default is an estimate of the likelihood of default over a given time horizon. A default may only happen at a certain time over the assessed period, if the facility has not been previously derecognized and is still in the portfolio.

• LGD: The loss given default is an estimate of the loss arising in the case where a default occurs at a given time. It is based on the difference between the contractual cash flows due and those that the lender would expect to receive, including from the realization of any collateral.

• EAD: The exposure at default is an estimate of the exposure at a future default date, taking into account expected changes in the exposure after the reporting date, including repayments of principal and interest, whether scheduled by contract or otherwise, expected drawdown on committed facilities, and accrued interest from missed payments.

For measuring 12-month and lifetime ECL, cash shortfalls are identified as follows:

• 12-month ECL: the portion of lifetime ECL that represents the ECL that result from default events on the financial instruments that are possible within the 12 months after the reporting date.

• Lifetime ECL: the ECL that result from all possible default events over the expected life of the financial instrument.

We considered a multi-factor analysis to perform our credit risk analysis. The type of portfolio or transactions, and whether individually or collectively assessed.

We divide our portfolio into commercial loans, mortgage loans, consumer loans and contingent loans.

We evaluate individually whether objective evidence of impairment exists for loans that are individually significant, then collectively assess loans that are not individually significant and loans which are significant but for which there is no objective evidence of impairment available under individually assessment.

Contingent loans

We enter into various irrevocable loan commitments and contingent liabilities. Even though these obligations may not be recognized on our statements of financial position, they contain credit risk and, therefore, form part of our overall risk.

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We estimate the ECL for contingent loans, we estimate the expected portion of the loan commitment that will be drawn down over its expected life.

Forward looking information

The ECL model includes a broad range of forward looking information as economic inputs, such as:

• GDP growth

• Unemployment rates

• Central Bank interest rates

• Real estate prices

Modifications of financial assets

When a loan measured at amortized cost has been renegotiated or modified but not derecognized, the Bank recognizes the resulting gains or losses as the difference between the carrying amount of the original loans, and modified contractual cash flows discounted using the Effective Interest Rate (“EIR”) before modification. The EIR is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial asset or financial liability to the gross carrying amount of a financial asset or to the amortized cost of a financial liability.

For ECL estimation purposes of financial assets that have been modified, we are required to distinguish between modification that result in derecognition from those that does not result in derecognition. If the modification does not result in derecognition, then the subsequent assessment of whether there is a significant increase in credit risk is made comparing the risk at the reporting date based on the modified contractual term and the risk at initial recognition based on the original, unmodified contractual term.

If the modification results in derecognition, then the modified asset is considered to be a new asset. Accordingly, the date of modification is treated as the date of initial recognition for the purposes of the impairment requirements.

Collateral

We seek to use collateral to mitigate our credit risks on financial assets, where possible. Types of collateral are cash, securities, letters of credit, real estate and inventories. Our accounting policy for collateral assigned to us through our lending arrangements under IFRS 9 is the same is it was under IAS 39. Collateral, unless repossessed, is not recorded our statements of financial position. However, the fair value of collateral affects the calculation of ECLs. The main collateral associated to mortgage loans are real estate, which are valued based on data provided by specialized third parties.

The estimation of ECL reflects the cash flows expected from collateral and other credit enhancement that are part of the contractual terms of the financial instruments.

Our policy when an asset (real estate) is repossessed, it is transferred to assets held for sale at its fair value less cost to sell and classified as non-financial assets at the repossession date.

Guarantees

Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it occurs because a specified debtor fails to make payments when due, in accordance with the terms of a debt instruments. Such financial guarantees are given to banks, financial institutions and others on behalf of customers to secure loans, overdrafts and other banking facilities.

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Financial guarantee contracts are initially measured at fair value and subsequently measured at the higher of:

• The amount of the loss allowance (calculated as described in Note 19 of our consolidated financial statements); and

• The premium received on initial recognition less income recognized in accordance with the principles of IFRS 15.

Loan commitments provided by us are measured as the amount of the loss allowance (calculated as described in Note 28 of our consolidated financial statements). We have not provided any commitment to provide loans at a below-market interest rate, or that can be settled net in cash or by delivering or issuing another financial instrument.

For loan commitments and financial guarantee contracts, the loss allowance is recognized as a provision. However, for contracts that include both a loan and an undrawn commitment and we cannot separately identify the ECLs on the undrawn commitment component from those on the loan component, the ECLs on the undrawn commitment are recognized together with the loss allowance for the loan. To the extent that the combined ECLs exceed the gross carrying amount on the loan, the ECLs are recognized as a provision.

Charge-offs

The gross carrying amount of a financial asset is reduced when there is no reasonable expectation of recovery. A charge-off constitutes a derecognition event of the corresponding loan transaction in its entirety, and therefore, include portions not past-due for installments loans or leasing operation (no partial charge-off).

Subsequent recoveries of amounts previously charge-off are credited to the income statements, as recovery of loans previously charged-off, as a deduction from provisions for loan losses.

Loan and accounts receivable charge-offs are recorded for overdue and current installments based on the time periods expired since reaching overdue status, as described below:

Type of loan	Term
Consumer loans with or without collateral Other transactions without collateral Commercial loans with collateral Mortgage loans Consumer leasing Other non-mortgage leasing transactions Mortgage leasing (household and business)	6 months 24 months 36 months 48 months 6 months 12 months 36 months

Impairment Assessment prior to January 1, 2018 (Under IAS 39)

Loans Analyzed on an Individual Basis

For individually analyzed commercial loans, the Bank uses a risk classification process that combines parametrical variables with expert judgment, to assign risk categories to each individually analyzed customer. This process considers financial risk factors such as profitability, payment ability and financial indebtedness, and qualitative risk factors such as the economic sector in which the customer develops its activities, the management and experience of the owners, and its historical payment behavior.

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As a result of this classification process, the Bank differentiates the normal loans from the impaired ones, identifying three mayor categories:

1. Debtors classified in risk categories A1, A2, A3, A4, A5 or A6. These debtors are current or have less than 30 days overdue on their payment obligations and show no significant signs of deterioration in their credit quality.

2. Debtors classified in risk categories B1, B2, B3 or B4. These debtors overdue between 30 and 89 days on their payment obligations, thus showing a certain level of deterioration in their credit quality.

3. Debtors classified as C1, C2, C3, C4, C5 or C6. This portfolio includes debtors whose loans with us have been in default (over 90 days) or are being managed by a specialized collection area.

For loans classified as A1, A2, A3, A4, A5, A6, B1, B2, B3 and B4, the Bank assigns a specific allowance percentage on an individual basis to each rating. The amount of the allowance for loan losses is determined based on debt servicing capacity, the company’s financial history, solvency and capacity of shareholders and management and projections for the industry sector in which the customer operates. There is a determined allowance percentage by group of debtors with similar characteristics (i.e., A1, A2, A3, A4, A5, A6, B1, B2, B3 and B4).

Estimated Incurred Loan Loss = Allowance for Loan Losses

The Estimated Incurred Loan Loss (EIL) is how much could be lost in the event a debtor does not perform the obligations under the loan, and it is determined by multiplying the risk factors as defined in the following equation:

EIL	=	EAD X Pd X LGD X LIP
EAD	=	Exposure at Default
PD	=	Probability of Default
LGD	=	Loss Given the Default
LIP	=	Loss Identification Period

Exposure at Default (EAD) is the loan amount outstanding at the balance sheet date that is considered in the calculation and not any future movements and draw downs.

Probability of Default (PD) is the probability, expressed as a percentage that a debtor will default within the next 12 months. This percentage is associated with the rating that given to each debtor.

Loss Identification Period (LIP) is the period between the time at which the event occurs and the date when the entity identifies it.

Loss Given Default (LGD) is the effective loss rate given for default to debtors in the same risk category, which is determined statistically based on the historical effective losses.

Allowances for loan losses for each C risk category are based mainly on the value of the collateral, adjusted for the estimated expenses associated with the recovery and asset sale discounted by the effective interest rate. The allowance percentage for each category is then based mostly on the level of collateral.

Loans Analyzed on a Group Basis

For the consumer loan and group-evaluated commercial loan portfolio the allowances for credit risk are determined by statistical models. The population (clients) is first profiled with a wide range of variables such as demographic variables, payment behavior, aging of the balance of the loan, in order to determine “probability of default” factors indicating transfer into the normalization portfolio.

Each profile in the group-evaluated loan portfolio has aggregated information basically, historical loss experience (less recoveries).

This historical loss experience, which represents the derived loan loss allowance percentage, is applied by profile to the consumer and commercial loan portfolio, taking into consideration, if applicable, any additional factors, such as increase in the unemployment rate in the country, economic downswings, etc. based upon more recent experience, should they affect the level of necessary loan loss reserves.

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The sufficiency of provisions is permanently monitored, with the objective of ensuring an adequate coverage. For this, loan loss allowances are compared against the effective losses and against the default portfolio, with thresholds of pre-defined alerts and with an established governance framework for the review of these parameters.

Total Loans — Models Based on Group Analysis

The following tables provide statistical data regarding the classification of our loans as of the dates indicated below, applying the classification explained in prior pages:

	As of December 31, 2016
	Total Loans		Allowances for loan losses		Risk Index (%)
	(in millions of Ch$ except for percentages)
Commercial		1,418,823		36,816		2.6	%
Leasing commercial		111,455		3,508		3.2	%
Factoring commercial		4,052		177		4.4	%
Student loans		610,315		12,369		2.0	%
Consumer		2,463,873		116,332		4.7	%
Leasing consumer		17,091		572		3.4	%
Mortgage		3,600,188		18,227		0.5	%
Leasing mortgage		288,329		5,245		1.8	%
	As of December 31, 2017
	Total Loans		Allowances for loan losses		Risk Index (%)
	(in millions of Ch$ except for percentages)
Commercial		1,202,416		129,038		10.7	%
Leasing commercial		77,352		6,837		8.8	%
Factoring commercial		12,267		93		0.8	%
Student loans		653,003		12,794		2.0	%
Consumer		2,502,130		136,196		5.4	%
Leasing consumer		11,176		398		3.6	%
Mortgage		3,870,618		26,059		0.7	%
Leasing mortgage		282,135		8,960		3.2	%
	As of December 31, 2018
	Total Loans		Allowances for loan losses(1)		Risk Index (%)
	(in millions of Ch$ except for percentages)
Commercial		1,208,771		274,884		22.7	%
Leasing commercial		73,863		25,113		34.0	%
Factoring commercial		16,418		9		0.1	%
Student loans		676,689		51,091		7.6	%
Consumer		2,663,560		216,820		8.1	%
Leasing consumer		6,203		476		7.7	%
Mortgage		4,133,709		61,722		1.5	%
Leasing mortgage		312,118		4,395		1.4	%

⁽¹⁾ Allowance for loan losses as of December 31, 2018 corresponds to allowances for loans and accounts receivable from customers at amortized cost according to IFRS 9. Prior periods are in accordance with IAS 39.

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Consumer Loans — Models Based on Group Analysis

	As of December 31, 2016
	Total Loans		Allowances for loan losses		Risk Index (%)
	(in millions of Ch$ except for percentages)
Credit cards		414,903		18,390		4.4	%
Lines of credit		259,045		15,244		5.9	%
Other revolving		3,889		655		16.9	%
Installment consumer loans		1,060,901		31,652		3.0	%
Card loans		26,252		859		3.3	%
Salary discount loans		570,120		20,316		3.6	%
Renegotiation		128,722		29,205		22.7	%
Others		42		12		29.6	%
	As of December 31, 2017
	Total Loans		Allowances for loan losses		Risk Index (%)
	(in millions of Ch$ except for percentages)
Credit cards		421,169		20,182		4.8	%
Lines of credit		267,001		18,306		6.9	%
Other revolving		3,893		581		14.9	%
Installment consumer loans		1,168,078		33,195		2.8	%
Card loans		21,308		775		3.6	%
Salary discount loans		469,951		20,699		4.4	%
Renegotiation		150,706		42,450		28.2	%
Others		24		8		33.7	%
	As of December 31, 2018
	Total Loans		Allowances for loan losses(1)		Risk Index (%)
	(in millions of Ch$ except for percentages)
Credit cards		481,567		38,426		6.4	%
Lines of credit		256,456		25,585		10.0	%
Other revolving		3,752		575		15.3	%
Installment consumer loans		1,368,909		68,237		5.0	%
Card loans		14,676		769		5.2	%
Salary discount loans		372,671		23,668		6.4	%
Renegotiation		165,529		67,200		40.6	%
Others		—		—		—

⁽¹⁾  Allowance for loan losses as of December 31, 2018 corresponds to allowances for loans and accounts receivable from customers at amortized cost according to IFRS 9. Prior periods are in accordance with IAS 39.

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Analysis of Our Loan Classification

The following tables provide statistical data regarding the classification of our loans as of the dates indicated below, applying the classification explained in prior pages:

2016

	Corporate Portfolio																														Group Portfolio
	Normal Portfolio															Impaired Portfolio															Normal Portfolio			Impaired Portfolio
As of December 31, 2016	A1			A2			A3			A4			A5			A6			B1			B2			Impaired			Total									Total			General Total
	(in millions of Ch$)
Loans and receivables from banks		37,960			76,834			33,751			2,235			—			—			—			—			—			150,780			—			—			—			150,780
Allowances for loan losses		14			85			74			39			—			—			—			—			—			212			—			—			—			212
As percentage of total loans		0.04	%		0.11	%		0.22	%		1.74	%		—			—			—			—			—			0.14	%		—			—			—			0.14	%
Loans and receivable from customers
Commercial loans:
Commercial loans		47,699			204,313			2,647,749			3,852,211			2,438,286			509,927			288,559			124,372			533,585			10,646,701			1,195,886			113,777			1,309,663			11,956,364
Foreign trade loans		—			727			150,548			337,499			113,418			34,313			21,950			7,419			67,299			733,173			20,198			773			20,971			754,144
Checking account debtors		2			407			10,443			19,249			20,847			7,218			2,140			914			3,452			64,672			65,640			3,389			69,029			133,701
Factoring operations		11,811			9,550			20,040			15,093			11,729			2,903			128			—			835			72,089			3,713			339			4,052			76,141
Student loans		—			—			—			—			—			—			—			—			—			—			583,776			26,539			610,315			610,315
Leasing transactions		4,234			6,064			107,786			307,019			325,678			62,920			54,327			6,998			87,025			962,051			104,279			7,176			111,455			1,073,506
Other loans and receivables		111			312			2,101			3,264			3,318			664			493			51			826			11,140			17,446			1,714			19,160			30,300
Subtotal Commercial loans		63,857			221,373			2,938,667			4,534,335			2,913,276			617,945			367,597			139,754			693,022			12,489,826			1,990,938			153,707			2,144,645			14,634,471
Allowances for loan losses		—			28			5,463			33,775			47,643			23,149			14,663			21,760			219,577			366,058			21,337			31,533			52,870			418,928
As percentage of total loans		—			0.01	%		0.19	%		0.74	%		1.64	%		3.75	%		3.99	%		15.57	%		31.68	%		2.93	%		1.07	%		20.52	%		2.47	%		2.86	%
Consumer loans																																2,387,009			93,955			2,480,964			2,480,964
Allowances for loan losses		—			—			—			—			—			—			—			—			—			—			65,934			50,970			116,904			116,904
As percentage of total loans		—			—			—			—			—			—			—			—			—			—			2.76	%		54.25	%		4.71	%		4.71	%
Mortgage loans																																3,755,370			133,147			3,888,517			3,888,517
Allowances for loan losses		—			—			—			—			—			—			—			—			—			—			12,494			10,978			23,472			23,472
As percentage of total loans		—			—			—			—			—			—			—			—			—			—			0.50	%		12.51	%		0.60	%		0.60	%
Total loans and receivable to customers		63,857			221,373			2,938,667			4,534,335			2,913,276			617,945			367,597			139,754			693,022			12,489,826			8,133,317			380,809			8,514,126			21,003,952
Allowances for loan losses		—			28			5,463			33,775			47,643			23,149			14,663			21,760			219,577			366,058			99,765			93,481			193,246			559,304
As percentage of total loans		—			0.09	%		0.11	%		0.82	%		1.80	%		2.86	%		4.6	%		14.3	%		33.8	%		3.06	%		1.23	%		24.55	%		2.27	%		2.66	%
Financial investments		—			—			—			—			—			—			—			—			—			—			—			—			—			—

116

2017

	Corporate Portfolio																													Group Portfolio
	Normal Portfolio														Impaired Portfolio															Normal Portfolio			Impaired Portfolio
As of December 31, 2017	A1		A2			A3			A4			A5			A6			B1			B2			Impaired			Total									Total			General Total
	(in millions of Ch$)
Loans and receivables from banks		862		42,105			23,025			4,293			—			—			—			—			—			70,285			—			—			—			70,285
Allowances for loan losses		—		76			132			—			—			—			—			—			—			208			—			—			—			208
As percentage of total loans		—		0.18	%		0.57	%		—			—			—			—			—			—			0.30	%		—			—			—			0.30	%
Loans and receivable from customers
Commercial loans:
Commercial loans		34,371		188,865			2,651,517			3,263,945			2,423,298			593,069			158,313			106,093			606,942			10,026,413			980,093			109,570			1,089,663			11,116,076
Foreign trade loans		—		—			150,154			244,954			145,609			13,995			17,078			8,085			85,032			664,907			27,168			8,658			35,826			700,733
Checking account debtors		633		922			13,317			25,229			24,647			5,443			4,345			640			4,447			79,623			48,594			11,131			59,725			139,348
Factoring operations		27,456		9,726			17,735			50,559			18,656			3,443			598			—			298			128,471			12,202			65			12,267			140,738
Student loans		—		—			—			—			—			—			—			—			—			—			598,717			54,286			653,003			653,003
Leasing transactions		2,186		7,059			94,226			269,425			310,915			66,536			25,076			5,783			82,231			863,437			70,641			6,711			77,352			940,789
Other loans and receivables		3		59			508			2,972			3,509			563			126			39			878			8,657			13,817			3,385			17,202			25,859
Subtotal Commercial loans		64,649		206,631			2,927,457			3,857,084			2,926,634			683,049			205,536			120,640			779,828			11,771,508			1,751,232			193,806			1,945,038			13,716,546
Allowances for loan losses		21		197			2,153			22,819			52,873			16,509			6,087			2,315			195,178			298,152			57,057			91,705			148,762			446,914
As percentage of total loans		—		0.10	%		0.07	%		0.59	%		1.81	%		2.42	%		2.96	%		1.92	%		25.03	%		2.53	%		3.26	%		47.32	%		7.65	%		3.26	%
Consumer loans																															2,396,246			117,060			2,513,306			2,513,306
Allowances for loan losses		—		—			—			—			—			—			—			—			—			—			93,255			43,339			136,594			136,594
As percentage of total loans		—		—			—			—			—			—			—			—			—			—			3.89	%		37.02	%		5.43	%		5.43	%
Mortgage loans																															3,975,744			177,009			4,152,753			4,152,753
Allowances for loan losses		—		—			—			—			—			—			—			—			—			—			22,730			12,289			35,019			35,019
As percentage of total loans		—		—			—			—			—			—			—			—			—			—			0.57	%		6.94	%		0.84	%		0.84	%
Total loans and receivable to customers		64,649		206,631			2,927,457			3,857,084			2,926,634			683,049			205,536			120,640			779,828			11,771,508			8,123,222			487,875			8,611,097			20,382,605
Allowances for loan losses		21		197			2,153			22,819			52,873			16,509			6,087			2,315			195,178			298,152			173,042			147,333			320,375			618,527
As percentage of total loans		—		0.10	%		0.07	%		0.59	%		1.81	%		2.42	%		2.96	%		1.92	%		25.03	%		2.53	%		2.13	%		30.20	%		3.72	%		3.03	%
Financial investments		—		—			—			—			—			—			—			—			—			—			—			—			—			—

117

	Corporate Portfolio																														Group Portfolio
As of December 31, 2018	Normal Portfolio																		Impaired Portfolio (*)												Normal Portfolio			Impaired Portfolio
	A1 MCh$			A2 MCh$			A3 MCh$			A4 MCh$			A5 MCh$			A6 MCh$			B1 MCh$			B2 MCh$			Impaired MCh$			Subtotal MCh$			MCh$			MCh$			Total MCh$			General Total MCh$
Loans and receivables from banks		9,648			256,680			62,699			12,680			—			—			—			—			—			341,707			—			—			—			341,707
Allowances for loan losses		3			414			46			—			—			—			—			—			—			463			—			—			—			463
As percentage of total loans		0.03	%		0.16	%		0.07	%		0.00	%		—			—			—			—			—			0.14	%		—			—			—			0.14	%
Loans and receivable from customers
Commercial loans
Commercial loans		77,530			401,697			2,825,432			3,624,000			2,359,123			544,098			230,739			65,738			592,765			10,721,122			732,307			3,959			736,266			11,457,388
Foreign trade loans		—			—			120,431			194,385			132,301			10,015			16,595			7,695			71,030			552,452			275,178			100,813			375,991			928,443
Current account debtors		—			917			8,625			12,407			13,189			3,579			3,420			383			8,947			51,467			62,083			17,550			79,633			131,100
Factoring operations		33,027			44,471			42,572			36,018			28,489			1,092			4,349			—			4,131			194,149			16,305			113			16,418			210,567
Student loans		—			—			—			—			—			—			—			—			—			—			604,599			72,090			676,689			676,689
Leasing transactions		—			6,283			93,172			291,530			302,280			56,196			22,572			2,942			79,322			854,297			68,929			4,934			73,863			928,160
Other loans and receivables		8			45			6,769			3,028			5,484			487			150			67			1,634			17,672			12,992			3,889			16,881			34,553
Subtotal Commercial loans		110,565			453,413			3,097,001			4,161,368			2,840,866			615,467			277,825			76,825			757,829			12,391,159			1,772,393			203,348			1,975,741			14,366,900
Allowances for loan losses		508			475			3,506			37,403			58,360			27,477			18,067			9,793			233,242			388,831			37,352			58,524			95,876			484,707
As percentage of total loans		0.46	%		0.10	%		0.11	%		0.90	%		2.05	%		4.46	%		6.50	%		12.75	%		30.78	%		3.14	%		2.11	%		28.78	%		4.85	%		3.37	%
Consumer loans		—			—			—			—			—			—			—			—			—			—			2,532,331			137,432			2,669,763			2,669,763
Allowances for loan losses		—			—			—			—			—			—			—			—			—			—			135,521			81,775			217,296			217,296
As percentage of total loans		—			—			—			—			—			—			—			—			—			—			5.35	%		59.50	%		8.14	%		8.14	%
Mortgage loans		—			—			—			—			—			—			—			—			—			—			4,235,934			209,893			4,445,827			4,445,827
Allowances for loan losses		—			—			—			—			—			—			—			—			—			—			39,755			26,362			66,117			66,117
As percentage of total loans		—			—			—			—			—			—			—			—			—			—			0.94	%		12.56	%		1.49	%		1.49	%
Total loans and receivable to customers		110,565			453,413			3,097,001			4,161,368			2,840,866			615,467			277,825			76,825			757,829			12,391,159			8,540,658			550,673			9,091,331			21,482,490
Allowances for loan losses		508			475			3,506			37,403			58,360			27,477			18,067			9,793			233,242			388,831			212,628			166,661			379,289			768,120
As percentage of total loans		0.46	%		0.10	%		0.11	%		0.90	%		2.05	%		4.46	%		6.50	%		12.75	%		30.78	%		3.14	%		2.49	%		30.26	%		4.17	%		3.58	%

118

Classification of Loan Portfolio Based on the Customer’s Payment Performance

The following tables set forth the amounts that are current as to payments and interest and the amounts that are overdue under IFRS, as of the dates indicated:

Total Loans

	As of December 31,
	2016		2017		2018
	(in millions of Ch$, except for percentages)
Current		19,763,116		19,266,605		20,358,662
Overdue 1-29 days		615,893		396,178		429,791
Overdue 30-89 days		272,243		257,807		241,090
Overdue 90-180 days		143,166		177,728		148,234
Overdue 181-240 days		52,791		58,703		28,977
Overdue 241-360 days		56,011		80,146		52,176
Overdue more than 360 days		100,732		145,437		223,560
Total loans (excludes interbank loans)		21,003,952		20,382,605		21,482,490

Analysis of Impaired Loans, Non-Performing Loans and Past Due Loans

The following tables analyze our impaired loans and past due loans and the allowances for loan losses existing as of the dates indicated:

	As of December 31,
	2016			2017			2018
	(in million of Ch$ except for percentages)
Total loans (1)		21,003,952			20,382,605			21,482,490
Impaired loans (2)		1,073,831			1,267,703			1,299,226
Allowance for loan losses (3)		559,304			618,527			768,120
Impaired loans as a percentage of total loans		5.1	%		6.2	%		6.0	%
Non-performing loans (4)		352,700			462,015			452,947
Non-performing loans as a percentage of total loans (4)		1.7	%		2.3	%		2.1	%
Past due loans (5)		112,450			131,021			179,875
Past due loans as a percentage of total loans		0.5	%		0.6	%		0.8	%
Allowance for loans losses as a percentage of:
Total loans		2.7	%		3.0	%		3.6	%
Total impaired loans		52.1	%		48.8	%		59.1	%
Total Non-performing loans		158.6	%		133.9	%		169.6	%
Total amounts past due		497.4	%		472.1	%		427.0	%
Reported ECL		—			—			782,713
Reported Coverage (Reported ECL/ loans and accounts receivable at amortized cost)		—			—			3.6	%

⁽¹⁾  Total loans as of December 31, 2018 corresponds to loans and accounts receivable from customers at amortized cost according to IFRS 9. Prior periods are in accordance with IAS 39.

⁽²⁾  Impaired loans include those loans on which there is objective evidence that debtors will not meet some of their contractual payment obligations. For 2018, impaired loans include loans classified in stage 3 according to IFRS 9. For prior periods impaired loans include (a) for loans individually evaluated for impairment: (i) the carrying amount of all loans to clients that are rated C1 through C4, D1 and D2 and (ii) the carrying amount of all loans to an individual client with at least one non-performing loan (which is not a residential mortgage loan past due less than 90 days), regardless of category; and (b) for loans collectively evaluated for impairment, the carrying amount of all loans to a client, when at least one loan to that client is not performing or has been renegotiated. Renegotiated loans on which payments are not past-due are not ordinarily classified as non-performing loans, but do not accrue interest.

⁽³⁾  Allowance for loan losses as of December 31, 2018 corresponds to allowances for loans and accounts receivable from customers at amortized cost according to IFRS 9. Prior periods are in accordance with IAS 39.

⁽⁴⁾  Non-performing loans include the principal and interest on any loan with one installment more than 90 days overdue. Total loans in 2018 corresponds to loans at amortized cost. Our loan portfolio classified as stage 3 under IFRS 9 was Ch$884,977 million as of December 31, 2018 with an ECL coverage of 3.6%.

⁽⁵⁾  Past due loans include all installments and lines of credit more than 90 days overdue. Past due loans do not include the aggregate principal amount of such loans.

The following table provides further information on our non-performing loans:

As of December 31, 2018	Between 90-180 days		Between 181-240 days		Between 241-360 days		More than 360 days		Total
	(in millions of Ch$)
Commercial Loans		98,718		41,043		64,904		110,205		314,870
Mortgages Loans		27,215		8,868		18,341		36,683		91,107
Consumer Loans		46,970		—		—		—		46,970
Total loans (excludes interbank loans)		172,903		49,911		83,245		146,888		452,947

119

As of December 31, 2017	Between 90-180 days		Between 181-240 days		Between 241-360 days		More than 360 days		Total
	(in millions of Ch$)
Commercial Loans		95,917		50,327		69,079		104,054		319,378
Mortgages Loans		32,958		8,376		11,067		41,383		93,784
Consumer Loans		48,853		—		—		—		48,853
Total loans (excludes interbank loans)		177,728		58,703		80,146		145,437		462,015
As of December 31, 2016	Between 90-180 days		Between 181-240 days		Between 241-360 days		More than 360 days		Total
	(in millions of Ch$)
Commercial Loans		58,494		44,543		45,334		73,827		222,198
Mortgages Loans		39,268		8,248		10,677		26,905		85,098
Consumer Loans		45,404		—		—		—		45,404
Total loans (excludes interbank loans)		143,166		52,791		56,011		100,732		352,700

Analysis of Allowances for Loan Losses

The following table analyzes our provisions for loan losses charged to income and changes in the allowances attributable to write-offs, allowances released, recoveries, allowances on loans acquired for years ended December 31, 2016 and 2017 according to IAS 39:

	As of December 31,
	2016			2017
	(in millions of Ch$ except for percentages)
Allowances for loan losses at beginning of period		95,579			559,304
Allowances on acquired loans
Charge-offs		(188,095	)		(233,361	)
Provisions established		674,034			819,268
Provisions released(1)		(404,794	)		(472,305	)
Integration Itaú Corpbanca		442,947			—
Impairment		—			—
Use provision		(58,746	)		(9,760	)
Exchange rate differences (2)		(1,621	)		(44,619	)
Allowances for loan losses at end of period		559,304			618,527
Ratio of charge-offs to average loans		1.1	%		1.1	%
Allowances for loan losses at end of period as a percentage of total loans		2.7	%		3.0	%
Allowances for loan losses at end of period		559,304			618,527

⁽¹⁾  Represents the aggregate amount of provisions for loan losses released during the year as a result of charge-offs, recoveries or a determination by management that the level of risk existing in the loan portfolio has been reduced.

⁽²⁾  Reflects the effect of inflation on the allowances for loan losses at the beginning of each period.

The following sets forth the movements in our allowances for loan losses during the year ended December 31, 2018, according to IFRS 9. For a description of the various categories mentioned below, see “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information—Impairment Assessment as of January 1, 2018 (Under IFRS 9).”

120

	Individually assessed											Group assessed
	Stage 1		Stage 2			Stage 3						Stage 1			Stage 2			Stage 3
	12-Month ECL		Lifetime ECL			Lifetime ECL			Subtotals			12-Month ECL			Lifetime ECL			Lifetime ECL			Subtotals			Totals
Balances as of January 1, 2018		—		49,389			32,736			82,125			126,230			248,129			284,089			658,448			740,573
Changes in the allowances
- Net transfers to stage 1		—		—			—			—			—			36,325			41,471			77,796			77,796
- Net transfer to stage 2		—		—			—			—			(5,233	)		—			49,097			43,864			43,864
- Net transfer to stage 3		—		—			—			—			(4,354	)		(22,811	)		—			(27,165	)		(27,165	)
- Increases due to change in credit risk		—		3,732			16,587			20,319			18,307			18,459			28,670			65,436			85,755
- Decreases due to change in credit risk		—		(532	)		(1,706	)		(2,238	)		(23,460	)		(27,162	)		(9,105	)		(59,727	)		(61,965	)
- Charge-offs													(21,316	)		(18,559	)		(95,091	)		(134,966	)		(134,966	)
- Changes due to modifications that did not result in derecognition																									—
New financial assets originated or purchased		—		6,428			17,037			23,465			66,074			54,568			77,069			197,711			221,176
Financial assets that have been derecognized		—		(20,636	)		(15,355	)		(35,991	)		(19,950	)		(58,405	)		(78,728	)		(157,083	)		(193,074	)
Net transfer from (to) group assessed		—		7,772			38,158			45,930			138			(1,761	)		(38,158	)		(39,781	)		6,149
Foreign exchange and other movements													2,056			3,664			4,257			9,977			9,977
Balances as of December 31, 2018		—		46,153			87,457			133,610			138,492			232,447			263,571			634,510			768,120

Our policy with respect to write-offs is as disclosed in Note 1(q) to our financial statement included herein. The following table shows the write-offs breakdown by loan category:

	As of December 31,
	2016		2017		2018
	(in millions of Ch$)
Consumer loans		94,294		115,708		164,680
Mortgage loans		8,157		8,303		8,035
Commercial loans		85,644		109,350		102,450
Total		188,095		233,361		275,165

The following table shows loan loss recoveries by loan category for the periods indicated:

	As of December 31,
	2016		2017		2018
	(in millions of Ch$)
Bank debt		—		—		—
Consumer loans		13,088		16,419		25,959
Mortgage loans		1,285		1,908		2,588
Commercial loans		8,898		13,236		19,921
Total		23,271		31,563		48,468

Based on information available regarding our debtors, the Bank believes that our allowances for loan losses are sufficient to cover known probable losses and losses inherent in a loan portfolio of the size and nature of our loan portfolio.

Allocation of Allowances for Loan Losses

The following tables set forth, as of December 31, 2016, 2017 and 2018, allowances for loan losses that were attributable to our commercial, consumer and mortgage loans as of each date. Under IFRS, the fair value of a loan portfolio acquired should be shown as recorded upon acquisition under IFRS 3, business combination.

	As of December 31, 2018(1)
	Allowance amount		Allowance Amount as a percentage of loans in category			Allowance Amount as a percentage of total loans			Loans in category as percentage of total
	(in millions of Ch$ except for percentages)
Commercial loans		484,707		3.4	%		2.2	%		65.8	%
Consumer loans		217,296		8.1	%		1.0	%		12.2	%
Residential mortgage loans		66,117		1.5	%		0.3	%		20.4	%
Loans and receivables to banks		463		0.1	%		0.0	%		1.6	%
Total allocated allowances		768,583		3.5	%		3.5	%		100.0	%

⁽¹⁾  Allowance for loan losses as of December 31, 2018 corresponds to allowances for loans and accounts receivable from customers at amortized cost according to IFRS 9. Prior periods are in accordance with IAS 39.

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	As of December 31, 2017
	Allowance amount		Allowance Amount as a percentage of loans in category			Allowance Amount as a percentage of total loans			Loans in category as percentage of total
	(in millions of Ch$ except for percentages)
Commercial loans		446,914		3.3	%		2.2	%		67.2	%
Consumer loans		136,594		5.4	%		0.7	%		12.3	%
Residential mortgage loans		35,019		0.8	%		0.2	%		20.3	%
Loans and receivables to banks		208		0.6	%		0.0	%		0.2	%
Total allocated allowances		618,735		3.0	%		3.0	%		100	%
	As of December 31, 2016
	Allowance amount		Allowance Amount as a percentage of loans in category			Allowance Amount as a percentage of total loans			Loans in category as percentage of total
	(in millions of Ch$ except for percentages)
Commercial loans		418,928		2.9	%		2.0	%		69.2	%
Consumer loans		116,904		4.7	%		0.6	%		11.7	%
Residential mortgage loans		23,472		0.6	%		0.1	%		18.4	%
Loans and receivables to banks		212		0.1	%		0.0	%		0.7	%
Total allocated allowances		559,516		2.6	%		2.6	%		100	%

Composition of Deposits and Other Commitments

The following table sets forth the composition of our deposits and similar commitments as of December 31, 2016, 2017 and 2018.

	As of December 31,
	2016		2017		2018
	(in millions of Ch$)
Checking accounts		2,591,618		2,473,283		2,570,436
Other demand liabilities		1,861,573		1,668,384		1,730,039
Saving accounts		32,425		28,410		27,156
Time deposits		11,549,010		10,036,583		10,093,703
Other commitments		275		250		252
Total		16,034,901		14,206,910		14,421,586

Maturity of Deposits

The following table sets forth information regarding the currency and maturity of our deposits as of December 31, 2018, expressed in percentages. UF-denominated deposits are similar to Chilean peso-denominated deposits in all respects, except that the principal is readjusted periodically based on variations in the CPI.

	As of December 31, 2018
	Ch$			UF			Foreign Currency			Total
	(In %)
Demand deposits		24.02			0.69			42.74			29.82
Savings accounts		—			1.21			0.38			0.19
Time deposits:
Maturing within 3 months		47.53			33.32			27.01			39.48
Maturing after 3 but within 6 months		13.35			2.15			9.92			11.63
Maturing after 6 but within 12 months		10.46			6.71			10.08			10.16
Maturing after 12 months		4.64			55.92			9.87			8.72
Total time deposits		75.98			98.10			56.88			69.99
Total deposits		100	%		100	%		100	%		100	%

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The following table sets forth information regarding the maturity of the outstanding time deposits in excess of US$100,000 (or its equivalent) issued by us as of December 31, 2018.

	As of December 31, 2018
	Ch$		UF		Foreign Currency		Total
	(in millions of constant Ch$)
Maturing within 3 months		3,240,793		181,984		1,450,814		4,873,591
Maturing after 3 but within 6 months		398,177		342,971		429,309		1,170,457
Maturing after 6 but within 12 months		1,127,000		10,953		503,931		1,641,884
Maturing after 12 months		895,021		40,255		543,235		1,478,511
Total time deposits		5,660,991		576,163		2,927,289		9,164,443

Minimum Capital Requirements

The following table sets forth our minimum capital requirements as of December 31, 2016, 2017 and 2018.

	As of December 31,
	2016			2017			2018
	(in millions of constant Ch$ except for percentages)
Net capital base		3,173,516			3,189,876			3,324,531
3% total assets net of provisions		(957,058	)		(915,261	)		(953,445	)
Excess over minimum required equity		2,216,458			2,274,615			2,371,086
Net capital base as a percentage of the total assets, net of provisions		9.95	%		10.46	%		10.46	%
Effective net equity		3,252,175			3,249,572			3,415,845
10% of the risk-weighted assets		(2,319,500	)		(2,215,179	)		(2,331,556	)
Excess over minimum required equity		932,675			1,034,393			1,084,289
Effective equity as a percentage of the risk-weighted assets		14.0	%		14.7	%		14.6	%

Our capital ratios levels increased from 14.0% to 14.7% between 2016 and 2017 and decreased to 14.6% as of December 31, 2018.

Short-term Borrowings

Our short-term borrowings (other than deposits and other obligations) totaled Ch$1,071,295 million, Ch$1,114,716 million and Ch$2,009,621 million as of December 31, 2016, 2017 and 2018, respectively, in accordance with IFRS.

The principal categories of our short-term borrowings are amounts borrowed under foreign trade lines of credit, domestic interbank loans and repurchase agreements.

The table below presents the amounts outstanding at the end of each period indicated and the weighted average nominal interest rate for each such period by type of short-term borrowing.

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	As of and for the Year Ended December 31,
	2016					2017					2018
	Year End Balance		Weighted Average Nominal Interest Rate			Year End Balance		Weighted Average Nominal Interest Rate			Year End Balance		Weighted Average Nominal Interest Rate
	(in millions of constant Ch$ except for percentages)
Obligations under repurchase agreements		373,879		0.13	%		420,920		0.10	%		1,015,614		0.05	%
Central Bank borrowings		—		—			—		—			—		—
Domestic interbank loans		—		—			—		—			—		—
Borrowings under foreign trade credit lines		697,416		0.08	%		697,744		0.06	%		1,000,481		0.08	%
Total short-term borrowings		1,071,295		0.10	%		1,118,664		0.07	%		2,016,095		0.06	%

The following table shows the average balance and the weighted average nominal rate for each short-term borrowing category during the periods indicated:

	As of and for the Year Ended December 31,
	2016					2017					2018
	Average Balance		Weighted Average Nominal Interest Rate			Average Balance		Weighted Average Nominal Interest Rate			Average Balance		Weighted Average Nominal Interest Rate
	(in millions of constant Ch$ except for percentages)
Obligations under repurchase agreements		400,252		0.12	%		596,022		0.07	%		798,696		0.06	%
Central Bank borrowings		—		—			—		—			—		—
Domestic interbank loans		3,333		0.09	%		27,917		0.20	%		15,417		0.42	%
Borrowings under foreign trade credit lines		496,186		0.12	%		578,252		0.07	%		794,359		0.10	%
Total short-term borrowings		899,772		0.12	%		1,202,191		0.07	%		1,608,472		0.08	%

The following table presents the maximum month-end balances of our principal sources of short-term borrowings during the periods indicated:

	Maximum 2016 Month-End Balance		Maximum 2017 Month-End Balance		Maximum 2018 Month-End Balance
	(in millions of constant Ch$)
Obligations under repurchase agreements		848,219		948,657		1,015,614
Central Bank borrowings		—		—		—
Domestic interbank loans		40,017		215,858		132,179
Borrowings under foreign trade credit lines		774,636		1,074,498		1,108,097
Other obligations		31,392		24,488		20,642

C. ORGANIZATIONAL STRUCTURE

The following diagram presents our current corporate structure, including our principal subsidiaries, as of the date of this Annual Report.

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ITAÚ CORPBANCA & SUBSIDIARIES-CORPORATE STRUCTURE

Itaú Corredores de Bolsa Ltda., Itaú Administradora General de Fondos S.A., Itaú Asesorías Financieras S.A., Itaú Corredores de Seguros S.A., CorpLegal S.A., and Recaudaciones y Cobranzas Ltda. are incorporated and domiciled in Chile. Itaú Corpbanca New York Branch is incorporated and domiciled in the State of New York, United States. Itaú Corpbanca Colombia S.A., Itaú Securities Services Colombia S.A. Sociedad Fiduciaria, Itaú Comisionista de Bolsa Colombia S.A., Itaú Corredor de Seguros Colombia S.A. and Itaú Asset Management Colombia S.A. Sociedad Fiduciaria are incorporated and domiciled in Colombia. Itaú (Panamá) S.A. and Itaú Casa de Valores S.A. are incorporated and domiciled in Panama.

For more information about the services our subsidiaries and our New York Branch provide see “Item 4. Information on the Company—B. Business Overview—Principal Business Activities—Financial Services Offered Through Subsidiaries.”

D. PROPERTY

Our principal executive offices are located at Rosario Norte 660, Las Condes, Santiago, Chile since 2007. As of December 31, 2018, we owned 38 of the 436 properties where our branches were located. Total branch space as of December 31, 2018 was approximately 17,775 square meters (191,328 square feet). Our branches are located throughout Chile, including the Santiago metropolitan region, and Colombia, including in the cities of Bogotá, Medellín, Cali, Bucaramanga and Barranquilla.

ITEM 4A. UNRESOLVED STAFF COMMENTS

None.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

A. OPERATING RESULTS

The following discussion should be read in conjunction with our consolidated financial statements, together with the notes thereto, included elsewhere in this Annual Report, and in conjunction with the information included under “Item 3A. Selected Financial Data” and “Item 4B. Business Overview — Selected Statistical Information.” Our consolidated financial statements as of December 31, 2015, 2016, 2017 and 2018 and for the years ended December 31, 2015, 2016, 2017 and 2018 have been prepared in accordance with IFRS.

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Our financial statement data as of and for the years ended December 31, 2015 and 2016 are not comparable to the data as of and for the years ended December 31, 2017 and 2018 because of the Merger, which was consummated on April 1, 2016. The Merger has been accounted for as a reverse acquisition, based on guidance in IFRS 3 “Business Combinations,” with Banco Itaú Chile (the legal acquiree) considered as the accounting acquirer and Corpbanca (the legal acquirer) considered as the accounting acquiree. Accordingly, the financial statements of Itaú Corpbanca for periods prior to the acquisition date of April 1, 2016 reflect the historical financial information of Banco Itaú Chile. Before the Merger, former Banco Itaú Chile (the legal acquiree) only produced financial statements pursuant to Chilean Banking GAAP, while former Corpbanca (the legal acquirer) from 2009 to 2015 issued financial statements according to Chilean Banking GAAP and according to IFRS.

The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from these discussed in forward-looking statements as a result of various factors, including those set forth in “Cautionary Statement Regarding Forward-Looking Information” and “Item 3D. Risk Factors.”

INTRODUCTION

We are a banking corporation organized under the laws of Chile. Our common shares are listed on the Santiago Stock Exchange and the Chilean Electronic Exchange, and our ADSs are listed on the NYSE. We are regulated by the SBIF. We offer general commercial and consumer banking services and provide other services including factoring, collection, leasing, securities and insurance brokerage, asset management and investment banking.

The following classification of revenues and expenses is based on our consolidated financial statements:

Revenues

We have three main sources of revenues, which include both cash and non-cash items:

Interest income

We earn interest income from our interest-earning assets, which are mainly represented by loans to customers.

Income from service fees

We earn income from service fees related to checking accounts, loans, mutual funds, credit cards and other financial services.

Other operating income

We earn income relating to changes in the fair value of our securities portfolio, other trading activities and foreign exchange transactions.

Expenses

We have three main sources of expenses, which include both cash and non-cash items:

Interest Expense

We incur interest expense on our interest bearing liabilities, such as deposits, short-term borrowings and long-term debt.

Provisions for Loan Losses

Our allowance and provision for loan losses as recorded in our consolidated financial statements included herein have been determined in accordance with IFRS.

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Other Operating Expenses

We incur expenses relating to salaries and benefits, administrative expenses and other non-interest expenses.

THE ECONOMY

Primary Markets in Which We Operate

A majority of our investments are located in Chile and Colombia. Accordingly, our financial condition and results of operations are substantially dependent upon economic conditions prevailing in Chile and Colombia.

Developments in the Chilean Economy

After four years of below-potential growth, Chile saw a significant recovery in 2018, favored by external conditions and an improved private sector sentiment. The recovery of the labor market was slower, while external accounts remained at sustainable levels. Financial market volatility led the Chilean peso to depreciate from the beginning of the year, while tradable goods inflation remained stable. In spite of low inflationary pressures, the Central Bank announced that a gradual monetary normalization cycle would begin in the fourth quarter of 2018 as they believed narrowing output gap could lead to inflation down the road.

Given that there was a major mining strike in the first quarter of the year 2017, it is difficult to compare the first half of 2018 (when the Chilean economy experienced robust growth) with the first half of 2017. Recovering mining production drove the 4.9% growth rate during the first half of 2018, while a gradual recovery of investment fueled growth in the second half of the year. Meanwhile, consumption has seen an uneven recovery, with durable consumption thriving (particularly led by automobile sales), while non-durable consumption remained weak. Additionally, the Argentinean economic crisis has limited consumption, resulting in low rates and low inflation. In terms of the labor market, it has not followed the economic recovery trend, with an average unemployment rate of 7.0% in 2018, slightly higher than the 6.7% observed in 2017.

The widespread improvement of investment was another factor of the end of four years of contraction in 2018. The improvement began in late 2017, when purchases of machinery and equipment recovered, with construction growth picking up throughout the year. The improvement was fueled by higher copper prices in 2018, as compared to 2017, thereby increasing investment in mining; increased business confidence after the conclusion of the presidential elections was also likely a contributing factor. Investment, measured as the net increase in physical assets (investment minus disposals), expanded to 5%, as compared to the negative 1.1% decrease in 2017. The contribution from net exports continued to improve due to higher copper volume exports, despite improvement in domestic demand. Overall, the Chilean economy expanded 4.0% in 2018, as compared to 1.5% in 2017.

On the other hand, external accounts were hurt by falling copper prices and higher average oil prices during the year. The 2018 current account deficit increased to US$7.8 billion (negative 2.6% of GDP), from US$4.1 billion (negative 1.5% of GDP in 2017). The trade balance surplus decreased to US$5.4 billion in 2018, as compared to US$7.9 billion in 2017. As copper prices remained below US$3/lb in 2018, it is expected that the current account deficit may increase in 2019. However, despite a larger current account deficit, foreign direct investment remained robust and fully funded the external imbalance. In 2018, foreign direct investment remained stable as compared to 2017, at US$7 billion (2.5% of GDP).

Falling copper prices and a general global risk aversion hurt the Chilean peso. After ending 2017 at Ch$615 per US$1.00, the exchange rate did appreciate to approximately Ch$600 per US$1.00 during the first third of the year, as copper prices were above average. However, as risk aversion increased primarily due to the trade dispute between the United States and China and expectations of swift monetary tightening worldwide and commodity prices decreased, the Chilean peso/U.S. dollar exchange rate moved towards Ch$700 in the second half of the year. The exchange rate closed at Ch$694 in 2018. Expectations of a resolution of the trade dispute between the United States and China could aid copper prices and lead to some appreciation of the Chilean peso.

Some narrowing of the output gap and a weaker currency helped inflation accelerate to 2.6% by December 31, 2017, as compared to 2.3% in December 2018, despite falling fuel prices in the last months of the year. It is expected that inflation will continue rising towards the 3% target set by the Chilean Central Bank this year.

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The Chilean Central Bank expressed that the current degree of monetary stimulus is unnecessary, considering the output gap narrowing that took place in the first half of 2018. Thus, in its Monetary Policy Report for the third quarter of 2018, the board of the Chilean Central Bank indicated that a tightening cycle (from the 2.5% monetary policy rate level) would begin shortly. The board implemented one 25 basis points rate hike to 2.75% in October and retained the tightening bias, despite holding the rate steady at its December meeting. It was generally expected that the Chilean Central Bank would make several rate hikes this year; however, there may be bias towards fewer, given the continued elevated uncertainty in the global financial markets.

President Piñera’s second administration, which took office in March 2018, made fiscal policy a priority given that Fitch Ratings and Standard and Poor’s revised the sovereign debt rating to ‘A’ and ‘A+’, respectively, and Moody’s changed its rating to ‘A1’ with a stable outlook. Despite this rating downgrade, 2018 was a better year for fiscal accounts. It is expected that the nominal deficit was below the 1.9% estimated deficit, as compared to 2.8% in 2017. The 2019 budget includes a 1.7% deficit, with narrowing figures in coming years as the administration aims at curbing debt growth.

Developments in the Colombian Economy

2018 brought mixed news for Colombia’s economy. Activity remained subdued, despite improving at the end of the year, inflationary pressures were contained, interest rates remained stable, and the correction of external accounts moderated amid recovering domestic demand and flailing oil prices. Arising from last year’s congressional and the presidential elections, a continuity government was elected, a stabilizing development that soothed markets. However, it is widely believed that President Duque’s administration faces an uphill battle in order to keep fiscal accounts healthy.

In the absence of supply-side shocks, inflation normalization progressed, measuring 3.18% in December 2018, as compared to 4.09% in 2017. Weak domestic demand likely aided this normalization as tradable inflation remained contained despite the depreciation of the Colombian peso against the U.S. dollar throughout the year. In this context, the Colombian Central Bank applied two 25 basis points rate cuts (in January and April) decreasing its reference rate to 4.25%, where it remained for the rest of the year. As Colombian inflationary pressures remained contained and the output gap continued to widen despite recovering growth, the board of the Colombian Central Bank has indicated it remains comfortable with the current degree of monetary stimulus.

The Presidential elections cycle, falling private sector sentiment, and lower oil prices kept activity subdued in the first half of the year. While the economy did recover in the second half of 2018, uncertainty about external conditions likely limited such recovery. Investment remained weak, but construction showed signs of recovery, alongside industrial activity. However, the prolonged period of weak activity has affected the labor market (with the unemployment rate remaining broadly unchanged from 2017 at 9.4% and job creation falling to historically low levels) and consumer confidence, posing a risk to the expected recovery ahead. Overall, GDP grew to 2.7% last year, as compared to 1.8% in 2017.

The fiscal and external deficits remain points of attention. On the fiscal side, last year’s nominal was likely a 3.1% of GDP deficit, a decrease from the 3.6% deficit recorded in 2017 and the lowest since 2015. President Duque’s administration inherited a budget containing a target of 2.4% of GDP deficit in 2019, which included adjustments to investment expenditure growth to reach the structural balance target. However, the authorities deemed it necessary to reinstate part of investment expenditure in order to boost growth in an expenditure bill that was approved in October. To keep fiscal accounts balanced, the ministry of finance raised the need of a tax reform, which included higher VAT on food staples, a provision that faced widespread opposition. A less robust version of the bill, raising just half of the needed resources, was approved by year end. The authorities have yet to announce whether they will opt to exceed the deficit target or cut expenditure by the revenue shortfall.

Rating agencies have been lenient regarding Colombia’s fiscal situation. Fitch, for instance, commented that gross general government debt will remain stable at around 41% of GDP in 2018—near the ‘BBB’ rating category median, assuming continued fiscal adjustment. Late last year, S&P retained its ‘BBB-’ rating with a stable outlook, and stated Colombia might not meet the mandated 2.4% of GDP deficit target this year, but that would not necessarily prompt a rating downgrade, which would lead to a loss of the investment grade rating. Meanwhile, Moody’s Investors Service and Fitch Ratings continue to rate Colombia two notches above investment grade.

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Higher imports led the trade deficit to reach US$6 billion in 2018, as compared to US$6.1 billion in 2017. Despite the weakening of the Colombian peso, lower oil prices have hampered the outlook for an external account correction. Rather than narrowing mildly in 2018, we saw the current account deficit ended the year at 3.3% of GDP, the same rate recorded in the previous two years. The tax reform adjustment to the withholding tax from government bond interest payments to foreigners (from 14% to 5%) could aid portfolio investments and help finance the current account deficit. Falling oil prices, risk-off mode and fiscal concerns have led to the weakest level for the Colombian peso since early 2016. In this context, the Colombian peso traded at COP3,248.52 per US$1.000 at the end of 2018, as compared to COP2,985.78 per US$1.000 at the end of 2017.

Inflation

General

In the past, Chile has experienced high levels of inflation, which has significantly affected our financial condition and results of operations during such periods. In recent years, Chile has experienced relatively low inflation rates, with sporadic episodes where price growth deviated from the Chilean Central Bank’s 2%-4% target range. In 2016, 2017 and 2018 the inflation rate was 2.7%, 2.3%, and 2.6% respectively. Our results of operations reflect the effect of inflation in the following ways:

• substantial portion of our assets and liabilities are denominated in UF. The UF is a unit of account, the peso value of which is indexed daily to reflect inflation recorded in the previous month. The net increase or decrease in the nominal peso value of our UF-denominated assets and liabilities is reflected as income or loss in our income statement, and

• the rates of interest earned and paid on peso-denominated assets and liabilities reflect, to a certain degree, inflation and expectations regarding inflation.

Under Chilean law, banks are authorized to earn interest income on loans that are adjustable for the effects of inflation. Most banks, including Itaú Corpbanca, charge an interest rate that includes an estimate of future inflation. In addition, the peso-denominated value of our assets and liabilities that are denominated in UF fluctuate as the UF is adjusted based on inflation. In the case of assets, these fluctuations are recorded as income (for increases in the peso-denominated value) and losses (for decreases in the peso-denominated value). In the case of liabilities, these fluctuations are recorded as losses (for increases in the peso-denominated value) and income (for decreases in the peso-denominated value).

Colombia has experienced high levels of inflation recently amid its currency depreciation and supply-side shocks affecting food prices. The rate of inflation in Colombia in 2016, 2017 and 2018 was 5.8%, 4.09% and 3.18%, respectively. At its peak, the 12-month inflation rate reached 9% in July 2016. The components that led the elevated level of inflation in year-end 2016 were food (with a 7.2% increase from 2015), housing (a 4.8% increase from 2015) and transport (a 4.5% increase from 2015), while the normalization of food production in 2017 (1.9% food inflation from 2016) helped pull inflation down.

UF-Denominated Assets and Liabilities

The UF is revalued by the INE on a monthly basis. Every day in the period beginning the tenth day of the current month through the ninth day of the succeeding month, the nominal Chilean peso value of the UF is indexed up (or down in the event of deflation) in order to reflect each day a proportional amount of the prior calendar month’s change in the CPI. One UF was equal to Ch$26,347.98, Ch$26,798.14 and Ch$27,565.79 as of December 31, 2016, 2017 and 2018, respectively. The effect of any changes in the nominal Chilean peso value of our UF-denominated assets and liabilities is reflected in our results of operations as an increase (or decrease, in the event of deflation) in interest income and expense, respectively. Our net interest income is positively affected by increases in inflation to the extent that our average UF-denominated assets exceed our average UF-denominated liabilities. Conversely, our net interest income will be negatively affected by inflation in any period in which our average UF-denominated liabilities exceed our average UF-denominated assets. Our average UF-denominated assets exceeded our average UF-denominated liabilities by Ch$2,402,718 million, Ch$3,401,660 million and Ch$3,377,750 million during the years ended December 31, 2016, 2017 and 2018, respectively. See “Item 4. Information on the Company—B. Business Overview—Principal Business Activities—Selected Statistical Information— Average Balance Sheets, Income Earned from Interest-Earning Assets and Interest Paid on Interest Bearing Liabilities.”

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Chilean Peso-Denominated Assets and Liabilities

Interest rates prevailing in Chile are materially affected by the current rate of inflation during the period and market expectations concerning future inflation. The responsiveness to such prevailing rates of our Chilean peso-denominated interest-earning assets and interest bearing liabilities varies. See “Item 5. Operating and Financial Review and Prospects—Interest Rates,” Item 5. Operating and Financial Review and Prospects —Results of Operations” below and “Item 11. Quantitative and Qualitative Disclosures about Financial Risk.” We maintain a substantial amount of non-interest bearing Chilean peso-denominated demand deposits. The ratio of the average balance of such demand deposits to average interest-earning assets was 2.1%, 2.1% and 2.6% during the years ended December 31, 2016, 2017 and 2018, respectively. Because such deposits are not sensitive to inflation or changes in the market interest rate environment, any decline in interest rates or the rate of inflation adversely affects our net interest margin on assets funded with such deposits and any increase in the rate of inflation increases the net interest margin on such assets.

Interest Rates

Interest rates earned and paid on our assets and liabilities, respectively, reflect, to a certain degree, inflation, expectations regarding inflation, shifts in short-term interest rates set by the Central Bank of Chile and the Central Bank of Colombia and movements in long-term real rates.

Interest Rates in Chile

The Central Bank of Chile manages short-term interest rates based on its objective of maintaining currency stability. Because our liabilities are generally re-priced to reflect interest rate changes more frequently than our interest-earning assets, changes in the rate of inflation or in the monetary policy interest rate published by the Central Bank of Chile are reflected in the interest rates we pay on our liabilities before such changes are reflected in the interest rates we earn on our assets. Therefore, when short-term interest rates fall, our net interest margin is positively impacted, but when short-term rates increase, our interest margin is negatively affected. At the same time, our net interest margin tends to be adversely affected in the short term by a decrease in inflation because generally our UF-denominated assets exceed our UF-denominated liabilities. See “Item 5. Operating and Financial Overview and Prospects—A. Operating Results—The Economy—Developments in the Chilean Economy” and “—UF-denominated Assets and Liabilities” above. An increase in long-term interest rates also has a positive effect on our net interest margin, because our interest-earning assets generally have a longer duration than our interest bearing liabilities.

In addition, because our Chilean peso-denominated liabilities have relatively short re-pricing periods, they are generally more responsive to changes in inflation or short-term rates than our UF-denominated liabilities. As a result, during periods when current inflation or expected inflation exceeds the previous month’s inflation, customers often switch funds from Chilean peso-denominated deposits to more expensive UF-denominated deposits, thereby adversely affecting our net interest margin. See “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Sources of Liquidity—Financial Investments.”

Interest Rates in Colombia

The Central Bank of Colombia manages short-term interest rates based on its objectives of maintaining a low and stable inflation rate, stabilizing output around its natural levels and contributing to the preservation of financial stability.

Colombian commercial banks, finance corporations and financing companies are required to report data to the Central Bank of Colombia on a weekly basis regarding the total volume (in Colombian pesos) of certificates of deposit issued during the prior week and the average interest rates paid for certificates of deposit with maturities of 90 days. Based on such reports, the Central Bank of Colombia calculates the Depósito a Término Fijo (“Fixed Term Deposit Interest Rate” or “DTF”) rate, which is the main benchmark interest rate in Colombia and is published at the beginning of the following week. The DTF is the weighted average interest rate paid by commercial banks, finance corporations and financing companies for certificates of deposit with maturities of 90 days.

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As of March 31, 2019 the DTF rate was 4.51%. The Central Bank of Colombia also calculates the interbank rate (Interés Bancario de Referencia or “IBR”), which acts as a reference of overnight and one-month interbank loans, based on quotations submitted each business day by eight participating banks to the Central Bank of Colombia. Using a weighted average of the quotations submitted, the Central Bank of Colombia calculates the overnight IBR each business day. The one-month IBR is calculated each Tuesday. Article 884 of the Colombian Commercial Code provides for a limit on the amount of interest that may be charged in commercial transactions. The limit is 1.5 times the current banking interest rate (Interés Bancario Corriente), calculated as the average of the interest ordinarily charged by banks within a set period of time. The current banking interest rate is certified by the Colombian Superintendency of Finance.

A significant portion of our banking subsidiaries’ assets are linked to the DTF; accordingly, changes in the DTF affect our banking subsidiaries’ net interest income. The Central Bank of Colombia increased its decreased rate to 3.25% on March 26, 2013, and the interest rate remained stable until March of 2014. On average, the DTF went from 7.96% in 2007 to 3.88% in the first quarter of 2014.

From April 2014 to August 2014, the Central Bank of Colombia increased the Repo Rate by 125 basis points to 4.50%, a level consistent with neutral conditions. After a year on hold, amid accelerating inflation, which led to increasing inflation expectations, and a rapid deterioration of the current account deficit above 6% of GDP, the Central Bank began a monetary tightening cycle in September 2015, taking the policy rate to 5.75% by year-end. The tightening cycle ended in July 2016, with the policy rate at 7.75%. As inflation began to slow down in the third quarter of the year, the Central Bank moved back to loosening the monetary policy stance with a 25 basis point cut to 7.50% in December 2016. The easing cycle continued in 2017, with further cuts totaling 275 basis points leading to the policy rate ending 2017 at 4.75%. Rates reached 4.25% in April 2018.

In response to the changing monetary policy conditions, the DTF adjusted upward moving from 4.34% in 2014 to 5.22% at the end of December 2015 and 7.59% by the end of July 2016, before retreating to 6.86% by year-end 2016. As monetary loosening proceeded in 2017, the DTF rate dropped to 5.21% by year-end.

Currency Exchange Rates

A material portion of our assets and liabilities is denominated in foreign currencies, principally the U.S. dollar and the Colombian peso. Our reported income is affected by changes in the value of the Chilean peso with respect to foreign currencies (principally the U.S. dollar and Colombian peso) because such assets and liabilities, as well as interest earned or paid on such assets and liabilities, and gains (losses) realized upon the sale of such assets, are converted to Chilean pesos in preparing our consolidated financial statements. The Chilean government’s economic policies and any future changes in the value of the Chilean peso against the U.S. dollar could adversely affect our financial condition and results of operations. In the past, the Chilean peso has been subject to significant volatility when compared to the U.S. dollar. In 2014, the Chilean peso depreciated against the U.S. dollar by 15.0% as compared to 2013. In 2015 the Chilean peso depreciated against the U.S. dollar by 17.3% as compared to 2014. In 2016, the Chilean peso appreciated against the U.S. dollar by 5.7% as compared to 2015. In 2017, the Chilean peso appreciated against the U.S. dollar by 1.3% as compared to 2016. In 2018, falling copper prices and a risk aversion sentiment led to a 12% depreciation of the Chilean peso. The exchange rate between the Chilean peso and the U.S. dollar as of December 31, 2016, 2017 and 2018 was Ch$669.81, Ch$615.22, and Ch$694.00 per US$1.00, respectively. The Chilean peso may be subject to significant fluctuations in the future.

Entering into forward exchange transactions enables us to reduce the negative impact of material gaps between the balances of our foreign currency-denominated assets and liabilities. As of December 31, 2016, 2017 and 2018, the gap between foreign currency denominated assets and foreign currency denominated liabilities, including forward contracts, was Ch$(481,755) million, Ch$(531,771) million and Ch$793,218 million, respectively.

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Critical Accounting Policies and Estimates

General

In our filings with the SEC, we prepare our consolidated financial statements in accordance with IFRS. In preparing our consolidated financial statements, we use estimates and assumptions to account for certain assets, liabilities, revenues, expenses and other transactions. While we review these estimates and assumptions in the ordinary course of business, the portrayal of our financial condition and results of operations often require our management to make judgments regarding the effects on our financial condition and results of operations on matters that are inherently uncertain. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances. The following discussion describes those areas that require the most judgment or involve a higher degree of complexity in the application of the accounting policies that currently affect our financial condition and results of operations. Actual results may differ from those estimated under different variables, assumptions or conditions, and if these differences could have a material impact on our reported results of operations. Note 1 to our consolidated financial statements contains a summary of our significant accounting policies.

In addition to the critical accounting policies described below, information regarding other accounting policies is set forth in the notes to our consolidated financial statements.

Allowance for Loan Losses

Starting January 1, 2018, we record our allowances following our internal models for the recording of expected credit losses according to IFRS 9. For further details see “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information—Impairment Assessment as of January 1, 2018 (Under IFRS 9).”

Until December 31, 2017, we recorded our allowances following our internal models for the recording of incurred debt in accordance with IAS 39. To establish impairment losses, the Bank carried out an evaluation of outstanding loans and accounts receivable from customers, as detailed below:

• Individual assessment of debtors: Conducted for debtors who were recorded as individually significant (i.e., when they had significant debt levels) or could be classified in a group of financial assets with similar credit risk features and that, due to the size, complexity or level of exposure, required detailed information.

• Group assessment of debtors: Conducted when there was no evidence of impairment for individually-assessed debtors and debtors with loans treated collectively regardless of significance status. Individually-assessed debtors with a recorded loss due to impairment were not included in the group assessment.

For a further description relating to loan classification and provisioning, see “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information—Impairment Assessment as of January 1, 2018 (Under IFRS 9)” and “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information—Impairment Assessment prior to January 1, 2018 (Under IAS 39).”

Derivative Financial Instruments

Derivative financial instruments are recorded at fair value. Fair values are based on market quotes, discounted cash flow models and option valuations, as appropriate. If market information is limited or in some instances, not available, management applies its professional judgment. Other factors that may also affect estimates are incorrect model assumptions, market dislocations and unexpected correlations. Notwithstanding the level of subjectivity in determining fair value, we believe our estimates of fair value are adequate. The use of different models or assumptions could lead to changes in our reported results. See “Note 1—General Information and Summary of Significant Accounting Policies.”

In addition, we make loans and accept deposits in amounts denominated in foreign currencies, principally the U.S. dollar. Such assets and liabilities are translated at the applicable exchange rate at the balance sheet date.

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Financial Investments

See “Item 5. Operating and Financial Review and Prospects—Operating Results—The Economy—Recently Adopted and New Accounting Pronouncements” for a detailed description of our financial investments.

Estimate of Impairment of Goodwill

We assess annually, or when there is a triggering event, whether goodwill has experienced any impairment, according to the accounting policy described in our consolidated financial statements. The recoverable amount of the cash generating units (“CGUs”) has been determined using the methodology of a dividend discount model. This methodology considers the cash flows that would generate the dividends distributed to its shareholders in a perpetual forecast projection, discounted at their rate of cost of capital at the valuation date. In this way, the economic equity value can be estimated, using projections of cash flows derived from financial budgets and other assumptions approved by the management. The projection of cash flows is carried out using the functional currency of each country and considering a horizon of five years, after which the cash flows are projected to perpetuity using growth rates of the gross domestic product aligned with those rates expected for the markets in which a particular CGU operates. These calculations are carried out by each CGU. The six-year period projections are based on historical information from the previous year and the main macroeconomic variables affecting the markets involved in the calculations.

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Estimates and judgments included in the calculations of recoverable amounts are based on historical experience and other factors, including the expectations of management for future events that are considered reasonable in the current circumstances. Due to the inherent uncertainty associated with considering these estimates, actual results could differ from those estimates. Future events and changing market conditions may impact the Bank’s assumptions as to future interest and commissions’ revenue, net interest margin growth rates or discount rates, which may result in changes in the estimates of the Bank’s future cash flows.

The following factors, among others, could significantly impact the impairment analysis and may result in future goodwill impairment charges that, if incurred, could have a material adverse effect on the Company’s financial condition and results of operations:

• The macroeconomic factors in both the Chilean and Colombian markets may not recover and evolve from 2019 onwards in line with current expectations.

• The operational integration of the banks in Chile is not completed by 2019.

• The operational integration, introduction of the Itaú brand and client segmentation in the Colombian market may not have the expected impact. Additionally, the Bank may not achieve the change in the product mix as stated in its formal budgets and plans.

• The recovery of the Bank’s pre-merger market share in Colombia expected to occur by 2023, depends on the achievement of the projection of an annual composed average growth rate for the loans portfolio, during the first years.

Recently Adopted and New Accounting Pronouncements

See Note 2 to our consolidated financial statements for a detailed description of recently adopted and new accounting pronouncements in IFRS, the most significant of which is IFRS 9:

IFRS 9 Financial Instruments

We adopted IFRS 9 as issued by the IASB in July 2014 with a date of transition of January 1, 2018, which resulted in changes to our accounting policies. The adoption of IFRS 9 has resulted in changes in our accounting policies for recognition, classification and measurement of financial assets and financial liabilities and impairment of financial assets. IFRS 9 also significantly amends other standards dealing with financial instruments such as IFRS 7 “Financial Instruments: Disclosures”.

As per the permitted transitional provisions of IFRS 9, we elected not to revise comparative figures; accordingly, some IFRS 9 disclosures presented in our consolidated financial statements and this Annual Report with respect to certain financial assets are not comparable since their classification and measurement may differ between IFRS 9 and the prior standard of IAS 39.

Any adjustments to the carrying amounts of financial assets and liabilities as of the date of transition were recognized as an adjustment to the opening retained earnings. We have elected to continue to apply the hedge accounting requirements of IAS 39 on the adoption of IFRS 9.

Consequently, for disclosures purposes, the amendments to IFRS 7 have also been applied to the current period only. The comparative period disclosures shows those disclosures made in the prior year.

Set out below are disclosures regarding the impact of the adoption of IFRS 9 on us and further details of the specific IFRS 9 accounting policies applied in the current period (as well as the previous IAS 39 accounting policies applied in the comparative period).

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Classification and Measurement of Financial Instruments

	IAS 39 as of December 31, 2017				IFRS 9 as of January 1, 2018
Balance	Measurement category	Portfolio	Book Value MCh$		Measurement category	Portfolio	Book Value MCh$
Trading investments	Fair value through profit or loss	Financial instruments classified as trading investments		415,061	Financial instruments at fair value through profit or loss	Financial instruments at fair value through profit or loss		423,855
Investments instruments	Fair value through profit or loss	Financial assets available for sale (including those that were valued at cost at December)		2,663,478	Financial instruments at fair value through other comprehensive income	Financial instruments at fair value through other comprehensive income		2,658,739
	Amortized cost	Financial assets classified as held to maturity		202,030	Amortized cost	Financial instruments at fair value through profit or loss		201,993
Loans and accounts receivable from customers	Amortized cost	Loans and accounts receivable from customers, net of allowances for loan losses according to IAS 39.		19,764,078	Amortized cost	Loans and accounts receivable from customers, net of allowances for loan losses according to IFRS 9.		19,612,201
Interbank loans	Amortized cost	Interbank loans, net of allowances for loan losses according to IAS 39.		70,077	Amortized cost	Interbank loans, net of allowances for loan losses according to IFRS 9.		70,077

• Classification of financial assets

Financial assets are classified into a measurement category based on both our business model for managing the financial asset and the contractual cash flow characteristics of our financial asset.

Contractual cash flow assessment determine if the cash flows from the financial asset meet the SPPI (solely payment of principal and interest) criterion, i.e. whether the contractual terms of the financial asset give rise, on specific dates, to cash flows that are solely payments of principal and interest. Principal is the fair value of the financial assets at initial recognition, and interest is the consideration for the time value of money, the credit risk associated with the principal outstanding, and also may include liquidity risk, administrative cost and profit margin.

For classification process we perform the SPPI test, which assesses the contractual term to identify whether they meet SPPI criterion, the contract is a basic lending arrangement. We apply judgment and consider relevant factors such as currency in which the financial asset is denominated, and period for which the interest rate is set.

Business model refers to how we manage our financial assets in order to generate cash flows. We determined our business model on initial application of IFRS 9 at the level that best reflects how it manages groups of financial assets to achieve its business objective.

Our business model represents how financial assets are managed to generate cash flows and does not depend on our management’s intention regarding an individual instrument, but at a higher level of aggregated portfolio and is based on observable factors such as: risks that affect the performance of business model; how business managers are compensated; how the performance of business model is assessed and reported to our management.

In addition, our business model is not assessed on an instrument-by- instrument basis, but at a higher level of aggregated portfolio and is based on observable factors such as: performance of the financial assets, the risk that affect the performance, and the expected frequency, value and timing of sales, among others.

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In accordance with IFRS 9 the business models are:

• Held to collect business model (HTC). Financial assets that are held within a business model whose objective is to hold assets in order to collect contractual cash flows are managed to realize cash flows by collecting contractual payments over the life of the instrument, under this business model sales made when there is an increase in the credit risk, or to manage credit concentration risk are not inconsistent with a business model whose objective is to hold financial assets to collect contractual cash flows.

• Held to collect and sell (HTC&S). Financial assets under this business model achieve the objective by both collecting contractual cash flows and selling financial assets, then involve a greater frequency and value of sales than HTC business model.

• Other business model. Financial assets held in this business has the objective of realizing cash flows through the sale of the assets. We make decisions based on our assets’ fair values and manage the assets to realize those fair values.

• Reclassification

Reclassification of financial assets is required if, and only if, the objective of our business model for managing those financial assets changes. Financial liabilities cannot be reclassified.

Measurement of Financial Instruments

• Initial measurement

On initial recognition, financial assets and financial liabilities are measured at the transaction price, i.e. the fair value of the consideration given or received (IFRS 13). In the case of financial instruments not at fair value through profit or loss, transaction costs of financial assets and financial liabilities carried at fair value are expensed in profit or loss.

• Subsequent measurement- financial assets

After initial recognition, we measure a financial asset at:

• Amortized cost. Financial assets that are held in a business model to collect the contractual cash flows and contain contractual terms that give rise on specific dates to cash flows that are SPPI, are measured at amortized cost. The effective interest method is used in the calculation of the amortized cost of a financial asset or a financial liability and in the allocation and recognition of the interest revenue or interest expense in profit or loss over the relevant period.

• FVOCI. Financial assets that are debt instruments held in a business model that is achieved by both collecting contractual cash flows and selling, and that contain contractual terms that give rise on specific dates to cash flows that are SPPI, are measured at FVOCI. They are subsequently remeasured at fair value and changes therein (except for those relating to impairment, interest income and foreign currency exchange gains and losses) are recognized in other comprehensive income, until the assets are sold. Upon disposal, the cumulative gain and losses in OCI are recognized in the income statements.

• Fair value through profit or loss (FVTPL). Financial assets that do not contain contractual terms that give rise on specified dates to cash flows that are SPPI, or if the financial assets, or if the financial asset is not held in a business model that is either (i) a business model to collect the contractual cash flows or (ii) a business model that is achieved by both collecting contractual cash flows and selling. Financial assets held for trading are recognized at fair value through profit or loss, likewise derivatives contracts for trading purposes.

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For certain equity instruments, we may make an irrevocable election to present subsequent changes in the fair value of the instrument in other comprehensive income, except for dividend income which is recognized in profit or loss. Gains or losses on derecognition of these equity instruments are not transferred to profit or loss.

• Subsequent measurement- financial liabilities

After initial recognition, we measure a financial liability at amortized cost, except for derivatives that are measured at fair value through ptofit or loss.

Derecognition of financial assets and liabilities

Financial assets are derecognized when, and only when:

• the contractual rights to the cash flows from the financial asset expire, or

• we transfer substantially all the risks and rewards of ownership of the financial asset, and therefore we derecognize the financial asset and recognize separately any rights and obligations created or retained in the transfer.

In some cases, we enter into transactions for which it retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows in an arrangement that meets all the conditions required, i.e. we only transfer collected amounts from original assets, selling or pledging original assets is prohibited, and we have the obligation to remit cash flows collected without material delay.

When a financial asset is sold and we simultaneously agree to repurchase it (or an asset that is substantially the same) at a fixed price on a future date, we continue to recognize the financial assets in their entirety in the statements of financial position because it retains substantially all of the risks and rewards of ownership. The cash consideration received is recognized as a financial asset and a financial liability is recognized for the obligation to pay the repurchase price.

Financial liabilities are derecognized when, and only when, they are extinguished, cancelled or expired.

Contingent loans

We issue contingent loans (including letters of credit, foreign letters of credit and performance guarantee) and loan commitments. Contingent loans and undrawn loan commitments are commitments under which, over the duration of the commitment, we are required to provide a loan with pre-specified term to the customer.

The nominal contractual loan value, when the loan agreed to be provided is on market terms, is not recorded in the statements of financial position. The related ECL allowances are disclosed in Note 19.

Offsetting

Financial assets and financial liabilities are offset in the balance sheet only when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously. As of December 31, 2018, we do not have balance offsetting of financial instruments.

Derivatives and hedging activities

We have elected to continue applying the hedge accounting requirements of IAS 39 on adoption of IFRS 9. We have not provided comparative information for prior periods on the date of initial application of IFRS 9 for the new disclosures introduced by IFRS 9 as a consequential amendment to IFRS 7, as permitted by IFRS 7 paragraph 44z. For presentation purposes, derivatives are presented in accordance with their positive or negative fair value as assets or liabilities, respectively, and include trading and hedging instruments separately (see Note 8).

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Expected credit losses allowance – under IFRS 9

Starting from January 1, 2018, we replaced the “incurred loss” model of IAS 39 with an “expected credit loss” (“ECL”) model established by IFRS 9. For a description of the expected credit loss model, see “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information—Impairment Assessment as of January 1, 2018 (Under IFRS 9).”

IFRS 15 Revenue from Contracts with Customers

On January 1, 2018, IFRS 15 “Revenues from contracts with customers” became effective. In accordance with our activities, income and expenses arising from fees and commission are under the scope of this new standard. Consequently a review over fees and commissions has been performed, to ensure the five step approach is fully met.

We have elected to adopt IFRS 15 using a modified retrospective approach where the cumulative effect of initially applying it was recognized as an adjustment to the opening balance of retained earnings and comparative information was not restated.

We concluded that there was no impact as of January 1, 2018, however new note disclosure requirements were adopted. See Note 1 and Note 24 to our consolidated financial statements included in this Annual Report.

In addition, new standards and interpretations to IFRS standards have been issued but not yet adopted in our consolidated financial statements as of December 31, 2018, such as IFRS 16, among others:

IFRS 16 Leases. On January 13, 2016, the IASB published a new standard, IFRS 16 “Leases.” The new standard shall imply that most leases are presented in the lessee’s balance under a single model, eliminating the distinction between operating and financial leases. However, the accounting for the lessors remains largely unchanged and the distinction between operating and financial leases is retained. IFRS 16 replaces IAS 17 “Leases” and related interpretations and is effective for periods beginning on or after January 1, 2019. Its early application is allowed, provided that IFRS 15 “Revenue from Contracts with Customers” is also applied.

Our management evaluated the impact of the adoption of this new standard through the valuation of our lease agreements, recording an asset for right-of-use for an amount equal to the lease liability for an amount of Ch$176,795, which will generate a negative impact on our solvency indicator of 11 basis points, going from 14.65% to 14.54% on January 1, 2019.

For a description of these new accounting standards, see Note 1(hh) of our consolidated financial statements.

Results of Operations for the Years Ended December 31, 2016, 2017 and 2018

Comparability of the Results

As per the permitted transitional provisions of IFRS 9, we elected not to revise comparative figures; accordingly, some IFRS 9 disclosures presented in our consolidated financial statements and this Annual Report with respect to certain financial assets are not comparable since their classification and measurement may differ between IFRS 9 and the prior standard of IAS 39.

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Introduction

We ended 2018 with Ch$166,854 million in consolidated net income, the strongest result since the merger, posting a 165.6% increase when compared to 2017 based on stronger loan growth with lower delinquency, the highest net interest income and fee revenues and the lowest cost of credit since the Merger, with operating expenses virtually flat when compared to 2017. We believe this is a solid improvement and an important step forward towards the construction of competitive and sustainable results.

The acceleration of economic activity in both Chile and Colombia favored the generation of new business and the credit risk of part of our loan portfolio. Also, the drop in the monetary policy interest rate in Colombia, which went from 4.75% at the beginning of the year to 4.25% at the end of December, positively impacted our cost of funding in 2018. Finally, a higher inflation in Chile, 2.8% in 2018 compared to a variation of the CPI of 2.3% in 2017, led to an improvement in our financial margin.

In 2017 our main focus was to comply with the terms of the Merger by minimizing its effects on the quality of our service. That transition year we completed retail migration and client segmentation in Chile.

Economic activity in 2017 was lower than what we initially expected, especially in Chile. While it accelerated toward the end of the year, 2017 showed the lowest growth since 2009. This translated into the lowest loan growth rates in Chile in over seven years. Investment showed a fourth consecutive year of contraction, and commercial loans grew only 1.2% year-over-year. Due to our current portfolio mix, this has noticeable effects on our revenues growth. On the other hand, inflation and interest rates decreased, especially in Colombia where the 275-basis point reduction in the year positively affected our banking book.

Net Income (Loss)

For the year ended December 31, 2018, our consolidated financial statements reported a consolidated net income of Ch$166,854 million, a 165.6% or Ch$104,029 million increase from our net income of Ch$62,825 million in 2017.

The increase in our consolidated net income for the year ended December 31, 2018 was primarily due to: (i) higher net interest income and net service fee income as a result of increased activity with our clients and more favorable market conditions and (ii) lower provisions for loan loss expenses.

The following table sets forth the components of our net income for the years ended December 31, 2016, 2017 and 2018:

	For the Year Ended December 31,									% Change from			% Change from
	2016			2017			2018			2017/2016			2018/2017
	(in millions of constant Ch$ except for percentages)
Components of net income:
Net interest income		639,175			782,982			887,663			22.5	%		13.4	%
Net fees and commissions		150,796			177,571			186,129			17.8	%		4.8	%
Trading and Investment, foreign exchange gains and other operating income		83,551			95,965			181,446			14.9	%		89.1	%
Provisions for loan losses		(245,990	)		(315,417	)		(279,798	)		28.2	%		11.3	%
Total operating expenses		(616,627	)		(731,147	)		(741,527	)		18.6	%		1.4	%
Income before income taxes		10,905			9,954			233,913			(8.7	)%		2,249.9	%
Income taxes		3,568			52,871			(67,059	)		1,381.8	%		(226.8	)%
Income from continuing operations		14,473			62,825			166,854			334.1	%		165.6	%
Income from discontinued operations		(504	)		—			—			—			—
Net income for the year		13,969			62,825			166,854			349.7	%		165.6	%

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Net Interest Income

The following table sets forth the components of our net interest income for the years ended December 31, 2016, 2017 and 2018:

	For the Year Ended December 31,									% Change from			% Change from
	2016			2017			2018			2017/2016			2018/2017
	(in millions of constant Ch$ except for percentages)
Interest income		1,509,203			1,646,329			1,739,317			9.1	%		5.6	%
Interest expense		(870,028	)		(863,347	)		(851,654	)		(0.8	)%		(1.4	)%
Net interest income		639,175			782,982			887,663			22.5	%		13.4	%

The following table sets forth information as to the components of our interest income for the years ended December 31, 2016, 2017 and 2018:

	For the Year Ended December 31,						% Change from			% Change from
	2016		2017		2018		2017/2016			2018/2017
	(in millions of constant Ch$ except for percentages)
Interest income		1,509,203		1,646,329		1,739,317		9.1	%		5.6	%
Average interest-earning assets:
Loans		17,801,885		20,857,542		20,983,806		17.2	%		0.6	%
Financial investments		1,610,668		2,166,896		2,986,100		34.5	%		37.8	%
Interbank deposits		362,492		361,624		203,672		(0.2	)%		(43.7	)%
Total average interest-earning assets		19,775,044		23,386,062		24,173,577		18.3	%		3.4	%

The following table sets forth information as to the components of our interest expense for the years ended December 31, 2016, 2017 and 2018:

	For the year end December 31,						% Change from			% Change from
	2016		2017		2018		2017/2016			2018/2017
	(in millions of constant Ch$ except for percentages)
Interest expense		870,028		863,347		851,654		(0.8	)%		(1.4	)%
Average interest-earning liabilities:
Bonds		4,205,997		6,045,928		5,789,542		43.7	%		(4.2	)%
Time deposits		9,884,092		10,144,559		10,097,251		2.6	%		(0.5	)%
Central Bank borrowings		—		—		—		—			—
Repurchase agreements		400,252		596,351		806,223		49.0	%		35.2	%
Mortgage finance bonds		71,742		72,900		58,939		1.6	%		(19.2	)%
Other interest-bearing liabilities		4,029,170		4,652,106		4,769,459		15.5	%		2.5	%
Total average interest-bearing liabilities		18,591,253		21,511,844		21,521,414		15.7	%		0.0	%

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2018 Compared to 2017

Our net interest income was Ch$887,663 million for the year ended December 31, 2018, an increase of 13.4% as compared to Ch$782,982 million for the year ended December 31, 2017. The increase in interest income was primarily the result of (i) an increase in inflation-related income in Chile and (ii) the decrease in monetary policy rates in Colombia (4.25% as of December 31, 2018, as compared to 4.75% as of December 31, 2017), which positively affected our net interest margin given that our interest-earning assets in Colombia are mostly fixed-rate and with a long duration, whereas our interest-bearing liabilities are mostly floating-rate and with a shorter duration.

The aforementioned factors had a total Ch$104,681 million impact in our net interest margin (net interest income divided by average interest-earning assets), which increased by 32 basis points to 3.67% in 2018 from 3.35% in 2017.

2017 Compared to 2016

Our net interest income was Ch$782,982 million for the year ended December 31, 2017, an increase of 22.5% as compared to Ch$639,175 million for the year ended December 31, 2016. The increase in interest income was primarily the result of (i) the consolidation of former Corpbanca into former Banco Itaú Chile from April 1, 2016 and (ii) the decrease in monetary policy rates in Colombia (4.75% as of December 31, 2017 coming from 7.5% as of December 31, 2016), which positively affected our net interest margin given that our interest-earning assets in Colombia are mostly fixed-rate and with a long duration, whereas our interest-bearing liabilities are mostly floating-rate and with a shorter duration.

The aforementioned factors had a total Ch$143,807 million impact in our net interest margin (net interest income divided by average interest-earning assets), which increased by 12 basis points to 3.35% in 2017 from 3.23% in 2016.

Allowances for Loan Losses

Allowance for loan losses as of December 31, 2018 corresponds to allowances for loans and accounts receivable from customers at amortized cost according to IFRS 9. Prior periods are in accordance with IAS 39. The following table sets forth information relating to our allowances for loan losses as of December 31, 2016, 2017 and 2018 2018 (allowance for loan losses as of December 31, 2018 corresponds to allowances for loans and accounts receivable from customers at amortized cost according to IFRS 9 and prior periods are in accordance with IAS 39):

	As of December 31,									% Change from			% Change from
	2016			2017			2018			2017/2016			2018/2017
	(in millions of constant Ch$ except for percentages)
Total loans (excludes interbank loans)		21,003,952			20,382,605			21,482,490			(3.0	)%		5.4	%
Past due loans(1)		112,450			131,021			179,875			16.5	%		37.3	%
Non-performing loans(2)		352,700			462,015			452,947			31.0	%		(2.0	%)
Impaired loans(3)		1,073,831			1,267,703			1,299,226			18.1	%		2.5	%
Allowances for loan losses		559,304			618,527			768,120			10.6	%		24.2	%
Allowances for loan losses as a percentage of total loans		2.7	%		3.0	%		3.6	%		14.0	%		20.1	%
Allowances for loan losses as a percentage of non-performing loans		158.6	%		133.9	%		169.6	%		(15.6	)%		26.7	%
Allowances for loan losses as a percentage of impaired loans		52.1	%		48.8	%		59.1	%		(6.3	)%		21.1	%
Non-performing loans as a percentage of total loans		1.7	%		2.3	%		2.1	%		35.0	%		(7.0	%)
Allowances for loan losses as a percentage of past due loans		497.4	%		472.1	%		427.0	%		(5.1	)%		(9.6	%)

⁽¹⁾  Past due loans include all installments and lines of credit more than 90 days overdue. Do not include the aggregate principal amount of such loans.

⁽²⁾  Non-performing loans include the principal and interest on any loan with one installment more than 90 days overdue.

⁽³⁾  Impaired loans include those loans on which there is objective evidence that debtors will not meet some of their contractual payment obligations.

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2018 Compared to 2017

Allowances for loan losses (excluding allowances for loan loss on loans and receivables to banks) increased by 24.2% to Ch$768,120 million as of December 31, 2018 compared to Ch$618,527 million as of December 31, 2017. Higher allowances for loan losses resulted primarily from the effects of the first adoption of IFRS 9 in 2018 and provisions we took for new financial assets originated or purchased.

Our non-performing loans, as a percentage of total loans, decreased to 2.1% as of December 31, 2018 compared to 2.3% as of December 31, 2017. This decrease was the result of lower delinquency rates in our retail and wholesale operations in Chile, while in Colombia the reduction in delinquency of consumer loans was partially offset by increases in the delinquency of both the commercial and mortgage portfolios.

2017 Compared to 2016

Allowances for loan losses (excluding allowances for loan loss on loans and receivables to banks) increased by 10.6% to Ch$618,527 million as of December 31, 2017 compared to Ch$559,304 million as of December 31, 2016. Higher allowances for loan losses resulted primarily from an increase in provisions for certain corporate clients, both in Chile and in Colombia, as well as higher delinquency rates in our retail operations, especially in Colombia due to the worsening of economic conditions.

Our non-performing loans, as a percentage of total loans, increased to 2.3% as of December 31, 2017 compared to 1.7% as of December 31, 2016. This increase was the result of higher delinquency rates in our retail operations.

Provisions for Loan Losses

2018 Compared to 2017

Provisions for loan losses decreased by 11.3% to Ch$279,798 million for the year ended December 31, 2018, compared to Ch$315,417 million for the year ended December 31, 2017. The decrease in our provisions for loan losses was primarily due to lower provisions expense for corporate clients, both in Chile and in Colombia.

2017 Compared to 2016

Provisions for loan losses increased by 28.2% to Ch$315,417 million for the year ended December 31, 2017, compared to Ch$245,990 million for the year ended December 31, 2016. The increase in our provisions for loan losses was due to (i) the consolidation of former Corpbanca into former Banco Itaú Chile from April 1, 2016, (ii) provision for some specific corporate clients and (iii) higher delinquency in our retail operations, especially in Colombia.

Net Service Fee Income

2018 Compared to 2017

Our net service fee income (including income from financial advisory services) for the year ended December 31, 2018 was Ch$186,129 million, representing a 4.8% increase when compared to Ch$177,571 million for the year ended December 31, 2017. Our income from service fees during the year ended December 31, 2018 increased by 10.0% to Ch$237,956 million from Ch$216,420 million for the year ended December 31, 2017. Our expenses from service fees increased by a 33.4% to Ch$51,827 million for the year ended December 31, 2018, from Ch$38,849 million for the year ended December 31, 2017.

The increase in our net service fee income was driven primarily by higher financial advisory services fees and higher revenues from sales of insurance products to our retail clients.

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2017 Compared to 2016

Our net service fee income (including income from financial advisory services) for the year ended December 31, 2017 was Ch$177,571 million, representing a 17.8% increase when compared to Ch$150,796 million for the year ended December 31, 2016. Our income from service fees during the year ended December 31, 2017 increased by 11.7% to Ch$216,420 million from Ch$193,801 million for the year ended December 31, 2016. Our expenses from service fees decreased by a 9.7% to Ch$38,849 million for the year ended December 31, 2017, from Ch$43,005 million for the year ended December 31, 2016.

The increase in our net service fee income was driven primarily by the consolidation of former Corpbanca into former Banco Itaú Chile from April 1, 2016.

Other Net Operating Income

The following table sets forth the components of our other net operating income for the years ended December 31, 2016, 2017 and 2018:

	For the Year Ended December 31,								% Change from			% Change from
	2016			2017		2018			2017/2016			2018/2017
	(in millions of constant Ch$ except for percentages)
Trading and investment income, net		112,952			8,268		172,755			(92.7	)%		1989.4	%
Foreign exchange gains (losses), net		(48,848	)		46,165		(17,965	)		(194.5	)%		(138.9	)%
Other operating revenue		19,447			41,532		26,656			113.6	%		(35.8	)%
Trading and investment, foreign exchange gains and other operating income		83,551			95,965		181,446			14.9	%		89.1	%

2018 Compared to 2017

In the year ended December 31, 2018, trading and investment, foreign exchange gains and other net operating income increased by 89.1 % to Ch$181,446 million from Ch$95,965 million in 2017. This increase was mainly the result of more favorable market environment and by the result of the hedge position for the tax effect of our investments in Colombia and New York. For tax purposes, the “Servicio de Impuestos Internos” (Chilean Internal Revenue Service) considers that our investments abroad are denominated in U.S. dollars, which for Colombia and our New York Branch, based on the exchange rates of each of the disbursements (not current exchange rates), amounts to US$1,437 million, and for our New York branch amounts to US$ 166 million, respectively. Because we are obligated to translate the valuation of this investment from U.S. dollars to Chilean pesos in our book, the volatility of the exchange rate generates an impact on the net income attributable to shareholders. In order to limit that effect, management has decided to hedge this exposure with financial instruments to be analyzed along with income tax expenses.

2017 Compared to 2016

In the year ended December 31, 2017, trading and investment, foreign exchange gains and other net operating income increased by 14.9% to Ch$95,965 million from Ch$83,551 million in 2016. This increase was mainly the result of the consolidation of former Corpbanca and former Banco Itaú Chile from April 1, 2016 and gains on the sale of the former Banco Itaú Chile headquarters. This was partially offset by the result of the hedge position for the tax effect of our investment in Colombia. For tax purposes, the “Servicio de Impuestos Internos” (Chilean Internal Revenue Service) considers that our investment in Colombia is denominated in U.S. dollars, which, based on the exchange rates of each of the disbursements (not current exchange rates), amounts to US$1,437.51 million. Because we are obligated to translate the valuation of this investment from U.S. dollars to Chilean pesos in our book, the volatility of the exchange rate generates an impact on the net income attributable to shareholders. In order to limit that effect, management has decided to hedge this exposure with financial instruments to be analyzed along with income tax expenses.

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Operating Expenses

The following table sets forth the components of our operating expenses for the years ended December 31, 2016, 2017 and 2018:

	For the Year Ended December 31,						% Change from			% Change from
	2016		2017		2018		2017/2016			2018/2017
	(in millions of constant Ch$ except for percentages)
Personnel salary and expenses		245,665		281,323		294,747		14.5	%		4.8	%
Administration expenses		235,204		305,622		291,736		29.9	%		(4.5	)%
Depreciation and amortization		63,692		81,845		86,817		28.5	%		6.1	%
Impairment		351		27		28		(92.3	)%		3.7	%
Other operating expenses		71,715		62,330		68,199		(13.1	)%		9.4	%
Total operating expenses		616,627		731,147		741,527		18.6	%		1.4	%

2018 Compared to 2017

Operating expenses increased by 1.4% to Ch$741,527 million for the year ended December 31, 2018 from Ch$731,147 million for the year ended December 31, 2017. This increase was primarily the result of higher personnel salary and expenses, an increase in depreciation and amortization that reflects the investments made in technology and a fine in the amount of Ch$ 5,985 million imposed by the SBIF by means of Resolution No. 101 as described in “Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Legal Proceedings.”

2017 Compared to 2016

Operating expenses increased by 18.6% to Ch$731,147 million for the year ended December 31, 2017 from Ch$616,627 million for the year ended December 31, 2016. This increase was primarily the result of the consolidation of former Corpbanca and former Banco Itaú Chile from April 1, 2016.

Income Taxes

2018 Compared to 2017

Our income tax for the year ended December 31, 2018 was an expense of Ch$67,059 million compared to an income of Ch$52,871 million for the year ended December 31, 2017. This change is mostly explained by (i) the change in the statutory tax rate from 25.5% to 27%; (ii) a Ch$223,959 million increase in profits before taxes; and (iii) a depreciation of the Chilean peso against the U.S. dollar observed exchange rate in 2018 that increased the valuation of our taxable investment and consequently our tax expense. As we have previously discussed, for tax purposes, our investments in Colombia and New York are considered by the Chilean Internal Revenue Service to be denominated in U.S. dollars and the appreciation/depreciation of this currency when compared to the Chilean peso generates a taxable gain/loss.

2017 Compared to 2016

Our income tax for the year ended December 31, 2017 was Ch$52,871 million compared to an income of Ch$3,568 million for the year ended December 31, 2016. This change is mostly explained by the consolidation of our operations in Colombia as for tax purposes; the Chilean Internal Revenue Service (Servicio de Impuestos Internos) considers that our investment in Colombia is denominated in U.S. dollars and the depreciation of this currency when compared to the Chilean peso generated a taxable loss. This loss is compensated by the result of the aforementioned hedge position in Other Net Operating Income. Other factors explaining the change are the local taxes for our U.S. and Panamanian operations, among other differences, including the tax benefit derived from the acquisition of Helm Bank in 2013 (Ch$20,568 million in 2017 compared with Ch$14,276 million in 2016). These effects were partially offset by the impact of the U.S. tax reform.

Results of Our Operating Segments

The following discussion should be read in conjunction with our consolidated financial statements, especially Note 4 regarding segment information included elsewhere in this Annual Report. The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from these discussed in forward-looking statements as a result of various factors, including those set in forth in “Cautionary Statement Regarding Forward-Looking Statements” and “Item 3D. Risk Factors.”

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Overview

Reported segments are determined based on our operating segments: Chile—which includes our New York Branch—and Colombia. Each of Chile and Colombia mainly differentiates by the risks and returns that affect them in their own markets. Reported segments are in accordance with IFRS 8 “Operating Segments.”

Chile. The Bank’s commercial activities in Chile have been strategically aligned in four commercial areas directly related to the needs of its clients and the Bank’s strategy: 1) Wholesale Banking (a. Corporate, b. Large Companies and c. Real Estate ); 2) Retail Banking (a. Itaú Personal Bank, b. Itaú, c. Itaú Private Bank, d. Midsize Companies, e. Small-to-Medium-Sized Enterprises or SMEs and f. Banco Condell, our Consumer Finance Division); and 3) Treasury.

The Bank manages these business areas under a managerial reporting system for profitability purposes. The operating results are regularly reviewed by our senior management for operating decisions as one single cash generating unit (“CGU”), to decide about resource allocation for each segment and to evaluate its performance accordingly.

Colombia: Colombia has been identified as a separate operating segment based on the business activities. Its operating results are regularly reviewed by our senior management for operating decisions as one single CGU, to decide about resource allocation for the segment and to evaluate its performance.

The bank’s commercial activities in Colombia are carried out by Itaú Corpbanca Colombia S.A. (former Banco Corpbanca Colombia S.A) and its subsidiaries. The operations and businesses carried out by these entities in that country are related to the needs of their clients and the Bank’s strategy.

Year Ended December 31, 2018 Results

The following table presents summary information related to each of our operating segments for the year ended December 31, 2018:

	As of December 31, 2018
	Chile			Colombia			Total
	MCh$			MCh$			MCh$
Net interest income		591,575			296,088			887,663
Net fees and commissions		149,673			36,456			186,129
Net Trading and investment income		128,264			44,491			172,755
Net foreign exchange gain (loss)		5,726			(23,691	)		(17,965	)
Other operating income		14,337			12,319			26,656
Provision for loan losses		(127,804	)		(151,994	)		(279,798	)
Total operating income, net of provision for loan losses		761,771			213,669			975,440
Depreciation and amortization		(53,544	)		(33,273	)		(86,817	)
Other operating expenses		(442,943	)		(211,767	)		(654,710	)
Total operating expenses		(496,487	)		(245,040	)		(741,527	)
Income before taxes		265,284			(31,371	)		233,913
Income (loss) taxes		(85,269	)		18,210			(67,059	)
Income from continuing operations		180,015			(13,161	)		166,854
Income (loss) from continuing operations		—			—			—
Net income for the period		180,015			(13,161	)		166,854
Average loans		16,250,960			4,732,846			20,983,806
Average investments		1,764,400			1,303,562			3,067,962

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Year Ended December 31, 2017 Results

The following table presents summary information related to each of our operating segments for the year ended December 31, 2017:

	As of December 31, 2017
	Chile			Colombia			Total
	MCh$			MCh$			MCh$
Net interest income		537,540			245,442			782,982
Net fees and commissions		135,624			41,947			177,571
Net trading and investment income		(49,615	)		57,883			8,268
Net foreign exchange gains (losses)		34,661			11,504			46,165
Other operating income		33,398			8,134			41,532
Provision for loan losses		(169,233	)		(146,184	)		(315,417	)
Total operating income, net of provision for loan losses		522,375			218,726			741,101
Depreciation and amortization		(51,213	)		(30,632	)		(81,845	)
Other operating expenses		(424,733	)		(224,569	)		(649,302	)
Total operating expenses		(475,946	)		(255,201	)		(731,147	)
Income before taxes		46,429			(36,475	)		9,954
Income (loss) taxes		31,188			21,683			52,871
Income from continuing operations		77,617			(14,792	)		62,825
Income (loss) discontinued operations		—			—			—
Net income for the period		77,617			(14,792	)		62,825
Average loans		15,950,784			4,906,758			20,857,542
Average investments		1,565,017			1,141,938			2,706,955

Year Ended December 31, 2016 Results

The following table presents summary information related to each of our operating segments for the year ended December 31, 2016:

	As of December 31, 2016
	Chile			Colombia			Total
	MCh$			MCh$			MCh$
Net interest income		459,705			179,470			639,175
Net fees and commissions		112,147			38,649			150,796
Net trading and investment income		38,642			74,310			112,952
Net foreign exchange gains (losses)		(26,744	)		(22,104	)		(48,848	)
Other operating income		9,058			10,389			19,447
Provision for loan losses		(146,812	)		(99,178	)		(245,990	)
Total operating income, net of provision for loan losses		445,996			181,536			627,532
Depreciation and amortization		(40,610	)		(23,082	)		(63,692	)
Other operating expenses		(397,060	)		(155,875	)		(552,935	)
Total operating expenses		(437,670	)		(178,957	)		(616,627	)
Income before taxes		8,326			2,579			10,905
Income (loss) taxes		(84	)		3,652			3,568
Income from continuing operations		8,242			6,231			14,473
Income (loss) discontinued operations		(504	)		—			(504	)
Net income for the period		7,738			6,231			13,969
Average loans		12,645,761			5,156,124			17,801,885
Average investments		830,584			1,142,595			1,973,180

Analysis of Segment Results

2018 Compared to 2017

We ended 2018 with Ch$166,854 million in consolidated net income, which consisted of a gain of Ch$180,015 million in Chile and a loss of Ch$13,161 million in Colombia. This is the strongest result since the merger, posting a 165.6% increase when compared to 2017, based on stronger loan growth with lower delinquency, the highest net interest income and fee revenues and the lowest cost of credit since the merger, with operating expenses virtually flat when compared to 2017. We believe this is a solid improvement and an important step forward towards the construction of competitive and sustainable results.

From a macroeconomic perspective, the events with the greatest impact on our results by segments were: (i) an acceleration of economic activity in both Chile and Colombia, which favored both the generation of new business and an improvement in the credit risk of part of our portfolio; (ii) the drop in the monetary policy rate in Colombia, which went from 4.75% at the beginning of the year to 4.25% at the end of December, positively impacting our cost of funding in 2018; and (iii) a higher inflation in Chile, 2.8% in 2018 against a variation of the CPI of 2.3% in 2017, which improved our financial margin.

Despite the positive factors in Colombia mentioned in the paragraph above, in 2018, we did not achieve the expected turn-around point in Colombia mainly due to the effects of our first time adoption of IFRS 9. Nevertheless, despite a continued challenging environment in Colombia, our gross operating income showed a more sustainable trend primarily as a result of two main factors: (i) the normalization of our interest margins as we incorporated the effects of the normalization of market risk in our banking book; and (ii) a strong focus on cost management and efficiency as this is part of the culture we are establishing at the bank in Colombia.

Overall, we believe that despite a prolonged slow economic cycle, we are on track to achieving a gradual increase in sustainable results that are more in line with the overall markets in both of our segments.

2017 Compared to 2016

Our consolidated net income for 2017 was a gain of Ch$62,825 million, which is composed of a gain of Ch$77,617 million in Chile and a loss of Ch$14,792 million in Colombia, showing a recovery compared to 2016.

Macroeconomic and other factors specific to Itaú Corpbanca influenced our 2017 result. From the macroeconomic perspective, the events with the greatest impact on our results were: (i) the reduction in economic activity in both Chile and Colombia, which negatively affected both the generation of new business as well as the credit risk of a part of our loan portfolio; (ii) the drop in the monetary policy interest rate in Colombia, which went from 7.50% at the beginning of the year to 4.75% at the end of December, positively impacting our cost of funding in the year; and (iii) lower inflation in Chile, 1.7% in 2017 against a variation of the CPI of 2.7% in 2016, which reduced our financial margin.

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B. LIQUIDITY AND CAPITAL RESOURCES

We maintain adequate liquidity to ensure our ability to honor withdrawals of deposits, make repayments of other liabilities at maturity, extend loans and meet our own working capital requirements.

Sources of Liquidity

Our funding strategy aims for diversification by counterparties and maturities, both in the domestic and foreign markets. We are permanently monitoring the main vulnerability factors that could affect our current and potential capacity to obtain funding. Our objective is to ensure a diversified funding base by tenors within a risk appetite framework and cost structure. Stable and diversified financing is obtained through different sources by types of providers, products and markets. In this way, we have generated robust liquidity levels to face potential liquidity stress scenarios.

Regarding mismatches, our Assets and Liabilities Committee (ALCO) defines the limitation framework. Within this framework, each unit manages term mismatches. Once the ALCO has set the limits of term mismatches, they are confirmed by our board of directors.

From a liquidity point of view, the ALCO also proposes to the board of directors the liquidity reserves that each unit must maintain and manage. The determination of these limits depends, among other things, on the maturity structure for the next 30 days, on the type of customers holding short-term deposits and on-demand deposits and on other obligations we maintain. The ALCO also defines the type of eligible instruments to be considered liquidity reserves, and it periodically monitors the liquidity levels maintained at all time. The compliance of the entire structure of limits is monitored daily by our Market Risk department.

For our operations in Chile, the main source of funding are deposits provided by three major types of clients: (i) institutional investors; (ii) large corporations; and (iii) retail clients.

For short-term funding (less than one year), we usually issue deposits. Interest rates granted to clients consider characteristics of stability of the funding by type of customer and terms associated with the operation.

If the funding requirements are longer than one year, we may also carry out other operations such as bilateral credits with correspondent banks, syndicated loans with foreign banks, and the issuance of bonds in both the local and foreign markets.

The choice of one or the other of the aforementioned options will depend, among other factors, on the tenor, the specific price conditions and the amount. In general, in transactions between one and three years, bilateral credits are used with correspondent banks and syndicated loans. For operations exceeding these terms, we access the capital markets through bonds. The price conditions and the size of the transaction will determine if the issuance will be carried out in the domestic or in the foreign market.

On the other hand, our funding strategy considers not having currency mismatches and, therefore, for operations carried out in foreign markets to finance operations in local currency, derivatives are used to transform the foreign currency into local currency. Any mismatch of currencies presented on the balance sheet is measured in our currency risk reports that are daily calculated.

Within this context, in 2018 Itaú Corpbanca successfully placed Ch$383 billion senior bonds in the local market (ChS$1,032 billion in 2017) seeking longer tenor and maintaining comfortable liquidity levels under BIS III standards. In addition, the spreads obtained on these issuances have allowed for an improvement in the cost of funds.

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Our strategy of diversification also includes two syndicated loans, one for US$465 million (Ch$323,496 million) maturing in April 2020 and a US$200 million (Ch$139,138 million) AB Loan arranged by the International Finance Corporation (“ IFC”) (a five-year tenor for the A Loan and a three-year tenor for the B Loan, maturing in December 2020 and December 2018, respectively).

Capital

As of December 31, 2018, our shareholders’ equity was in excess of that required by Chilean regulatory requirements. According to the Chilean General Banking Act (as amended, including by Law No. 21,130), as a general rule a bank must have (1) an effective net equity of at least 8% of its risk-weighted assets, net of required reserves, and (2) paid-in capital and reserves (basic capital) not lower than (y) 4.5% of its risk weighted assets and (z) 3% of its total assets, in both cases, net of required reserves. Nevertheless, when approving the Merger, the SBIF required that Itaú Corpbanca must have an effective net equity of at least 10% of its risk-weighted assets, net of required reserves.

Note, however, that in any of the following events a higher effective net equity and/or a higher basic capital may be required:

(1) If at the moment in which the incorporation deed of a bank is granted (or at the moment in which the authorization of existence of a branch of a foreign bank is granted), at least 50% of the minimum paid-in capital and reserves, or basic capital (capital básico) (i.e., UF800,000 (Ch$22,052.6 million or US$31.7 million as of December 31, 2018)) has not been paid, the respective bank shall have an additional basic capital equal to 2% of its risk weighted assets, net of required allowances, above the general minimum basic capital of 4.5% plus any additional basic capital that may be applicable pursuant to number (2) below. The additional 2% requirement will be reduced to 1% once the bank’s paid basic capital reaches UF 600,000 (Ch$16,539.5 million or US$23.8 million as of December 31, 2018).

(2) Once the CMF replaces the SBIF, the following shall occur:

a. Within 18 months from the date in which such replacement occurs, the CMF shall issue a regulation (with the affirmative consent of the Council of the Chilean Central Bank) setting forth (i) the standardized methodology for risk weighting the assets of a bank and, (ii) in the event of banks authorized to use their own methodologies, the requirements to use and implement them. Once such regulation becomes effective, a bank will be required to have an additional basic capital equal to 2.5% of its risk weighted assets, net of required allowances, above the minimum requirements. This additional requirement will come into effect progressively during a 4-year term at a ratio of 0.625% per year, starting on the date in which the CMF issues the aforementioned regulation;

b. Within 18 months from the date in which such replacement occurs, the CMF shall issue a regulation setting forth the conditions that may trigger the imposition by the Chilean Central Bank of an additional basic capital requirement of up to 2.5% of a bank’s risk weighted assets, net of required allowances, above the minimum requirements. This additional requirement may be imposed by the Chilean Central Bank on a general basis applicable to all banking institutions, as a contra-cyclical measure;

c. Within 18 months from the date in which such replacement occurs, the CMF shall issue a regulation (with the affirmative consent of the Council of the Chilean Central Bank), which shall set forth the criteria for considering a bank or group of banks of systemic importance. Further, with the affirmative vote of the Chilean Central Bank, the CMF may determine, through a grounded resolution, that a bank is of systemic importance. In such event, the CMF will be entitled to impose, among others, one or more of the following conditions: (y) an increase between 1% and 3.5% to the basic capital over risk weighted assets, net of required allowances, above the aforementioned 8% minimum effective net equity (Patrimonio Efectivo) requirement; and (z) an increase of up to 2% to the basic capital over total assets, net of required allowances, above the aforementioned 3% minimum basic capital requirement.

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The conditions imposed on a bank qualified of systemic importance, may be terminated in the event the Council of the CMF determines that a bank no longer has systemic importance; and

d. If after a review process, to the judgment of the CMF, a bank presents risks not properly protected with the equity requirements mentioned above, the CMF may impose additional equity requirements. Such additional equity requirements may consist in an additional basic capital, or one or more of the instruments listed in numbers (ii), (iii) and (iv) of the following paragraph. In any event, the additional equity requirements shall not exceed 4% of its risk weighted assets, net of required allowances. For these purposes, the CMF shall issue a regulation which shall set forth the criteria applicable in these cases.

For these purposes, the effective net equity of a bank is the sum of (i) a bank’s basic capital, (ii) bonds issued without a maturity date and preferred stock issued once the CMF issues a regulation authorizing their issuance. These instruments shall be valued at their issue price, for an amount up to one third of its basic capital, (iii) subordinated bonds issued by a bank valued at their issue price up to 50% of its net capital base; provided that the value of the bonds shall decrease 20% for each year that lapses during the period commencing six years prior to their maturity, and (iv) voluntary loan loss allowances in an amount up to 1.25% of a bank’s risk-weighted assets (if a bank has goodwill, this value would be required to be deducted from the calculation of the effective net equity). Note that the CMF shall issue a regulation setting forth (A) the standardized methodology for risk weighing the assets of a bank, and (B) in the event of banks authorized to use their own methodologies, the requirements to use and implement them. Once such regulations are issued, voluntary allowances shall be considered up to the following amounts: (y) up to 1.25% of its credit risk weighted assets, if standard methodologies are applied, or (z) 0.625% in the event non-standard methodologies are applied, (v) minority interests of up to 20% of the basic capital (provided that if such minority interests exceed 20%, only 20% will be taken into account), minus (vi) goodwill or premiums, paid balances and investments in companies that are not consolidated and (vii) certain deductions to be made in accordance with provisions of chapter 12-1 of the regulations of the SBIF (Recopilación Actualizada de Normas), or the Regulations of the SBIF.

The calculation of the effective net equity does not include the capital contributions made to subsidiaries of a bank and is made on a consolidated basis rather than on an unconsolidated basis.

Pursuant to Transitory Article First of Law No. 21,130, until the date in which the CMF issues the regulations that shall set forth (i) the standardized methodology for calculating risk-weighted assets, and (ii) in the event of banks authorized to use their own methodologies, the requirements to use and implement them, in order to weight the risk of a bank’s assets, the following five different categories of assets will apply:

Category	Weighting
1		0	%
2		10	%
3		20	%
4		60	%
5		100	%

Basic capital is defined as a bank’s paid-in capital and reserves and is similar to Tier 1 capital, except that does not deduct goodwill nor intangible assets.

Reserves

Under the Chilean General Banking Act in effect as of December 31, 2018 (i.e., without considering the amendments under Law No. 21,130), a bank must have a minimum paid-in capital and reserves of UF 800,000 (Ch$22,052.6 million or US$31.7 million as of December 31, 2018). However, a bank may begin its operations with 50% of such amount, provided that it has a total capital ratio (defined as effective net equity as a percentage of risk weighted assets) of not less than 12%. When such bank’s paid-in capital reaches UF600,000 (Ch$16,539.5 million or US$23.8 million as of December 31, 2018) the total capital ratio required is reduced to 10%.

149

The following table sets forth our minimum capital requirements as of the dates indicated. See Note 34 to our consolidated financial statements included herein for a description of the minimum capital requirements.

	As of December 31,
	2016			2017			2018
	(in millions of constant Ch$ except for percentages)
Net capital base		3,173,516			3,189,876			3,324,531
3% total assets net of provisions		(957,058	)		(915,261	)		(953,445	)
Excess over minimum required equity		2,216,458			2,274,615			2,371,086
Net capital base as a percentage of the total assets, net of provisions		9.95	%		10.46	%		10.46	%
Effective net equity		3,252,175			3,249,572			3,415,845
10% of the risk-weighted assets		(2,319,500	)		(2,215,179	)		(2,331,556	)
Excess over minimum required equity		932,675			1,034,393			1,084,289
Effective equity as a percentage of the risk-weighted assets		14.0	%		14.7	%		14.6	%

Our capital ratio levels decreased to 14.6% in 2018 when compared to 2017 primarily due to the increase of risk-weighted assets being partly compensated by an increase in core capital, driven by higher net income.

With respect to the minimum paid-in capital and reserves applicable to a bank under the Chilean Banking Act as amended by Law No. 21,130, See “Item 3. Key Information—Presentation of Financial and Other Information—Specific Loan Information.”

Financial Investments

Since 2018, our financial investments are classified into measurement categories based on both our business model for managing the financial asset and the contractual cash flow characteristics of the financial asset. For periods prior to 2018, our financial investments are classified at the time of purchase, based on our management’s determination, as trading or investment instruments, the latter being categorized as available-for-sale or held to maturity. For additional details on our investment in Chilean government and corporate securities and certain other financial investments as of December 31, 2016, 2017 and 2018, please see “Item 4. Information on the Company—Business Overview—Selected Statistical Information — Investment Portfolio.”

Unused Sources of Liquidity

As part of our liquidity policy, we maintain at all times a diversified portfolio of highly liquid assets that can be quickly monetized, including cash, financial investments and Central Bank of Chile and other government securities.

Working Capital

The majority of our funding is derived from deposits and other borrowings from the public. In the opinion of management, our working capital is sufficient for our present needs.

Liquidity Management

We seek to ensure that, even under adverse conditions; we have access to the funds necessary to cover client needs, maturing liabilities and capital requirements. Liquidity risk arises in the general funding for our financing, trading and investment activities. It includes the risk of unexpected increases in the cost of funding the portfolio of assets at appropriate maturities and rates, the risk of being unable to liquidate a position in a timely manner at a reasonable price and the risk that we will be required to repay liabilities earlier than anticipated. See “Item 11. Quantitative and Qualitative Disclosures about Financial Risk” for more detailed information relating to the methods we employ in managing our liquidity.

150

Cash Flow

The tables below set forth information about our main sources and uses of cash. No legal or economic restrictions exist on the ability of our Chilean subsidiaries to transfer funds to us in the form of loans or cash dividends as long as these subsidiaries abide by the regulations in the Chilean Corporations Law regarding loans to related parties, and dividend payments. In addition, no legal or economic restrictions exist on the ability of our Colombian subsidiaries to transfer funds to us in the form of cash dividends. However, in the case of Itaú Corpbanca Colombia, for the following four to five years there is a possibility that shareholders may vote to capitalize such dividends in order to meet current capital adequacy requirements following Basel standards, as they did in respect of 2013 dividends, 2014 dividends and 2015 dividends. Itaú Corpbanca Colombia may also transfer funds to Itaú Corpbanca in the form of loans, as long as they abide by the regulations in the Colombian financial law regarding loans to related parties. Colombian subsidiaries (other than Itaú Corpbanca Colombia) may not transfer funds to us in the form of loans, due to their limited corporate purpose.

Net Cash (Used in) Provided by Operating Activities

	For the Year Ended December 31,
	2016			2017			2018
	(in millions of constant Ch$ as of December 31, 2018)
Net cash (used in) provided by operating activities		(978,898	)		(1,390,863	)		695,755

Our net cash used in operating activities for the year ended December 31, 2018 increased from Ch$(1,390,863) million in 2017 to Ch$695,755 million in 2018. This increase in net cash provided by operating activities was mainly due to increased collections of our trading and non-trading portfolio related to financial instruments.

Net Cash (Used in) Provided by Investing Activities

	For the Year Ended December 31,
	2016		2017			2018
	(in millions of constant Ch$ as of December 31, 2018)
Net cash (used in) provided by investing activities		1,589,074		(87,155	)		(41,874	)

Our net cash used in investing activities decreased from Ch$(87,155) million for the year ended December 31, 2017 to Ch(41,874) million for the year ended December 31, 2018. This decrease in net cash used in investing activities was mainly due to an increase in cash inflow from the sales of properties.

Net Cash (Used in) Provided by Financing Activities

	For the Year Ended December 31,
	2016		2017		2018
	(in millions of constant Ch$ as of December 31, 2018)
Net cash (used in) provided by financing activities		874,784		349,602		(449,272	)

We saw a reversal in our financing cash flows from a net cash inflow of Ch$349,602 million for the year ended December 31, 2017 to a net cash outflow of Ch(449,272) million for the year ended December 31, 2018. This reversal was mainly due to cash outflows associated with our redemption of debt issued.

151

Deposits and Other Borrowings

The following table sets forth our average month-end balance of our liabilities for the years ended December 31, 2016, 2017 and 2018, in each case together with the related average nominal interest rates paid thereon.

	As of December 31,
	2016							2017							2018
	Average Balance		Interest Paid		Average Normal Rate			Average Balance		Interest Paid		Average Normal Rate			Average Balance		Interest Paid		Average Normal Rate
	(in millions of Ch$ except for percentages)
Time deposits		9,884,092		459,381		4.6	%		10,144,561		433,237		4.3	%		10,097,251		385,734		3.8	%
Central Bank borrowings		—		—		—			—		—		—			—		—
Repurchase agreements		400,252		48,086		12.0	%		596,351		32,677		5.5	%		806,223		29,664		3.7	%
Mortgage finance bonds		71,742		4,241		5.9	%		72,900		3,249		4.5	%		58,939		2,963		5.0	%
Bonds		4,205,997		231,053		5.5	%		6,045,928		279,635		4.6	%		5,789,542		319,289		5.5	%
Other interest bearing-liabilities		4,029,170		127,267		3.2	%		4,652,106		114,549		2.5	%		4,769,459		114,004		2.4	%
Subtotal interest-bearing liabilities		18,591,253		870,028		4.7	%		21,511,846		863,347		4.0	%		21,521,414		851,654		4.0	%
Non-interest bearing liabilities:
Non-interest bearing deposits		1,898,469							2,196,697							2,334,249
Derivatives		845,920							1,021,662							1,088,108
Other non-interest bearing liabilities		603,382							817,955							786,415
Shareholders’ equity		2,806,690							3,438,445							3,490,821
Subtotal non-interest bearing liabilities		6,154,461							7,474,759							7,699,593
Total		24,745,714		870,028					28,986,605		863,347					29,221,007		851,654

Our current funding strategy is to continue to utilize all sources of funding in accordance with their cost, their availability and our general asset and liability management strategy. Our most important source of funding is our time deposits. Time deposits represented 46.9% of our average interest bearing liabilities for the year ended December 31, 2018. We continue to place special emphasis on increasing deposits from retail customers, which consist primarily of checking accounts that do not bear interest and accordingly represent an inexpensive source of funding for us. Our total checking accounts and other demand liabilities increased/decreased by 3.8% as of December 31, 2018 compared to December 31, 2017. To the extent that these types of deposits represent a larger percentage of our funding base, the percentage represented by time deposits is expected to decrease and, accordingly, we believe that the materiality to our business of uncertainties relating to rolling over deposits will be diminished. We also intend to continue to broaden our customer deposit base, to emphasize core deposit funding and to fund our mortgage loans with the matched funding available through the issuance of letters of credit loans in Chile’s domestic capital markets. Management believes that broadening our deposit base by increasing the number of account holders has created a more stable funding source.

Total Borrowings

The following tables set forth the long-term, short-term and total outstanding amounts of our principal categories of borrowings for the years ended December 31, 2016, 2017 and 2018.

	As of December 31, 2016
	Long term		Short term		Total
	MCh$		MCh$		MCh$
Loans obtained from the Chilean Central Bank(a)		—		—		—
Obligations under repurchase agreements		—		373,879		373,879
Loans obtained from domestic financial institutions(b)		—		—		—
Loans obtained from foreign financial institutions(b)		973,294		1,206,576		2,179,870
Letters of credit(c)		71,239		14,971		86,210
Bonds(d)		3,836,778		453,969		4,290,747
Subordinated bonds(e)		1,051,148		32,148		1,083,296
Other financial obligations(f)		23,298		2,265		25,563
Total borrowings		5,955,757		2,083,808		8,039,565

	As of December 31, 2017
	Long term		Short term		Total
	MCh$		MCh$		MCh$
Loans obtained from the Chilean Central Bank(a)		—		—		—
Obligations under repurchase agreements		—		420,920		420,920
Loans obtained from domestic financial institutions(b)		—		21,958		21,958
Loans obtained from foreign financial institutions(b)		720,542		1,453,630		2,174,172
Letters of credit(c)		55,678		12,260		67,938
Bonds(d)		4,178,313		662,605		4,840,918
Subordinated bonds(e)		1,041,182		—		1,041,182
Other financial obligations(f)		16,255		811		17,066
Total borrowings		6,011,970		2,572,184		8,584,154

	As of December 31, 2018
	Long term		Short term		Total
	MCh$		MCh$		MCh$
Loans obtained from the Chilean Central Bank(a)		—		—		—
Obligations under repurchase agreements		—		1,015,614		1,015,614
Loans obtained from domestic financial institutions(b)		—		5,863		5,863
Loans obtained from foreign financial institutions(b)		497,909		1,823,951		2,321,860
Letters of credit(c)		43,029		10,434		53,463
Bonds(d)		4,220,626		661,715		4,882,341
Subordinated bonds(e)		1,052,111		22,209		1,074,320
Other financial obligations(f)		—		12,400		12,400
Total borrowings		5,813,675		3,552,186		9,365,861

152

(a) Loans obtained from the Chilean Central Bank

Central Bank borrowings include credit lines for the renegotiations of loans and other Central Bank borrowings. The maturities of the outstanding amounts due are as follows:

	As of December 31, 2016 (in millions of Ch$)		As of December 31, 2017 (in millions of Ch$)		As of December 31, 2018 (in millions of Ch$)
Loans obtained from Chilean Central Bank		—		—		—
Total		—		—		—

(b) Loans obtained from domestic and foreign financial institutions (foreign borrowings)

These are short-term and long-term borrowings from domestic and foreign banks used to fund our foreign trade business. The maturities of the outstanding amounts are as follows:

	As of December 31, 2016 (in millions of Ch$)		As of December 31, 2017 (in millions of Ch$)		As of December 31, 2018 (in millions of Ch$)
Due within 1 year		1,206,576		1,475,588		1,829,814
Due after 1 year but within 2 years		730,642		422,911		319,870
Due after 2 years but within 3 years		5,068		106,260		17,595
Due after 3 years but within 4 years		12,887		15,154		77,993
Due after 4 years but within 5 years		6,889		73,536		11,644
Due after 5 years		217,808		102,681		70,807
Total		2,179,870		2,196,130		2,327,723

(c) Mortgage finance bonds

These securities are used to finance mortgage loans. The range of maturities of these securities is between five and twenty years. Loans are indexed to UF and pay a yearly interest rate.

	As of December 31, 2016 (in millions of Ch$)		As of December 31, 2017 (in millions of Ch$)		As of December 31, 2018 (in millions of Ch$)
Due within 1 year		14,971		12,260		10,434
Due after 1 year but within 2 years		11,056		9,965		7,612
Due after 2 years but within 3 years		10,128		8,114		7,092
Due after 3 years but within 4 years		8,158		7,554		6,516
Due after 4 years but within 5 years		5,346		6,952		5,908
Due after 5 years		36,551		23,093		15,901
Total mortgage finance bonds		86,210		67,938		53,463

(d) Bonds

153

The bonds are denominated principally in UFs and are primarily used to fund assets with similar durations. The maturities of these bonds are as follows:

	As of December 31, 2016 (in millions of Ch$)		As of December 31, 2017 (in millions of Ch$)		As of December 31, 2018 (in millions of Ch$)
Due within 1 year		453,969		662,605		661,715
Due after 1 year but within 2 years		716,695		516,061		637,595
Due after 2 years but within 3 years		562,914		653,601		216,695
Due after 3 years but within 4 years		657,866		199,908		446,323
Due after 4 years but within 5 years		695,324		312,597		276,047
Due after 5 years		1,203,979		2,496,146		2,643,966
Total bonds		4,290,747		4,840,918		4,882,341

The following table sets forth as of the dates indicated our issued bonds. In 2018, the Bank issued bonds in UF for UF11,450,000 and in Chilean pesos for Ch$70,000 million detailed as follows:

							As of December 31,
	Expiration Date	Interest rate					2016		2017		2018
					Currency		MCh$		MCh$		MCh$
A	7/1/2017		3.75	%		UF		67,084		—		—
B	10/1/2017		3.50	%		UF		66,466		—		—
E	6/1/2032		5.00	%		UF		41,871		42,493		43,595
F	1/1/2032		4.00	%		UF		26,961		27,399		28,151
G	3/1/2032		4.00	%		UF		41,894		42,529		43,649
H	9/1/2015		3.00	%		UF		—		—		—
I	10/1/2030		4.00	%		UF		27,533		27,961		28,707
J	1/1/2031		4.00	%		UF		27,203		27,625		28,362
K	6/1/2021		3.50	%		UF		26,406		26,906		27,721
L-2	10/1/2022		3.50	%		UF		26,039		26,543		27,359
M-2	10/1/2018		3.50	%		UF		26,332		26,829		—
N	5/1/2019		3.50	%		UF		26,364		26,839		27,626
O	3/1/2021		3.50	%		UF		26,118		26,630		27,454
P	3/1/2026		3.75	%		UF		26,262		26,725		27,498
Q-1	3/1/2023		3.75	%		UF		26,451		26,912		27,683
R-2	2/1/2028		3.75	%		UF		26,387		26,846		27,616
S	9/1/2020		3.50	%		UF		26,321		26,814		27,621
T	9/10/2022		3.50	%		UF		26,320		26,797		27,587
U	9/1/2024		3.75	%		UF		26,144		26,621		27,409
V	9/1/2027		3.75	%		UF		25,945		26,425		27,212
W	9/1/2029		3.75	%		UF		25,914		26,388		27,168
X	3/1/2024		3.80	%		UF		53,118		53,993		55,488
Y	3/1/2028		3.80	%		UF		52,943		53,840		55,357
Z	2/1/2033		3.80	%		UF		26,739		27,181		27,936
AA	6/1/2018		6.70	%		CLP		30,765		27,868		—
AB	10/1/2029		3.80	%		UF		41,770		42,360		43,430
AC	10/1/2033		3.80	%		UF		54,867		55,727		57,224
AF	6/1/2022		3.50	%		UF		53,663		54,437		55,828
AG	6/1/2024		3.50	%		UF		162,150		164,469		168,660
AH	6/1/2029		3.60	%		UF		54,792		55,595		57,032
AI	4/1/2020		3.50	%		UF		137,924		138,739		141,066
AJ	6/1/2025		3.60	%		UF		58,620		55,554		56,904
AL-2	7/1/2025		3.50	%		UF		54,483		55,321		56,791

154

							As of December 31,
	Expiration Date	Interest rate					2016		2017		2018
					Currency		MCh$		MCh$		MCh$
Sub total Former Banco Itaú Chile								1,421,849		1,300,366		1,278,134
BCORAF0710	7/1/2017		3.00	%		UF		166,897		—		—
BCORAG0710	9/10/2018		3.00	%		UF		81,084		77,592		—
BCORAI0710	7/1/2020		3.00	%		UF		195,199		197,220		202,909
BCOR-L0707	7/1/2017		3.40	%		UF		107,869		—		—
BCORAJ0710	8/3/2021		3.00	%		UF		75,080		104,654		107,049
BCOR-P0110	7/9/2020		7.30	%		CLP		24,982		23,838		23,792
BCORBW0914	8/30/2020		5.00	%		CLP		46,669		45,379		45,254
BCOR-R0110	7/9/2020		4.00	%		UF		140,226		140,265		143,237
BCORUSD0118	1/15/2018		3.13	%		USD		495,871		452,172		—
BCORUSD0919	9/22/2019		3.88	%		USD		517,724		471,546		529,363
BCORAL0710	8/3/2023		3.00	%		UF		110,845		112,173		114,787
BCORAN0710	7/1/2025		3.00	%		UF		179,460		181,908		246,007
BCORAO0710	7/1/2026		3.00	%		UF		234,079		324,089		332,122
BCORBX0914	8/30/2021		5.00	%		CLP		43,336		41,718		42,507
BCORCA0914	9/1/2024		5.00	%		CLP		99,917		100,105		100,303
BCORAR0710	7/1/2029		3.00	%		CLF		—		—		219,939
BCORBZ0914	9/1/2023		5.00	%		CLP		—		102,921		100,992
BCORBY0914	9/1/2022		5.00	%		CLP		—		31,306		103,268
BCORAP0710	7/1/2027		3.00	%		CLF		—		380,404		388,654
BCORAQ0710	7/1/2028		3.00	%		CLF		—		293,884		359,509
BCORAK0710	7/1/2022		3.00	%		CLF		—		173,514		176,185
Sub total Former Corpbanca								2,519,238		3,254,688		3,235,877
BBSA168B18	3/2/2018		8.99	%		COP		48,144		45,255		—
BBSA26SA48	8/10/2020		8.74	%		COP		46,181		43,406		44,739
BBSA316SA060	11/23/2020		8.03	%		COP		40,364		37,940		39,076
BBCR1109B84	10/28/2017		10.33	%		COP		26,606		—		—
BBCR3119B84	8/3/2018		10.57	%		COP		21,005		19,686		—
BBSA4188B024	6/21/2020		5.41	%		COP		—		—		53,716
BBSA4189C060	6/21/2023		6.41	%		COP		—		—		32,585
BBCR1099B120	12/10/2019		11.30	%		COP		18,826		17,676		18,208
BBSA69C120	8/10/2026		10.68	%		COP		23,198		21,732		22,375
BBSA69C180	8/10/2031		10.95	%		COP		43,316		40,578		41,779
BBSA3169C180	11/23/2031		10.80	%		COP		49,479		46,388		47,792
BBSA168B18	9/2/2017		9.74	%		COP		19,047		—		—
BBCR3117C84	8/3/2018		4.58	%		COP		13,494		13,203		—
BBSA5188B030	5/22/2021		1.20	%		COP		—		—		11,964
BBSA5189C048	11/22/2022		2.91	%		COP		—		—		56,096
Sub total Itaú Corpbanca Colombia								349,660		285,864		368,330
Total								4,290,747		4,840,918		4,882,341

(e) Subordinated bonds

The following table sets forth, at the dates indicated our issued subordinated bonds. The subordinated bonds are denominated principally in UFs and are primarily used to fund the Bank’s mortgage portfolio. These bonds are considered to be a part of our regulatory capital.

	As of December 31, 2016 (in millions of Ch$)		As of December 31, 2017 (in millions of Ch$)		As of December 31, 2018 (in millions of Ch$)
Due within 1 year		32,148		—		22,209
Due after 1 year but within 2 years		—		21,500		—
Due after 2 years but within 3 years		23,622		—		—
Due after 3 years but within 4 years		—		—		18,604
Due after 4 years but within 5 years		—		22,303		22,484
Due after 5 years		1,027,526		997,379		1,011,023
Total subordinated bonds		1,083,296		1,041,182		1,074,320

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In 2018, we did not issue subordinated bonds. The following table sets forth as of the dates indicated our issued subordinated bonds:

								As of December 31,
	Expiration		Interest					2016		2017		2018
	Date		rate			Currency		MCh$		MCh$		MCh$
AE1		1/1/2034		3.80	%		UF		53,669		54,585		56,130
C1		4/1/2033		3.50	%		UF		6,572		6,285		6,051
C2		4/1/2033		3.50	%		UF		14,273		13,681		13,204
D		10/1/2033		4.50	%		UF		21,833		20,934		20,214
Sub total Former Banco Itaú Chile									96,347		95,485		95,599
UCOR-V0808		8/1/2033		4.60	%		UF		157,444		159,479		163,359
UCOR-Y1197		11/1/2022		6.50	%		UF		7,786		6,689		5,580
UCOR-Z1197		11/1/2022		6.50	%		UF		18,176		15,614		13,024
UCORAA0809		8/9/2035		4.90	%		UF		143,413		145,174		148,585
UCORBF0710		7/1/2032		4.00	%		UF		13,795		14,013		14,395
UCORBI0710		7/1/2035		4.00	%		UF		31,723		32,230		33,121
UCORBJ0710		7/1/2036		4.00	%		UF		150,861		153,334		157,602
UCORBL0710		7/1/2038		4.00	%		UF		109,868		111,668		114,789
UCORBN0710		7/1/2040		4.00	%		UF		84,573		85,968		88,378
UCORBP0710		7/1/2042		4.00	%		UF		41,237		41,917		43,092
Sub total Former Corpbanca									758,876		766,086		781,925
US05968TAB17		3/8/2024		LIBOR +SPREAD 4			USD		115,706		106,041		463
BBSA1099B1		3/30/2019		10.79	%		COP		483		445		120,535
BBSA110BAVA		9/23/2017		10.68	%		COP		32,148		—		—
BBSA1099B4		3/30/2019		12.85	%		COP		23,139		21,055		21,746
BBSA1139AS10		2/7/2023		10.08	%		COP		23,542		21,659		22,484
BBSA1139AS15		2/7/2028		10.20	%		COP		33,055		30,411		31,568
Sub total Itaú Corpbanca Colombia									228,073		179,611		196,796
Total									1,083,296		1,041,182		1,074,320

(f) Other financial obligations

Other obligations are summarized as follows:

	As of December 31, 2016 (in millions of Ch$)		As of December 31, 2017 (in millions of Ch$)		As of December 31, 2018 (in millions of Ch$)
Due within 1 year		2,265		811		—
Due after 1 year but within 2 years		—		—		—
Due after 2 years but within 3 years		—		—		—
Due after 3 years but within 4 years		—		—		—
Due after 4 years but within 5 years		—		—		—
Due after 5 years		—		—		—
Total long obligation		2,265		811		—
The detail of other short term financial obligations is as follows:
Amounts due to credit card operations		23,298		16,255		12,400
Others		—		—		—
Total short term financial obligations		23,298		16,255		12,400
Total other financial obligations		25,563		17,066		12,400

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C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES

We do not currently conduct any significant research and development activities.

D. TREND INFORMATION

Our net interest income for the year ended December 31, 2018 increased to Ch$887,663 million, or by 13.4%, when compared to the year ended December 31, 2017. Generally, our net interest income is positively affected by an inflationary environment to the extent that our average UF-denominated assets exceed our average UF-denominated liabilities, while our net interest income is negatively affected by inflation in any period in which our average UF-denominated liabilities exceed our average UF-denominated assets. Currently, we have more UF-denominated assets than liabilities.

Our operating income depends significantly on our net interest income. For the years ended December 31, 2016, 2017 and 2018, net interest income over total operating income before provision for loan losses represented 73.2%, 74.1% and 70.7%, respectively. Changes in market interest rates may affect the interest rates earned on our interest-earning assets and the interest rates paid on our interest bearing liabilities, which may result in a further reduction in our net interest income.

Consolidation in the market, which can result in the creation of larger and stronger competitors, may adversely affect our financial condition and results of operations by decreasing the net interest margins we are able to generate and increasing our costs of operation. In addition, we expect to continue to face competition from non-banking financial entities such as department stores, leasing, factoring and automobile finance companies, mutual funds, pension funds and insurance companies.

The following are the most important trends, uncertainties and events that are reasonably likely to affect us or that would cause the financial information disclosed herein not to be indicative of our future operating results or financial condition:

• Higher levels of uncertainty related to the expectation of a possible global economic recession and a higher than expected slowdown of Chinese economic activity, which may translate into an upward adjustment of risk premium and higher global interest rates;

• In this context, the upturn in the Chilean and/or Colombian economies could be weaker than expected. Higher than anticipated unemployment rates and lower economic growth could increase provision expenses and decrease our rate of loan growth in the future; and

• Finally, uncertainty relating to the implementation of the Labor Reform do not allow us to predict its effects.

Also see “Item 5. Operating and Financial Review and Prospects—A. Operating Results.”

E. OFF-BALANCE SHEET ARRANGEMENTS

We are party to transactions with off-balance-sheet risk in the normal course of our business. These transactions expose us to credit risk in addition to amounts recognized in our consolidated financial statements and include commitments to extend credit. These commitments include contractual arrangements to which an unconsolidated entity is a party, under which Itaú Corpbanca has:

• Any obligation under certain guarantee contracts;

• A retained or contingent interest in assets transferred to an unconsolidated entity or similar arrangement that serves as credit, liquidity or market risk support to that entity for such assets;

• Any obligation under certain derivative instruments;

• Any obligation under a material variable interest held by Itaú Corpbanca in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to Itaú Corpbanca, or engages in leasing, hedging or research and development services Itaú Corpbanca.

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Such commitments are agreements to lend money to a customer at a future date, subject to the customer’s compliance with contractual terms. Since a substantial portion of these commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent our actual future cash requirements. The aggregate amount outstanding of these commitments was Ch$5,383,914 million as of December 31, 2018.

Contingent loans are those operations or commitments in which the Bank assumes a credit risk upon committing itself to third parties, before the occurrence of a future event, to make a payment or disbursement that must be recovered from its clients.

The Bank keeps a record of the following balances related to commitments or to liabilities of its own line of business in memorandum accounts: collateral and guarantees, confirmed foreign letters of credit, letters of credit, bank guarantees, cleared lines of credit, other credit commitments and other contingencies.

The total amount of contingent loans held off balance sheet as of December 31, 2106, 2017 and 2018 was Ch$5,310,136 million, Ch$5,291,615 million and Ch$5,383,914 million, respectively. Contingent loans are considered in the calculation of risk weighted assets and capital requirements as well as for credit risk reserve requirements.

See Note 1 “General Information and Summary of Significant Accounting Policies” and Note 21 “Contingencies, Commitments and Responsibilities” to our consolidated financial statements included herein for a better understanding and analysis of the figures held off sheet balance.

We use the same credit policies in making commitments to extend credit as we do for granting loans. In the opinion of our management, our outstanding off-balance sheet commitments do not represent an unusual credit risk.

Traditional financial instruments which meet the definition of a “derivative,” such as forwards in foreign currency, UF, interest rate futures currency and interest rate swaps, currency and interest rate options and others, are initially recognized on the balance sheet at their fair value. Fair value is obtained from market quotes, discounted cash flow models and option valuation models, as applicable. For further details of fair value, see Note 8 of our consolidated financial statements included herein.

In terms of outstanding exposure to credit risk, the true measure of risk from derivative transactions is the marked-to-market value of the contracts at a point in time (i.e., the cost to replace the contract at the current market rates should the counterparty default prior to the settlement). For most derivative transactions, the notional principal amount does not change hands; it is simply an amount that is used as a reference upon which to calculate payments.

F. TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

In addition to the scheduled maturities of our contractual obligations which are included under “—Liquidity and Capital Resources—Sources of Liquidity” above, as of December 31, 2018, we also had other commercial commitments which mainly consist of open and unused letters of credit, together with guarantees granted by us in Ch$, UF and foreign currencies (principally U.S. dollars). We expect most of these commitments to expire unused.

The following table includes both the accrued interest and the interest expense projected over time of each contractual obligation as of December 31, 2018. For variable rate debt and interest rate swaps and other derivatives, where applicable, the interest rates upon which we based our contractual obligations going forward are based on the applicable forward curves. For any cross-currency swaps or other derivatives as applicable, the foreign currency exchange rate used was spot.

Contractual Obligations(*)	Less than 1 year		1-3 years			3-5 years			More than 5 years			Total
	(in millions of Ch$)
Time deposits and saving accounts		9,716,591		798,613			75,261			727,527			11,317,992
Deposits and other demand liabilities		4,486,195		—			—			—			4,486,195
Bank obligations		2,456,553		352,214			96,886			115,027			3,020,680
Investments under repurchase agreements		826,276		—			—			—			826,276
Issued debt instruments		941,746		1,306,313			1,038,963			4,284,565			7,571,587
Other financial liabilities		14,162		17,492			13,742			17,050			62,447
Financial derivative contracts		104,073		(104,912	)		(38,679	)		(70,558	)		(110,076	)
Total contractual obligations		18,545,596		2,369,719			1,186,174			5,073,610			27,175,100

(*) The variable rates projections are obtained from the Forward Rate Agreement (FRA) rates of the respective projection curves. The parities used to convert the amounts to Chilean pesos correspond to the accounting parities used in the referred date.

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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. DIRECTORS AND SENIOR MANAGEMENT

We are managed by our CEO (Gerente General) under the direction of our board of directors, which, in accordance with the Company’s by-laws, consists of 11 directors and two alternates who are elected at our annual ordinary shareholders’ meetings. Pursuant to the provisions of our bylaws, members of the board of directors are generally elected for three-year terms. All of the members of the board of directors were elected on March 19, 2019 for a three-year period at which the board of directors was renewed in its entirely. Cumulative voting is permitted for the election of directors. The board of directors may appoint replacements to fill any vacancies that occur during periods between elections. Our principal executive officers are appointed by the board of directors and the CEO and hold their offices at the discretion of the board of directors and the CEO. Scheduled meetings of the board of directors are held monthly. Extraordinary meetings can be held when called by the chairman of the board of directors, by one or more directors with the prior approval of the chairman of the board of directors, or by five directors. None of the members of our board of directors has a contract or agreement which entitles any director to any benefits upon termination of employment with us.

Our current directors are as follows:

Directors	Position	Age
Jorge Andrés Saieh Guzmán	Chairman and director		47
Ricardo Villela Marino	Vice chairman and director		45
Jorge Selume Zaror	Director		67
Fernando Aguad Dagach	Director		59
Gustavo Arriagada Morales	Director		65
Caio Ibrahim David	Director		51
Milton Maluhy Filho	Director		42
Directors	Position	Age
Andrés Bucher Cepeda	Director		55
Pedro Samhan Escandar	Director		68
Fernando Concha Ureta	Director		59
Bernard Pasquier	Director		65
Diego Fresco Gutiérrez	Alternate director		49
Jessica López Saffie	Alternate director		63

Jorge Andrés Saieh Guzmán became a director on August 25, 1998. On February 2, 2012, Mr. Saieh Guzmán became the chairman of our board of directors. Mr. Saieh Guzmán also serves as the chairman of the board of directors for Consorcio Periodístico de Chile S.A. Mr. Saieh Guzmán has also served as the vice chairman of the board of AFP Protección, as a member of the board of AFP Provida, as member of the board of the Chilean National Press Association and as a member of the board of a former affiliate of Corpbanca, Corpbanca Venezuela. Mr. Saieh Guzmán also serves similar positions on a variety of different boards. Mr. Saieh Guzmán received a B.A. in Business and Administration and graduated from the Universidad Gabriela Mistral. Mr. Saieh Guzmán holds a Masters in Economics and a Master in Business and Administration from the University of Chicago. Alvaro Saieh Bendeck is the father of Mr. Saieh Guzmán.

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Ricardo Villela Marino became a director on April 11, 2016. Mr. Marino has served Itaú Unibanco Group as a Vice President of Itaú Unibanco since August 2010 and as chairman of Itaú Unibanco’s Latam Strategic Council since April of 2018. He served as Executive Officer (September 2006 to August 2010), Senior Managing Director (August 2005 to September 2006), Managing Director (December 2004 to August 2005) at Itaú Unibanco. He has served as an Alternate Member of the Board of Directors of Itaúsa since April 2011. He has served as an Alternate Member of the Board of Directors of Duratex S.A., Elekeiroz S.A. and Itautec S.A. since April 2009. He was President of the Latin American Federation of Banks (FELABAN) (2008 to 2010). He has a B.A. degree in Mechanical Engineering from the Polytechnic School of USP in Brazil and a Master degree in Business Administration from MIT Sloan School of Management.

Jorge Selume Zaror became a director on May 23, 2001. Mr. Selume also serves as director of the board, among others, for Clínica Indisa, Andean Region — Laureate International, Universidad Andrés Bello, Universidad Las Americas, Instituto Profesional AIEP and Blanco y Negro. Prior to this, Mr. Selume was a director on the board of directors of Banco Osorno y La Unión, a director of the government budget office of Chile, chairman of our former affiliate Corpbanca Venezuela and the CEO of Corpbanca between 1996 and 2001. Mr. Selume received a B.A. in Business and Administration and graduated from the Universidad de Chile. Mr. Selume holds a Masters in Economics from the University of Chicago.

Fernando Aguad Dagach became a director on June 18, 1996. Mr. Aguad has previously held similar positions in a variety of institutions including Interbank Perú, Banco Osorno y La Unión and Canal de Televisión La Red. Mr. Aguad is an investor in financial institutions.

Gustavo Arriagada Morales became a director on September 28, 2010. He has held different senior positions since 1979 in the Chilean Production Development Corporation (Corporación para el Fomento de la Producción or CORFO), Banco de Talca, Chilean Copper Commission (Comisión Chilena del Cobre), Banco de Chile and Banco del Estado, among others. Mr. Arriagada also served in the Chilean Superintendence of Banks and Financial Institutions (Superintendencia de Bancos e Instituciones Financieras or SBIF) as director and as intendent between 1997 and 2005 and as superintendent between 2005 and 2010. He received a B.A. in Business and Administration and an Economics degree from the Universidad de Chile.

Milton Maluhy Filho became a director on January 1, 2019. Previously, Mr. Maluhy was CEO of Itaú Corpbanca between April 1, 2016 and December 31, 2018. Mr. Maluhy joined Itaú Unibanco in 2002 and became a partner in 2010. Previously, he was CEO of Rede S.A. (former Redecar S.A.), a card-processing subsidiary, and Executive Director at Itaú Unibanco, responsible for the management of the credit card segment and retail store alliances. Previously, he worked at Itaú BBA, holding leadership positions in areas such as international, products, operations, treasury, and trading desk. Prior to joining the Bank, he worked at J.P. Morgan, Crédit Commercial de France (CCF Brazil) and Lloyds TSB. Mr. Maluhy holds a B.A. in Business Administration from Fundação Armando Álvares Penteado — FAAP.

Caio Ibrahim David became a director on January 1, 2019. Mr. David has held several positions within the Itaú Unibanco Group including Executive Officer at Itaú Unibanco Holding S.A. He is currently General Director of Wholesale Banking. Previously he served as CFO and CRO of the Conglomerate. He has also served as Director Vice President at Itaú Unibanco S.A. since May 2013 and was also Executive Officer. He has joined the Group in 1987 as a trainee and has worked in the Controllership, Market and Liquidity Risk Control and Treasury departments. Mr. David was Executive Officer at Banco Itaú BBA S.A. Mr. David has served as vice chairman of the Board of Directors (June 2010 to December 2012) and Member of the Board of Directors (May 2010 to December 2012) of Redecard S.A. He has a B.A. degree in Engineering from Universidade Mackenzie and a Postgraduate degree in Economics and Finance from Universidade de São Paulo (USP). He also has a Master’s degree in Controllership from Universidade de São Paulo (USP) and M.B.A. from New York University with specialization in Finance, Accounting and International Business.

Andrés Bucher Cepeda became a director on February 23, 2017. Mr. Bucher has held numerous senior management positions in the Chilean financial industry in the past 28 years. He served as Banchile Corredores de Bolsa’s Chief Executive Officer from November 2012 until May 2016. Mr. Bucher previously worked as the Investment Banking and Capital Markets Division Manager at Banco de Chile beginning in 2008. Before that, Mr. Bucher was Investment Banking head for Citigroup Chile, where he worked for more than 19 years. Mr. Bucher holds a degree in industrial civil engineering from the Pontificia Universidad Católica de Chile and an M.B.A. from The Wharton School at the University of Pennsylvania.

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Pedro Samhan Escandar became a director on September 27, 2016. Mr. Samhan was formerly a member of the Board of Citibank in Panama and Costa Rica. Before that, he was the CFO of Banco de Chile and was appointed as director of Banchile Trade Services Limited. Previously, Mr. Samhan was the CFO of Citigroup Chile for several years. He served as a member of the board of directors of Cruz Blanca Seguros de Vida from 1994 to 1997, AFP Habitat from 1996 to 2006 and Compañía Minera Las Luces from 1994 to 1996. Mr. Samhan was CFO of Citicorp for Caribbean and Central America from 1990 to 1993 and investment banking head of Citicorp Chile from 1988 to 1990. Mr. Samhan holds a degree in civil industrial engineering from Universidad de Chile.

Fernando Concha Ureta became a director on April 11, 2016. Mr. Concha is a co-founding partner at Falcom Capital. He has more than 30 years of experience in the financial industry in Chile and the region. While at Citigroup, he held several leading positions, including Banamex Corporate Director of Treasure Operations, CEO at Citibank Chile and CEO of the Andean Cluster and Central America, among others. In addition, he has also represented Citi as member in several boards and committees, such as Banco de Chile Board, among others. He holds a degree in Business from the Pontificia Universidad Católica de Chile.

Bernard Pasquier became a director on May 31, 2017. Mr. Pasquier has served as consultant and independent board director since 2008 and as a secretary general in Compagnie Monegasque de Banque in Monaco between 2004 and 2007. Mr. Pasquier was appointed by IFC on the Board of Directors of Grupo Mundial, Panama (2008-2013), Gorenje (Slovenia), Davivienda (Colombia 2011 to 2017), and Sogebank (Haïti). He was elected to Monaco Parliament in 2013. He has also served as a director of South Asia Department and as manager in the Africa Department at the IFC. He has also served as senior adviser in the office of the president of the World Bank, as a principal economist and country officer of Africa Region (1985 to 1990), and as an investment officer at the World Bank Group. Mr. Pasquier received a Master of Public Administration and a Major in Business and Economic Development from the Harvard University.

Diego Fresco Gutiérrez became an alternate director on March 28, 2018. Mr. Fresco is currently a member of the Audit Committee of Itaú Unibanco Holding S.A. He previously served as a partner at PwC – São Paulo (2000 to June 2013) in the Capital Markets and Accounting Advisory Services area and prior to that held several positions at PwC in Uruguay (1998 to 2000 and 1990 to 1997) and in the United States (1997 to 1998). He has a B.A. in Accounting from Universidad de la República Oriental del Uruguay in 1994. He is a Certified Public Accountant registered in the State of Virginia (United States) since 2002 (Registration 27,245) and a Contador registered with the Regional Council of Accountancy of the State of São Paulo. He is a member of the Commission of Governance in Financial Institutions of the Brazilian Institute of Corporate Governance (IBGC) since 2013.

Jessica López Saffie became an alternate director on March 19, 2019. Currently, Ms. López is the executive chairperson of the National Association of Healthcare Services Companies (Asociación Nacional de Empresas de Servicios Sanitarios, ANDESS AG). She has more than 35 years of executive and management experience in financial institutions in Chile and specializes in design and strategic execution, risk management, internal audit, and team management. Ms. López previously served as chief executive officer at Banco del Estado de Chile and chairperson of the board of directors of Banco Estado Microempresas. Prior to that, she was also vice chair of the board of directors, member of the board of directors, executive committee and audit committee and chair of the ethics committee and the operational risk committee at Banco del Estado de Chile. She received a B.A. in Business and Administration and an Economics degree from Universidad de Chile.

Our current Executive Officers are as follows:

Executive Officer	Position	Age
Manuel Olivares Rossetti	Chief Executive Officer		53
Gabriel Amado de Moura	Chief Financial Officer		43
Christian Tauber Domínguez	Corporate Director — Wholesale Banking		47
Julián Acuña Moreno	Corporate Director — Retail Banking		53
Pedro Silva Yrarrázaval	Corporate Director — Treasury		58
Luciana Hildebrandi Marchione	Corporate Director — Marketing & Products		46
Mauricio Baeza Letelier	Chief Risk Officer		56
Luis Antônio Rodrigues	Corporate Director — IT		54

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Jorge Novis	Corporate Director — Operations	41
Cristián Toro Cañas	General Counsel	48
Marcela Leonor Jiménez Pardo	Corporate Director — Human Resources	43
Emerson Bastian Vergara	Chief Audit Officer*	40
Sven Riehl	Chief Compliance Officer*	50
Joaquín Rojas Walbaum	General Manager — New York Branch	39
Alvaro De Alvarenga Freire Pimentel	Chief Executive Officer — Itaú Corpbanca Colombia	48

* Mr. Emerson Bastian reports to the audit committee. Mr. Riehl coordinates with senior management through the Chief Risk Officer and has direct communication with the audit committee and the board of directors.

Manuel Olivares Rossetti became Chief Executive Officer on January 1, 2019. He is also currently the Chairman of the board of directors of Itaú Corpbanca Colombia. Mr. Olivares was most recently the Chief Executive Officer and Country Head of Banco Bilbao Vizcaya Argentaria (BBVA), Chile for the last six years, after holding various positions with that bank. Until July 2018, he was also Chairman of the board of directors Forum Servicios Financieros S.A. Mr. Olivares worked for 12 years in different positions at Citibank in both the Santiago and New York branches. Mr. Olivares is currently Vice Chairman of INACAP Technical Training Center and until December 2018 he chaired the Productivity Commission of the Confederación de la Producción y del Comercio (CPC). Mr. Olivares received a B.A. in Economics from the Universidad de Chile and attended the General Management Program (GMP) at Harvard Business School.

Gabriel Amado de Moura became CFO of Itaú Corpbanca on April 1, 2016. Mr. Moura joined Itaú Unibanco in 2000 and became an associate partner in 2010. He has more than 23 years of experience in asset management, risk management, finance and M&A. Mr. Moura held the position of Chief Investment Officer for Itaú’s pension funds, endowments and insurance businesses. He was also Chief Risk Officer for Wealth Management as well as member of the board of directors of different companies in Brazil and abroad. Prior to joining the Bank, he worked at BBVA Asset Management and Itaú Bankers Trust. Mr. Moura holds a M.B.A. from the Wharton School at the University of Pennsylvania.

Christian Tauber Domínguez became corporate director of Wholesale Banking in October 2016. Previously, he served as Corporate Banking director in BBVA. He joined Banco Itaú Chile in October 2007 as the Corporate Banking manager, and from 2011 to 2016 he served as the Corporate Banking manager of Itaú Chile. In 2016 Mr. Tauber took office as the Corporate Manager of Corporate Banking. Mr. Tauber received a B.A. in Business and Economics from the Pontificia Universidad Católica de Chile.

Julián Acuña Moreno became corporate director of Retail Banking in September 2016. Mr. Acuña has vast experience in both national and international banking, having worked as Commercial Division Manager in Chile and in Colombia in Banco Santander-Chile and in Banco Santander Colombia, respectively. Mr. Acuña holds an Accountant Auditor degree from the Universidad Diego Portales, Chile.

Pedro Silva Yrarrázaval became corporate director of Treasury on April 1, 2016. Between October 2006 and March 2016, Mr. Silva held the same position at Corpbanca. Mr. Silva previously served as CEO of our subsidiary Corpbanca Administradora General de Fondos S.A. (Asset Management). Mr. Silva received a B.A. in Business and Administration from the Universidad de Chile and also a M.B.A. from the University of Chicago.

Luciana Hildebrandi Marchione became corporate director of Marketing & Products on January 1, 2019. She joined Itaú Unibanco in 2005, serving as Superintendent of Commercial Planning Itaú Uniclass, and Commercial Superintendent Itaú Uniclass Digital. In 2017, she became Vice President of Product, Franchise and Digital at Itaú Corpbanca Colombia. Mrs. Hildebrandi received a B.A. in Business and Marketing from ESPM in Brazil and an M.B.A. in Commercial Management from the Fundação Getulio Vargas of Brazil.

Mauricio Baeza Letelier became Chief Risk Officer in September 2016. With almost 30 years of experience in the banking industry, Mr. Baeza Letelier has held diverse executive positions in risk management areas of local banking institutions. During the last five years he was the Manager of Corporate Risk of Banco de Chile, while leading the Risk Committee of the Bank and Financial institution Association of Chile (Asociación de Bancos e Instituciones Financieras de Chile). Mr. Baeza received an undergraduate degree in Civil Engineering from the Pontificia Universidad Católica de Chile.

¹  ITCB: Please specify subject matter of the degree, if possible.

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Luis Antônio Rodrigues became Corporate Director of IT in October 2017 after the split of the IT & Operations division from which he was responsible for since April 1, 2016 until September 2017. Mr. Rodrigues has been a director of Itaú Unibanco since 2004, a partner since 2010 and an executive director since 2011. He initiated his career in the Itaú group 32 years ago, and participated on the technology side of every merger and acquisition of the group (Banco Francês e Brasileiro, Banerj, Bemge, Banestado and BankBoston), as well as having a key role in the system integration of Itaú and Unibanco.

Jorge Novis became Corporate Director of Operations in April 2018. Mr. Novis joined Itaú Corpbanca in May 2017 as Head of Strategic Planning and Quality Service. He previously worked at Itaú Unibanco for approximately five years. Mr. Novis received a Civil Engineer degree from Universidade Federal da Bahia, an M.B.A. from Harvard Business School and a Master of Science in Finance from Fundação Getulio Vargas.

Cristián Toro Cañas became General Counsel in June 2016. Mr. Toro worked for more than 10 years in Citibank Chile, acting as general counsel since 2004. In 1999 he worked at Shearman & Sterling in New York. In 2008 he joined Lan Airlines as legal vice-president. After the merger of Lan and Tam, he continued to work as legal vice-president and as the secretary of the board of directors of Latam Airlines Group. Mr. Toro received a law degree from the Pontificia Universidad de Católica de Chile and an MCJ law degree from the New York University School of Law.

Marcela Leonor Jiménez Pardo became Corporate Director of Human Resources in April 2016. Between July 2012 and March 2016 she held the same position at Corpbanca. Previously, she served in the Global Banking Consulting Group at Banco de Chile from 2008 to 2012. Mrs. Jiménez received an undergraduate degree in Philology from the Pontificia Universidad Católica de Chile and a postgraduate degree in Human Resources Management from Universidad Adolfo Ibáñez.

Emerson Bastian Vergara became Chief Audit Executive in April 2017. Previously, Mr. Bastian was a partner in Deloitte Chile´s Governance, Regulatory and Risk Strategies practice. Mr. Bastian received an undergraduate degree in Accounting from Universidad de Chile and a Master degree in Business Administration from Universidad Adolfo Ibáñez.

Sven Riehl became Chief Compliance Officer in August 2017 and is currently the Head of all Non-Financial Risks at Itaú Corpbanca. From April 1, 2016 onwards, Mr. Riehl has also held the position of Head of Operational Risk, Internal Controls & Regulatory Affairs. Previously, he served as Head of International Compliance, Operational Risk and Internal Controls at Itaú Unibanco in São Paulo. Mr. Riehl holds a banking diploma (Germany, 1989) and is Master in Finance from ICADE University (Spain, 2001).

Joaquín Rojas Walbaum became General Manager of Itaú Corpbanca’s New York Branch in October 2017. Previously he was Treasury Director at the New York Branch since September 2009 and beforehand worked in the investment division at MetLife Chile and credit division at MetLife Investments Latin America. Mr. Rojas has more than 14 years of experience. He holds an undergraduate degree in Economics from Universidad de Chile and a Master of Business Administration from Columbia University.

Alvaro De Alvarenga Freire Pimentel became CEO of Itaú Corpbanca Colombia on January 6, 2017. Previously, Mr. Pimentel held different positions during his 20 years with the group in Corporate Banking and the General Operation and Technology areas. He is a partner of Itaú Unibanco. Mr. Pimentel received a degree in Economics from the Universidad de Campinas and an Executive M.B.A. in Finance from the Insper, both in Brazil.

²  ITCB: Please specify academic institution.

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B. COMPENSATION

Consistent with Chilean law, we do not disclose to our shareholders, or otherwise make public, information regarding the individual compensation of our officers. However, we publicly disclose the fees paid to each of our directors and members of the board committees. For the year ended December 31, 2018, we paid the following to each: director UF100 per month, vice-chairman UF450 per month and chairman UF600 per month. Also, our shareholders agreed to continue to pay a monthly fee of UF150 for each member of a board committee and UF250 for the chairman of each such committee. Finally, our ordinary shareholders’ meeting approved additional compensation for the directors and external advisors participating in the following committees:

(a) Credit Committee: UF200 per month;

(b) Assets and Liabilities Committee: UF140 per month;

(c) Audit Committee: UF50 per month for each member and UF150 per month for its chairman;

(d) Corporate Governance Committee: UF50 per month;

(e) Anti-Money Laundering and Anti-Terrorism Finance Prevention Committee: UF50 per month;

(f) Compliance Committee: UF50 per month; and

(g) Management and Talent Committee: UF50 per month.

No amounts were set aside or accrued by us to provide pension, retirement or similar benefits for our directors and executive officers. In the year ended December 31, 2018, we paid our middle management, senior management and directors an aggregate of Ch$23,384 million. Chilean law does not require us to have a compensation committee.

At our ordinary shareholders’ meeting held on March 19, 2019, our shareholders approved to pay each director UF100 per month, the vice-chairman UF450 per month and the chairman UF600 per month. Also, our shareholders agreed to continue to pay a monthly fee of UF150 for each member of a board committee and UF250 for the chairman. Finally, our ordinary shareholders’ meeting approved an additional compensation for the directors and external advisors participating in the following committees:

a) Audit Committee: UF50 per month for each member and UF150 per month for its chairman;

b) Other committees: UF50 for attending meetings of each such committee.

C. BOARD PRACTICES

The period during which the directors have served in their office is shown in the table under Section A of this Item 6. The date of expiration of the current term of office is shown in the table below:

Director	Date of Expiration of Term
Jorge Andrés Saieh Guzmán		March 2022
Ricardo Villela Marino		March 2022
Jorge Selume Zaror		March 2022
Fernando Aguad Dagach		March 2022
Gustavo Arriagada Morales		March 2022
Caio Ibrahim David		March 2022
Milton Maluhy Filho		March 2022
Andrés Bucher Cepeda		March 2022
Pedro Samhan Escandar		March 2022
Fernando Concha Ureta		March 2022
Bernard Pasquier		March 2022
Diego Fresco Gutiérrez		March 2022
Jessica López Saffie		March 2022

Pursuant to the provisions of our bylaws, the members of the board are generally renewed every three years, based on length of service and according to the date and order of their respective appointments. In the Annual Ordinary Shareholders’ Meeting held on March 19, 2019 the board of directors was renewed in its entirety.

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Consequently, the first eleven individuals listed above were elected to the board of directors with Diego Fresco Gutiérrez and Jessica López Saffie elected as alternate directors.

BOARD COMMITTEES

Audit Committee

Our board of directors maintains an audit committee which is currently comprised of five members, including two directors, one alternate director and two non-director members. The current members of the audit committee are Messrs. Andrés Bucher Cepeda, who chairs it, Gustavo Arriagada Morales, Diego Fresco Gutiérrez, Juan Echeverría González and Antonio de Lima Neto.

A description of the experience and qualifications for Messrs. Andrés Bucher Cepeda, Gustavo Arriagada Morales, and Diego Fresco Gutiérrez, each of whom is a director of our Company, is included in “Item 6. Directors, Senior Management and Employees—A. Directors and Senior Management.” Below we include a summary of the experience and qualifications for Mr. Juan Echeverría González and Mr. Antonio de Lima Neto, who are non-director members of the Audit Committee.

Juan Echeverría González currently serves as Corporate Chief Compliance Officer at CorpGroup. He was previously a partner in charge of Deloitte’s audits of Corpbanca, Banco Osorno y la Unión, Banco Bilbao Vizcaya Argentaria, Chile, Banco del Desarrollo, Banco Internacional, Financiera Condell, Banco Corpbanca Venezuela, and of several services provided to such financial institutions from 1993 to 2012. Mr. Echeverría is currently a director and a member of the audit committee of Itaú Corpbanca Colombia, Consorcio Periodístico de Chile (COPESA), Grupo de Radios DIAL S.A., CorpGroup Activos Inmobiliarios S.A., Centro Cultural CorpGroup SpA, and an advisor to the board of directors and audit committee of Compañía Minera San Gerónimo. He has participated in several local and international seminars regarding corporate governance, restructurings and business acquisitions. Mr. Echeverría received a B.A. in Accounting from Universidad de Chile and received two Master degrees from Universidad Adolfo Ibáñez in Business Law and Tax Law. He also holds two Diplomas in Tax Law from Universidad Adolfo Ibáñez.

Antonio de Lima Neto has served as President (August 2009 to October 2013) at Banco Fibra S.A. He has worked as President (December 2006 to April 2009); Vice President of Retail and Distribution (July 2005 to December 2006); Vice President of International Business and wholesale (November 2004 to July 2005); Commercial Director (September 2001 to November 2004); Executive Superintendent of the Commercial Board (July 2000 to September 2001); Tocantins State Superintendent (May 1999 to May 2000) and Regional Superintendent of Belo Horizonte (January 1997 to May 1999) at Banco do Brasil S.A. He has also served as Member of the Board of Directors (2007 to 2009) at Brasilprev Seguros e Previdência S.A.; Member of the Board of Directors (2006 to 2009) at FEBRABAN Brazilian Federation of Banks; Member of the Board of Directors (2004 to 2005) at BB Seguridade e Participações S.A; Member of the Board of Directors (2003 to 2005) at Brasilsaúde Companhia de Seguros; Member of the Board of Directors (2001 to 2009) at Alliance Insurance Company of Brazil; Member of the Board of Directors (2000 to 2007) at BB Securities Limited Pension Fund. He holds a Master’s degree in Economics from Fundação Getulio Vargas (2017); a Course for Board Members from the Brazilian Institute of Corporate Governance (2014); a Postgraduate degree in Marketing from PUC-Rio (2001); Training for Executive M.B.A. from Fundação Dom Cabral (1997); and a B.A. in Economics from Universidade Federal de Pernambuco (UFPE), 1996.

The local regulator for the banking industry (SBIF) recommends that at least one of the members of the audit committee be experienced with respect to the accounting procedures and financial aspects of banking operations. Moreover, the members of the audit committee are appointed by the board of directors and must be independent according to the criteria set forth by the board of directors, and they cannot accept any payment or other compensatory fee from the Company, other than in their role and responsibility as members of the board of directors, of the audit committee or of other established Committees. Members of the audit committee receive a monthly remuneration.

The audit committee has one charter that establishes its composition, objectives, roles, responsibilities and extension of its activities. The SBIF requires the audit committee to meet at least every four months and to provide an annual written report to the board of directors informing it of its activities. This report must also be presented to the annual shareholders’ meeting. According to their charter, the audit committee meetings take place at least twice a month.

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The main objectives of the audit committee are to oversee the effectiveness of the internal controls established by management, as well as to oversee compliance with laws and regulations. Other specific responsibilities of the audit committee include:

• propose to the directors’ committee the firm of external auditors and the rating agencies to be engaged;

• review the reports, content and procedures applied by the rating agencies;

• approve the annual internal audit plan and its modifications;

• approve the annual budget, oversee the activities of and evaluate the performance of internal audit, who reports directly to the audit committee;

• receive and review reports issued by internal auditors;

• review with management and the external auditors the annual and interim financial statements and report the results to the board of directors;

• review the reports issued by regulators;

• be informed about relevant internal frauds or about misconduct cases related to employees; and

• report to the board of directors changes in accounting policies and its effects.

Directors’ Committee

Our board maintains a directors’ committee which is currently comprised of three members, all of which are considered under Chilean law as independent directors of our board of directors. Also, a fourth director participates as a guest member. The current members of the directors committee are Messrs. Gustavo Arriagada Morales, who chairs it, Fernando Concha Ureta and Bernard Pasquier, as office-holders, and Pedro Samhan as permanent guest.

A description of the experience and qualifications for Messrs. Gustavo Arriagada Morales, Fernando Concha Ureta, Pedro Samhan and Bernard Pasquier, each of whom is a director of the Company is included in “Item 6. Directors, Senior Management and Employees—A. Directors and Senior Management.”

The directors’ committee has bylaws that establish their composition, organization, objectives, duties, responsibilities and extension of its activities. The SBIF requires the directors committee to meet at least every four months and to provide an annual written report to the board of directors informing it of its activities. The report must also be presented to the annual shareholders’ meeting. According to its charter, the directors committee meets once per month.

The directors committee’s responsibilities are, among others:

• reviewing the reports of the internal and external auditors, the balance sheet and any other financial statements presented by the administration to the shareholders, and to sign-off on it prior to its presentation to the shareholders for approval;

• recommending external auditors and rating agencies to the board of directors;

• reviewing operations with related parties and reporting to the board of directors;

• reviewing the compensation plans of executive officers and principal officers;

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• examining the systems of remuneration and compensation plans for managers, senior executives and employees of the company;

• preparing an annual report about its activities, including its main recommendations to shareholders; and

• other duties required by our bylaws, a shareholders meeting and our board of directors.

OTHER COMMITTEES

Corporate Governance Committee

The corporate governance committee was established by the board of directors as an advisory body of it that aims to ensure the existence and development of better corporate governance practices for financial institutions. For that purpose, it is in charge of evaluating practices and policies that are currently in execution, making proposals to the board of directors of improvements, adjustments or reforms and pursuing for the proper implementation and applications of said practices and policies of corporate governance. The committee performs its duties with respect to the Bank, its affiliates and related entities abroad.

The committee is composed of six directors and one non-director member. This committee is empowered to engage external consultants. This committee is currently comprised by Mr. Andrés Bucher Cepeda, who chairs it, and Messrs. Ricardo Villela Marino, Caio Ibrahim David, Bernard Pasquier, Jessica López Saffie and Alejandro Ferreiro Yazigi (non-director member).

The committee is regulated by its bylaws, by applicable legal and regulatory rules and by the principles established by the Organization for Economic Co-operation and Development (OECD) as well as those defined by the Basel Committee on Banking Supervision on good corporate governance matters for financial institutions.

Anti-Money Laundering and Anti-Terrorism Finance Prevention Committee

This committee is in charge of preventing money laundering and terrorism financing. Its main purposes include planning and coordinating activities to comply with related policies and procedures, staying informed about the work carried out by the Compliance Officer and making decisions on any improvements to control measures proposed by the Compliance Officer. This committee is comprised of two directors, the CEO, the Legal Counsel, the Chief Risk Officer, the Chief of Retail Banking, the Chief of Wholesale Banking and the Compliance Officer. This committee has the authority to request attendance from any executives or associates that it deems necessary. The committee has regular monthly meetings and holds extraordinary sessions when considered appropriate by any of its members.

Compliance Committee

The purpose of this committee is to monitor compliance with our codes of conduct and other complementary rules, establish and develop procedures necessary for compliance with these codes, interpret, administer and supervise compliance with these rules and resolve any conflicts that may arise. This committee is comprised of one director, the CEO, the Legal Counsel, the Chief of Human Resources and the Chief Risk Officer.

Assets and Liabilities Committee

The main purpose of this committee is to monitor compliance with the financial guidelines established by our board of directors. In this regard, it approves and follows up on the financial strategies that guide the Bank regarding the composition of its assets and liabilities, income and expenditure flows and operations with financial instruments.

Credit Committee

The purpose of this committee is to (i) establish the limits and procedures of the credit policy of the Bank and its subsidiaries and to establish approval exceptions for financial decisions exceeding certain thresholds and (ii) evaluate and resolve lending operations in general that are of competence of this committee.

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Management and Talent Committee

The purpose of this committee is to determine an objective process to recommend the appointment of the senior management and perform an advisory role in relation with the administration of the senior management, including the right to make non-binding recommendations to the board of directors relating to the compensation, the milestones to be achieved and the evaluation of the CEO and other senior officers. This committee is comprised of five directors.

D. EMPLOYEES

As of December 31, 2018, on a consolidated basis, we had 9,179 employees. At the same date, approximately 49.2% of our employees were unionized. All management positions are held by non-unionized employees. We believe that we have good relationships with our employees and the unions to which some of our employees belong. Our employees are covered by collective bargaining agreements, which Itaú Corpbanca entered into in 2017 for former Corpbanca’s unions and for former Banco Itaú Chile’s unions. Both agreements provide for improved benefits and have a term of three years.

The table below shows our employees by geographic area:

	Year Ended December 31,
	2016		2017		2018
Chile		5,904		5,817		5,653
Colombia		3,675		3,594		3,445
Panama		52		50		49
United States		28		31		32
Total		9,659		9,492		9,179

E. CONTROLLING SHAREHOLDER’S SHARE OWNERSHIP

As of March 31, 2019, Itaú Unibanco is the sole controlling shareholder of Itaú Corpbanca with a total share of capital of 38.14% through Itaú Unibanco Holding S.A., ITB Holding Brasil Participações Limitada, CGB II SpA, CGB III SpA, SAGA II SpA and SAGA III SpA who beneficially own approximately 22.45%, 11.13% , 2.13%, 0.35%, 1.37% and 0.71% of our outstanding shares, respectively.

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The following chart is an overview of our ownership structure as of March 31, 2019:

Our directors and senior managers do not have different or preferential voting rights with respect to those shares they own.

We do not have any arrangements for issuing capital to our employees, including any arrangements that involve the issue or grant of options of our shares or securities.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A. MAJOR SHAREHOLDERS

Our only outstanding voting securities are our common shares. As of March 31, 2019, we had 512,406,760,091 common shares outstanding.

The following table sets forth information with respect to the record and beneficial ownership of our capital stock as of March 31, 2019:

Shareholders	Number of Shares		Percentage of Total Share Capital			Number of Votes		Percentage of Voting and Dividend Rights
Itaú Unibanco		195,408,043,473		38.14	%		195,408,043,473		38.14	%
Itaú Unibanco Holding S.A.		115,039,610,411		22.45	%		115,039,610,411		22.45	%
ITB Holding Brasil Participações Limitada		57,008,875,206		11.13	%		57,008,875,206		11.13	%
CGB II SpA		10,908,002,836		2.13	%		10,908,002,836		2.13	%
CGB III SpA		1,800,000,000		0.35	%		1,800,000,000		0.35	%
Saga II SpA		7,000,000,000		1.37	%		7,000,000,000		1.37	%

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Shareholders	Number of Shares		Percentage of Total Share Capital			Number of Votes		Percentage of Voting and Dividend Rights
Saga III SpA		3,651,555,020		0.71	%		3,651,555,020		0.71	%
Saieh Family		146,394,540,608		28.57	%		146,394,540,608		28.57	%
Corp. Group Banking S.A.		136,127,850,073		26.57	%		136,127,850,073		26.57	%
Cía. Inmob. y de Inversiones Saga SpA(1)		10,266,690,535		2.00	%		10,266,690,535		2.00	%
IFC		17,017,909,711		3.32	%		17,017,909,711		3.32	%
Others		153,586,266,299		29.97	%		153,586,266,299		29.97	%
Securities Brokerage		56,476,665,178		11.02	%		56,476,665,178		11.02	%
ADSs holders and Foreign Inst. Investors		44,953,944,517		8.77	%		44,953,944,517		8.77	%
Local Institutional Investors		26,894,700,808		5.25	%		26,894,700,808		5.25	%
Other minority shareholders		25,260,955,796		4.93	%		25,260,955,796		4.93	%
Total		512,406,760,091		100.00	%		512,406,760,091		100.00	%

⁽¹⁾  Includes 508,725,981 shares owned by Cía. Inmob. y de Inversiones Saga SpA that are under custody.

As of March 31, 2019, ADS holders (through the depositary) and foreign institutional investors held approximately 14.01% of our total common shares, represented by seven registered shareholders (The Bank of New York Mellon ADRs; Banco de Chile on behalf of non-resident third parties; Itaú Corpbanca on behalf of investors; Banco Santander on behalf of foreign investors; Banco Santander-HSBC Bank PLC London Client Account; IFC and Sierra Nevada Investments Chile Dos Limitada). The remaining 86.0% of our total shares were held locally, in Chile, represented by 440,617,813,683 shares held by local shareholders. All of our shareholders have identical voting rights.

Itaú Unibanco Holding S.A., ITB Holding Brasil Participações Limitada, CGB II SpA, CGB III SpA, Saga II SpA and Saga III SpA, accounted for approximately 22.45%, 11.13%, 2.13%, 0.35%, 1.37% and 0.71%, respectively, of our outstanding common shares as of March 31, 2019. Itaú Unibanco Holding S.A., ITB Holding Brasil Participações Limitada, CGB II SpA, CGB III SpA, Saga II SpA and Saga III SpA are each controlled by Itaú Unibanco who is the sole controlling shareholder of Itaú Corpbanca.

Itaú Unibanco and CorpGroup have signed the Itaú CorpGroup Shareholders’ Agreement to determine aspects related to corporate governance, dividend policy (based on performance and capital metrics), transfer of shares, liquidity and other matters. For a description of the Itaú CorpGroup Shareholders’ Agreement and the Transaction Agreement, see “Item 10. Additional Information—C. Material Contracts.”

B. RELATED PARTY TRANSACTIONS

GENERAL

In the ordinary course of our business, we engage in a variety of transactions with certain of our affiliates and related parties. The Chilean Corporations Act requires that our transactions with related parties be in our interest and also on an arm’s-length basis or on similar terms to those customarily prevailing in the market. We are required to compare the terms of any such transaction to those prevailing in the market at the date the transaction is to be entered into. In the event that the transaction is not within the ordinary course of business, prior to its effectiveness, the directors committee must prepare a report describing the conditions of the operation and present it to the board of directors for its express approval. Directors of companies that violate this provision are liable for the resulting losses. Under the Chilean General Banking Act, transactions between a bank and its affiliates are subject to certain additional restrictions.

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Under the Chilean Corporations Act, a “related party transaction,” in the case of an open stock corporation, is any operation between such corporation and (i) one or more related persons under Article 100 of the Securities Market Act (see below), (ii) a director, manager, administrator, principal officer or liquidator of the corporation, by him/herself or on behalf of persons other than the corporation, or their respective spouses or blood or marriage relatives to the second degree, (iii) an entity of which any of the persons indicated in the previous numeral is the direct or indirect owner of ten percent or more of its capital or a director, manager or officer, (iv) a person or entity determined as such by the by-laws of the corporation or the board committee, and (v) an entity in which a director, manager, administrator, principal officer or liquidator of the corporation, has acted in any of those capacities during the immediately previous 18 months.

Article 100 of the Securities Market Act provides that the following persons are “related” to a company: (i) the other entities of the business conglomerate to which the company belongs, (ii) parents, subsidiaries and equity-method investors and investees of the company, (iii) all directors, managers, officers and liquidators of the company and their spouses or blood relatives to the second degree, or any entity controlled, directly or indirectly, by any of the referred individuals, (iv) any person that, by him/herself or with other persons under a joint action agreement, may appoint at least one member of the management of the company or control ten percent or more of the capital or voting capital of a stock company and (v) other entities or persons determined as such by the CMF.

A publicly-traded corporation may only enter into a related transaction when its aim is to contribute to the corporate general interests, its conditions are set at arm’s length and the corporation has followed the procedure indicated in the Chilean Corporations Act. The procedure to approve a related transaction can be summarized as follows: (i) the directors, managers, administrators, principal officers and liquidators involved in the potential transaction must give notice thereof to the board (these persons are obligated to disclose their interest in the transaction and their reasons to justify the convenience of the transaction for the corporation, both of which must be informed to the public), (ii) the absolute majority of the board, excluding any director involved in the transaction, must approve the transaction, (iii) the approval given by the board must be informed to the next shareholders’ meeting, (iv) if the directors involved in the transaction form the majority of the board, the transaction may only be approved by the unanimity of the remaining directors or by two-thirds of the issued voting shares in the corporation in a shareholders’ meeting, and (v) where the approval of the shareholders’ meeting is required, the board will request an independent appraiser to submit to the shareholders the conclusions regarding the conditions of the transaction.

These rules are not applicable to non-material transactions in terms of amounts involved, transactions included in the ordinary course of business of the corporation, according to the policies approved by the board and transactions with another entity of which the corporation owns at least 95% of its shares or rights.

Non-compliance with these rules does not invalidate the transaction, but the persons involved will be obligated to transfer the benefit accrued thereby from the transaction to the corporation and will be held liable for the potential damages suffered by the corporation. These rules apply to all publicly-traded corporations and to their subsidiaries, regardless of their corporate type.

We believe that we have complied with the applicable requirements of the Chilean Corporations Act in all transactions with related parties and affirm that we will continue to comply with such requirements.

As of December 31, 2016, 2017 and 2018, loans to related parties totaled Ch$233,672 million, Ch$214,026 million and Ch$263,338 million, respectively. See Note 32 to our consolidated financial statements for a more detailed accounting of transactions with related parties.

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LOANS TO RELATED PARTIES

As of December 31, 2016, 2017 and 2018, loans to related parties were as follows (loans for 2018 refer to loans and accounts receivable from customers at amortized cost and for prior periods, loans refer to loans and accounts receivable from customers, net):

	Operating Companies			Investment Companies			Individuals
As of December 31, 2018	(in millions of constant Ch$ as of December 31, 2018)
Loans and receivables to customers:
Commercial loans		170,873			64,073			3,960
Mortgage Loans		—			—			21,154
Consumer Loans		—			—			5,961
Loans and receivables to customers—gross		170,873			64,073			31,075
Provision for loan losses		(2,550	)		(70	)		(63	)
Loans and receivables to customers, net		168,323			64,003			31,012

	Operating Companies			Investment Companies			Individuals
As of December 31, 2017	(in millions of constant Ch$ as of December 31, 2017)
Loans and receivables to customers:
Commercial loans		113,202			79,715			3,730
Mortgage Loans		—			—			19,273
Consumer Loans		—			—			5,081
Loans and receivables to customers—gross		113,202			79,715			28,084
Provision for loan losses		(1,627	)		(5,252	)		(96	)
Loans and receivables to customers, net		111,575			74,463			27,988

	Operating Companies			Investment Companies			Individuals
As of December 31, 2016	(in millions of constant Ch$ as of December 31, 2016)
Loans and receivables to customers:
Commercial loans		117,362			93,170			3,070
Mortgage Loans		—			—			19,568
Consumer Loans		—			—			3,493
Loans and receivables to customers—gross		117,362			93,170			26,131
Provision for loan losses		(2,398	)		(396	)		(197	)
Loans and receivables to customers, net		114,964			92,774			25,934

All loans to related parties were made in the ordinary course of business, were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons, and did not involve more than the normal risk of collectability or present other unfavorable features. During 2016, 2017 and 2018 and in accordance with IFRS, the total gross amounts of related party loans outstanding amounted to Ch$236,663 million, Ch$221,001 million and Ch$266,021 million, respectively.

OTHER TRANSACTIONS WITH RELATED PARTIES

During 2016, 2017 and 2018, we had the following income (expenses) from services provided to (by) related parties:

	2016			2017			2018
Company	Income (expenses)			Income (expenses)			Income (expenses)
	(in millions of nominal Ch$)
Redbanc S.A.		(3,754	)		(3,355	)		(3,002	)
Transbank S.A.		(10,882	)		(14,586	)		(15,469	)
Combanc S.A.		(291	)		(378	)		(350	)
Itaú Chile Cía. de Seguros de Vida S.A.		—			—			—
Seguros		(21,775	)		6,871			(613	)
Servicios de recaudación		—			—			—
Arriendos		—			—			—
Asesorías Cumelen S.A.		(450	)		—			—

172

	2016			2017			2018
Company	Income (expenses)			Income (expenses)			Income (expenses)
	(in millions of nominal Ch$)
Corp Research S.A.		(443	)		(453	)		(463	)
Recuperadora de Créditos S.A.		(540	)		—			—
Itaú Chile Inv. Serv. y Administración S.A.		(422	)		(650	)		63
Compañía de Seguros Confuturo S. A.		(1,418	)		—
Instituto de Estudios Bancarios Guillermo Subercaseaux		(69	)		(143	)		(121	)
Opina S.A.		(110	)		—			—
VIP Asesorías y Servicios Integrales Limitada		(185	)		(415	)		(129	)
Everis Chile S.A.		—			(607	)		(906	)
Itaú Unibanco S.A.		—			—			—
CAI Gestión Inmobiliaria S.A.		(90	)		(115	)		(103	)
Compañía de Seguros Corp Seguros S.A		(3,263	)		—			—
Universidad Andres Bello		(32	)		—			—
Promoservice S.A.		(1,431	)		(267	)		—
Comder Contraparte Central S.A		(697	)		(1,067	)		(902	)
Sinacofi S.A.		(918	)		—			—
Operadora de Tarjeta de Crédito Nexus S.A.		(1,896	)		(3,836	)		(2,909	)
Pulso Editorial S.A.		(521	)		(509	)		(471	)
Inmobiliaria Edificio CorpGroup S.A.		(5,010	)		(4,725	)		(4,693	)
Grupo de Radios Dial S.A.		(107	)		—			—
Hotel Corporation of Chile S.A.		(64	)		(265	)		(94	)
Corp Imagen y diseños S.A.		(82	)		(196	)		(99	)
Asesorías e Inversiones Rapelco Limitada S.A.		(37	)		—			—
CorpGroup Holding Inversiones Limitada		(394	)		(398	)		(408	)
SMU S.A., Rendic Hnos. S.A.		(2,152	)		(2,221	)		(2,262	)
Inversiones Corp Group Interhold Limitada		(2,172	)		(3,097	)		(2,476	)
Bcycle Latam SPA		—			(552	)		(4,048	)
Bolsa de Comercio de Santiago		—			—			(204	)
Adexus S.A.		—			—			(254	)
Total		(59,205	)		(30,964	)		(40,210	)

These transactions were carried out on terms normally prevailing in the market at the date of the transaction.

C. INTERESTS OF EXPERTS AND COUNSEL

Not applicable.

ITEM 8. FINANCIAL INFORMATION

A. CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION

See “Item 17. Financial Statements.”

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LEGAL PROCEEDINGS

We are involved in collections proceedings initiated by us in the normal course of business and certain proceedings against us in the ordinary course of banking business as disclosed in Note 21 to our consolidated financial statements included herein.

On December 30, 2015, the SBIF issued Letter No. 16,191 (or Letter 16,191) whereby we were informed that as a consequence of the appointment of the former member of our board of directors, Mr. Rafael Guilisasti Gana, as member of the board of directors of Norte Grande S.A., Sociedad de Inversiones Oro Blanco S.A. and Sociedad de Inversiones Pampa Calichera S.A., the SBIF had commenced a special review on the corporate group known as “Cascadas” in order to verify our compliance with credit limitations set forth in the Chilean General Banking Act. The SBIF concluded that all the companies of the Cascadas group are part of a “corporate organizational structure” to exercise control over SQM S.A., therefore, they should be considered a single debtor for the purposes of computing the above referenced credit limitations. As a consequence of the above, the SBIF concluded that Corpbanca violated the individual lending limits set forth in Article 84 No. 1 of the Chilean General Banking Act in relation to Article 85 of the same norm regarding the companies that constitute the Cascadas group. In light of the foregoing, the SBIF imposed three fines on Corpbanca of 10% of the excess of such credit limitations for a total amount of Ch$21,764,507,494 (US$30.65 million).

On January 8, 2016, the Bank paid the full amount of the fines as a mandatory condition precedent to exercise its appeal rights. On January 18, 2016, the Bank brought an action before the Santiago Court of Appeals seeking the annulment of the fines. Pursuant to a final ruling by the Court of Appeals of Santiago dated August 31, 2016, the fines imposed by the SBIF pursuant to letter No.16,191 were declared illegal. In accordance with Article 22 of the General Law on Banks, the favorable ruling obtained by Itaú Corpbanca is not subject to appeal.

On September 6, 2016, the SBIF filed a complaint (Recurso de Queja) against the judges of the Court of Appeals of Santiago before the Supreme Court, which was dismissed by the Supreme Court on May 9, 2017.

On October 19, 2017, the SBIF filed a complaint against Itaú Corpbanca regarding the same alleged violations, giving rise to a new administrative procedure. On November 14, 2017, Itaú Corpbanca filed a special constitutional rights action (Acción de Protección) before the Santiago Court of Appeals that was declared inadmissible. This ruling was confirmed by the Supreme Court. On November 22, 2017, Itaú Corpbanca filed a defense arguing that it acted in full compliance with applicable law. Pursuant to resolution No. 101, dated January 4, 2019, the SBIF partially accepted the defenses of Itaú Corpbanca, imposing a fine for one of the three charges originally formulated. The total amount of the fine imposed was Ch$5,985,328,978. In an extraordinary meeting on January 14, 2019, Itaú Corpbanca’s board of directors analyzed the grounds and consequences of resolution No. 101, including potential courses of action, and reaffirmed the conviction that Itaú Corpbanca has acted in compliance with applicable law. Notwithstanding the foregoing, Itaú Corpbanca decided not to file any appeals against the SBIF’s resolution.

In December 2016, Helm LLC (“Helm”) initiated an arbitration proceeding before the ICC International Court of Arbitration (the “ICC”) against Corp Group Holding Inversiones Ltda. (“Corp Group”) and Itaú Corpbanca (collectively, “Respondents”). Helm alleged that the Respondents had breached (i) the Amended and Restated Shareholders Agreement of HB Acquisition S.A.S., dated July 31, 2013, which governs Itaú Corpbanca’s subsidiary Itaú Corpbanca Colombia (formerly Banco Santander Colombia S.A.), and (ii) the Transaction Agreement, dated January 29, 2014, as amended and restated, which governs the merger between Itaú Chile S.A. and Corpbanca, by which Itaú Corpbanca was formed, and the potential acquisition by Itaú Corpbanca of certain shares of Itaú Corpbanca Colombia from Corp Group.

During the course of the proceedings, Helm demanded that Itaú Corpbanca and Corp Group effect the acquisition of its shares of Itaú Corpbanca Colombia at a price in excess of the price agreed with Corp Group in the Transaction Agreement, which would have totaled approximately $850 million (with interest at 9% per year from January 29, 2014 onwards). On February 28, 2019, a three-member Tribunal of the ICC rejected Helm’s demand and ordered Helm to sell its shares of Itaú Corpbanca Colombia, which represent 19.44% of the equity in Itaú Corpbanca Colombia, to Respondents at approximately $299 million (including interest at LIBOR plus 2.7% per year from April 1, 2016 onwards). Itaú Corpbanca intends to purchase the shares from Helm. This price of $299 million implies a valuation multiple of 1.36 times the book value of Itaú Corpbanca Colombia as of December 31, 2018 and is consistent with the valuations of Itaú Corpbanca Colombia in Itaú Corpbanca’s financial statements. The acquisition, when completed, will result in an estimated impact of 0.82% on Itaú Corpbanca’s Common Equity Tier 1 capital, as if we were applying the new regulatory capital requirements on a fully loaded basis, under the Basel III standards (using exchange rates as of February 28, 2019).

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The purchase of shares of Itaú Corpbanca Colombia by Itaú Corpbanca will be subject to regulatory approvals in Colombia, Chile and Brazil. We have also sought regulatory approval to purchase the shares held by Kresge Stock Holding Company Inc. (“Kresge”) in Itaú Corpbanca Colombia, which represent 1.38% of the capital stock of Itaú Corpbanca Colombia. When the purchase of shares is complete, Itaú Corpbanca and Corp Group intend to terminate the existing Shareholders Agreement. We can offer no assurances as to when the regulatory approvals, which are not perfunctory, will be received. The acquisition of the non-controlling interest of Kresge and corresponding obligation is to be reflected in our consolidated financial statements once the approval process is completed. Consequently, there are no effects to be recognized in our consolidated financial statements included in our Annual Report.

DIVIDEND POLICY

Under the Chilean Corporations Act, Chilean open stock companies, such as ours, are generally required to distribute at least 30% of their net income each year, unless otherwise agreed by the unanimous consent of our shareholders. In the event of any loss of capital or of the legal reserve, no dividends can be distributed so long as such loss is not recovered from earnings or otherwise. No dividends above the legal minimum can be distributed if doing so would result in the Bank exceeding its indebtedness ratio or our lending limits.

On the other hand, the Itaú CorpGroup Shareholders’ Agreement provides for a dividend policy that targets, in the following order of priority: (i) first, complying with the Optimal Regulatory Capital for such fiscal year, as this term is defined therein, (ii) second, the payment of cash dividends aggregating at least US$370 million for each year and (iii) third, achieving a growth rate of the total assets of Itaú Corpbanca and Itaú Corpbanca Colombia above the Minimum Growth Rate (as this term is defined therein) and other reasonable objectives as determined by the board of Itaú Corpbanca. See “Item 10. Additional Information—C. Material Contracts — Itaú CorpGroup Shareholders’ Agreement.”

The Itaú CorpGroup Shareholders’ Agreement provides for the distribution of the 100% of the fiscal year’s net income, calculated as total net income for the period less an amount provisioned to comply with the Optimal Minimum Regulatory Capital, as this term is defined in the Itaú CorpGroup Shareholders’ Agreement. In accordance with the Itaú CorpGroup Shareholders’ Agreement, at our ordinary shareholders’ meeting held on March 27, 2018, our shareholders approved a dividend payout ratio of 40% of 2017 net income, equivalent to a dividend yield of 0.76%. In 2018, we paid an annual dividend of Ch$0.04484469/share.

In accordance with the Itaú CorpGroup Shareholders’ Agreement, at our ordinary shareholders’ meeting held on March 19, 2019, our shareholders approved a dividend payout ratio of 30% of 2018 net income. As a result, in 2019, we paid an annual dividend of Ch$0.100728627/share, equivalent to a dividend yield of 1.64%.

The actual amount of dividend payments will depend upon, among other factors, our then current level of earnings, capital and legal reserve requirements, as well as market conditions, and there can be no assurance as to the amount or timing of future dividends.

In the event that dividends are paid, holders of ADSs will be entitled to receive dividends to the same extent as the owners of common shares. Dividends received by holders of ADSs will, absent changes in Chilean exchange controls or other laws, be converted into U.S. dollars and distributed net of currency exchange expenses and fees of the depositary and will be subject to Chilean withholding tax, currently imposed at the rate of 35% (which may be subject to credits in certain cases). Owners of ADSs are not charged with any fees with respect to cash or stock dividends.

B. SIGNIFICANT CHANGES

There have been no significant changes since the date of our annual financial statements.

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ITEM 9. OFFER AND LISTING DETAILS

Not applicable.

A. OFFER AND LISTING DETAILS

Not applicable.

B. PLAN OF DISTRIBUTION

Not applicable.

C. MARKETS

Our common shares are traded on the Santiago Stock Exchange and the Chilean Electronic Stock Exchange under the symbol “ITAUCORP.” Our ADSs have been listed since November 1, 2004 on the New York Stock Exchange under the symbol “ITCB.”

D. SELLING SHAREHOLDER

Not applicable.

E. DILUTION

Not applicable.

F. EXPENSES OF THE ISSUE

Not applicable.

ITEM 10. ADDITIONAL INFORMATION

A. SHARE CAPITAL

Not applicable.

B. MEMORANDUM AND ARTICLES OF INCORPORATION

Set forth below is material information concerning our share capital and a brief summary of the significant provisions of our by-laws and Chilean law. This description contains material information concerning the shares, but does not purport to be complete and is qualified in its entirety by reference to our by-laws, the Chilean General Banking Act, the Chilean Corporations Act and the Chilean Securities Market Act each referred to below.

GENERAL

Shareholders rights in a Chilean bank that is also a special corporation (Sociedad Anónima Especial) are subject to the regulations of open stock corporations (Sociedades Anónimas Abiertas or “Public Companies”) are governed by the bank’s by-laws, which effectively serve the purpose of both the articles or certificate of incorporation and the by-laws of a company incorporated in the United States, by the Chilean General Banking Act and secondarily, to the extent not inconsistent with the latter, by the provisions of Chilean Corporations Act applicable to public companies except for certain provisions which are expressly excluded. Article 137 of the Chilean Corporations Act sets forth that all provisions of the Chilean Corporations Act take precedence over any contrary provision in a corporation’s by-laws. Both the Chilean Corporations Act and our by-laws provide that legal actions by shareholders against us (or our officers or directors) to enforce their rights as shareholders or by one shareholder against another in their capacity as such, are to be brought in Chile in arbitration proceedings, notwithstanding the plaintiff’s right to submit the action to the ordinary courts of Chile.

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The Chilean securities markets are principally regulated by the CMF under the Chilean Securities Market Act and the Chilean Corporations Act. In the case of banks, compliance with these laws is supervised by the SBIF. These two acts provide for disclosure requirements, restrictions on insider trading and price manipulation, and protection of minority investors. The Chilean Securities Market Act sets forth requirements relating to public offerings, stock exchanges, securities brokers and dealers, and outlines disclosure requirements for companies that issue publicly offered securities. The Chilean Corporations Act sets forth the rules and requirements for establishing public companies while eliminating government supervision of closed (closely-held) corporations. Public companies are those that voluntarily, or are legally required to, register their shares in the Securities Registry kept by the CMF.

BOARD OF DIRECTORS

Our board of directors has 11 regular members and two alternate members, elected by shareholders’ vote at ordinary shareholders’ meetings. The directors may be either shareholders or non-shareholders of the Company. There is no age limit for directors.

A director remains in office for three years and may be re-elected indefinitely. If for any reason, the ordinary shareholders’ meeting in which the new appointments of directors are to be made is not held, the duties of those serving as such shall be extended until their replacements are designated, in which case, the board of directors shall convene a meeting at the earliest possible time in order to effect the appointments.

The directors are entitled to compensation for the performance of their duties. The amount of their compensation is determined annually at the ordinary shareholders’ meeting. In addition, payments in the form of wages, fees, travel accounts, expense accounts, dues as representatives of the board of directors and other cash payments, payments in kind or royalties of any sort whatsoever, may be paid to certain directors for the performance of specific duties or tasks in addition to their functions as directors imposed upon them specifically by the ordinary shareholders’ meeting. Any special compensation must be reported at the ordinary shareholders’ meeting, and for that purpose, a detailed and separate entry shall be made in our annual report to investors, which shall expressly indicate the complete name of each of the directors receiving special compensation.

Without prejudice to any other incapacity or incompatibility established by the Chilean Corporations Act, according to the Chilean General Banking Act, the following may not be directors: (i) those persons who have been sentenced or are being tried for crimes punishable with a principal or accessory penalty of temporary or permanent suspension from or incapacity to hold public office, (ii) those persons who have been declared bankrupt and have not been rehabilitated, (iii) members of the Chilean Congress, (iv) directors or employees of any other financial institutions, brokers and security traders, together with its directors, officers, executives and managers; employees appointed by the President of Chile and employees or officers of (x) the State, (y) any public service, public institution, semi-public institution, autonomous entity or state-controlled company, or any such entity, a Public Entity, or (z) any enterprise, corporation or public or private entity in which the State or a Public Entity has a majority interest, has made capital contributions, or is represented or participating, provided that persons holding positions in teaching activities in any of the above entities may be directors, and (v) the bank’s employees, which shall not prevent a director from holding on a temporary basis and for a term not to exceed 90 days the position of manager. The CEO may not be elected as a director.

For purposes of the election of directors, each shareholder shall have the right to one vote per share for purposes of electing a single person, or to distribute his votes among candidates as he or she may deem convenient, and the persons obtaining the largest number of votes in the same and single process shall be awarded positions, until all positions have been filled. The elections of regular and alternate board members are carried out separately. For purposes of casting votes, the chairman and the secretary, together with any other persons that may have been previously designated by at the meeting to sign the minutes thereof, shall issue a certificate giving evidence of the oral votes of shareholders attending, following the order of the list of attendance being taken.

Each shareholder is entitled to cast his or her vote by means of a ballot signed by him or her, stating whether he or she signs for his own account or as a representative. This entitlement notwithstanding, in order to expedite the voting process, it can be ordered that the vote be taken alternatively or by oral vote or by means of ballots. At the time of polling, the chairman may instruct that the votes be read aloud, in order for those in attendance to count the number of votes issued and verify the outcome of the voting process.

177

Every election of directors, or any changes in the election of directors, shall be transcribed into a public deed before a notary public, published in a newspaper of Santiago and notified to the SBIF by means of the filing of a copy of the respective public deed. Likewise, the appointments of general manager, manager and deputy managers shall be communicated and transcribed into a public deed.

If a director ceases to be able to perform his or her duties, whether by reason of conflict of interest, limitation, legal incapacity, impossibility, resignation or any other legal cause, the vacancy is filled as follows: (i) the positions of regular director is filled by a member appointed by the board of directors on its first meeting after the vacancy occurs and such member appointed by the board of directors will remain in the position until the next ordinary shareholders’ meeting, where the appointment may be ratified, in which case, the replacement director will remain in his or her position until the expiration of the term of the director he or she replaced and act as full director; and (ii) while the vacancy has not been filled by the board of directors, an alternate director shall act as regular member.

The alternate directors may temporarily replace regular directors in case of their absence or temporary inability to attend a board meeting. Alternate board members are always entitled to attend and speak at board meetings. They are entitled to vote at such meetings only when a regular member is absent and such alternate member acts as the absent member’s replacement.

During the first meeting following the ordinary shareholders’ meeting, the board of directors elects, by an absolute majority and in separate and secret votes, from among its members, a chairman and a vice chairman. If no director obtains such majority, the election is repeated among those three directors who obtained the most votes, adding any blank votes to the person who obtained the greatest number of votes. In case of a tie, the vote is repeated and, if a tie were to occur again, there is a drawing. The chairman and the vice president may be reelected indefinitely.

The board of directors meets in ordinary sessions at least once a month, held on pre-set dates and times determined by the board. Extraordinary meetings are held whenever called by the chairman, whether at his own will or upon the request of one or more directors, so long as the chairman determines in advance that the meeting is justified, except if the request is made by the absolute majority of the directors in office, in which case the meeting shall be held without such prior determination. The extraordinary meetings may only address those matters specifically included in the agenda for the extraordinary meeting, except that, if the meeting is attended by all the directors in office, they may agree otherwise by a unanimous vote. Notifications of meetings of the board of directors shall be made by certified letter sent to the address of each director registered with the bank, at least five days in advance of the date on which the ordinary or extraordinary session should be held. The five-day period shall be calculated from the date on which the letter is placed in the mail.

The quorum for the board of directors’ meeting is majority of its members in office, this is six directors. Resolutions shall be adopted by the affirmative vote of the absolute majority of the attending directors. In the event of a tie, the person acting as the chairman of the meeting shall have a casting vote.

Directors having a vested interest in a negotiation, act, contract or transaction that is not related to the bank business, either as principal or as representative of another person, shall communicate such fact to the other directors. If the respective resolutions are approved by the board, it shall be in accordance with the prevailing company’s interest and fair market conditions and such director’s interest must be disclosed at the next ordinary shareholders’ meeting by the chairman of such board meeting.

The discussions and resolutions of the board of directors shall be recorded in a special book of minutes maintained by the secretary. The relevant minutes shall be signed by the directors that attended the relevant meeting. If a director determines that the minutes for a meeting are inaccurate or incomplete, he or she is entitled to record an objection before actually signing the minutes. The minutes shall be deemed approved as from the moment it is signed by all the directors that attended such meeting and all the resolutions adopted may be carried out upon the approval. However, by unanimous consent of the directors that attended the meeting, the resolutions adopted by the board may be carried out before the approval of the minutes, provided that the agreement is recorded in a written document signed by all the relevant directors. In the event of death, refusal or incapacity for any reason of any of the directors attending to sign the minutes, such circumstance shall be recorded at the end of the minutes stating the reason for the impediment.

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The directors are personally liable for all of the acts they effect in the performance of their duties. Any director who wishes to disclaim responsibility for any act or resolution of the board of directors must record his or her opposition in the minutes, and the chairman must report such opposition at the following ordinary shareholders’ meeting.

The board will represent us in and out of court and, for the performance of the Bank’s business, a circumstance that will not be necessary to prove before third parties, it will be empowered with all the authorities and powers of administration that the law or the by-laws do not set as exclusive to the ordinary shareholders’ meeting, without being necessary to grant any special power of attorney, even for those acts that the law requires to do so. This provision is notwithstanding the judicial representation of the Bank that is part of the general manager’s authorities. The board may delegate part of its authority to the general manager, to the managers, deputy managers or attorneys of the Bank, a director, a commission of directors, and for specifically determined purposes, in other persons.

CAPITALIZATION

Under Chilean law, the shareholders of a bank, acting at an extraordinary shareholders’ meeting, have the power to authorize an increase in such company’s capital with the authorization of the SBIF. When an investor subscribes for issued shares, the shares are registered in such investor’s name, even if not paid for, and the investor is treated as a shareholder for all purposes except with regard to receipt of dividends and the return of capital; provided that the shareholders may, by amending the by-laws, also grant the right to receive dividends or distributions of capital. An investor becomes eligible to receive dividends and returns of capital once it has paid for the shares (if it has paid for only a portion of such shares, it is entitled to receive a corresponding pro-rata portion of the dividends declared and/or returns of capital with respect to such shares unless the company’s by-laws provide otherwise). If an investor does not pay for shares for which it has subscribed on or prior to the date agreed upon for payment, the board of directors is obligated to initiate legal action to recover outstanding amounts unless holders of two-thirds of the issued shares in an extraordinary shareholders meeting authorizes the board of directors to refrain from pursuing the collection, in which case the company’s capital will be reduced to the amount actually paid. Upon termination of the actions for collection, the board of directors shall propose to the shareholders meeting the write-off of the non-paid amount and the reduction of the capital of the company to the amount effectively paid in. Authorized shares and issued shares which have not been subscribed and paid for within the period fixed for their payment (which cannot be longer than three years) are cancelled and are no longer available for issuance by the company, unless in case of an issuance of convertible bonds (in which case the unsubscribed portion of the capital increase shall remain in place for a number of shares sufficient to comply with the option) or when reserved for compensation plans for employees (in which case the maximum term for subscription and payment cannot be longer than five years).

Article 22 of Chilean Corporations Act states that the purchaser of shares of a company implicitly accepts its by-laws and any agreements adopted at shareholders’ meetings.

OWNERSHIP RESTRICTIONS

Under Article 12 of the Chilean Securities Market Act and the Regulations of the SBIF, shareholders of Public Companies are required to report the following to the CMF and the Chilean stock exchanges:

• any direct or indirect acquisition or sale of shares that results in the holder’s acquiring or ceasing to own, directly or indirectly, 10% or more of a Public Company’s share capital; and

• any direct or indirect acquisition or sale of shares or options to buy or sell shares, in any amount, if made by a holder of 10% or more of a Public Company’s capital or if made by a director, liquidator, main officer, general manager or manager of such corporation.

The foregoing requirements also apply to the acquisition or sale of securities or agreements which price or return depends or is conditioned (all or in a significant part) on changes or movements in the price of such shares. Such report shall be made the day following the execution of the transaction.

179

In addition, majority shareholders must state in any such report whether their purpose is to acquire control of the company or if they are making a financial investment. Any beneficial owner of ADSs representing 10% or more of our share capital is subject to these reporting requirements under Chilean law. The Chilean Securities Market Act also sets forth certain regulations on takeovers of corporations.

Under Article 54 of the Chilean Securities Market Act and the regulations of the CMF, persons or entities intending to acquire control, directly or indirectly, of a Public Company, regardless of the acquisition vehicle or procedure, and including acquisitions made through direct subscriptions or private transactions, are also required to inform the public of such acquisition at least ten business days before the date of perfection of the acts which allow to obtain control of the company, but in any case, as soon as negotiations regarding the change of control are formalized and/or as soon as reserved information and/or documents concerning the target are delivered to the potential acquirer through a filing with the CMF, the stock exchanges and the companies controlled by and that control the target and through a notice published in two Chilean newspapers, which notice must disclose, among other information, the person or entity purchasing or selling and the price and conditions of any negotiations.

Within the same term, a written communication to such effect must be sent to the target corporation, the controlling corporation, the corporations controlled by the target corporation, the CMF, and to the Chilean stock exchanges on which the securities are listed.

In addition to the foregoing, Article 54A of the Chilean Securities Market Act requires that within two business days of the completion of the transactions pursuant to which a person has acquired control of a Public Company, a notice shall be published in the same newspapers in which the notice referred to above was published and notices shall be sent to the same persons mentioned in the preceding paragraphs.

A beneficial owner of ADSs intending to acquire control of us is also subject to the foregoing reporting requirements.

The provisions of the aforementioned articles do not apply whenever the acquisition is being made through a tender or exchange offer.

Title XXV of the Chilean Securities Market Act on tender offers and the regulations of the CMF provide that the following transactions shall be carried out through a tender offer:

• an offer which allows a person to take control of a Public Company;

• an offer for all the outstanding shares of a Public Company upon acquiring two-thirds or more of its voting shares, in which case such controlling shareholder must offer to purchase the remaining shares from the investing shareholders in a tender offer, unless (i) the controlling shareholder has reached two-thirds of the voting shares through a tender offer for all of the shares of the company or due to any of the situations exempted, or (ii) it reaches such percentage as a result of a reduction of the capital of the company by operation of law: such offer must be made at a price not lower than the price at which appraisal rights may be exercised, that is, book value if the shares of the company are not actively traded or, if the shares of the company are actively traded, the weighted average price at which the stock has been traded during the 60 stock exchange business days between the thirtieth and the ninetieth stock exchange business days immediately preceding the acquisition; and

• an offer for a controlling percentage of the shares of a listed operating company if such person intends to take control of the company (whether listed or not) controlling such operating company, to the extent that the operating company represents 75% or more of the consolidated net worth of the holding company.

Nevertheless, the following exceptions are applicable to all the cases described above (i) the shares are being sold by a controlling shareholder of such company at a price in cash which is not substantially higher than the market price and the shares of such company are actively traded on a stock exchange, or (ii) those shares are acquired (a) through a capital increase, (b) as a consequence of a merger, (c) by inheritance, or (d) through a forced sale.

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Article 200 of the Chilean Securities Market Act prohibits any shareholder that has taken control of a Public Company to acquire, within the period of 12 months from the date of the transaction that permitted such shareholder to take control of the Public Company, a number of shares equal to or higher than 3% of the outstanding issued shares of the target without making a tender offer at a price per share not lower than the price paid at the time of the change of control transaction. However, if the acquisition is made on a stock exchange and on a pro rata basis, the controlling shareholder may purchase a higher percentage of shares, if so permitted by the regulations of the stock exchange.

Title XV of the Chilean Securities Market Act sets forth the basis to determine what constitutes control of a business group and a related party while Title XXV establishes a special procedure for acquiring control of a Public Company through a tender offer. The Chilean Securities Market Act defines control as the power of a person, or group of persons acting pursuant to a joint action agreement, to direct the majority of the votes in the shareholders meetings of the corporation, or to elect the majority of members of its board of directors, or to influence the management of the corporation significantly. Significant influence is deemed to exist in respect of the person or group of persons acting together pursuant to a joint action agreement holding, directly or indirectly, at least 25% of the voting share capital, unless:

• another person or group of persons acting pursuant to a joint action agreement, directly or indirectly, control a stake equal to or higher than the percentage controlled by such person or group;

• the person or group does not control, directly or indirectly, more than 40% of the voting share capital and the percentage controlled is lower than the sum of the shares held by other shareholders holding more than 5% of the voting share capital; and

• in cases where the CMF has ruled otherwise, based on the distribution or atomization of the overall shareholding.

According to the Chilean Securities Market Act, a joint action agreement is an agreement among two or more parties which, directly or indirectly, own shares in a corporation at the same time and whereby they agree to participate with the same interest in the management of the corporation or in taking control of the same. The law presumes that such an agreement exists between:

• a principal and its agents;

• spouses and relatives up to certain level of kindred;

• entities within the same business group; and

• an entity and its controller or any of its members.

Likewise, the CMF may determine that a joint action agreement exists between two or more entities considering, among others, the number of companies in which they simultaneously participate and the frequency with which they vote identically in the election of directors, appointment of managers and other resolutions passed at shareholders’ meetings.

According to Article 96 of the Chilean Securities Market Act, a business group is a group of entities with such ties in their ownership, management or credit liabilities that it may be assumed that the economic and financial action of such members is directed by, or subordinated to, the joint interests of the group, or that there are common credit risks in the credits granted to, or securities issued by, them. According to the Chilean Securities Market Act, the following entities are part of the same business group:

• a company and its controlling person;

• all the companies with a common controlling person and the common controlling person; and

• all the entities that the CMF declare to be part of the business group due to one or more of the following reasons:

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• a substantial part of the assets of the company are involved in the business group, whether as investments in securities, equity rights, loans or guaranties;

• the company has a significant level of indebtedness and that the business group has a material participation as a lender or guarantor;

• when the controller is a group of entities, that the company is a member of a controlling person of the entities mentioned in the first two bullets above and there are grounds to include it in the business group based on the definitions above; and

• the company is controlled by one or more member of the controlling group of any of the entities of the business group, when such controller is composed of more than one person and there are grounds to include the company in the business group based on the definition above.

Article 36 of the Chilean General Banking Act states that as a matter of public policy, no person or company may acquire, directly or indirectly, shares that alone or jointly with the shares previously owned by it, represent more than 10% of the shares of a bank without the prior authorization of the SBIF, which may not be unreasonably withheld. The prohibition also applies to beneficial owners of ADSs. In the absence of such authorization, any person or group of persons acting in concert would not be permitted to exercise voting rights with respect to the shares or ADSs acquired. In determining whether or not to issue such an authorization, the SBIF considers a number of factors enumerated in the Chilean General Banking Act, including the financial stability of the purchasing party.

Article 35 bis of the Chilean General Banking Act establishes that prior authorization of the SBIF is required for:

• the merger of two or more banks, where the absorbing bank becomes a bank of systemic importance, pursuant to a regulation that the CMF shall issue within 18 months from the date on which it replaces the SBIF;

• the acquisition of all or a substantial portion (more than one third) of a bank’s assets and liabilities by another bank, where the acquiring bank becomes a bank of systemic importance, pursuant to a regulation that the CMF shall issue within 18 months from the date on which it replaces the SBIF;

• the control by the same person, or controlling group, of two or more banks, where the banks become banks of systemic importance, pursuant to a regulation that the CMF shall issue within 18 months from the date on which it replaces the SBIF; or

• a substantial increase in the share ownership by a controlling shareholder of a bank (understood as either acquiring a majority or two thirds of the bank’s shares), where the controlled bank becomes a bank of systemic importance, pursuant to a regulation that the CMF shall issue within 18 months from the date on which it replaces the SBIF

Such prior authorization is required solely when the acquiring bank or the resulting group of banks would own a significant market share in loans (Colocaciones), defined by the SBIF to be more than 15% of all loans in the Chilean banking system. The intended purchase, merger or expansion may be denied by the SBIF pursuant to a report from the Chilean Central Bank’s Council. Alternatively, a purchase, merger or expansion, when the acquiring bank or resulting group would have a market share in loans defined by the SBIF to be more than 20% of all loans in the Chilean banking system, may be conditioned on one or more of the following:

• that the bank or banks maintain an effective net equity higher than 8% and up to 14% of their risk weighted assets;

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• that the technical reserve established in Article 65 of the Chilean General Banking Act be applicable when deposits exceed one and a half times the resulting bank’s effective net equity (which is the sum of (x) paid-in capital and reserves, plus (y) subordinated bonds up to 50% of letter (x) above under certain terms, plus (z) certain effective risk voluntary reserves up to 1.25% of its risk weighted assets); or

• that the margin for interbank loans be diminished to 20% of resulting bank’s effective net equity.

If the acquiring bank or resulting group would have a market share in loans defined by the SBIF to be more than 15% but less than 20%, the authorization will be conditioned on the bank or banks maintaining an effective net equity not lower than 10% of their risk-weighted assets for the time set forth by the SBIF, which may not be less than one year. The calculation of risk-weighted assets is based on a five-category risk classification system applied to a bank’s assets that is based on the Basel Committee recommendations.

According to the Chilean General Banking Act a bank may not grant loans to related parties on more favorable terms than those generally offered to non-related parties. Article 84 No. 2 of the Chilean General Banking Act and the Regulations of the SBIF create the presumption, among other cases, that natural persons who are holders of shares and who beneficially own more than 1% of the shares (or 5% in the case of bank’s shares actively traded) are related to the bank and imposes certain restrictions on the amounts and terms of loans made by banks to related parties. This presumption would also apply to beneficial owners of ADSs representing more than 1% of the shares, and accordingly the limitations of Article 84 No. 2 would be applicable to such beneficial owners. Finally, according to the Regulations of the SBIF, Chilean banks that issue ADSs are required to inform the SBIF if any person, directly or indirectly, acquires ADSs representing 5% or more of the total amount of shares of capital stock issued by such bank.

Article 16 bis of the Chilean General Banking Act provides that the individuals or legal entities which, individually or with other people, directly control a bank and who individually own more than 10% of its shares shall send to the SBIF reliable information on their financial situation in the form and within the time set forth in Chapter 1-3 of the regulations of the SBIF (Recopilación Actualizada de Normas). Also, controlling shareholders must submit information regarding their financial situation pursuant to Chapter 1-17 of said regulations.

PREEMPTIVE RIGHTS AND INCREASES OF SHARE CAPITAL

The Chilean Corporations Act provides that whenever a Chilean company issues new shares for consideration, it must offer to its existing shareholders the right to purchase a sufficient number of shares to maintain their existing ownership percentages in the company. Pursuant to this requirement, preemptive rights in connection with any future issuance of shares will be offered by us to the depositary as the registered owner of the shares underlying the ADSs. However, the depositary will not be able to make such preemptive rights available to holders of ADSs unless a registration statement under the Securities Act is effective with respect to the underlying shares or an exemption from the registration requirements thereunder is available.

We intend to evaluate, at the time of any preemptive rights offering, the practicality under Chilean law and Central Bank of Chile regulations in effect at the time of making such rights available to our ADS holders, as well as the costs and potential liabilities associated with registration of such rights and the related common shares under the Securities Act, and the indirect benefits to us of thereby enabling the exercise by all or certain holders of ADSs of their preemptive rights and any other factors we consider appropriate at the time, and then to make a decision as to whether to file such registration statement. We cannot assure you that any registration statement would be filed. If we do not file a registration statement and no exemption from the registration requirements under the Securities Act is available, the depositary will attempt to sell such holders’ preemptive rights and distribute the proceeds thereof, after deduction of its expenses and fees, if a premium can be recognized over the cost of such sale. In the event that the depositary is not able, or determines that it is not feasible, to sell such rights at a premium over the cost of any such sale, all or certain holders of ADSs may receive no value for such rights. The inability of all or certain holders of ADSs to exercise preemptive rights in respect of common shares underlying such ADSs could result in such holders not maintaining their percentage ownership of the common shares following such preemptive rights offering unless such holder made additional market purchases of ADSs or common shares.

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Under Chilean law, preemptive rights are exercisable or freely transferable by shareholders during a period that cannot be less than 30 days following the grant of such rights. During such period (except for shares as to which preemptive rights have been waived), Chilean Public Companies are not permitted to offer any newly issued shares for sale to any third party. For an additional 30-day period thereafter, a Chilean company is not permitted to offer any unsubscribed shares for sale to third parties on terms which are more favorable than those offered to its shareholders. Thereafter, unsubscribed shares may be offered through any Chilean stock exchange without any indication of price. Unsubscribed shares that are not sold on a Chilean stock exchange can be sold to third parties only on terms no more favorable for the purchaser than those offered to shareholders.

SHAREHOLDERS’ MEETINGS AND VOTING RIGHTS

An annual ordinary meeting of shareholders is held within the first four months of each year, generally in March and must be called by the board of directors. The annual ordinary meeting of shareholders is the corporate body that approves the annual financial statements, approves all dividends in accordance with the dividend policy proposed by the board of directors, elects the members of our board of directors and approves any other matter which does not require an extraordinary shareholders’ meeting. The last annual ordinary meeting of our shareholders was held on March 19, 2019.

Extraordinary meetings may be called by our board of directors when deemed appropriate, and ordinary or extraordinary meetings must be called by our board of directors when requested by shareholders representing at least 10% of the issued voting shares or by the SBIF.

Notice to convene the annual ordinary meeting or an extraordinary meeting is given by means of written notice which must be published at least three different days in a newspaper of our corporate domicile (currently Santiago) designated by the shareholders at their annual meeting and if a shareholder fails to make such designation, the notice must be published in the Official Gazette pursuant to legal regulations. The first notice must be published not less than 15 days nor more than 20 days in advance of the scheduled meeting. Notice must also be mailed 15 days in advance to each shareholder and to the SBIF, CMF and the Santiago and Chilean Electronic stock exchanges. Currently, we publish our official notices in the Diario Pulso.

The quorum for a shareholders’ meeting is established by the presence, in person or by proxy, of shareholders representing at least an absolute majority of the issued common shares; if a quorum is not present at the first meeting, the meeting can be reconvened (in accordance with the procedures described in the previous paragraph) and, upon the meeting being reconvened, shareholders present at the reconvened meeting are deemed to constitute a quorum regardless of the percentage of the shares represented. The shareholders’ meetings pass resolutions by the affirmative vote of an absolute majority of those voting shares present or represented at the meeting.

Only shareholders registered with us on the fifth business day prior to the date of a meeting are entitled to attend and vote their shares. A shareholder may appoint another individual (who need not be a shareholder) as his proxy to attend and vote on his behalf. Every shareholder entitled to attend and vote at a shareholders’ meeting has one vote for every share subscribed. Under our by-laws, directors are elected by cumulative voting. Each shareholder has one vote per share and may cast all of his or her votes in favor of one nominee or may apportion is or her votes among any number of nominees.

The following matters can only be agreed upon at an extraordinary shareholders’ meeting:

• our dissolution;

• a merger, transformation, division or other change in our corporate form or the amendment of our by-laws;

• the issuance of bonds or debentures convertible into shares;

• the conveyance of 50% or more of our assets or the submission of, or changes to any business plan that contemplates the sale of more than 50% of the assets of the company;

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• the conveyance of 50% or more of the assets of a subsidiary, if represent at least 20% of our total assets, and any transfer of shares of a subsidiary that implies the Company loses control of such subsidiary;

• granting of a security interest or a personal guarantee in each case to secure the obligations of third parties, unless (i) to secure or guarantee the obligations of a subsidiary, in which case the approval of the board of directors will suffice (although this restriction is not applicable to banks: (a) granting sureties, (b) becoming jointly and/or jointly and severally liable with clients or (c) issuing bank guarantees within their course of business) and (ii) in those cases exempted by the Chilean General Banking Act; and

• other matters that require shareholder approval according to Chilean law or our by-laws.

The matters referred to in the first five items listed above may only be approved at a meeting held before a notary public, who shall certify that the minutes are a true record of the events and resolutions of the meeting.

The by-laws establish that resolutions are passed at shareholders’ meetings by the affirmative vote of an absolute majority of those shares present or represented at the meeting. However, under the Chilean Corporations Act, the vote of a two-thirds majority of the outstanding voting shares is required to approve any of the following actions:

• a change in corporate form, merger or spin-off;

• an amendment to our term of existence or early dissolution;

• a change in corporate domicile;

• a decrease of corporate capital;

• the approval of capital contributions in kind and a valuation of the assets contributed;

• a modification of the authority reserved for the shareholders’ meetings or limitations on the powers of our board of directors;

• a reduction in the number of members of our board of directors;

• the conveyance of 50% or more of the corporate assets, regardless of whether it includes liabilities, or the submission of or change to any business plan that contemplates the conveyance of 50% or more of the corporate assets;

• the conveyance of 50% or more of the assets of a subsidiary, if those assets represent at least 20% of our total assets, and any transfer of shares of a subsidiary that implies the Company loses control of such subsidiary;

• the manner in which the corporation’s profits shall be distributed;

• the creation of security interests to secure third-party obligations in excess of 50% of the corporate assets, unless granted to a subsidiary or when exempted by the Chilean General Banking Act (although this restriction is not applicable to banks: (i) granting sureties, (ii) becoming jointly and/or jointly and severally liable with clients or (iii) issuing bank guarantees within their course of business);

• the acquisition of our own shares, when, and or the terms and conditions permitted by law;

• the cure of formal defects in the incorporation of the corporation or an amendment to its by-laws related to any of the matters referred to in the preceding bullets;

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• to establish the right of the controller to force other shareholders to sell their shares in case the controller has surpassed 95% of the shares of the company as a result of a tender offer for 100% of its shares under certain circumstances;

• the approval of material related-party transactions according to Article 147 of the Chilean Corporations Act; or

• all other matters provided for in our by-laws.

In general, Chilean law does not require a Chilean public company to provide the level and type of information that U.S. securities laws require a reporting company to provide to its shareholders in connection with a solicitation of proxies. However, shareholders are entitled to examine the books of the company within the 15-day period before the ordinary annual meeting. Under Chilean law, a notice of a shareholders’ meeting listing matters to be addressed at the meeting must be mailed not fewer than 15 days prior to the date of such meeting, and, in cases of an ordinary annual meeting, shareholders must have available an annual report of the company’s activities which includes audited financial statements. In addition to these requirements, we regularly provide, and management currently intends to continue to provide, together with the notice of shareholders’ meeting, a proposal for the final annual dividend.

The Chilean Corporations Act provides that whenever shareholders representing 10% or more of the issued voting shares so request, a Chilean company’s annual report must include, in addition to the materials provided by the board of directors to shareholders, such shareholders’ comments and proposals in relation to the company’s affairs. Similarly, the Chilean Corporations Act provides that whenever the board of directors of a public company convenes an ordinary meeting of the shareholders and solicits proxies for that meeting, or distributes information supporting its decisions, or other similar material, it is obligated to include as an annex to its said materials any pertinent comments and proposals that may have been made by shareholders owning 10% or more of the company’s voting shares who have requested that such comments and proposals be so included.

DIVIDEND, LIQUIDATION AND APPRAISAL RIGHTS

Under the Chilean Corporations Act, Chilean companies are generally required to distribute at least 30% of their earnings as dividends, unless there is unanimous consent to the contrary. In the event of any loss of capital or of the legal reserve, no dividends can be distributed so long as such loss is not recovered. Also, no dividends of a bank can be distributed if doing so would result in the bank exceeding certain capital ratios.

Dividends that are declared but not paid by the date set for payment at the time of declaration are adjusted from the date set for payment to the date such dividends are actually paid. The right to receive dividends lapses if it is not claimed within five years from the date the dividend is payable.

We may declare a dividend in cash or in shares. When a share dividend is declared above the legal minimum (which minimum must be paid in cash), our shareholders must be given the option to elect to receive cash. Our ADS holders may, in the absence of an effective registration statement under the Securities Act or an available exemption from the registration requirement thereunder, effectively be required to receive a dividend in cash.

In the event of our liquidation, the holders of fully paid shares would participate equally and ratably, in proportion to the number of paid-in shares held by them, in the assets available after payment of all creditors.

In accordance with the Chilean General Banking Act, our shareholders have no appraisal rights.

APPROVAL OF FINANCIAL STATEMENTS

Our board of directors is required to submit our audited financial statements to the shareholders annually for their approval at the ordinary shareholders meeting. The approval or rejection of such financial statements is entirely within our shareholders’ discretion. If our shareholders reject our financial statements, our board of directors must submit new financial statements not later than 60 days from the date of such rejection. If our shareholders reject our new financial statements, our entire board of directors is deemed removed from office and a new board of directors is elected at the same meeting. Directors who individually approved such rejected financial statements are disqualified for re-election for the ensuing period.

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REGISTRATIONS AND TRANSFERS

Our common shares are registered by an administration agent named DCV Registros S.A. This entity is responsible for our shareholders’ registry. In the case of jointly owned common shares, an attorney-in-fact must be appointed to represent the joint owners in dealings with us.

C. MATERIAL CONTRACTS

The following is a brief summary of our material contracts currently in force. A copy of each of these contracts has been included as an exhibit hereto. See “Item 19. Exhibits.”

Transaction Agreement

This section describes the material terms of (i) the Transaction Agreement executed by former Corpbanca, CorpGroup Parent, Itaú Unibanco and former Itaú Chile on January 29, 2014, and amended on June 2, 2015 and on January 20, 2017; and (ii) the text of the Itaú CorpGroup Shareholders’ Agreement contemplated by the Transaction Agreement and executed by Itaú Unibanco Holding S.A., Inversiones Gasa Limitada, CorpGroup Holding Inversiones Limitada, CorpGroup Banking S.A., Compañía Inmobiliaria y de Inversiones Saga SpA and CorpGroup Interhold SpA on April 1, 2016.

The rights and obligations of the parties to the Transaction Agreement and the Itaú CorpGroup Shareholders’ Agreement are governed by the express terms and conditions of such agreement and not by this summary or any other information contained in this Form 20-F. The description in this section and elsewhere in this Form 20-F is qualified in its entirety by reference to the complete text of the Transaction Agreement and the form of Itaú CorpGroup Shareholders’ Agreement, copies of which are attached as Exhibit 10.C.1 and are incorporated by reference herein. This summary does not purport to be complete and may not contain all of the information about the Transaction Agreement or the Itaú CorpGroup Shareholders’ Agreement. Itaú Corpbanca encourages you to read the Transaction Agreement and the Itaú CorpGroup Shareholders’ Agreement carefully and in their entirety.

Capitalized terms used but not defined herein shall have the same meaning as in the Transaction Agreement or the Itaú CorpGroup Shareholders’ Agreement, as applicable.

Explanatory Note Regarding the Transaction Agreement

The following summary is included to provide you with information regarding the terms of the Transaction Agreement. This section is not intended to provide you with any factual information about Itaú Corpbanca. Such information can be found elsewhere in this Annual Report and in the public filings that Itaú Corpbanca makes with the SEC.

The representations, warranties and covenants made in the Transaction Agreement by former Itaú Chile and former Corpbanca were qualified and subject to important limitations agreed to by Itaú Chile and Corpbanca in connection with negotiating the terms of the Transaction Agreement. In particular, in your review of the representations and warranties contained in the Transaction Agreement and described in this summary, it is important to bear in mind that the representations and warranties were negotiated with the principal purpose of establishing the circumstances in which a party to the Transaction Agreement may have the right not to consummate the Merger if the representations and warranties of the other party proved to be untrue due to a change in circumstance or otherwise, and allocating risk between the parties to the Transaction Agreement, rather than establishing matters as facts. The representations and warranties are also subject to a contractual standard of materiality and in some cases were qualified by the matters contained in the disclosure schedules that the parties delivered in connection with the Transaction Agreement. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of the Transaction Agreement, which subsequent information may or may not be fully reflected in public disclosures by Itaú Unibanco or former Corpbanca. The representations and warranties and other provisions in the Transaction Agreement should not be read alone but instead together with the information provided elsewhere in this Form 20-F and in the documents incorporated by reference hereto. We refer to January 29, 2014, the date that the parties entered into the Transaction Agreement, as the signing date.

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Overview

To help you better understand the Merger and the other transactions contemplated by the Transaction Agreement the charts below illustrate, in simplified form, the organizational structure of former Corpbanca and Itaú Chile in Chile and Colombia.

The Merger

The following transactions occurred prior to the Merger:

• The Saieh Family divested 5,208,344,218 shares it held in former Corpbanca which, collectively, amounted to 1.53% of the capital stock of Corpbanca. Such shares were divested to third parties other than the Saieh Family and Itaú Unibanco, and were intended to be transferred to minority shareholders of CorpGroup Parent.

• Itaú Chile increased its capital by US$652 million through the issuance of shares that were fully subscribed and paid for by Itaú Unibanco.

After these transactions occurred, Itaú Chile merged with and into Corpbanca, with Corpbanca as surviving entity under the name of “Itaú Corpbanca.” The Merger resulted in the issuance of 172,048,565,857 shares of Corpbanca (representing 33.58% of the shares of Itaú Corpbanca) to Itaú Unibanco. The Saieh Family retained 33.13% of the capital stock of Itaú Corpbanca and the remaining 33.29% of the capital stock was held by public shareholders. After the Merger, Itaú Unibanco indirectly acquired an additional 2.13% and 0.35% interest in our share capital from the Saieh Family, on October 26, 2016 and on September 15, 2017, respectively, which resulted in an aggregate holding of 36.06% of the capital stock of Itaú Corpbanca.

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Consummation of the Merger

In an extraordinary shareholders’ meeting held on June 26, 2015, our shareholders approved the Merger and the other Transactions contemplated in the Transaction Agreement. On September 4, 2015 the SBIF issued Resolution No. 409 approving the Merger. Pursuant to the agreements adopted and the approval by the SBIF, the Merger was consummated on April 1, 2016.

After the Merger, and according to the Transaction Agreement and its amendment on January 20, 2017, the following transactions will be implemented:

• Itaú Corpbanca Colombia shall purchase all of the assets and liabilities of Itaú BBA Colombia in accordance with the terms and conditions agreed by Itaú Corpbanca Colombia and Itaú BBA Colombia on November 1, 2016 (the “Itaú Colombian Asset Acquisition”). The Itaú Colombian Asset Acquisition was approved by the shareholders of Itaú Corpbanca Colombia and the CFS, and completed on June 16, 2017, as established in the agreement signed on June 1, 2017, between Itaú Corpbanca Colombia, as assignee, and Itaú BBA Colombia S.A. Corporación Financiera, as assignor. Pursuant to the Itaú Colombian Asset Acquisition transaction, Itaú Corpbanca Colombia acquired Itaú BBA Colombia S.A. Corporación Financiera assets and liabilities. In relation to this transaction, Itaú Corpbanca Colombia S.A. paid Ch$33,205 million to Itaú BBA Colombia S.A Corporación Financiera. This agreement also contemplated the rendering of certain services by Itaú Corpbanca Colombia in favor of Itaú BBA Colombia and the hiring of the senior management of Itaú BBA Colombia by Itaú Corpbanca Colombia.

• Itaú Corpbanca shall acquire of the shares of Banco Corpbanca Colombia S.A., now Itaú Corpbanca Colombia, held by CorpGroup (currently representing 12.36% of shares outstanding) no later than January 28, 2022, subject to receipt of the applicable regulatory approvals. The purchase price for the shares will be US$3.5367 per share plus (i) interest from (and including) August 4, 2015 until (but excluding) the payment date at an annual interest rate equal to Libor plus 2.7% minus (ii) the sum of (x) the aggregate amount of dividends paid by Itaú Corpbanca Colombia to CorpGroup since the date of the Transaction Agreement, plus (y) the accrued interest with respect to the amount of such dividends since the date of their payment until the payment date of the purchase price, at an annual interest rate equal to Libor plus 2.7%.

The foregoing transactions are collectively referred to as the Transactions.

Employee Matters

Following completion of the Merger, Itaú Corpbanca had the discretion to either (i) offer generally to officers and employees of Itaú Chile and its subsidiaries that have or will become employees of Itaú Corpbanca or its subsidiaries, or the Itaú Chile Continuing Employees, employee benefits under compensation and benefit plans on terms and conditions similar to those maintained by former Corpbanca and its subsidiaries and/or (ii) maintain for the benefit of Itaú Chile Continuing Employees, the compensation and benefit plans maintained by former Itaú Chile immediately before the Merger. For purposes of eligibility, participation, vesting and benefit accrual (except not for purposes of benefit accrual to the extent that such credit would result in a duplication of benefits) under former Corpbanca’s compensation and benefit plans, service with or credited by former Itaú Chile or any of its subsidiaries or any of their predecessors shall be treated as service with former Corpbanca.

Indemnification of Officers and Directors

From and after completion of the Merger, in the event of any threatened or actual claim, action, suit, proceeding or investigation, whether civil, criminal or administrative, in which any person who was a director or officer of former Corpbanca or former Itaú Chile or any of their subsidiaries, or the Indemnified Parties, is, or is threatened to be, made a party on the basis of the Transaction Agreement or the Transactions, Itaú Corpbanca has agreed to indemnify, defend and hold harmless, to the fullest extent permitted by applicable law, each such Indemnified Party against any liability, judgments, fines and amounts paid in settlement in connection with any such threatened or actual claim, action, suit, proceeding or investigation.

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Registration of the Shares of Itaú Corpbanca Colombia S.A.

Itaú Corpbanca and CorpGroup will carry out commercially reasonable efforts, in accordance with the shareholders agreement of Itaú Corpbanca Colombia S.A., in order to cause Itaú Corpbanca Colombia to be registered as a public company in the National Registry of Securities and Issuers of the CFS and its shares to be listed in the Colombian Stock Market (the “CSM”). The registration process is subject to the approval of Itaú Corpbanca Colombia’s extraordinary shareholders’ meeting.

Itaú Corpbanca and CorpGroup, pursuant to the terms of the shareholders’ agreement dated July 1, 2013 entered into with Helm LLC and other shareholders of Itaú Corpbanca Colombia, requested to submit for the shareholders’ approval the registration of Itaú Corpbanca Colombia in the National Registry of Securities and Issuers of the CFS and the listing of its shares in the CSM. On February 1, 2017, in a meeting of shareholders of Itaú Corpbanca Colombia called for the decision of the above-mentioned matters, Helm LLC voted against such registration and listing and, therefore, those matters were rejected. Following this rejection, Itaú Corpbanca and CorpGroup filed a counterclaim in the Arbitration held in New York against Helm LLC for breaching the shareholders’ agreement. See “Item 8. Financial Information—A. Consolidated Statements and other Financial Information—Legal Proceedings.”

Insurance Matters

Following completion of the Merger, Itaú Unibanco is required to cause Itaú Chile Compañía de Seguros de Vida S.A. to provide life insurance-related products to all the clients of Itaú Corpbanca that are permitted to obtain an offer from an insurance broker to acquire life insurance and to pay Corpbanca Corredores de Seguros, S.A. and Itaú Chile Corredora de Seguros Limitada brokerage and/or services fees in an aggregate annual amount equal to 47.7%, or the Applicable Premium Percentage of the aggregate revenues generated by them from the sales of such life-insurance related products for the relevant year, in consideration and exchange for the offer of such products to the clients of Itaú Corpbanca.

The Applicable Premium Percentage will be revised on a yearly basis as provided by the Transaction Agreement.

If Itaú Unibanco desires not to continue to cause Itaú Chile Compañía de Seguros de Vida S.A. to offer the life-insurance related products to the insurance clients of Itaú Corpbanca, Itaú Unibanco shall use its reasonable best efforts to, enter into an agreement with a third party and one or more Corpbanca Corredores de Seguros, S.A. and/or Itaú Chile Corredora de Seguros Limitada, whereby such third party will provide life-insurance related products to the insurance clients of Itaú Corpbanca and pay to Corpbanca Corredores de Seguros, S.A. and/or Itaú Chile Corredora de Seguros Limitada, as applicable, the related insurance brokerage fees on substantially the same terms described above. Until an agreement with such third party has been executed, Itaú Unibanco will continue to pay Itaú Corpbanca or Corpbanca Corredores de Seguros, S.A. and/or Itaú Chile Corredora de Seguros Limitada an amount equal to the average of the Insurance Brokerage Fees paid by Itaú Chile Compañía de Seguros de Vida S.A. in the 12-month period prior to the date on which Itaú Chile Compañía de Seguros de Vida S.A. ceases to provide life-insurance related products to Itaú Corpbanca or Corpbanca Corredores de Seguros, S.A. and/or Itaú Chile Corredora de Seguros Limitada.

Itaú CorpGroup Shareholders’ Agreement

The following summary is included to provide you with information regarding the terms of the form of Itaú CorpGroup Shareholders’ Agreement executed by Itaú Unibanco Holding S.A. and CorpGroup on April 1, 2016. This section is not intended to provide you with any factual information about Itaú Corpbanca. Such information can be found elsewhere in the public filings that Itaú Corpbanca makes with the SEC.

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Corporate Governance

Composition and size of the Board of Directors of Itaú Corpbanca and its subsidiaries.

Itaú Unibanco and CorpGroup Parent agreed that of the number of directors of each of the board of (i) Itaú Corpbanca and Itaú Corpbanca Colombia that they are entitled or able to appoint (including by causing Itaú Corpbanca to appoint) at any time (in addition to any independent directors required by applicable law) and (ii) the respective subsidiaries of Itaú Corpbanca and Itaú Corpbanca Colombia that they are entitled or able to appoint at any time (in addition to any independent directors required by applicable law), each of Itaú Unibanco and CorpGroup Parent shall be entitled to designate a number in proportion to its respective direct and indirect percentage ownership in Itaú Corpbanca, rounded to the nearest whole number; provided that Itaú Unibanco shall designate at least a majority of such directors of each board appointed by them and that at least one of such directors of each board is appointed by CorpGroup Parent.

The board of Itaú Corpbanca shall be comprised of 11 directors and two alternate directors (one selected by Itaú Unibanco and one selected by CorpGroup Parent). The board of Itaú Corpbanca Colombia shall be comprised of nine directors and the number of directors of the board of all other subsidiaries shall be specified by the board of Itaú Corpbanca.

Itaú Unibanco and CorpGroup Parent agreed to cause, (i) a designee of CorpGroup Parent to be the chairman of the board of Itaú Corpbanca as long as CorpGroup Parent holds at least 13% of the capital stock of Itaú Corpbanca, (ii) a designee of CorpGroup Parent to be the chairman of the board of Itaú Corpbanca Colombia as long as CorpGroup Parent holds at least 13% of the capital stock of Itaú Corpbanca and (iii) a designee of Itaú Unibanco to be the vice-chairman of Itaú Corpbanca and Itaú Corpbanca Colombia. The chairman of the board of Itaú Corpbanca shall not have a casting vote.

Itaú Unibanco and CorpGroup Parent shall cause the directors of the relevant board appointed by them to vote, to the extent permitted by applicable law, together as a single block on all matters in accordance with the recommendation of Itaú Unibanco (except in the cases subject to shareholder consent rights). To this end, in the event that (i) a director of Itaú Corpbanca, Itaú Corpbanca Colombia or any other subsidiary of Itaú Corpbanca designated by CorpGroup Parent or Itaú Unibanco does not vote with the other directors as a single block and (ii) as a consequence, the relevant board is unable to adopt a decision on such matter in accordance with the recommendation of Itaú Unibanco (except that (ii) will not be required if such director is a member of the Saieh Group, or fails to comply on more than two occasions and more than two matters in any calendar year), Itaú Unibanco or CorpGroup Parent (whomever designated such director), shall take all required action to have such director removed from the relevant board within 60 calendar days. Failure to take such action shall be considered to constitute a Material Breach by the shareholder who designated such director.

A majority of the directors will constitute quorum for all meetings of the relevant boards. However, if less than all of the directors appointed by Itaú Unibanco to such board are not present, a quorum will not exist without the consent of the majority of the directors appointed by Itaú Unibanco to such board. The vote of the majority of the directors attending a meeting will be required to pass a resolution of the relevant boards (except in the cases subject to shareholder consent rights).

Board Committees

Itaú Unibanco and CorpGroup Parent agreed to cause Itaú Corpbanca and Itaú Corpbanca Colombia to each create the following committees of the board of directors: Directors Committee, Audit Committee, Management and Talent Committee, Assets and Liabilities Management Committee and Credit Committee.

The Credit Committee shall (i) have binding power to establish the limits and procedures of the credit policy of Itaú Corpbanca and its subsidiaries and the power to establish approval exceptions for financial decisions exceeding certain thresholds (to be defined by the Credit Committee) and (ii) shall impose a binding framework with upper limits on credit exposures for which approval of Itaú Unibanco will be required. In connection with the latter, Itaú Unibanco shall respond to any such requests for approval within seven business days (the absence of explicit denial being considered as an approval).

The Credit Committee shall be comprised of five members (of which three shall be appointed by Itaú Unibanco and two by CorpGroup Parent), all of whom shall be local executives or directors of the relevant board, and be headed by a local executive officer or director recommended by the CEO of Itaú Corpbanca or its relevant subsidiary, as applicable.

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Officers

The board of directors of Itaú Corpbanca shall appoint from time to time the CEO, the country heads and other senior management of Itaú Corpbanca and Itaú Corpbanca Colombia. Itaú Unibanco and CorpGroup Parent shall cause Itaú Corpbanca to cause its subsidiaries to appoint designees of the board of Itaú Corpbanca from time to time to the designated positions at such subsidiary. A Management and Talent Committee will determine an objective process to recommend designees to these positions based on internal promotion, international, merit-based standards and professional track record, and relevant industry and jurisdiction-specific experience, and will provide a list of selected candidates to the board of Itaú Corpbanca who will be ultimately responsible for their final appointment.

CorpGroup Parent may request the removal of the CEO of Itaú Corpbanca and of Itaú Corpbanca Colombia if during three consecutive years (excluding the year of the closing of the Merger) the ROE (return on equity) of the respective bank is at least 1% lower than the average ROE of the three largest privately-owned banks (measured by assets, and excluding Itaú Corpbanca and Itaú Corpbanca Colombia) of Chile or Colombia, as the case may be, during such three-year period.

Shareholder Consent Rights

Subject to certain exceptions set forth in the Itaú CorpGroup Shareholders’ Agreement, Itaú Unibanco and CorpGroup Parent agreed that Itaú Corpbanca shall not take, and shall not permit any subsidiary to take, any of the following transactions without the consent of (i) CorpGroup Parent, so long as CorpGroup Parent owns at least 13% of the capital stock of Itaú Corpbanca, and (ii) Itaú Unibanco:

• merge, reorganize or consolidate Itaú Corpbanca or any of its subsidiaries or enter into a joint venture or similar transaction in excess of materiality thresholds;

• issue or sell any equity securities of Itaú Corpbanca or any of its subsidiaries, other than solely to the extent required to comply with immediate legal and regulatory requirements or to meet the Optimal Regulatory Capital;

• repurchase or otherwise retire or acquire any shares or other equity securities of Itaú Corpbanca or any of its subsidiaries;

• list or delist any shares or other equity securities of Itaú Corpbanca or any of its subsidiaries;

• enter into, modify or terminate a contract or transaction with a related party;

• effect any acquisition of the stock, equity interests, assets or business of any third-party or any disposition of assets of Itaú Corpbanca or any subsidiary or the capital stock or other equity interests of any subsidiary, in each case in excess of materiality thresholds;

• effect any liquidation, dissolutions, reorganizations through a voluntary bankruptcy or similar transactions;

• amend or repeal any provision of the organizational documents of Itaú Corpbanca or any of its subsidiaries;

• change the size or powers of the board of directors or any committee thereof;

• enter into any new line of business, that is not a Banking Business;

• create or dissolve one or more subsidiaries in excess of materiality thresholds; enter into agreements between Itaú Corpbanca or any of its subsidiaries, on the one hand, and any Governmental Authority, on the other hand;

• make any change in the external auditors of Itaú Corpbanca or any of its subsidiaries;

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• make any change to the dividend policy;

• enter into any agreement that limits or restricts the ability of Itaú Corpbanca or any of its subsidiaries to own, manage, operate, control, participate in, perform services for, or otherwise carry on or engage in any business or in any geographic area; enter into any contract to do any of the foregoing actions; and

• any other matter not set forth above that requires the approval of a supermajority of the shareholders of Itaú Corpbanca under Article 67 of the Chilean Corporations Act.

Transfer of Shares of Itaú Corpbanca

Itaú Unibanco and CorpGroup Parent have agreed not to directly or indirectly purchase or otherwise acquire shares of Itaú Corpbanca or any beneficial interest therein to the extent such acquisition would require Itaú Unibanco or CorpGroup Parent to launch a tender offer to acquire all shares of Itaú Corpbanca. Any transfer of shares of Itaú Corpbanca made by Itaú Unibanco and CorpGroup Parent shall be implemented through the Santiago Stock Exchange with a five-day prior notice to the other party.

So long as CorpGroup Parent and Itaú Unibanco collectively hold an aggregate direct or indirect participation in the voting shares of Itaú Corpbanca of at least 50% plus one share, CorpGroup Parent shall keep (and may not transfer) the direct or indirect ownership of a number of shares of Itaú Corpbanca representing the lesser of: (i) 16.42% of the shares of Itaú Corpbanca at the time of execution of the Itaú CorpGroup Shareholders’ Agreement (i.e. at the closing of the Transactions) or (ii) the minimum percentage of such shares that allows Itaú Unibanco and CorpGroup Parent to hold such aggregate direct or indirect participation in the voting shares of Itaú Corpbanca. Such number of shares will be pledged by CorpGroup Parent in favor of Itaú Unibanco.

Right of First Offer, Tag-Along and Drag-Along Rights

Right of first offer

Subject to the terms set forth on the Itaú CorpGroup Shareholders’ Agreement, Itaú Unibanco and CorpGroup Parent shall have a right of first offer with regard to potential transfers of shares of the Companies. If either Itaú Unibanco or CorpGroup Parent intend to transfer shares of the Companies, such party shall notify in writing to the other party of such intention, stating the number of shares, the price and other terms and conditions of the proposed transfer. The recipient party shall have the right to purchase all such shares for a price and under terms and conditions equal to those notified by the selling shareholder. If the recipient party elects not to purchase all the shares intended to be transferred, the selling shareholder shall be permitted for a period of six (6) months from the date the notice to purchase the shares was due to be received by the selling party, to transfer to a third party not less than the number of shares, at a price not less than and on terms and conditions not materially less favorable to the selling shareholder than those stated in the notice of such proposed transfer.

Tag-along

CorpGroup Parent will have the right to tag-along on the sale of shares of Company One or of shares of Itaú Corpbanca owned by Company One by Itaú Unibanco and jointly sell to a third party with Itaú Unibanco in such sale. Pursuant to such right, in the event of a proposed transfer of shares of Company One or shares of Itaú Corpbanca by Itaú Unibanco, Itaú Unibanco shall deliver to CorpGroup Parent prompt written notice stating, to the extent applicable, (i) the name of the proposed transferee, (ii) the number of shares proposed to be transferred, (iii) the proposed purchase price and (iv) any other material terms and conditions of the proposed transfer.

The proposed transferee will not be obligated to purchase a number of shares exceeding that set forth in the notification of the proposed transfer. In the event such transferee elects to purchase less than all of the total shares sought to be transferred by CorpGroup Parent and Itaú Unibanco, CorpGroup Parent shall be entitled to transfer to the proposed transferee a number of shares equal to (i) the total number of shares originally proposed to be transferred by Company One and Itaú Unibanco multiplied by (ii) a fraction, (A) the numerator of which is the total number of shares of Itaú Corpbanca held by Company Two, and (B) the denominator of which is the total number of shares of Itaú Corpbanca held by the Companies.

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Drag-along

In the event of a proposed sale of all of the issued and outstanding shares of Company One or shares of Itaú Corpbanca held by Itaú Unibanco to a third party and if at such time CorpGroup Parent owns less than 10% of the capital stock of Itaú Corpbanca, Itaú Unibanco may notify CorpGroup Parent in writing of such proposed sale stating (i) the name of the proposed transferee, (ii) the proposed purchase price (which shall be equal to at least the higher of fair value and market price), (iii) the obligation of the transferee to purchase all of CorpGroup Parent shares of Itaú Corpbanca, and (iv) any other material terms and conditions of the transfer.

Under these circumstances, CorpGroup Parent shall be obligated to sell all of its shares of Itaú Corpbanca, free and clear of liens at the same price and on other terms no less favorable than Itaú Unibanco.

Put of Company Shares

If and to the extent that CorpGroup Parent is prohibited from selling its shares of Itaú Corpbanca, CorpGroup Parent shall have the unconditional right, from time to time on one or more occasions, to sell to Itaú Unibanco, and Itaú Unibanco shall have the unconditional obligation to acquire from CorpGroup Parent, any number of shares of Company Two at a price per share equal to the market price as of the date on which CorpGroup Parent notifies Itaú Unibanco of CorpGroup Parent’s exercise of its unconditional right to sell if immediately following such sale CorpGroup Parent and Itaú Unibanco would continue to collectively hold an aggregate direct or indirect participation in the voting shares of Itaú Corpbanca of at least 50% plus one share.

At the time of payment of the purchase price of the shares of Company Two, Itaú Unibanco shall pay CorpGroup Parent, as an indemnity for not being able to benefit from the exemption on capital gains set forth in Article 107 of the Chilean Income Tax Law to which it would otherwise have been entitled to if it would have sold the underlying shares of Itaú Corpbanca in the Santiago Stock Exchange, a cash amount equal to (i) 50% of any taxes of CorpGroup Parent or its affiliates arising out of or in connection with such transfer that would not have arisen if it had sold the underlying shares of Itaú Corpbanca in the Santiago Stock Exchange and benefit from the abovementioned exemption on capital gains, and (ii) any taxes of CorpGroup Parent or its affiliates arising out of the application of such indemnity payment.

Change of Control of CorpGroup Parent

Under the Itaú CorpGroup Shareholders’ Agreement, CorpGroup Parent shall notify Itaú Unibanco prior to consummating a Change of Control of CorpGroup Parent and provide Itaú Unibanco a right of first offer to purchase a number shares of Company Two equal to the number required by Itaú Unibanco to hold an aggregate direct or indirect participation in the voting shares of Itaú Corpbanca of at least 50% plus one share at a price equal to the higher of the market price or fair value.

If Itaú Unibanco accepts the price proposed by CorpGroup Parent, CorpGroup Parent shall be obligated to cause Company Two to sell such number of Itaú Corpbanca’s shares to Itaú Unibanco at such price.

In the event that Itaú Unibanco does not accept the price proposed by CorpGroup Parent and as a result, an agreement is not reached, then CorpGroup Parent shall be permitted to proceed with such Change of Control and Itaú Unibanco shall be entitled to unilaterally terminate the Itaú CorpGroup Shareholders’ Agreement during a period of 60 days after receipt of notice from CorpGroup notifying of the consummation of such Change of Control.

For purposes of the Itaú CorpGroup Shareholders’ Agreement, Change of Control shall mean, with respect to CorpGroup Parent, the Saieh Group ceasing to own, directly and indirectly, in a single transaction or in a series of related transactions, at least 50% plus one additional share of the issued voting stock of CorpGroup Parent.

Right to Exchange Shares for Shares of Itaú Unibanco

In the event Itaú Unibanco issues or sells certain equity securities of Itaú Unibanco to any third-party as consideration for or in connection with a transaction or series of transactions involving the direct or indirect investment by Itaú Unibanco in such equity securities or assets of any other third party, Itaú Unibanco shall inform CorpGroup Parent of such issuance or sale and shall offer to CorpGroup Parent the right to exchange for the same type of equity securities of Itaú Unibanco. CorpGroup Parent shall be entitled to exchange any or all of its shares of Company Two (or shares of Itaú Corpbanca) for such equity securities of Itaú Unibanco at an exchange ratio that reflects the relative fair values of the relevant equity securities of Itaú Unibanco and the shares of Company Two or Itaú Corpbanca, as the case may be.

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Notwithstanding the foregoing, if the issuance of any such equity securities to CorpGroup Parent would result in Itaú Unibanco Participações S.A. ceasing to hold more than 50% of Itaú Unibanco’s voting equity, then CorpGroup Parent shall have the right to exchange no more than an amount of equity securities of Itaú Unibanco the issuance of which would not result in Itaú Unibanco Participações S.A. ceasing to hold more than 50% of Itaú Unibanco’s voting equity.

Controlling Shareholder

Notwithstanding the other provisions of the Itaú CorpGroup Shareholders’ Agreement, Itaú Unibanco shall have no obligation to purchase shares of Itaú Corpbanca or Company Two, to the extent such purchase would, in and of itself, require Itaú Unibanco to make a tender offer for all of the outstanding shares of Itaú Corpbanca.

If Itaú Unibanco ceases to be the Controlling Shareholder (as defined in Article 97 of the Chilean Securities Market Act) of Itaú Corpbanca, prior to consummating any obligation pursuant to a provision of the Itaú CorpGroup Shareholders’ Agreement to purchase shares of Itaú Corpbanca or Company Two from CorpGroup Parent which would result in Itaú Unibanco being the Controlling Shareholder of Itaú Corpbanca, Itaú Unibanco shall commence a tender offer to purchase a number of shares of Itaú Corpbanca which would result in Itaú Unibanco being the Controlling Shareholder of Itaú Corpbanca for the purchase price provided in such applicable provision of the Itaú CorpGroup Shareholders’ Agreement and shall in any event satisfy its obligation (whether through the tender offer or a subsequent purchase thereafter) within 90 calendar days.

CorpGroup Parent Liquidity Put and Call Options

During a period of 18 months from the closing date of the Merger, CorpGroup Parent shall have the right to (i) sell to Itaú Unibanco, a number of shares of Company Two representing in the aggregate up to 6.6% of all of the outstanding shares of Itaú Corpbanca at a price equal to the market price as of the notice date of such put right; or (ii) cause Company Two to sell to Itaú Unibanco, through one of the mechanisms available on the Santiago Stock Exchange that only allows block sales, a number of shares of Itaú Corpbanca representing up to 6.6% of all of the outstanding shares of Itaú Corpbanca (in which event Itaú Unibanco will place an order to purchase such shares in the Santiago Stock Exchange at a price not less than such market price). If, as a result of the competitive bidding procedures of the Santiago Stock Exchange, the shares of Itaú Corpbanca sold by Company Two are unexpectedly sold over the Santiago Stock Exchange to a third party other than Itaú Unibanco or any of its affiliates at a higher price, then CorpGroup Parent shall no longer have the right to repurchase such shares of Itaú Corpbanca from Itaú Unibanco or one of its wholly-owned subsidiaries.

If the put right described above has been exercised, at any time and from time to time during the five-year period thereafter, CorpGroup Parent shall have the unconditional right either to (i) acquire from Itaú Unibanco a number of shares of Company Two up to the number of shares sold pursuant to the put right described above at the same price per share as was paid by Itaú Unibanco pursuant to such put right plus an annual interest rate at the Chilean Índice de Cámara Promedio plus a spread that is not to exceed the lowest spread then being offered by Itaú Corpbanca to non-governmental borrowers in Chile; or (ii) cause Itaú Unibanco to place an order on the Santiago Stock Exchange to sell to CorpGroup Parent and/or Company Two a number of shares of Itaú Corpbanca of up to the number of shares of Itaú Corpbanca sold to Itaú Unibanco pursuant to the put right described above at the same price per share as was paid by Itaú Unibanco pursuant to such put right plus an annual interest rate at the Chilean Índice de Cámara Promedio plus a spread that is not to exceed the lowest spread then being offered by Itaú Corpbanca to non-governmental borrowers in Chile. If, as a result of the competitive bidding procedures of the Santiago Stock Exchange, the shares of Itaú Corpbanca sold by Itaú Unibanco or one of its wholly-owned subsidiaries are sold over the Santiago Stock Exchange to a third party at a higher price, then CorpGroup Parent and/or Company Two shall not have the right to repurchase such shares of Itaú Corpbanca.

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Call Option in Event of Material Breach

If either Itaú Unibanco or CorpGroup Parent commits a Material Breach of the Itaú CorpGroup Shareholders’ Agreement, or the Breaching Shareholder, the non-Breaching Shareholder shall have the right to give written notice to the Breaching Shareholder describing such Material Breach and demanding that the Breaching Shareholder cure the Material Breach by fully performing its obligation.

If the Breaching Shareholder has not cured its Material Breach within 50 calendar days after receipt of any such notice, the non-Breaching Shareholder shall have the unconditional right to (i) require the Breaching Shareholder to sell all of its shares to the non-Breaching Shareholder at a price per share equal to 80% of the market price as of the date of the notice exercising a call option and (ii) if the non-Breaching Shareholder is CorpGroup Parent, to sell to Itaú Unibanco all of its shares at a price per share equal to 120% of the market price as of the date of the notice exercising a put option.

Notwithstanding the foregoing, if the non-Breaching Shareholder is Itaú Unibanco, Itaú Unibanco may elect to purchase the maximum number of shares which would allow Itaú Unibanco to avoid making a public offer for all of the outstanding shares of Itaú Corpbanca.

Non-Competition; Non-Solicit

Non-Competition

Neither Itaú Unibanco nor CorpGroup Parent shall, directly or indirectly, own, invest, control, acquire, operate, manage, participate or engage in any Banking Business in Chile, Colombia and the Republic of Panama other than (i) through its investment in the Itaú Corpbanca and its subsidiaries and (ii) through any sociedad de apoyo al giro in which Itaú Corpbanca has an ownership interest.

For purposes of the Itaú CorpGroup Shareholders’ Agreement, Banking Business shall mean providing (i) consumer financial products and/or services, including secured and/or unsecured consumer lending, consumer mortgage products, consumer card products, retail banking products and/or services, and consumer leasing; and/or (ii) deposit-taking services including both consumer and commercial deposits, and payroll services; and/or (iii) credit and/or debit card transaction processing services (which transaction processing services, for the avoidance of doubt, include merchant acquiring); and/or (iv) commercial financial products and/or services, including bilateral and syndicated loans, trustee and depositary services; and/or (v) investment banking services; and/or (vi) financial advisory services related to the services described in clauses (i) through (v) above; and/or (vii) all businesses related or reasonably incidental thereto.

Notwithstanding the foregoing, the Itaú CorpGroup Shareholders’ Agreement permits the following activities: (i) providing consumer financing and other financial products or services offered from time to time by supermarkets and other nonbank retailers in the applicable jurisdiction; (ii) financing or providing asset management products and services; (iii) receiving from or providing to any third party a personal guaranty or a loan or engaging in other financial arrangements in connection with a transaction or transactions that does not otherwise constitute a Banking Business in Chile, Colombia or the Republic of Panama; (iv) making investments by or in employee retirement, pension or similar plans or funds or in companies that manage such plans or funds; (v) acquiring, owning, controlling or managing, in any third party that has any Banking Business in Chile, Colombia and the Republic of Panama pursuant to purchase, merger, consolidation or otherwise so long as (A) the Banking Business in Chile, Colombia or the Republic of Panama conducted by such third party or business constitutes not more than 10% of the revenues of such acquired third party or business and not more than 5% of the revenues of Itaú Corpbanca, in each case for the immediately preceding 12 months, and (B) after consummation of such acquisition, Itaú Corpbanca is offered the right to acquire such Banking Business for cash at the fair value thereof; (vi) acquiring, owning, controlling, managing, investing in any third party or business which would otherwise be prohibited under the non-compete obligation, provided that action is undertaken to sell the competing portion of such business; (vii) acquiring, owning, controlling, managing, investing in any third party that has any Banking Business in Chile, Colombia and the Republic of Panama or engaging in a new business opportunity in the Banking Business in Chile, Colombia, Peru and Central America, if such transaction or opportunity was presented by Itaú Corpbanca to Itaú Unibanco, if CorpGroup Parent is the investing party, or by Itaú Corpbanca to CorpGroup Parent, if Itaú Unibanco is the investing party, and CorpGroup Parent or Itaú Unibanco, as the case maybe, withheld their consent to Itaú Corpbanca consummating such transaction; (viii) providing products or services pursuant to any unsolicited request from any client that operates in Chile, Colombia and the Republic of Panama which cannot be reasonably provided by Itaú Corpbanca or its subsidiaries or (ix) acquiring, owning, managing or investing in the MCC Entities (as defined in the Itaú CorpGroup Shareholders’ Agreement) or prohibit any activities currently conducted by the MCC Entities.

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Non-Solicit

Neither Itaú Unibanco nor CorpGroup Parent shall, directly or indirectly, solicit for hire, hire or otherwise induce or attempt to induce any officer of Itaú Corpbanca or any of its subsidiaries to leave the employment of Itaú Corpbanca or any of its subsidiaries, or in any way interfere with the relationship between Itaú Corpbanca or any of its subsidiaries, on the one hand, and any officer thereof on the other hand.

Dividend Policy; Dividend Put and Call Options.

For a period of eight fiscal years starting from the closing of the Transaction, or the Dividend Period, Itaú Unibanco and CorpGroup Parent agreed to cause Itaú Corpbanca to adopt an annual business plan and budget expressly providing for the management of Itaú Corpbanca and its subsidiaries in a manner that has as its primary target, in the following order of priority: (i) first, complying with the Optimal Regulatory Capital for such fiscal year, (ii) second, the payment by Itaú Corpbanca of cash dividends aggregating at least US$370 million for each year during the Dividend Period and (iii) third, achieving a growth rate of the total assets of Itaú Corpbanca and Itaú Corpbanca Colombia above the Minimum Growth Rate and other reasonable objectives as determined by the board of Itaú Corpbanca. Itaú Unibanco and CorpGroup Parent have agreed to cause the board of Itaú Corpbanca to cause management of Itaú Corpbanca and its subsidiaries to conduct their respective businesses in accordance with such annual business plan and budget.

If the amount of the dividends paid in cash by Itaú Corpbanca is less than US$370 million for any fiscal year during the Dividend Period, Itaú Unibanco and CorpGroup agreed to cause Itaú Corpbanca and its subsidiaries to maximize the use of Tier 2 capital, to the fullest extent permitted by applicable Law to increase its regulatory capital to the extent required to maintain Optimal Regulatory Capital requirements for such fiscal year.

Optimal Regulatory Capital means at any date, with respect to either Itaú Corpbanca or Itaú Corpbanca Colombia, as the case may be, (a) the higher of (i) 120% of the minimum regulatory Capital Ratio required by applicable law of the applicable country and (ii) the average regulatory Capital Ratio of the three largest privately-owned banks (excluding the Itaú Corpbanca and/or Itaú Corpbanca Colombia) (measured in terms of assets) in Chile or Colombia, as the case may be, in each case as of the last day of the most recent fiscal year multiplied by (b) the risk-weighted assets (including any risk-weighted assets of subsidiaries that are consolidated for purposes of calculating minimum regulatory Capital Ratio in such country) of the Itaú Corpbanca or Itaú Corpbanca Colombia, as the case may be, as of the date one year from the last day of the most recent fiscal year assuming that such risk-weighted assets grow during such year at a rate equal to the Minimum Growth Rate.

Minimum Growth Rate for any year shall mean the minimum growth rate of the total assets of Itaú Corpbanca and Itaú Corpbanca Colombia (determined in accordance with IFRS) for the applicable country (e.g., Chile or Colombia) determined in good faith by the board of directors of Itaú Corpbanca (but in no event exceeding Forecasted System Growth in such country for such year) reasonably necessary to maintain the market share of Itaú Corpbanca and Itaú Corpbanca Colombia (each measured in terms of assets in their respective countries) as of the last day of the immediately preceding year.

Itaú Corpbanca shall pay an annual dividend equal to 100% of the annual cash distributable earnings, net of any reserves required to maintain Optimal Regulatory Capital, before March 31 of each Fiscal Year. If the portion of such dividend to be received by CorpGroup Parent is less than US$120 million in any fiscal year of the Dividend Period, CorpGroup Parent shall have the right, from and after the date that such dividend is declared to (i) sell to Itaú Unibanco, at a price per share equal to the market price as of the date of the notification to exercise this put right, a number of shares of Company Two equal to (A) US$120 million minus the portion of the annual dividend declared by Itaú Corpbanca to be received by CorpGroup Parent, divided by (B) the market price of the shares of Itaú Corpbanca as of the date of the notification to exercise this put right; or (ii) cause Company Two to sell to Itaú Unibanco, a number of shares of Itaú Corpbanca equal to (A) US$120 million minus the annual dividend declared by Itaú Corpbanca and to be received by CorpGroup Parent, divided by (B) the market price of such shares as of the date of the notification to exercise this put right. If, as a result of the competitive bidding procedures of the Santiago Stock Exchange, the shares of Itaú Corpbanca sold by Company Two are unexpectedly sold over the Santiago Stock Exchange to a third party at a higher price, then CorpGroup Parent shall no longer have the right to repurchase such shares of Itaú Corpbanca from Itaú Unibanco or one of its wholly-owned subsidiaries.

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If the put right described above has been exercised, during the five-year period thereafter, CorpGroup Parent shall have the right either to (i) acquire from Itaú Unibanco, a number of shares of Company Two up to the number of shares sold pursuant to such put right at the same price per share as was paid by Itaú Unibanco plus an annual interest rate at the Chilean Índice de Cámara Promedio plus a spread that is not to exceed the lowest spread then being offered by Itaú Corpbanca to non-governmental borrowers in Chile; or (ii) cause Itaú Unibanco to place an order on the Santiago Stock Exchange to sell to CorpGroup Parent and/or Company Two a number of shares of Itaú Corpbanca up to the number of shares sold to Itaú Unibanco pursuant to such put right at the same price per share as was paid by Itaú Unibanco plus an annual interest rate at the Chilean Índice de Cámara Promedio plus a spread that is not to exceed the lowest spread then being offered by Itaú Corpbanca to non-governmental borrowers in Chile. If, as a result of the competitive bidding procedures of the Santiago Stock Exchange, the shares of Itaú Corpbanca sold by Itaú Unibanco or one of its wholly-owned subsidiaries are sold over the Santiago Stock Exchange to a third party at a higher price, then CorpGroup Parent and/or Company Two shall not have the right to repurchase such shares of Itaú Corpbanca.

Use of Brands

Itaú Unibanco and CorpGroup Parent have agreed that for so long as Itaú Unibanco owns shares of Itaú Corpbanca, Itaú Corpbanca and its subsidiaries shall have a royalty-free, perpetual license to use the Itaú Brand, whether alone or in conjunction with other trademarks.

Preapproved Matters

CorpGroup Parent agreed to consent to and affirmatively vote its shares of Itaú Corpbanca at any shareholders’ meeting in favor of the approval of a transaction between the Itaú Corpbanca’s securities broker (Corredora) subsidiary and MCC at such time as MCC is wholly owned by an Affiliate of Itaú Unibanco, transaction which may be structured as an acquisition of equity securities of MCC by Itaú Corpbanca (followed by a merger of such subsidiary and MCC).

Strategic Transactions

Pursuant to the terms of the Itaú CorpGroup Shareholders’ Agreement, CorpGroup Parent and Itaú Unibanco intend to use Itaú Corpbanca and its subsidiaries as their exclusive vehicle to pursue business opportunities in the Banking Business in Chile, Colombia, Peru and Central America. As a result, if either CorpGroup Parent or Itaú Unibanco, intends to pursue or develop any new business opportunities in the Banking Business in the abovementioned territories, either individually or with third parties, such party shall notify the other party and provide Itaú Corpbanca with the exclusive right to pursue such business opportunity prior to presenting it to or pursuing it individually or with third parties. If CorpGroup Parent or Itaú-Unibanco, as the case may be, does not agree to Itaú Corpbanca pursuing or continue to pursue or consummate such particular business opportunity within 30 days following receipt of such notice, the other party shall have the right to pursue and implement it unilaterally and not through Itaú Corpbanca.

If CorpGroup Parent agrees to Itaú Corpbanca pursuing a business opportunity that would require a capital increase and/or a change in the dividend policy of Itaú Corpbanca, Itaú Unibanco agreed to provide CorpGroup Parent with long-term financing in an amount reasonably necessary as to finance its subscription of its pro rata share in such capital increase. If, on the other hand, CorpGroup Parent agrees to allow Itaú Corpbanca to pursue and implement such business opportunity but decides not to participate in the capital increase in connection therewith, Itaú Unibanco will grant CorpGroup Parent a call option with respect to the number of shares that if purchased by CorpGroup Parent at such time would restore its direct and indirect ownership percentage of outstanding shares of Itaú Corpbanca to its ownership percentage of outstanding shares of Itaú Corpbanca immediately prior to such capital increase.

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Itaú Unibanco’s Paraguay and Uruguay Operations

In respect of Itaú Unibanco’s Paraguay and Uruguay Operations, CorpGroup Parent and Itaú Unibanco agreed to (i) negotiate in good faith the inclusion of their respective businesses in Paraguay and Uruguay as part of the business owned and operated by Itaú Corpbanca, (ii) use their reasonable best efforts to agree on the valuation of such businesses in Paraguay and Uruguay and (iii) if CorpGroup Parent and Itaú Unibanco agree on the valuation of such businesses, to transfer to and operate such businesses by Itaú Corpbanca.

Systems Operations Services Agreement

We have entered into a Systems Operations Services Agreement with IBM, initially dated March 30, 2001, and covering a term from April 1, 2001 through April 15, 2006 which can be renegotiated periodically. The current extension became effective on April 16, 2008 until April 30, 2019. Under this agreement, IBM provides outsourcing computer system operations services to us and we are obligated to pay fees amounting to UF 2,421.4 per month.

Service Contracts

On July 6, 2001, we entered into a Services Agreement with our affiliate Inversiones CorpGroup Interhold Limitada pursuant to which CorpGroup provides us with professional and technical consulting services including preparation of financial statements, implementing financial and administrative procedures; preparing, analyzing, and providing legal advisory services; and analyzing economic, financial sectors and feasibility of investment plans; we pay fees of approximately UF6,250 per month. On January 27, 2014, we entered into an amendment to the agreement which took effect as of January 1, 2015. Pursuant to this amendment, the agreement was extended for a further 10-year term beginning on January 1, 2015, subject to certain early termination provisions. Either party may extend the term of the agreement for five additional years. Provisions for the payment of expenses were also included in this amendment.

On April 10, 2008, we entered into a Services Agreement with our affiliate Inversiones CorpGroup Interhold Limitada, pursuant to which CorpGroup provides us with professional and technical consulting services in the finance, capital markets, real estate and operations areas; we pay fees of approximately UF 1,350 per month. On January 27, 2014, we entered into an amendment to the agreement which took effect as of January 1, 2015. Pursuant to the amendment, the agreement was extended for a further 10-year term beginning on January 1, 2015, subject to certain early termination provisions. Either party may extend the term of the agreement for five additional years, subject to certain conditions. Provisions for the payment of expenses were also included in this amendment.

On March 27, 2012, we entered into a Services Agreement with Mr. Álvaro Saieh Bendeck and our affiliate CorpGroup Holding Inversiones Limitada, pursuant to which CorpGroup Holding Inversiones Limitada provides us with professional and technical consulting services in all matters related to strategic planning and definitions, new businesses, including acquisitions in Chile or abroad, and management controls; we pay fees of approximately UF 1,250 per month. On January 27, 2014, we entered into an amendment to the agreement which took effect as of January 1, 2015. Pursuant to the amendment, the agreement was extended for a further 10-year term beginning on January 1, 2015, subject to certain early termination provisions. Either party may extend the term of the Service Contract for five additional years, provided that on such date the services continue to be rendered with the participation of Mr. Álvaro Saieh Bendeck. Provisions for the payment of expenses were also included in this amendment.

Software Consulting and Development Agreement

We have entered into a Software Consulting and Development Agreement, for the Integrated Banking System (IBS), dated as of October 4, 2001, with Datapro, Inc. The contract covers a five-year term for system maintenance and adjustments, which is automatically renewable at the end of the term. The contract includes an initial charge for development and user license of US$380,000.00 and a schedule of additional fees for services provided as well as a monthly maintenance fee.

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Redbanc Agreement

We entered into an agreement dated as of April 1, 2001 to participate in the automated teller machine network operated by Redbanc S.A. Due to the Merger, on October 11, 2016, this agreement was amended and restated in order to (i) terminate the equivalent agreement entered into by former Banco Itaú Chile with Redbanc S.A. prior to the Merger and (ii) recognize and confirm the agreement entered into by former Corpbanca, which remains in full force and effect.

The agreement covers a three-year term which is automatically and successively renewed for equal three-year periods. The purpose of this agreement is to provide services to facilitate the performance of banking objectives. This includes the installation, operation, maintenance, and development of equipment, devices, systems, and services used for the management and operation of automated and non-automated cash and point-of-sale machines and the related services. Redbanc shall invoice and charge us a different monthly fee for each of the services connected to the automated teller machine network.

D. EXCHANGE CONTROLS

The Central Bank of Chile is responsible for, among other things, monetary policies and exchange controls in Chile. Foreign investments must be registered with the Central Bank of Chile under the Ley Orgánica Constitucional del Banco Central de Chile, or the Chilean Central Bank Act and the Compendio de Normas de Cambios Internacionales, or the Central Bank Foreign Exchange Regulations or the Compendium. The Chilean Central Bank Act is a constitutional law requiring a “special majority” vote of the Chilean Congress to be modified. Until January 1, 2016, foreign investments could be registered with the Comité de Inversiones Extranjeras or the Foreign Investment Committee under Decree Law No. 600 of 1974, as amended or DL 600, as an alternative to the registration with the Central Bank of Chile. The Tax Reform, however, repealed DL 600 as of January 1, 2016. As from 2016, the Foreign Investment Committee shall not be entitled to register new foreign investments. All foreign investments previously registered with the Foreign Investment Committee under DL 600, shall continue to be subject to the provisions of DL 600.

Pursuant to the Central Bank Foreign Exchange Regulations, investors are allowed to freely enter into any kind of foreign exchange transaction, the only restriction being that investors must inform the Central Bank of Chile about certain operations which they have conducted and must conduct certain operations through the Formal Exchange Market. The type of information related to equity investment that must be reported to the Central Bank of Chile by non-Chilean residents include the occurrence of, among other things, any assignment, substitution, changes in organizational status, change in the form of the investment, or material changes to the terms of the agreement governing the foreign currency transaction. Transactions that are required to be conducted through the Formal Exchange Market include transactions involving foreign commercial bank loans or Chilean company issued bonds, deposits made in Chilean financial institutions by foreign depositors, and equity investments and contributions of capital by foreign investors. The Formal Exchange Market entities through which transactions are conducted will report such transactions to the Central Bank of Chile.

Pursuant to the provisions of Chapter XIV of the Compendium, it is not necessary to seek the Central Bank of Chile’s prior approval in order to establish an ADS facility. The Central Bank of Chile only requires that (i) any foreign investor acquiring shares to be converted into ADSs who has actually brought funds into Chile for that purpose shall bring those funds through the Formal Exchange Market, (ii) any foreign investor acquiring shares to be converted into ADSs informs the Central Bank of Chile of the investment in the terms and conditions described below, (iii) all remittances of funds from Chile to the foreign investor upon the sale of the shares underlying the ADSs or from dividends or other distributions made in connection therewith, shall be made through the Formal Exchange Market, and (iv) all remittances of funds to the foreign investor, whether or not from Chile, shall be informed to the Central Bank of Chile in the terms and conditions described below.

When the shares to be converted into ADSs have been acquired by the foreign investor with funds brought into Chile through the Formal Exchange Market, a registration form shall be filed with the Department of International Financial Operations of the Central Bank of Chile by the foreign investor acting through an entity of the Formal Exchange Market on or before the date on which the foreign currency is brought into Chile. However, if the funds were brought into Chile with a different purpose and subsequently were used to acquire shares to be converted into ADSs, the Department of International Financial Operations of the Central Bank of Chile then shall be informed of such investment by the Custodian within ten days following the end of each 15-day period on which the Custodian has to deliver periodic reports to the Central Bank of Chile. If the funds were not brought into Chile, a registration form shall be filed with the Department of International Financial Operations of the Central Bank of Chile by the foreign investor itself or through an entity of the Formal Exchange Market within first 10 days of the month following the date on which the proceeds were used.

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All payments in U.S. dollars in connection with the ADS facility made from Chile shall be made through the Formal Exchange Market. Pursuant to Chapter XIV of the Compendium no previous authorization from the Central Bank of Chile is required for the remittance of U.S. dollars obtained in the sale of the shares underlying ADSs or from dividends or other distributions made in connection therewith. The entity of the Formal Exchange Market participating in the transfer shall provide certain information to the Central Bank of Chile on the next banking business day. In the event there are payments made outside Chile, the foreign investor shall provide the relevant information to the Central Bank of Chile directly or through an entity of the Formal Exchange Market within the first 10 days of the month following the date on which the payment was made.

Under Chapter XIV of the Compendium payments and remittances of funds from Chile are governed by the rules in effect at the time the payment or remittance is made. Therefore, any change made to Chilean laws and regulations after the date hereof will affect foreign investors who have acquired ADSs or shares to be converted into ADSs. There can be no assurance that further Central Bank of Chile regulations or legislative changes to the current foreign exchange control regime in Chile will not restrict or prevent foreign investors to purchase and remit abroad U.S. dollars, nor can there be any assessment to the duration or impact of such restrictions, if imposed.

This situation is different from the one governing ADSs issued by Chilean companies prior to April 19, 2001. Prior to such date, ADSs representing shares of stock of Chilean corporations were subject to Chapter XXVI of the Compendium, which addressed the issuance of ADSs by Chilean companies and foreign investment contracts entered into among the issuer of the shares, the Central Bank of Chile and the depository pursuant to Article 47 of the Central Bank Act. Chapter XXVI of the Compendium and the corresponding foreign investment contracts granted foreign investors the vested right to acquire dollars with the proceeds obtained in the sale of the underlying shares of stock, or from dividends or other distributions made in connection therewith and remit them abroad. On April 19, 2001, the Central Bank of Chile eliminated Chapter XXVI of the Compendium and made the establishment of new ADS facilities subject to the provisions of Chapter XIV of the Compendium. All foreign investment contracts executed under the provisions of Chapter XXVI of the Compendium remain in full force and effect and are governed by the provisions in effect at the time of their execution.

The foregoing is a summary of the Central Bank of Chile’s regulations with respect to the issuance of ADSs representing common shares as in force and effect as of the date hereof. This summary does not purport to be complete and is qualified in its entirety by reference to the provisions of Chapter XIV of the Compendium, a copy of which is available from Corpbanca upon request.

There can be no assurance that further Central Bank of Chile regulations or legislative changes to the current foreign exchange control regime in Chile will not restrict or prevent foreign investors from purchasing or remitting U.S. dollars, or that further restrictions applicable to foreign investors which affect their ability to remit the capital, dividends or other benefits in connection with the shares of stock will not be imposed by the Central Bank of Chile in the future, nor can there be any assessment to the duration or impact of such restrictions, if imposed.

E. TAXATION

CHILEAN TAX CONSIDERATIONS

The following discussion is based on material Chilean income tax laws presently in force, including Ruling No. 324 of January 29, 1990 of the Chilean Internal Revenue Service and other applicable regulations and rulings. The discussion summarizes the material Chilean income tax consequences of an investment in the ADSs or common shares received in exchange for ADSs by an individual who is not domiciled in or a resident of Chile, or a legal entity that is not organized under the laws of Chile and does not have a permanent establishment located in Chile, which we refer to as a foreign holder. For purposes of Chilean law, an individual holder is a resident of Chile if he or she has resided in Chile for more than six months in one calendar year or for a total of more than six months, whether consecutive or not, in two consecutive tax years. An individual holder is domiciled in Chile if he or she resides in Chile with the purpose of staying in Chile (such purpose to be evidenced by circumstances such as the acceptance of employment within Chile or the relocation of his or her family to Chile). On August 21, 2018, a bill was submitted to the Chilean National Congress aimed at reforming the tax legislation. The bill proposes to modify the definition of “resident,” considering a person a “resident” of Chile if a person remains in the country for a period or periods of time exceeding 183 days in any twelve-month period. This discussion is not intended as tax advice to any particular investor, which can be rendered only in light of that investor’s particular tax situation.

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Under Chilean law, provisions contained in statutes such as tax rates applicable to foreign holders, the computation of taxable income for Chilean purposes and the manner in which Chilean taxes are imposed and collected may be amended only by another statute. In addition, the Chilean tax authorities issue rulings and regulations of either general or specific application interpreting the provisions of Chilean tax law. Absent a retroactive law, Chilean taxes may not be assessed retroactively against taxpayers who act in good faith relying on such rulings and regulations, but Chilean tax authorities may change said rulings and regulations prospectively. There is no general income tax treaty in force between Chile and the United States (although a treaty has been signed, it has not yet been ratified by United States’ Congress and therefore is not yet effective).

CASH DIVIDENDS AND OTHER DISTRIBUTIONS

Cash dividends paid by us with respect to the ADSs or common shares held by a foreign holder will be subject to a 35% Chilean withholding tax, which is withheld and paid over to the Chilean tax authorities by us. We refer to this as the Chilean withholding tax. A credit against the Chilean withholding tax is available based on the level of corporate income tax, or first category tax, actually paid by us on the taxable income to which the dividend is imputed; however, this credit does not reduce the Chilean withholding tax on a one-for-one basis because it also increases the base on which the Chilean withholding tax is imposed.

From January 1, 2017, the first category tax may be credited partially (65%). Nevertheless, the foreign holder shall be entitled to a full first category tax credit, regardless of the tax regime chosen by the company, if such holder is established or domiciled in, or is a resident of, a country with which Chile maintains a double taxation treaty in force or, until December 31, 2021, if Chile has signed a double taxation treaty with such country, even if not in force, and the holder duly credits his tax residency according to Resolución No. 11, issued by the Chilean Internal Revenue Service on January 30, 2019. However, if the new tax reform bill which was presented to the Congress by the Government on August, 2018 passes, the first category tax would be fully credited to any foreign investor, regardless of his establishment or domicile.

In addition, distribution of book income in excess of retained taxable income is subject to the Chilean withholding tax, but such distribution is not eligible for the credit. In case such withholding is determined to be excessive at the end of the year, foreign holders will have rights to file for the reimbursement of the excess withholding. Under Chilean income tax law, for purposes of determining the level of the first category tax that has been paid by us, dividends generally are assumed to have been paid out of our oldest retained taxable profits. The first category tax rate was 24% in 2016, 25.5% in 2017, and 27% in 2018 onwards. The foregoing tax consequences apply to cash dividends paid by us. Dividend distributions made in property (other than common shares) will be subject to the same Chilean tax rules as cash dividends.

As indicated above, a bill was submitted to the Chilean National Congress on August 21, 2018 aimed at reforming the tax legislation. Among other matters, this bill provides for a general regime under which the corporate tax would apply as a general rule with a 27% rate, which would be fully creditable against the withholding tax or Global Complimentary Tax. To date, such bill is still under discussion by the Chilean National Congress.

CAPITAL GAINS

Gains realized on the sale, exchange or other disposition by a foreign holder of ADSs (or ADRs evidencing ADSs) will not be subject to Chilean taxation, provided that such disposition occurs outside Chile (confirmed by the Chilean IRS in ruling No. 1,307 of 2013). The deposit and withdrawal of common shares in exchange for ADSs will not be subject to any Chilean taxes.

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Gains recognized on a sale or exchange of common shares received in exchange for ADSs (as distinguished from sales or exchanges of ADSs representing such common shares) by a foreign holder until December 31, 2016 will be subject to both the first category tax and the Chilean withholding tax (the former being creditable against the latter) if (1) the foreign holder has held such common shares for less than one year since exchanging ADSs for the common shares, (2) the foreign holder acquired and disposed of the common shares in the ordinary course of its business or as a regular trader of stock, or (3) the sale is made to a company in which the foreign holder holds an interest (10% or more of the shares in the case of Public Companies). A 35% withholding tax is imposed on the amount of the gains obtained on the sale or exchange of common shares received in exchange for ADSs, less a Chilean credit tax. In all other cases, gain on the disposition of common shares will be subject only to the first category tax levied as a sole tax. However, in these latter cases, if it is impossible to determine the taxable capital gain, a 5% withholding will be imposed on the total amount to be remitted abroad without any deductions as a provisional payment of the total tax due.

From January 1, 2017 onwards, any gain obtained on the sale or exchange of common shares received in exchange for ADSs by a foreign holder will be subject to the Chilean withholding tax with a rate of 35%, which must be withheld by the purchaser. However, if it is impossible to determine the taxable capital gain, a 10% withholding will be imposed on the total amount to be remitted abroad without any deductions as a provisional payment of the total tax due.

The tax basis of common shares received in exchange for ADSs will be the acquisition value of such shares duly adjusted for local inflation. The valuation procedure set forth in the deposit agreement, which values common shares that are being exchanged at the highest price at which they trade on the Santiago Stock Exchange on the date of the exchange, generally will determine the acquisition value for this purpose. Consequently, the conversion of ADSs into common shares and sale of such common shares for the value established under the deposit agreement will not generate a capital gain subject to taxation in Chile, to the extent that the sale price is equal to the acquisition value at the time of redemption as discussed above. In the event the sale price exceeds the acquisition value of such shares determined, as explained above, such capital gain will be subject to first category tax (in the event the sale took place on or before December 31, 2016), and to the Chilean withholding, tax as discussed above.

Under the bill submitted to the Chilean National Congress on August 21, 2018 referred to above, capital gains obtained by individuals could be subject to a 20% single tax, or to Complementary Global Tax in case of taxpayers resident or domiciled in Chile.

The distribution and exercise of preemptive rights relating to the common shares will not be subject to Chilean taxation. Amounts received in exchange for the assignment of preemptive rights relating to the shares will be subject to both the first category tax and the Chilean withholding tax (the former being creditable against the latter to the extent described above).

Exempt capital gains - Article 107 of the Chilean Income Tax Law

According to Article 107 of the Chilean Income Tax Law, the sale and disposition of shares of Chilean public corporations which are significantly traded on a Chilean stock exchange is not levied by any Chilean tax on capital gains, if the sale or disposition was made:

• on a local stock exchange authorized by the CMF or in a tender offer process according to Title XXV of the Chilean Securities Market Act, so long as the shares (1) were purchased on a public stock exchange or in a tender offer process pursuant to Title XXV of the Chilean Securities Market Act, (2) are newly issued shares issued in a capital increase or incorporation of the corporation, (3) were acquired as a result of the exchange of convertible securities, or (4) were a contribution or redemption of securities in accordance with Article 109 of the Chilean Income Tax Law. In this case, gains exempted from Chilean taxes shall be calculated using the criteria set forth in the Chilean Income Tax Law; or

• within 90 days after the shares would have ceased to be significantly traded on the stock exchange. In such case, the gains exempted from Chilean taxes on capital gains will be up to the average price per share of the last 90 days in which the shares were significantly traded on the stock exchange. Any gains above the average price will be taxable capital gains.

For purpose of the bullets above, shares are considered to be significantly traded on a Chilean stock exchange when they (1) are registered in the securities registry, (2) are registered in a Chilean Stock Exchange and (3) have an adjusted presence equal to or above 25% or have a “Market Maker,” according to the CMF Ruling No. 327 dated January 17, 2012. Currently, our shares are considered to be significantly traded on a Chilean stock exchange.

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OTHER CHILEAN TAXES

No Chilean inheritance, gift, or succession taxes apply to the transfer or disposition of the ADSs by a foreign holder but such taxes generally will apply to the transfer at death or by a gift of common shares by a foreign holder. No Chilean stamp, issue, registration or similar taxes or duties apply to foreign holders of ADSs or common shares.

WITHHOLDING TAX CERTIFICATES

Upon request, we will provide to foreign holders appropriate documentation evidencing the payment of the Chilean withholding tax.

U.S. FEDERAL INCOME TAX CONSIDERATIONS

This section is a summary of certain U.S. federal income tax consequences applicable to the acquisition, ownership and disposition by a U.S. holder (as defined below) of ADSs or common shares. This summary applies to you only if you are a U.S. holder and you hold your ADSs or common shares as capital assets (generally, property held for investment) for U.S. federal income tax purposes. This summary is not a comprehensive description of all of the tax consequences that may be relevant to a decision to purchase, hold or dispose of our ADSs or common shares.

This section does not apply to you if you are a U.S. holder subject to special rules, including for example:

• a dealer in securities;

• a trader in securities that elects to use a mark-to-market method of accounting for securities holdings;

• a regulated investment company;

• a real estate investment trust;

• a tax-exempt organization;

• a bank or other financial institution;

• a life insurance company;

• a partnership (or other entity or arrangement treated as a partnership for U.S. federal income tax purposes) or a partner, member or owner therein;

• a person liable for alternative minimum tax;

• a person that actually or constructively owns 10% or more of the bank’s shares by vote or value;

• a person that holds ADSs or common shares as part of a straddle, a hedging, conversion or constructive sale transaction; or

• a person whose functional currency is not the U.S. dollar.

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This section is based on the Internal Revenue Code of 1986, as amended, or the Code, its legislative history, existing and proposed U.S. Treasury Regulations, published rulings, and court decisions, all as of the date of this Annual Report. These laws are subject to change, possibly on a retroactive basis, and subject to differing interpretations. This summary does not address any U.S. state or local or non-U.S. tax considerations or any U.S. federal estate, gift or alternative minimum tax considerations. On February 4, 2010, a comprehensive income tax treaty between the United States and Chile was signed, however such treaty has not yet been ratified by each country and therefore is not yet effective. It is unclear at this time when such treaty will be ratified by both countries. You should consult your tax advisor regarding the ongoing status of this treaty and, if ratified, the impact such treaty would have on the consequences described in this Annual Report.

As used herein, the term “U.S. holder” means a beneficial owner of ADSs or common shares who is, for U.S. federal income tax purposes, any of the following:

• an individual who is a citizen or resident of the United States,

• a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof, or the District of Columbia,

• an estate whose income is subject to U.S. federal income tax regardless of its source, or

• a trust if such trust validly elects to be treated as a United States person (as defined under the Code) for U.S. federal income tax purposes or if (1) a court within the United States is able to exercise primary supervision over its administration, and (2) one or more United States persons have the authority to control all of the substantial decisions of such trust.

If a partnership (or other entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds the ADSs or common shares, the U.S. federal income tax treatment of a partner, member or owner of such entity or arrangement will generally depend on the status of the partner, member or owner and the tax treatment of such entity. A partner, member or owner in an entity holding the ADSs or common shares should consult its tax advisor with regard to the U.S. federal income tax treatment of its investment in the ADSs or common shares.

Prospective investors should consult their tax advisors as to the particular tax considerations applicable to them relating to the acquisition, ownership and disposition of our ADSs or common shares, including the applicability of U.S. federal, state and local tax laws and non-U.S. tax laws.

OWNERSHIP OF ADSs

In general

The discussion below assumes that the representations contained in the deposit agreement are true and that the obligations in the relevant deposit agreement and any related agreement will be performed in accordance with the terms set forth therein. For U.S. federal income tax purposes, if you are a holder of ADSs, you generally will be treated as the owner of our common shares represented by such ADSs. Accordingly, deposits or withdrawals of common shares for ADSs will not be subject to U.S. federal income tax. The U.S. Treasury Department has expressed concern that depositaries for depositary receipts, or other intermediaries between the holders of shares of an issuer and the issuer, may be taking actions that are inconsistent with the claiming of U.S. foreign tax credits by U.S. holders of such receipts or shares. These actions would also be inconsistent with claiming the reduced rate for “qualified dividend income” described below. Accordingly, the analysis regarding the availability of a U.S. foreign tax credit for Chilean withholding taxes and sourcing rules described below and availability of the reduced rate for qualified dividend income could be affected by future actions that may be taken by the U.S. Treasury Department.

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Taxation of distributions

Subject to the PFIC rules discussed below, if you are a U.S. holder, the gross amount of any distribution of cash or property (including the net amount of Chilean taxes withheld, if any, on the distribution, after taking into account the credit for first category tax, as discussed above under “—Chilean Tax Considerations—Cash Dividends and Other Distributions”), paid by the bank out of its current or accumulated earnings and profits (as determined for U.S. federal income tax purposes) will be includable in gross income as ordinary dividend income. You must include the net amount of Chilean tax withheld, if any, from such distribution in gross income even though you do not in fact receive it. The dividend is taxable to you when you, in the case of common shares, or the depositary, in the case of ADSs, receive the dividend, actually or constructively. Distributions in excess of current and accumulated earnings and profits, as determined for U.S. federal income tax purposes, will be treated as a non-taxable return of capital to the extent of your basis in the ADSs or common shares and thereafter as either long-term or short-term capital gain, depending on whether you have held our ADSs or common shares for more than one year at the time of the distribution. The bank does not currently maintain, and does not intend to maintain, calculations of our earnings and profits in accordance with U.S. federal income tax principles. Consequently, a U.S. holder should treat the entire amount of any distribution received as a dividend. As used below, the term “dividend” means a distribution that constitutes a dividend for U.S. federal income tax purposes.

If you are a non-corporate U.S. holder, dividends paid to you may constitute qualified dividend income and be taxable to you at a reduced rate provided that (1) certain holding period requirements are met, (2) the ADSs or common shares are considered to be readily tradable on an “established securities market” in the United States, and (3) the bank is not a PFIC. Under U.S. Internal Revenue Service, or IRS, authority, ADSs are considered for purposes of clause (2) above to be readily tradable on an established securities market in the United States because they are listed on the NYSE. Based on existing guidance, it is not entirely clear whether dividends received with respect to the common shares will be treated as qualified dividend income because the common shares are not themselves listed on a U.S. exchange. Moreover, as discussed below, under “—Passive Foreign Investment Company rules,” we believe that we will not be treated as a PFIC for U.S. federal income tax purposes with respect to our 2018 and current taxable year, and based on our current expectations regarding the value and nature of our assets, the sources and nature of our income, relevant market and shareholder data and our current business plans, we do not anticipate becoming a PFIC in the future. However, there can be no assurance in this regard because the PFIC determination is made annually and is based on the portion of our assets (including goodwill) and income that is characterized as passive under the PFIC rules and our continued qualification for an exception to the PFIC rules for certain foreign banks. You should consult your tax advisor regarding the availability of the reduced rate for dividends paid with respect to our ADSs or common shares. Dividends paid by us generally will not be eligible for the dividends-received deduction available to certain U.S. corporations.

The amount of the dividend distribution that you must include in your income as a U.S. holder will be the U.S. dollar value of the Chilean peso payments made, determined at the spot Chilean peso/U.S. dollar rate on the date the dividend distribution is actually or constructively received by you or the depositary, regardless of whether the payment is in fact converted into U.S. dollars at that time. If the dividend is converted to U.S. dollars on the date of receipt, a U.S. holder generally will not recognize a foreign currency gain or loss. However, if the U.S. holder converts the Chilean pesos into U.S. dollars on a later date, the U.S. holder must include in income any gain or loss resulting from any exchange rate fluctuations. The gain or loss will be equal to the difference between (1) the U.S. dollar value of the amount included in income when the dividend was received, and (2) the amount received on the conversion of the Chilean pesos into U.S. dollars. Generally, any gain or loss resulting from currency exchange fluctuations during the period from the date you include the dividend payment in income to the date you convert the payment into U.S. dollars will be treated as ordinary income or loss and will not be eligible for the reduced tax rate applicable to qualified dividend income. The gain or loss generally will be income or loss from sources within the United States for foreign tax credit limitation purposes. U.S. holders should consult their own tax advisors regarding the tax consequences to them if the bank pays dividends in Chilean pesos or any other non-U.S. currency. The amount of any distribution of property other than cash will be the fair market value of such property on the date of distribution.

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Subject to certain limitations (including minimum holding period requirements), the net amount of Chilean income tax withheld and paid over to the Chilean taxing authorities (after taking into account the credit for first category tax, when available) will generally be creditable or deductible against your U.S. federal income tax liability. However, if the amount of Chilean withholding tax initially withheld from a dividend is determined under applicable Chilean law to be excessive (as described above under “—Chilean Tax Considerations—Cash Dividends and Other Distributions”), the excess tax may not be creditable. Special rules apply in determining the foreign tax credit limitation with respect to dividends received by individuals that are subject to the reduced tax rate for qualified dividends. Dividends will be treated as income from sources outside the United States and will generally be categorized as “passive category income” for most U.S. holders for U.S. foreign tax credit purposes. A U.S. holder that does not elect to claim a credit for any foreign income taxes paid during the taxable year may instead claim a deduction in respect of such foreign income taxes, provided that the U.S. holder elects to deduct (rather than credit) all foreign income taxes paid or accrued during the taxable year. This discussion does not address special rules that apply to U.S. holders who, for purposes of determining the amount of the foreign tax credit, take foreign income taxes into account when accrued. The rules governing foreign tax credits are complex and a U.S. holder should consult its own tax advisor regarding the availability of foreign tax credits under its particular circumstances.

Taxation of dispositions

Subject to the PFIC rules discussed below, if you are a U.S. holder and you sell, exchange or otherwise dispose of your ADSs or common shares in a taxable disposition, you will recognize capital gain or loss for U.S. federal income tax purposes equal to the difference between the U.S. dollar value of the amount that you realize and your tax basis, determined in U.S. dollars, in your ADSs or common shares. Any such gain or loss will be long-term capital gain or loss if your ADSs or common shares have been held for more than one year. Certain non-corporate U.S. holders (including individuals) may be eligible for preferential rates of U.S. federal income tax in respect of long-term capital gains. The deductibility of capital losses is subject to limitations.

If you are a U.S. holder of our ADSs or common shares, the initial tax basis of your ADSs or common shares will be the U.S. dollar purchase price or, if purchased in Chilean pesos, the U.S. dollar value of the Chilean peso-denominated purchase price determined on the date of purchase. If the common shares are treated as being traded on an “established securities market,” a cash basis U.S. holder, or, if it elects, an accrual basis U.S. holder, will determine the U.S. dollar value of the cost of such common shares by translating the amount paid at the spot rate of exchange on the settlement date of the purchase. If you convert U.S. dollars to Chilean pesos and immediately use the currency to purchase common shares, such conversion generally will not result in taxable gain or loss to you.

The amount realized generally will be equal to the amount of cash or the fair market value of any other property received. With respect to the sale, exchange or other taxable disposition of our common shares, if the payment received is in Chilean pesos, the amount realized generally will be the U.S. dollar value of the payment received determined on (1) the date of receipt of payment in the case of a cash basis U.S. holder, and (2) the date of disposition in the case of an accrual basis U.S. holder. If our common shares are treated as being traded on an “established securities market,” a cash basis U.S. holder, or, if it elects, an accrual basis U.S. holder, will determine the U.S. dollar value of the amount realized by translating the amount received at the spot rate of exchange on the settlement date of the sale.

If Chilean income tax is withheld on the sale, exchange or other taxable disposition of our ADSs or common shares, the amount realized by a U.S. holder will include the gross amount of the proceeds of that sale, exchange or other taxable disposition before deduction of the Chilean income tax. Capital gain or loss, if any, realized by a U.S. holder on the sale, exchange or other taxable disposition of ADSs or common shares generally will be treated as U.S. source gain or loss for U.S. foreign tax credit purposes. Consequently, in the case of a gain from the disposition of a common share that is subject to Chilean income tax, the U.S. holder may not be able to benefit from the foreign tax credit for that Chilean income tax (i.e., because the gain from the disposition would be U.S. source), unless the U.S. holder can apply the credit against U.S. federal income tax payable on other income from foreign sources. Alternatively, the U.S. holder may take a deduction for the Chilean income tax, provided that the U.S. holder elects to deduct all foreign taxes paid or accrued during the taxable year. The rules governing foreign tax credits are complex and a U.S. holder should consult its own tax advisor regarding the availability of foreign tax credits under its particular circumstances.

Passive Foreign Investment Company rules

Based upon our present regulatory status under Chilean law, current estimates, expectations and projections of the value and classification of our assets and the sources and nature of our income, we believe that the bank’s ADSs and common shares should not be treated as stock of a PFIC for U.S. federal income tax purposes for 2018, our current taxable year or in the foreseeable future, but this conclusion is a factual determination that is made annually and there can be no assurance that we will not be considered a PFIC for the current taxable year or any subsequent taxable year. Our actual PFIC status for our current taxable year ending December 31, 2019 will not be determinable until after the close of such taxable year and, accordingly, there is no guarantee that we will not be a PFIC for 2019.

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In general, if you are a U.S. holder, the bank will be a PFIC with respect to you if for any taxable year in which you held the bank’s ADSs or common shares:

• at least 75% of the bank’s gross income for the taxable year is “passive income;” or

• at least 50% of the value, determined on the basis of a quarterly average, of the bank’s assets is attributable to assets that produce or are held for the production of passive income.

Passive income for this purpose generally includes dividends, interest, royalties, rents, annuities and gains from assets that produce passive income. We will be treated as owning our proportionate share of the assets and earnings and our proportionate share of the income of any other corporation in which we own, directly or indirectly, at least 25% by value of the stock of another corporation. If we are a PFIC for any year during which you hold our ADSs or common shares, you will generally be required to treat our ADSs or common shares as stock in a PFIC for all succeeding years during which you hold our ADSs or common shares, even if the banks does not otherwise meet the PFIC tests for any such succeeding year.

We are unable to determine with certainty that we are not a PFIC because the application of the PFIC rules to banks is unclear under present U.S. federal income tax law. Banks generally derive a substantial part of their income from assets that are interest bearing or that otherwise could be considered passive under the PFIC rules. The IRS has issued a notice and has proposed regulations, which together describe what is referred to as the “active bank exception.” For purposes of the PFIC test, the active bank exception excludes from passive income any income derived in the active conduct of a banking business by a qualifying foreign bank. The IRS notice and proposed regulations each have different requirements for qualifying as a foreign bank and for determining the banking income that may be excluded from passive income under the active bank exception. Moreover, the proposed regulations have been outstanding since 1994 and will not be effective unless finalized. Nevertheless, we believe that we should qualify as an active bank under the requirements of both the notice and the proposed regulations, assuming that the proposed regulations are finalized in their current form.

In addition, because a PFIC determination is a factual determination that must be made following the close of each taxable year and is based on, among other things, the market value of our assets and shares, and because the proposed regulations (although proposed to be retroactive in application) are not currently in force, our PFIC status may change and there can be no assurance that we will not be considered a PFIC for the current taxable year or any subsequent taxable year. If the bank is treated as a PFIC for any year in which you hold ADSs or common shares, and you are a U.S. holder that did not make a mark-to-market election, as described below, you will be subject to special rules with respect to:

• any gain you realize on the sale, exchange or other taxable disposition (including certain pledges) of your ADSs or common shares; and

• any “excess distribution” that the bank makes to you (generally, any distributions to you during a single taxable year that are greater than 125% of the average annual distributions received by you in respect of the ADSs or common shares during the three preceding taxable years or, if shorter, your holding period for the ADSs or common shares).

Under these rules:

• the gain or excess distribution will be allocated ratably over your holding period for the ADSs or common shares;

• the amount allocated to the taxable year in which you realized the gain or excess distribution will be taxed as ordinary income;

• the amount allocated to each prior year, with certain exceptions, will be taxed at the highest tax rate in effect for that year; and

• the interest charge generally applicable to underpayments of tax will be imposed in respect of the tax attributable to each such year.

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The tax liability for amounts allocated to years prior to the year of disposition or “excess distribution” cannot be offset by any net operating losses for such years, and gains (but not losses) realized on the sale of the ADSs or common shares cannot be treated as capital, even if you hold the ADSs or ordinary shares as capital assets. If we were a PFIC, certain subsidiaries and other entities in which we have a direct or indirect interest may also be PFICs, or Lower-tier PFICs. Under attribution rules, U.S. holders would be deemed to own their proportionate shares of Lower-tier PFICs and would be subject to U.S. federal income tax according to the rules described above on (1) certain distributions by a Lower-tier PFIC and (2) certain dispositions of shares of a Lower-tier PFIC, in each case as if the U.S. holder held such shares directly, even though such U.S. holder had not received the proceeds of those distributions or dispositions.

Alternatively, a U.S. holder of “marketable stock” (as defined below) may make a mark-to-market election. If you make this election, you will not be subject to the PFIC rules described above. Instead, in general, you will include as ordinary income each year the excess, if any, of the fair market value of your ADSs or common shares at the end of the taxable year over your adjusted basis in your ADSs or common shares. These amounts of ordinary income will not be eligible for the reduced tax rates applicable to qualified dividend income or long-term capital gains. You will also be allowed to take an ordinary loss in respect of both (1) the excess, if any, of the adjusted basis of your ADSs or common shares over their fair market value at the end of the taxable year and (2) any loss realized on the actual sale or disposition of the ADSs or common shares, but in each case only to the extent of the net amount of previously included income as a result of the mark-to-market election. Any loss on an actual sale of your ADSs or common shares would be a capital loss to the extent it exceeds any previously included mark-to-market income not offset by previous ordinary deductions. Your basis in the ADSs or common shares will be adjusted to reflect any such income or loss amounts.

The mark-to-market election is available only for “marketable stock,” which is stock that is regularly traded in other than de minimis quantities on at least 15 days during each calendar quarter on a qualified exchange, including the NYSE, or other market, as defined in applicable regulations. The ADSs are listed on the NYSE, and we expect, although no assurance can be given, that they will be regularly traded on the NYSE. It is unclear whether the common shares will be treated as “marketable stock” for purpose of the mark-to-market rules. In addition, the mark-to-market election generally would not be effective for any Lower-tier PFICs. You are urged to consult your own tax advisors regarding the U.S. federal income tax consequences that would arise if we are treated as a PFIC while you hold ADSs or common shares.

Notwithstanding any election you make with regard to the ADSs or common shares, dividends that you receive from us will not constitute qualified dividend income to you, and therefore are not eligible for the reduced tax rate described above, if the bank is a PFIC either in the taxable year of the distribution or any preceding taxable year during which you held our ADSs or common shares. Instead, you must include the gross amount of any such dividend paid by us out of the bank’s accumulated earnings and profits (as determined for U.S. federal income tax purposes) in your gross income, and these amounts will be subject to tax at rates applicable to ordinary income.

If you directly (and, in some cases, indirectly) own ADSs or common shares that are treated as PFIC shares with respect to you during a taxable year, you will be required to file an annual report for such taxable year.

In addition, if we are a PFIC, we do not intend to prepare or provide you with the information necessary to make a “qualified electing fund” election, which, like the mark-to-market election, is a means by which U.S. taxpayers may elect out of the tax treatment that generally applies to PFICs.

YOU ARE URGED TO CONSULT YOUR TAX ADVISOR REGARDING THE APPLICATION OF THE PFIC RULES TO YOUR INVESTMENT IN ADSS OR COMMON SHARES, INCLUDING THE AVAILABILITY AND ADVISABILITY OF MAKING AN ELECTION TO AVOID THE ADVERSE TAX CONSEQUENCES OF THE PFIC RULES SHOULD WE BE CONSIDERED A PFIC FOR ANY TAXABLE YEAR.

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Possible Foreign Account Tax Compliance Act Withholding

Pursuant to Sections 1471 through 1474 of the Code and U.S. Treasury Regulations promulgated thereunder, commonly referred to as FATCA, a 30% withholding tax may, in the future, be imposed on all or some of the payments on the ADSs or our common stock to holders and non-U.S. financial institutions receiving payments on behalf of holders that, in each case, fail to comply with information reporting, certification and related requirements. Under current guidance, the amount to be withheld is not defined, and it is not yet clear whether or to what extent payments on the ADSs or shares of our common stock may be subject to this withholding tax. This withholding tax, if it applies, could apply to any payment made with respect to the ADSs or our common stock. Moreover, withholding may be imposed at any point in a chain of payments if a non-U.S. payee fails to comply with U.S. information reporting, certification and related requirements. Accordingly, ADSs or shares of our common stock held through a non-compliant institution may be subject to withholding even if the holder otherwise would not be subject to withholding. You should consult your tax advisor regarding potential U.S. federal withholding taxes imposed under FATCA.

If FATCA withholding is required, the bank will not be required to pay any additional amounts with respect to any amounts withheld. Certain beneficial owners of ADSs or our common stock that are not foreign financial institutions generally will be entitled to refunds of any amounts withheld under FATCA, but this may entail significant administrative burden. U.S. holders are urged to consult their tax advisers regarding the application of FATCA to their ownership of the ADSs or our common stock.

Medicare tax

A 3.8% tax is imposed on the lesser of (1) modified adjusted gross income in excess of US$200,000 (US$250,000 for joint-filers), and (2) net investment income of certain individuals, trusts and estates. For these purposes, net investment income will generally include any dividends paid to you with respect to the ADSs or common shares and any gain realized on the sale, exchange or other taxable disposition of an ADS or common share.

Backup withholding tax and information reporting requirements

U.S. backup withholding tax and information reporting requirements generally apply to certain payments to certain non-exempt holders of ADSs or common shares. Information reporting generally will apply to payments of dividends on, and to proceeds from the sale or redemption of, ADSs or common shares made within the United States, or by a U.S. payor or U.S. middleman, to a holder of ADSs or common shares, other than an exempt recipient. A payor will be required to withhold U.S. backup withholding tax from any payments of dividends on, or the proceeds from the sale or redemption of, ADSs or common shares within the United States, or by a U.S. payor or U.S. middleman, to a holder, other than an exempt recipient, if such holder fails to furnish its correct taxpayer identification number or otherwise fails to comply with, or establish an exemption from, such U.S. backup withholding tax requirements.

Backup withholding is not an additional tax. Any U.S. backup withholding tax generally will be allowed as a credit against the holder’s U.S. federal income tax liability or, to the extent the withheld amount exceeds such liability, refunded upon the timely filing of a U.S. federal income tax return.

Information with respect to foreign financial assets

Certain U.S. investors are subject to reporting requirements in connection with the holding of certain foreign financial assets, including our ADSs or common shares that they own, either directly or through certain foreign financial institutions, but only if the aggregate value of all of such assets exceeds US$50,000. Such investors are subject to penalties if they are required to submit such information to the IRS and fail to do so. You should consult your tax advisor regarding the application of these new reporting requirements to your particular situation.

The above description is not intended to constitute a complete analysis of all tax consequences relating to the purchase, ownership or disposition of the ADSs or common shares. Investors deciding on whether or not to invest in ADSs or common shares should consult their own tax advisors concerning the tax consequences of their particular situations.

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F. DIVIDENDS AND PAYING AGENTS

Not applicable.

G. STATEMENT BY EXPERTS

Not applicable.

H. DOCUMENTS ON DISPLAY

We are subject to the information requirements of the Exchange Act, except that as a foreign issuer, we are not subject to the proxy rules or the short-swing profit disclosure rules of the Exchange Act. In accordance with these statutory requirements, we file or furnish reports and other information with the SEC. Reports and other information filed or furnished by us with the SEC are available electronically at the SEC’s website: https://www.sec.gov. Copies of such material may also be inspected at the offices of the New York Stock Exchange, 11 Wall Street, New York, New York 10005, on which our ADSs are listed. In addition, the SEC maintains a website that contains information filed electronically with the SEC, which can be accessed on the internet at http://www.sec.gov. The information contained on this website does not form part of this annual report on Form 20-F.

Additional documents concerning Corpbanca which are referred to in this annual report may be inspected at our offices at Rosario Norte 660, Las Condes, Santiago, Chile.

I. SUBSIDIARY INFORMATION

Not applicable.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT FINANCIAL RISK

A. DEFINITION AND PRINCIPLES OF FINANCIAL RISK MANAGEMENT

Following the consummation of the Merger, as part of the integration process of the merged banks, we amended our risk management policies and procedures in order to adopt Itaú Unibanco’s risk policies and procedures according to Basel III framework.

While there is no single definition of financial risk, the Bank defines this risk as the possibility of an event having unexpected financial consequences on the institution. Although this definition involves a strong adversity component, it also involves an important opportunity component. Therefore, the purpose of financial risk management is not to eliminate this risk, but rather to limit its exposure to negative events in line with the risk appetite of the Bank’s shareholders and the regulations that govern the institution. The main financial risks to which the Bank is exposed are: Market Risk, Liquidity Risk and Counterparty Risk.

1. Market Risk

Market risk is the exposure to economic gains or losses caused by movements in prices and market variables. This risk stems from the activities of the Trading and Banking Books. The Trading Book includes non-derivative financial instruments that have been classified as trading instruments and all derivative positions that have not been classified as hedging instruments, according to accounting standards. The Banking Book includes all positions in derivative and non-derivative instruments that do not form part of the Trading Book. In the first case, it comes from activities intended to obtain short-term gains and from the intensive use of instruments recorded at fair value. In the second case, with a more long-term vision, it stems from commercial activities with products valued at amortized cost. The following section describes the main market risk factors to which the Bank and its subsidiaries are exposed:

a) Foreign Exchange Risk

Foreign exchange risk is the exposure to adverse movements in the exchange rates of currencies other than the base currency for all balance sheet and off-balance sheet positions.

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• The main sources of foreign exchange risk are:

• positions in foreign currency (FX) within the trading book;

• currency mismatches between assets and liabilities in the banking book;

• cash flow mismatches in different currencies; and

• structural positions produced from consolidating assets and liabilities from our foreign branches and subsidiaries denominated in currencies other than the Chilean peso. As a result, movements in exchange rates can generate volatility within the Bank’s income statement and equity. This effect is known as “translation risk.”

b) Indexation Rate Risk

Indexation risk is the exposure to changes in indexed units (e.g. UF, UVR or others) linked to domestic or foreign currency in which any instruments, contracts or other transactions recorded in the statement of financial position may be denominated.

c) Interest Rate Risk

Interest rate risk is the exposure to movements in market interest rates. Changes in market interest rates can affect both the price of instruments recorded at fair value and the financial margin and other gains from the Banking Book such as fees. Fluctuations in interest rates also affect the Bank’s economic value.

Interest rate risk can be represented by sensitivities to parallel and/or non-parallel yield shifts with the effects reflected in the prices of instruments, the financial margin, equity and economic value.

d) Volatility Risk

In addition to the exposure related to the underlying asset, issuing options has other risks. These risks arise from the non-linear relationship between the gain generated by the option and the price and level of the underlying factors, as well as exposure to changes in the price volatility of the underlying asset.

2. Funding Liquidity Risk

Funding liquidity risk is the exposure of the Bank and its subsidiaries to events that affect their ability to meet, in a timely manner and at reasonable costs, cash payment obligations arising from maturities of time deposits that are not renewed, withdrawals from demand accounts, maturities or settlements of derivatives, liquidations of investments or any other payment obligation.

Financial institutions are exposed to funding liquidity risk that is intrinsic to the role of intermediary that they play in the economy. In general, in financial markets demand for medium or long-term financing is usually much greater than the supply of funds for those terms while short-term financing is in considerable supply. In this sense, the role of intermediary played by financial institutions, which assume the risk of satisfying the demand for medium and long-term financing by brokering short-term available funds, is essential for the economy to function properly.

Appropriately managing funding liquidity risk not only allows contractual obligations to be met in a timely manner, but also enables:

• The liquidation of positions, when it so decides, to occur without significant losses.

• The commercial and treasury activities of the Bank and its subsidiaries to be financed at competitive rates.

• The Bank to avoid fines or regulatory penalties for not complying with regulations.

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3. Counterparty Risk

Counterparty risk is the risk of loss arising from non-compliance by a given counterparty, for whatever reason, in paying all or part of its obligations with the Bank under contractually agreed-upon conditions. This risk also includes a given counterparty’s inability to comply with obligations to settle derivative operations with bilateral risk.

The Bank diversifies credit risk by placing concentration limits on different groups. Exposure to credit risk is evaluated using an individual analysis of the payment capacity of debtors and potential debtors to meet their obligations on time and as agreed.

B. FINANCIAL RISK MANAGEMENT

The process of managing financial risks is an ongoing, interlinked process that begins by identifying the risks to which the institution is exposed. After that, the Bank calculates the potential impact of that exposure on its profit or loss and limits it to a desired level. This involves actively monitoring risk and studying how it evolves over time. The risk management process can be subdivided into the following stages:

1) Identification of Financial Risks

The Financial Risk Division has a highly technical team that is constantly monitoring the activities of the Bank and its subsidiaries to search for potential risks that have not been quantified and controlled. The Bank’s Treasury Division serves as a first line of defense and plays an essential role in risk detection. Itaú Corpbanca’s structure facilitates this role of identifying risks by preserving the division’s independence and ensuring active participation from management in creating/modifying products. After a risk is identified, it is quantified to see the potential impact on value creation within the institution.

2) Quantification and Control of Financial Risk Exposure

Once a risk has been identified, the Financial Risk Division is responsible for mapping the risk using the appropriate quantification metrics. Our board of directors and senior management are aware of the methods used to measure exposure and are responsible for setting the institution’s desired risk appetite levels (by business unit, associate, risk factor, area, etc.), always taking care to adhere to current regulations. The limit setting process is the instrument used to establish the equity available to each activity. Limit determination is, by design, a dynamic process that responds to the risk level considered acceptable by senior management.

The Financial Risk Division requests and proposes a system of quantitative and qualitative limits and warning levels that affect liquidity and market risk. This request must be authorized by the Assets and Liabilities Committee, or ALCO, and our board of directors. It also regularly measures risk incurred, develops valuation tools and models, performs periodic stress testing, measures the degree of concentration with interbank counterparties, drafts policy and procedure handbooks and monitors authorized limits and warning levels, which are reviewed at least once per year.

The limit structure requires the division to carry out a process that includes the following steps:

• Efficiently and comprehensively identify and outline the main types of financial risks incurred so that they are consistent with the running of the business and the defined strategy.

• Quantify and communicate to business areas the risk levels and profile that senior management considers acceptable in order to avoid incurring undesired risks.

• Give business areas flexibility to take on financial risks in an efficient and timely manner based on changes in market and business strategies, and always within the risk levels considered acceptable by the entity.

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• Enable business generators to take on a cautious yet sufficient level of risk in order to achieve budgeted results.

• Outline the range of products and underlying assets with which each treasury unit can operate, based on characteristics like the model, valuation systems and liquidity of the instruments involved, among other factors.

The metrics, by type of risk, used to quantify exposure or demonstrate that a risk has been materialized are detailed below:

a) Market Risk Metrics and Limits

Given the complexity and relevance of the portfolios managed by Itaú Corpbanca, diverse instruments have been chosen to control market risk based on the characteristics of the financial products in the Trading and Banking Books.

The following regulatory and internal metrics are used to monitor and control market risk:

Regulatory Risk Measurements for the Trading and Banking Books

The Bank measures regulatory exposure using the standardized methodology provided by the Chilean Central Bank (Chapter III-B-2.2 “Standards on Measuring and Controlling Market Risks in Banking Companies” of the Compendium of Financial Standards) and complemented by the SBIF (Chapter 12-21 —Standards on Measuring and Controlling Market Risks), which is a risk measurement based on the standard methodology of the Basel Committee and is designed to quantify exposure to market risks for the Banking and Trading Books.

The regulatory measurement of market risk in the Trading Book allows the Bank to estimate its potential losses from fluctuations standardized by the regulator. The regulatory limit is the sum of this risk (also known as Market Risk Exposure or MRE) and 10% of the credit risk weighted assets. This sum cannot be greater than the Bank’s minimum capital requirement.

The Bank, on an individual level, must continuously observe those limits and report to the SBIF on a weekly basis its positions at risk and compliance with those limits (Regulatory Report SBIF C41—Weekly information on market risk using standardized methodology). It must also inform the SBIF each month on the consolidated positions at risk of subsidiaries and foreign subsidiaries (Regulatory Report SBIF C43—Consolidated information on market risk using standardized methodology).

The following table details regulatory limit consumption for market risk, specifically for the Trading Book as of December 31, 2016, 2017 and 2018.

Trading Book

	As of December 31,
Limit Consumption	2016			2017			2018
Market risk exposure (MRE)		60.4	%		71.3	%		71.8	%

The regulatory risk measurement for the Banking Book (Regulatory Report SBIF C40—Cashflows related to interest rate and indexation risk in the Banking Book) is used to estimate the bank’s potential losses from standardized adverse movements in interest and exchange rates. For regulatory reporting purposes, the Trading Book includes the interest rate risk of derivatives managed in the Banking Book.

The standardized regulatory report for the Banking Book (Regulatory Report SBIF C40) is used to estimate the bank’s potential economic losses from standardized adverse movements in interest rates defined by the SBIF. Currently, limits for short-term exposure (STE) to interest rate and indexation risk in the Banking Book must not exceed 35% of annual operating income (LTM moving period) and long-term limit consumption (LTE) must be less than 20% of the Bank’s minimum capital requirement.

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The following table details regulatory limit consumption for market risk, specifically for the Banking Book as of December 31, 2016, 2017 and 2018:

Banking Book

	As of December 31,
Limit Consumption	2016			2017			2018
Short-term exposure to interest rate risk (STE)		51.8	%		45.0	%		51.4	%
Long-term exposure to interest rate risk (LTE)		60.1	%		43.2	%		50.3	%

Value at Risk (VaR) Calculation

Calculation of Historical Value at Risk (non-parametric): This measurement provides the maximum potential economic loss at a certain confidence level and a given time horizon. Historical VaR, as opposed to Statistical or Parametric VaR, is based on the observed distribution of past returns, does not need to make assumptions of probability distributions (frequently normal distribution) and, therefore, does not need a mean (assumed 0), standard deviation and correlations across returns (parameters). The Bank’s uses a 99% confidence level and a time horizon of one day.

Calculation of volatility-adjusted Historical Value at Risk (non-parametric): This measurement is based on the above and the profit and loss (P&L) vector is adjusted according to whether it is facing a period of greater or less volatility.

Our board of directors defines limits on the Value at Risk (as of the end of the first half of 2016 it uses the volatility-adjusted Historical VaR method) that can be maintained, which is monitored on a daily basis. The measurement is also subjected to back testing to verify that the daily losses that effectively occurred do not exceed VaR more than once every 100 days. The result is monitored daily to confirm the validity of the assumptions, hypothesis and the adequacy of the parameters and risk factors used in the VaR calculation. The Bank in turn calculates VaR for sub/portfolios and risk factors, which allows it to quickly detect pockets of risk. Since VaR does not consider stress scenarios, it is complemented by stress testing. Specifically, the Bank uses metrics that take into account prospective, historical and standardized scenarios.

(i) Limitations of VaR Model

Although the VaR model is one of the models most frequently used by the local financial industry, like any model it has limitations that must be considered:

• It does not take into account the expected loss in the event that the portfolio return is above the confidence level defined in the VaR. In other words, in the Bank’s case it does not reflect what happens in the 1% of the tail. This is mitigated with the stress measures detailed below.

• It does not consider intraday results, but only reflects the potential loss given current positions.

• It does not take into account potential changes in the dynamics of movements in market variables (i.e. potential changes in the matrix of variance and covariance).

(ii) Sensitivity Measurements

Sensitivity measurements are based on estimated scenarios for positions in the Trading and Banking Books.

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Trading Book Positions by Risk Factor: The table below sets forth the Trading Book positions by risk factor as of December 31, 2016, 2017 and 2018:

	Position
Risk Factor / Products	2016			2017			2018
	MCh$			MCh$			MCh$
CLP rates
Derivatives		(131,852	)		(738,006	)		120,171
Investments		344,390			263,964			(29	)
CLF rates
Derivatives		319,785			694,368			(77,821	)
Investments		72,668			171,330			0
COP rates
Derivatives		4,275			(223,400	)		(25	)
Investments		381,848			384,244			(6	)
UVR rates
Derivatives		0			0			47
Investments		164,828			0			(4	)
USD rates		44,211			256,495			57,649
OM rates		(1,061	)		10			(1,053	)
FX (exchange rate)		14,089			15,620			2,403
Inflation (CLF)		0			0			0
Optionality (Gamma, Vega)		6			120			156

Trading Book positions by risk factor correspond to the fair and equivalent nominal value (exchange rate or “FX,” inflation and optionality) of the portfolios within the Trading Book. The Trading Book is made up of the financial assets presented in Notes 6 and 8, and financial liabilities presented in Note 8, all of them included in our consolidated financial statements. The currency position incorporates the amortized cost positions from the statement of financial position, excluding the positions related to the foreign investment with their respective hedges. The currency positions in the Trading Book have limits for each currency.

Banking Book by Risk Factor:

FX and Inflation Positions in Banking Book:

The following table sets forth the foreign currency and inflation positions in the Banking Book as of December 31, 2016, 2017 and 2018:

	Year End 2016			Year End 2017			Year End 2018
CLF Position		1,118,526			877,152			1,783,587
FX Position		(684,938	)		(889,075	)		129,417

Positions in currencies other than Chilean pesos and exposure to indexation are classified by book and by their effect on the Bank’s financial statements, reflecting the spot exposure to each risk factor. It is important to highlight the impact of structural exchange rate risk arising from the Bank’s positions in currencies other than the Chilean peso related primarily to the consolidation of investments in subsidiaries or affiliates and the results and hedges of these investments. The process of managing structural exchange rate risk is dynamic and attempts to limit the impact of currency depreciation, thus optimizing the financial cost of hedges. The general policy for managing this risk is to finance them in the currency of the investment provided that the depth of the market so allows and the cost is justified by the expected depreciation. One-time hedges are also taken out when the bank considers that any currency may weaken beyond market expectations with respect to the Chilean peso. As of December 31, 2018, greater ongoing exposure was concentrated in Colombian pesos (approximately US$964 billion). The bank hedges part of these positions on a permanent basis using currency derivatives. The currency positions in the Banking Book have limits for each currency.

216

Structural Interest Rate Position in Banking Book (Interest Rate Gap):

Structural interest rate risk is measured using representation by risk factor of cash flows expressed at fair value, assigned at the repricing date and by currency. This methodology facilitates the detection of concentrations of interest rate risk over different time frames. All positions in and outside the statement of financial position must be ungrouped into cash flows and placed at the repricing / maturity point. For those accounts that do not have contractual maturities, an internal model is used to analyze and estimate their durations and sensitivities.

The following table shows the Banking Book positions for the most important currencies in which the Bank does business as of December 31, 2016, 2017 and 2018 (products valued at amortized cost and available-for-sale instruments and derivatives valued at fair value).

The exposures presented are the present values resulting from:

• Modeling contractual cash flows based on behaviors that affect market risk exposure (for example, prepayment and renewal, among others).

• Discounting cash flows from items accounted for on an accrual basis at a rate that represents the opportunity cost of the liability/asset.

• Discounting cash flows from items accounted for at market value at the market rate.

	Year-End 2016
CLP Position	<1 Month			1 - 3 Months			3 Months to 1 Year			1 to 3 Years			More than 3 Years
ASSETS		3,501,743			870,776			2,160,430			1,290,116			543,713
Cash		456,753			—			—			—			—
Repurchase agreements		82,146			—			—			—			—
Loans to customers, net		2,103,570			823,545			2,126,992			1,126,147			459,420
Financial assets available for sale		320,536			47,233			33,438			163,969			84,293
Financial assets held to maturity		—			—			—			—			—
PP&E and intangible assets		214,411			—			—			—			—
Other assets		324,327			—			—			—			—
LIABILITIES		(6,504,266	)		(1,196,757	)		(2,361,334	)		(227,588	)		(158,564	)
Checking accounts and demand deposits		(1,890,606	)		—			(58,425	)		—			—
Savings accounts and time deposits		(3,042,768	)		(1,190,542	)		(2,286,425	)		(157,934	)		(255	)
Debt issued		(831	)		(4,710	)		(15,982	)		(69,654	)		(158,309	)
Other liabilities		(302,491	)		(1,505	)		(502	)		—			—
Capital and reserves		(1,267,570	)		—			—			—			—
DERIVATIVES		(136,936	)		(204,005	)		548,898			(117,704	)		48,800
Financial derivative instruments		(136,936	)		(204,005	)		548,898			(117,704	)		48,800
	Year-End 2016
CLF Position	<1 Month			1 - 3 Months			3 Months to 1 Year			1 to 3 Years			More than 3 Years
ASSETS		460,596			467,103			2,112,730			1,828,020			3,977,336
Cash		—			—			—			—			—
Repurchase agreements		—			—			—			—			—
Loans to customers, net		498,761			453,798			2,019,088			1,751,321			3,931,531
Financial assets available for sale		3,792			13,305			93,642			76,699			45,805
PP&E and intangible assets		—			—			—			—			—
Other assets		(41,957	)		—			—			—			—
LIABILITIES		(366,933	)		(158,745	)		(1,087,649	)		(892,317	)		(3,218,064	)
Other liabilities		(86,149	)		—			(46,944	)		(66,944	)		(21,856	)
Capital and reserves		—			—			—			—			—

217

	Year-End 2016
CLF Position	<1 Month			1 - 3 Months			3 Months to 1 Year			1 to 3 Years			More than 3 Years
Debt issued		(41,651	)		(12,178	)		(542,146	)		(649,782	)		(2,773,046	)
Checking accounts and demand deposits		(17,596	)		—			—			—			—
Savings accounts and time deposits		(221,537	)		(146,567	)		(498,559	)		(175,591	)		(423,162	)
DERIVATIVES		(633,500	)		(290,901	)		(864,344	)		(448,301	)		233,496
Financial derivative instruments		(633,500	)		(290,901	)		(864,344	)		(448,301	)		233,496
	Year-End 2016
COP and UVR Position	<1 Month			1 -3 Months			3 Months to 1 Year			1 to 3 Years			More than 3 Years
Assets		2,777,361			610,840			667,891			761,052			690,494
Cash		328,871			—			—			—			—
Repurchase agreements		152,665			—			—			—			—
Loans to customers, net		1,697,264			602,867			629,102			695,626			508,008
Financial assets available for sale		44,235			7,973			38,789			65,426			182,486
Financial assets held to maturity		107,541			—			—			—			—
PP&E and investments		—			—			—			—			—
Other assets		446,735			—			—			—			—
Liabilities		(4,229,588	)		(581,868	)		(765,798	)		(461,681	)		(309,997	)
Checking accounts and demand deposits		(1,759,415	)		—			—			—			—
Savings accounts and time deposits		(930,983	)		(570,126	)		(631,854	)		(342,199	)		(101,967	)
	Year-End 2016
COP and UVR Position	<1 Month			1 -3 Months			3 Months to 1 Year			1 to 3 Years			More than 3 Years
Debt issued		(24,653	)		(11,742	)		(133,944	)		(119,482	)		(208,030	)
Other liabilities		(740,891	)		—			—			—			—
Capital and reserves		(773,646	)		—			—			—			—
Derivatives		(41,422	)		(24,828	)		220,845			(8,233	)		(83,679	)
Financial derivative instruments		(41,422	)		(24,828	)		220,845			(8,233	)		(83,679	)
	Year-End 2016
FX Position	<1 Month			1 -3 Months			3 Months to 1 Year			1 to 3 Years			More than 3 Years
ASSETS		979,846			774,212			1,123,227			31,486			34,326
Cash		349,543			—			—			—			—
Repurchase agreements		39,172			—			—			—			—
Loans to customers, net		645,830			774,108			1,122,529			22,872			22,093
Financial assets available for sale		287			104			698			8,614			12,233
Financial assets held to maturity		—			—			—			—			—
PP&E and investments		—			—			—			—			—
Other assets		(54,986	)		—			—			—			—
LIABILITIES		(1,880,468	)		(785,961	)		(1,179,179	)		(545,528	)		—
Checking accounts and demand deposits		(317,104	)		—			(7,959	)		—			—
Savings accounts and time deposits		(923,035	)		(264,542	)		(322,601	)		—			—
Debt issued		(7,529	)		(125,397	)		(469,452	)		(540,348	)		—
Other liabilities		(610,230	)		(396,022	)		(379,167	)		(5,180	)		—
Capital and reserves		(22,570	)		—			—			—			—
DERIVATIVES		329,880			264,544			461,844			543,063			(57,615	)
Financial derivative instruments		329,880			264,544			461,844			543,063			(57,615	)

218

	Year-End 2017
CLP Position	<1 Month			1 - 3 Months			3 Months to 1 Year			1 to 3 Years			More than 3 Years
ASSETS		4,256,811			892,701			1,688,269			1,315,538			665,015
Cash		387,847			—			—			—			—
Repurchase agreements		5,956			—			—			—			—
Loans to customers, net		2,162,363			859,897			1,614,115			1,080,663			427,787
Financial assets available for sale		67,735			32,804			74,154			234,876			237,228
Financial assets held to maturity		—			—			—			—			—
PP&E and intangible assets		703,689			—			—			—			—
Other assets		929,221			—			—			—			—
LIABILITIES		(6,418,945	)		(1,147,277	)		(3,162,828	)		(1,204,043	)		(221,117	)
Checking accounts and demand deposits		(577,488	)		(83,941	)		(484,133	)		(901,810	)		(114	)
Savings accounts and time deposits		(2,229,619	)		(989,646	)		(2,633,395	)		194,706			—
Debt issued		(831	)		(7,952	)		(45,081	)		(107,528	)		(221,002	)
Other liabilities		(374,333	)		(30,483	)		—			—			—
Capital and reserves		(3,207,101	)		(30,483	)		—			—			—
Repos		(29,573	)		(4,773	)		(219	)		—			—
DERIVATIVES		819,878			456,293			268,834			(324,113	)		(152,389	)
Financial derivative instruments		819,878			456,293			268,834			(324,113	)		(152,389	)
	Year-End 2017
CLF Position	<1 Month			1 - 3 Months			3 Months to 1 Year			1 to 3 Years			More than 3 Years
ASSETS		480,999			510,095			2,008,605			2,172,278			3,891,622
Cash		—			—			—			—			—
Repurchase agreements		—			—			—			—			—
Loans to customers, net		520,449			422,096			1,786,914			1,767,416			3,804,979
Financial assets available for sale		22,633			87,999			221,691			404,862			86,643
PP&E and intangible assets		—			—			—			—			—
Other assets		—			—			—			—			—
LIABILITIES		(352,331	)		(255,086	)		(423,122	)		(968,507	)		(3,748,085	)
Other liabilities		(15,778	)		—			—			—			—
Capital and reserves		(98,353	)		(244,699	)		(123,995	)		(41,967	)		(421,726	)
Debt issued		(48,724	)		(10,387	)		(262,792	)		(878,854	)		(3,319,434	)
Checking accounts and demand deposits		(189,476	)		—			(36,335	)		(47,686	)		(6,925	)
Savings accounts and time deposits		—			—			—			—			—
DERIVATIVES		(1,209,472	)		(508,032	)		(817,140	)		(226,061	)		321,390
Financial derivative instruments		(1,209,472	)		(508,032	)		(817,140	)		(226,061	)		321,390
	Year-End 2017
COP and UVR Position	<1 Month			1 -3 Months			3 Months to 1 Year			1 to 3 Years			More than 3 Years
Assets		1,995,875			579,940			774,648			1,014,375			593,650
Cash		165,848			—			—			—			—
Repurchase agreements		21,263			—			—			—			—
Loans to customers, net		1,237,941			522,042			633,470			619,269			531,424
Financial assets available for sale		3,885			—			141,177			395,107			62,225
Financial assets held to maturity		25,145			57,898			—			—			—
PP&E and investments		—			—			—			—			—
Other assets		541,794			—			—			—			—
Liabilities		(3,184,891	)		(628,485	)		(686,080	)		(484,123	)		(303,754	)
Checking accounts and demand deposits		(1,490,776	)		—			—			—			—
Savings accounts and time deposits		(350,584	)		(578,115	)		(635,840	)		(376,758	)		(140,162	)

219

	Year-End 2017
COP and UVR Position	<1 Month			1 -3 Months			3 Months to 1 Year			1 to 3 Years			More than 3 Years
Debt issued		—			(50,370	)		(50,240	)		(107,365	)		(163,593	)
Other liabilities		(669,363	)		—			—			—			—
Capital and reserves		(674,168	)		—			—			—			—
Derivatives		(233,772	)		62,977			(330,530	)		374,478			(95,155	)
Financial derivative instruments		(233,772	)		62,977			(330,530	)		374,478			(95,155	)
	Year-End 2017
FX Position	<1 Month			1 -3 Months			3 Months to 1 Year			1 to 3 Years			More than 3 Years
ASSETS		702,900			263,710			547,829			33,257			11,851
Cash		392,669			—			—			—			—
Repurchase agreements		—			—			—			—			—
Loans to customers, net		132,850			263,597			547,358			20,963			10,761
Financial assets available for sale		173			79			439			12,283			1,078
Financial assets held to maturity		—			—			—			—			—
PP&E and investments		—			—			—			—			—
Other assets		177,207			34			31			12			12
LIABILITIES		(1,861,588	)		(318,197	)		(539,389	)		(450,818	)		—
Checking accounts and demand deposits		(388,722	)		—			—			—			—
Savings accounts and time deposits		(837,274	)		(202,181	)		(526,101	)		(2,215	)		—
Debt issued		(452,157	)		(116,016	)		(13,288	)		(448,603	)		—
Other liabilities		(116,183	)		—			—			—			—
Capital and reserves		(66,994	)		—			—			—			—
DERIVATIVES		879,996			(47,020	)		70,834			361,999			6,409
Financial derivative instruments		879,996			(47,020	)		70,834			361,999			6,409
	Year-End 2018
CLP Position	<1 Month			1 - 3 Months			3 Months to 1 Year			1 to 3 Years			More than 3 Years
ASSETS		3,519,009			1,000,478			1,753,132			1,800,011			1,181,157
Cash		222,836			—			—			—			—
Repurchase agreements		76,610			—			—			—			—
Loans to customers, net		1,873,406			939,865			1,727,959			1,345,348			952,614
Financial assets available for sale		122,284			60,613			25,173			454,663			228,542
Financial assets held to maturity		—			—			—			—			—
PP&E and intangible assets		709,488			—			—			—			—
Other assets		514,384			—			—			—			—
LIABILITIES		(8,733,561	)		(1,463,211	)		(2,101,205	)		(560,099	)		(330,000	)
Checking accounts and demand deposits		(2,071,099	)		—			—			—			—
Savings accounts and time deposits		(2,700,406	)		(1,453,468	)		(2,090,629	)		(407,126	)		—
Debt issued		(832	)		(9,743	)		(10,575	)		(152,973	)		(330,000	)
Other liabilities		(349,465	)		—			—			—			—
Capital and reserves		(3,328,337	)		—			—			—			—
Repos		(283,422	)		—			—			—			—
DERIVATIVES		(209,799	)		1,521,695			394,300			209,804			65,913
Financial derivative instruments		(209,799	)		1,521,695			394,300			209,804			65,913

220

	Year-End 2018
CLF Position	<1 Month			1 - 3 Months			3 Months to 1 Year			1 to 3 Years			More than 3 Years
ASSETS		466,115			447,398			1,329,598			1,845,604			6,182,033
Cash		—			—			—			—			—
Repurchase agreements		—			—			—			—			—
Loans to customers, net		452,555			441,731			1,309,397			1,293,838			6,059,288
Financial assets available for sale		5,773			5,667			20,201			551,765			122,745
Financial assets held to maturity		—			—			—			—			—
PP&E and intangible assets		—			—			—			—			—
Other assets		7,787			—			—			—			—
LIABILITIES		(214,266	)		(181,744	)		(190,917	)		(1,072,879	)		(5,201,884	)
Checking accounts and demand deposits		—			—			—			—			—
Savings accounts and time deposits		(34,503	)		(173,824	)		(55,268	)		—			(625,916	)
Debt issued		(46,657	)		(7,920	)		(135,649	)		(1,072,879	)		(4,575,968	)
Other liabilities		(133,106	)		—			—			—			—
Capital and reserves		—			—			—			—			—
Repos		—			—			—			—			—
DERIVATIVES		(366,332	)		(1,221,035	)		(469,699	)		(330,428	)		762,022
Financial derivative instruments		(366,332	)		(1,221,035	)		(469,699	)		(330,428	)		762,022
	Year-End 2018
COP and UVR Position	<1 Month			1 - 3 Months			3 Months to 1 Year			1 to 3 Years			More than 3 Years
ASSETS		1,907,247			661,084			1,229,626			1,015,315			849,150
Cash		176,062			—			—			—			—
Repurchase agreements		10,864			—			—			—			—
Loans to customers, net		1,083,664			582,098			714,268			724,255			713,988
Financial assets available for sale		—			15,338			515,216			290,669			133,015
Financial assets held to maturity		2			63,648			142			391			2,147
PP&E and intangible assets		—			—			—			—			—
Other assets		636,655			—			—			—			—
LIABILITIES		(3,742,035	)		(397,056	)		(681,848	)		(399,100	)		(317,788	)
Checking accounts and demand deposits		(1,505,615	)		—			—			—			—
Savings accounts and time deposits		(438,977	)		(390,936	)		(623,200	)		(288,729	)		(116,165	)
Debt issued		(65,209	)		(6,120	)		(58,545	)		(110,184	)		(200,206	)
Other liabilities		(991,270	)		—			(103	)		(187	)		(1,417	)
Capital and reserves		(740,964	)		—			—			—			—
Repos		—			—			—			—			—
DERIVATIVES		(102,723	)		(119,945	)		(125,485	)		137,443			(35,028	)
Financial derivative instruments		(102,723	)		(119,945	)		(125,485	)		137,443			(35,028	)
	Year-End 2018
FX Position	<1 Month			1 - 3 Months			3 Months to 1 Year			1 to 3 Years			More than 3 Years
ASSETS		1,502,805			632,091			1,202,832			126,122			102,349
Cash		339,679			—			—			—			—
Repurchase agreements		—			—			—			—			—
Loans to customers, net		790,001			631,796			1,167,302			115,097			73,616
Financial assets available for sale		288			295			35,530			11,025			28,733
Financial assets held to maturity		—			—			—			—			—
PP&E and intangible assets		—			—			—			—			—
Other assets		372,838			—			—			—			—
LIABILITIES		(1,329,014	)		(643,544	)		(1,750,440	)		(173,922	)		—
Checking accounts and demand deposits		(255,343	)		—			—			—			—
Savings accounts and time deposits		(724,941	)		(271,892	)		(577,917	)		—			—

221

Debt issued	—		(131,356	)	(533,810	)	—		—
Other liabilities	(300,129	)	(240,296	)	(638,713	)	(173,922	)	—
Capital and reserves	(41,766	)	—		—		—		—
Repos	(6,835	)	—		—		—		—
DERIVATIVES	(50,293	)	263,381		452,557		(38,395	)	(8,123	)
Financial derivative instruments	(50,293	)	263,381		452,557		(38,395	)	(8,123	)

The following table summarizes the aforementioned exposures:

	2016			2017			2018
	Exposure			Exposure			Exposure
	MCh$			MCh$			MCh$
CLP		(1,942,677	)		(2,267,374	)		(1,952,375	)
CLF		1,118,526			877,152			1,783,587
COP-UVR		(778,611	)		(550,847	)		(121,146	)
FX		93,673			(338,228	)		288,406

(iii) Sensitivity Analysis for Financial Risks

The Bank uses stress testing as a sensitivity analysis tool in order to control financial risk. This measurement is performed separately for each class of financial instruments.

Sensitivity is estimated using the DV01 indicator, which is a measure of sensitivity of the portfolio results considering an increase of one basis point (0.01%) of the zero coupon interest rate of the financial risk factor for different maturities in annualized terms.

The following table presents an estimate of the likely, but reasonable impact of the fluctuations in interest rates, exchange rates and implicit volatilities (market factors) that would have an impact the based on a scenario of each class of financial instrument.

The estimated economic impact derived from the scenarios of changes in market factors presents effects in profit and loss for trading instruments and instruments measured at amortized cost, as well as impacts in other comprehensive income relating the available for sale, cash flow hedges and foreign investments portfolios.

The scenarios presented below correspond to the probable worst-case scenarios chosen from a set of scenarios agreed upon based on the opinions of specialists in economics, financial risk and traders. In order to estimate the economic impact, sensitivities (DV01) and scenario related changes must be multiplied for each market factor.

Scenarios are presented separately for Chile and Colombia.

Interest Rate Scenarios — Chile (basis points — 0.01%):

Scenarios for impact on financial trading instruments																Scenarios for impact on Available-for-Sale Assets  (AFS)															Scenarios for impact on instruments measured at amortized cost
Term		Overnight CLP			Gov’t CLP		Overnight CLF		Gov’t CLF		Curve USD			Curves MX		Term		Overnight CLP		Gov’t CLP		Overnight CLF			Gov’t CLF		Curve USD		Curves MX		Term		Overnight CLP		Overnight CLF		Curve USD
	1D		(35	)		52		139		140		(101	)		101		1D		35		52		(139	)		140		101		101		1D		—		—		—
	3M		(35	)		52		139		140		(101	)		101		3M		35		52		(139	)		140		101		101		1M		35		139		101
	6M		(35	)		52		139		140		(101	)		101		6M		35		52		(139	)		140		101		101		3M		35		139		101
	9M		(35	)		57		111		116		(86	)		86		9M		35		57		(111	)		116		86		86		6M		35		139		101
	1Y		(35	)		62		81		89		(70	)		70		1Y		35		62		(81	)		89		70		70		9M		35		111		86
	2Y		(46	)		52		86		56		(64	)		64		2Y		46		52		(86	)		56		64		64		1Y		35		81		70
	3Y		(47	)		48		83		60		(65	)		65		3Y		47		48		(83	)		60		65		65
	4Y		(48	)		43		79		64		(66	)		66		4Y		48		43		(79	)		64		66		66
	5Y		(48	)		39		75		68		(67	)		67		5Y		48		39		(75	)		68		67		67
	7Y		(45	)		43		67		68		(65	)		65		7Y		45		43		(67	)		68		65		65
	10Y		(39	)		50		55		68		(63	)		63		10Y		39		50		(55	)		68		63		63
	20Y		(39	)		50		42		48		(63	)		63		20Y		39		50		(42	)		48		63		63

222

Exchange Rate Scenarios — Chile:

Exchange Rate	Scenarios for impact on financial trading instruments			Scenarios for impact on Available-for-Sale Assets (AFS)			Scenarios for impact on instruments measured at amortized cost
USD-CLP		-7,2	%		-7,2	%		-7,2	%
USD-COP		7,2	%		7,2	%		-7,2	%

Interest Rate Scenarios — Colombia (basis points — 0.01%):

Scenarios for impact on financial trading instruments									Scenarios for impact on Available-for-Sale Assets (AFS)										Scenarios for impact on measured at amortized instruments cost
Term	Gov’t COP			Swap IBR		Curve USD			Term		Gov’t COP			Swap IBR		Curve USD			Term		Swap IBR		Curve USD
1D		(18	)		44		(1	)		1D		(18	)		44		(1	)		1D		44		28
3M		(13	)		31		(2	)		3M		(13	)		31		(2	)		1M		31		29
6M		(8	)		37		(6	)		6M		(8	)		37		(6	)		3M		31		32
9M		(3	)		40		(9	)		9M		(3	)		40		(9	)		6M		37		40
1Y		2			43		(12	)		1Y		2			43		(12	)		9M		40		35
2Y		22			48		(19	)		2Y		22			48		(19	)		1Y		43		31
3Y		42			46		(22	)		3Y		42			46		(22	)
4Y		53			55		(24	)		4Y		53			55		(24	)
5Y		54			63		(26	)		5Y		54			63		(26	)
7Y		56			58		(26	)		7Y		56			58		(26	)
10Y		58			50		(27	)		10Y		58			50		(27	)
20Y		49			23		(29	)		20Y		49			23		(29	)

Exchange Rate Scenarios — Colombia:

Exchange Rate	Scenario for impact on financial trading instruments			Scenario for impact on AFS			Scenario for impact on Amortized Cost Book
USD-COP		(4.7	)%		(4.7	)%		(4.7	)%

The consolidated effects in profit or loss of the scenarios are presented below:

• The following table presents the impact on profit and loss (P&L) for the years ended December 31, 2018, 2017 and 2016 derived from the aforementioned scenarios applied to our financial trading instruments as of year-end:

Potential Impact on P&L	2016			2017			2018
	MCh$			MCh$			MCh$
CLP Rate Risk		(2,812	)		(849	)		(5,019	)
Derivatives		(2,604	)		(847	)		(5,018	)
Investments		(208	)		(2	)		(1	)
CLF Rate Risk		(8,069	)		(7,839	)		(5,942	)
Derivatives		(8,069	)		(7,839	)		(5,942	)
Investments		—			—			—
COP Rate Risk		(11,622	)		(14,895	)		(29,182	)
Derivatives		(10,439	)		(9,909	)		(29,094	)
Investments		(1,183	)		(4,986	)		(88	)
UVR Rate Risk		(404	)		—			(375	)
Derivatives		—			—			(364	)
Investments		(404	)		—			(11	)
USD Rate Risk		(2,658	)		(2,001	)		(2,810	)
Other Currencies Rate Risk		(9	)		(50	)		(42	)
Total Rate Risk		(25,574	)		(25,633	)		(43,370	)
Foreign Exchange Risk		(1,921	)		(755	)		150
Options Risk(1)		(87	)		66			156
Total Impact		(27,582	)		(26,322	)		(43,064	)

⁽¹⁾  Option Risk includes the (Vega) and Gamma volatility risks.

223

• The following table presents the consolidated impact on the net interest income derived from the aforementioned scenarios on the financial instruments measured at amortized cost for the periods ended December 31, 2018, 2017 and 2016:

Potential impact on instruments measured at amortized cost	2016			2017			2018
	MCh$			MCh$			MCh%
Impact of Interbank Rate Risk		(7,096	)		(9,432	)		(12,359	)

The impact on the Banking Book does not necessarily mean a gain/loss but it does mean smaller/larger net income from the generation of funds (net funding income, which is the net interest from the financial instruments measured at amortized cost portfolio) for the next 12 months.

• Changes in market factors derived from the aforementioned scenarios also generate an impact on equity accounts as a result of the potential change in available-for-sale instruments portfolio and the cash flow and net foreign investment hedges portfolios, which are presented in the following table:

As of December 31, 2016:

	Potential Impact on Equity
Interest Rate	DV01 (+1 bp)			Impact of Change in Interest Rate
	US$			MUS$			MCh$
CLP		(293,337	)		(14.00	)		(9,211	)
CLF		41,167			(15.00	)		(10,029	)
COP		(152,241	)		(8.00	)		(5,588	)
UVR		—			—			—
USD		(77,927	)		(3.00	)		(2,094	)
Other		(159	)		—			(7	)
Total Rate Impact		(482,497	)		(40	)		(26,929	)

Exchange Rate	Impact of Change in Prices
	MUS$			MCh$
USD		(1	)		(269	)
COP		(150	)		(100,390	)
Total Impact on Exchange Rate		(151	)		(100,659	)
Total Impact		(191	)		(127,589	)

As of December 31, 2017:

	Potential Impact on Equity
Interest Rate	DV01 (+1 bp)			Impact of Change in Interest Rate
	US$			MUS$			MCh$
CLP		(386,979	)		(37.01	)		(22,745	)
CLF		(245,812	)		(47.62	)		(29,261	)
COP		(225,321	)		(17.50	)		(10,766	)
UVR		—			—			—
USD		(48,791	)		(2.77	)		(1,700	)
Other		—			—			—
Total Rate Impact		(906,903	)		(105	)		(64,473	)

Exchange Rate	Impact of Change in Prices
	MUS$			MCh$
USD		(8	)		(4,875	)
COP		(9	)		(5,621	)

224

Exchange Rate	Impact of Change in Prices
	MUS$			MCh$
Total Impact on Exchange Rate		(17	)		(10,497	)
Total Impact		(122	)		(74,969	)

As of December 31, 2018:

	Potential Impact on Equity
Interest Rate	DV01 (+1 bp)			Impact of Change in Interest Rate
	US$			MUS$			MCh$
CLP		(254,636	)		(11.73	)		(8,180	)
CLF		(177,471	)		(26.29	)		(18,328	)
COP		(189,242	)		(5.74	)		(3,988	)
UVR		(29,763	)		(0.55	)		(380	)
USD		(33,769	)		(2.44	)		(1,701	)
Other		—			—			—
Total Rate Impact		(684,880	)		(46.75	)		(32,577	)

Exchange Rate	Impact of Change in Prices
	MUS$			MCh$
USD		(3.77	)		(2,624	)
COP		(3.72	)		(2,594	)
Total Impact on Exchange Rate		(7.49	)		(5,218	)
Total Impact		(54.24	)		(37,795	)

The Bank uses accounting hedges to efficiently manage accounting asymmetries present in financial risk exposure. The use of accounting hedges is dependent on limits defined by our board of directors, definitions from the ALCO and our hedging policy. The ALM Division is responsible for designing and implementing strategies and the Financial Risk Management Division for measuring and monitoring the effectiveness of hedges, generating effectiveness indicators that are continuously monitored.

For further details on accounting hedge strategies, see Note 8 of our consolidated financial statements.

b) Liquidity Risk Metrics and Limits

Liquidity risk measurements are focused mainly on quantifying whether the institution has sufficient resources to meet its obligations under both normal and stressed conditions. The Bank monitors its liquidity position every day, determining the future flows of its outlays and revenues. In addition, stress tests are performed at the close of each quarter, for which a variety of scenarios encompassing both normal market conditions and stress scenario conditions. The liquidity policy and procedures are subject to review and approval by the Bank’s board of directors. Periodic reports are generated by the Financial Risk Department, providing a breakdown of the liquidity position of the Bank and its subsidiaries, including any exceptions and the corrective measures adopted, which are regularly submitted to the assets and liabilities committee (ALCO) for review.

The following regulatory and internal metrics are used to monitor and control liquidity risk.

(i) Regulatory Measurement of Liquidity Risk

Adjusted liquidity gap: SBIF Chapter 12-20 (“Management and Measurement of Liquidity Position”) establishes that, with prior authorization from the regulator, cash outflows to retail counterparties may be assigned a different maturity than their contractual maturity based on their statistical behavior. Adjusted mismatches (local consolidated) are restricted to a maximum of:

• 30-day mismatches in consolidated and foreign currency: 100% of core capital.

• 90-day mismatches in consolidated currency: 200% of core capital.

The Bank, on a local consolidated level, must continuously observe those limits and periodically report to the SBIF its positions at risk and compliance with those limits.

225

The following table sets forth the use of the liquidity regulatory limit as of December 31, 2016, 2017 and 2018:

	As of December 31,
	2016		2017		2018
	%		%		%
Regulatory Liquidity Indicator
At 30 days		4		18		33
At 30 days in foreign currency		12		25		12
At 90 days		16		11		20

Note: Negative percentage means that cash inflows exceed cash outflows at that maturity.

(ii) Regulatory Measurement of Contractual Liquidity Gap

In accordance with SBIF Chapter 12-20, all cash flows in and outside the statement of financial position are analyzed provided that they contribute cash flows at their contractual maturity point.

Balances of the Bank’s consolidated undiscounted contractual cash flows from financial assets and liabilities as of December 31, 2016, 2017 and 2018, are detailed as follows:

	December 31, 2016
	<1 Month			1 - 3 Months			3 Months to 1 Year			1 to 3 Years			More than 3 Years			Total
	MCh$			MCh$			MCh$			MCh$			MCh$			MCh$
Assets		4,437,895			2,112,587			4,778,259			5,251,810			17,824,808			34,405,359
Cash		1,119,862			—			—			—			—			1,119,862
Financial instruments recorded at market value		1,004,424			359,123			118,864			494,925			1,159,907			3,137,243
Loans to other domestic banks without lines of credit		167,076			4,092			—			—			—			171,167
Lines of credit granted to other domestic banks		—			—			—			—			—			—
Commercial loans without lines of credit		1,969,379			1,525,530			3,364,118			2,816,389			9,368,578			19,043,975
Commercial lines of credit and overdrafts		(276,662	)		2,781			58,006			45			45			(215,785	)
Consumer loans without lines of credit		62,325			131,324			525,925			1,038,327			1,744,874			3,502,775
Consumer lines of credit and overdrafts		94,515			4,484			325,597			3,248			3,248			431,093
Residential mortgage loans		37,140			66,144			283,201			739,403			5,314,672			6,440,560
Financial instruments recorded based on issuer’s flow		30,967			470			75,868			—			—			107,305
Other transactions or commitments without lines of credit		238,207			6,092			16,098			112,494			117,408			490,299
Other lines of credit granted		—			—			—			—			—			—
Derivative instruments		(9,338	)		12,547			10,582			46,999			116,076			176,865
Liabilities		(8,454,693	)		(2,799,978	)		(5,214,372	)		(2,960,247	)		(8,655,131	)		(28,084,422	)
Checking accounts and other demand deposits		(4,318,821	)		—			—			—			—			(4,318,821	)
Term savings accounts - unconditional withdrawal		(2,901	)		—			—			—			—			(2,901	)
Term savings accounts - deferred withdrawal		(39,644	)		—			—			—			—			(39,644	)
Obligations with Chilean Central Bank without lines of credit		(376,629	)		—			—			—			—			(376,629	)

226

	December 31, 2016
	<1 Month			1 - 3 Months			3 Months to 1 Year			1 to 3 Years			More than 3 Years			Total
	MCh$			MCh$			MCh$			MCh$			MCh$			MCh$
Lines of credit secured from Chilean Central Bank		—			—			—			—			—			—
Obligations with other domestic banks without lines of credit		—			—			—			—			—			—
Lines of credit secured from other domestic banks		—			—			—			—			—			—
Savings accounts and time deposits		(3,091,375	)		(2,474,208	)		(3,500,821	)		(1,139,025	)		(1,938,961	)		(12,144,391	)
Foreign loans without lines of credit		(245,352	)		(281,556	)		(1,017,915	)		(109,668	)		(328,524	)		(1,983,014	)
Lines of credit from foreign banks		—			—			—			—			—			—
Letter of credit obligations		(4,099	)		(809	)		(12,048	)		(26,473	)		(79,972	)		(123,402	)
Bonds payable		(40,256	)		(32,952	)		(632,208	)		(1,638,082	)		(6,217,523	)		(8,561,021	)
Other obligations or payment commitments without lines of credit		(335,616	)		(10,453	)		(51,380	)		(46,999	)		(90,151	)		(534,599	)
Other lines of credit secured		—			—			—			—			—			—
Net band		(4,016,798	)		(687,391	)		(436,113	)		2,291,563			9,169,677			6,320,937
	December 31, 2017
	<1 Month			1 - 3 Months			3 Months to 1 Year			1 to 3 Years			More than 3 Years			Total
	MCh$			MCh$			MCh$			MCh$			MCh$			MCh$
Assets		4,224,229			1,661,207			4,537,928			4,605,864			11,719,090			26,748,318
Cash		964,030			—			—			—			—			964,030
Financial instruments recorded at market value		1,031,730			1,214			15,746			15,448			19,973			1,084,111
Loans to other domestic banks without lines of credit		23,723			—			—			93,955			—			117,678
Lines of credit granted to other domestic banks		—			—			—			—			—			—
Commercial loans without lines of credit		1,746,846			1,401,225			3,153,075			2,656,850			6,132,404			15,090,400
Commercial lines of credit and overdrafts		(325,031	)		10,376			94,146			49			—			(220,459	)
Consumer loans without lines of credit		141,002			148,208			560,896			1,053,399			728,777			2,632,282
Consumer lines of credit and overdrafts		36,763			21,558			411,528			4,092			—			473,941
Residential mortgage loans		34,318			65,946			291,594			769,201			4,766,325			5,927,384
Financial instruments recorded based on issuer’s flow		18,891			250			66,361			—			—			85,502
Other transactions or commitments without lines of credit		703,120			—			—			2,599			—			705,720
Other lines of credit granted		—			—			—			—			—			—
Derivative instruments		(151,164	)		12,431			(55,419	)		10,270			71,611			(112,271	)
Liabilities		(8,239,221	)		(2,164,508	)		(5,649,539	)		(2,859,784	)		(6,349,855	)		(25,262,908	)

227

	December 31, 2017
	<1 Month			1 - 3 Months			3 Months to 1 Year			1 to 3 Years			More than 3 Years			Total
	MCh$			MCh$			MCh$			MCh$			MCh$			MCh$
Checking accounts and other demand deposits		(4,141,667	)		—			—			—			—			(4,141,667	)
Term savings accounts - unconditional withdrawal		(2,708	)		—			—			—			—			(2,708	)
Term savings accounts - deferred withdrawal		(25,702	)		—			—			—			—			(25,702	)
Obligations with Chilean Central Bank without lines of credit		(397,707	)		—			—			—			—			(397,707	)
Lines of credit secured from Chilean Central Bank		—			—			—			—			—			—
Obligations with other domestic banks without lines of credit		—			—			—			—			—			—
Lines of credit secured from other domestic banks		—			—			—			—			—			—
Savings accounts and time deposits		(1,910,317	)		(1,938,606	)		(4,462,994	)		(905,369	)		(915,012	)		(10,132,297	)
Foreign loans without lines of credit		(460,289	)		(147,694	)		(871,120	)		(362,455	)		(335,773	)		(2,177,330	)
Lines of credit from foreign banks		—			—			—			—			—			—
Letter of credit obligations		(3,120	)		(582	)		(9,448	)		(21,623	)		(41,055	)		(75,828	)
Bonds payable		(599,615	)		(78,780	)		(294,624	)		(1,511,971	)		(5,039,530	)		(7,524,520	)
Other obligations or payment commitments without lines of credit		(698,096	)		1,154			(11,353	)		(58,367	)		(18,485	)		(785,148	)
Other lines of credit secured		—			—			—			—			—			—
Net band		(4,014,992	)		(503,301	)		(1,111,611	)		1,746,079			5,369,235			1,485,410
	December 31, 2018
	<1 Month			1 - 3 Months			3 Months to 1 Year			1 to 3 Years			More than 3 Years			Total
	MCh$			MCh$			MCh$			MCh$			MCh$			MCh$
Assets		8,514,257			2,011,569			4,198,963			4,769,911			11,995,097			31,489,797
Cash		824,917			—			—			—			—			824,917
Financial instruments at fair value through profit or loss		2,482,559			53,064			48,895			21,194			21,448			2,627,161
Interbank loans at amortized cost without lines of credit		101,070			—			—			—			—			101,070
Lines of credit granted to other domestic banks		—			—			—			—			—			—
Loans and accounts receivable from customers at amortized cost:
Commercial loans without lines of credit		1,938,742			1,692,639			3,091,234			2,794,506			6,114,028			15,631,149
Commercial lines of credit and overdrafts		353,608			—			—			—			—			353,608
Consumer loans without lines of credit		238,599			144,822			530,210			1,042,725			764,555			2,720,910

228

	December 31, 2018
	<1 Month			1 - 3 Months			3 Months to 1 Year			1 to 3 Years			More than 3 Years			Total
	MCh$			MCh$			MCh$			MCh$			MCh$			MCh$
Consumer lines of credit and overdrafts		1,631,979			—			—			—			—			1,631,979
Residential mortgage loans		34,982			71,301			307,770			805,994			4,981,583			6,201,630
Financial instruments at fair value through other comprehensive income		138,948			42,419			180,970			432			4,245			367,015
Other transactions or commitments without lines of credit		920,134			—			—			147			—			920,281
Other lines of credit granted		—			—			—			—			—			—
Derivative instruments		(151,281	)		7,324			39,884			104,912			109,237			110,076
Liabilities		(10,384,693	)		(2,757,797	)		(5,299,033	)		(2,474,632	)		(6,369,021	)		(27,285,177	)
Checking accounts and other demand deposits		(4,182,632	)		—			—			—			—			(4,182,632	)
Term savings accounts—unconditional withdrawal		(2,415	)		—			—			—			—			(2,415	)
Term savings accounts—deferred withdrawal		(5,028	)		—			—			—			—			(5,028	)
Obligations with Chilean Central Bank without lines of credit		(290,257	)		—			—			—			—			(290,257	)
Lines of credit secured from Chilean Central Bank		—			—			—			—			—			—
Obligations with other domestic banks without lines of credit		(5,863	)		—			—			—			—			(5,863	)
Lines of credit secured from other domestic banks		—			—			—			—			—			—
Savings accounts and time deposits		(4,238,085	)		(2,315,021	)		(3,163,485	)		(798,613	)		(802,788	)		(11,317,992	)
Foreign loans without lines of credit		(662,358	)		(404,470	)		(1,389,725	)		(352,214	)		(211,913	)		(3,020,680	)
Lines of credit from foreign banks		(3,026	)		—			—			—			—			(3,026
Letter of credit obligations		(2,482	)		(443	)		(8,211	)		(17,492	)		(30,792	)		(59,420	)
Bonds payable		(166,271	)		(37,862	)		(737,613	)		(1,306,313	)		(5,323,528	)		(7,571,587	)
Other obligations or payment commitments without lines of credit		(826,276	)		—			—			—			—			(826,276	)
Other lines of credit secured		—			—			—			—			—			—
Net band		(1,870,437	)		(746,228	)		(1,100,070	)		2,295,279			5,626,076			4,204,620

The preceding tables present undiscounted cash flows from the Bank’s assets (Notes 5 — 11 of our consolidated financial statements) and liabilities (Notes 16 — 18 of our consolidated financial statements) on the basis of maturity estimation models. The Bank’s expected cash flows could vary as a function of changes in the variables that are used to estimate asset and liability maturities.

The grouping corresponds to regulatory categories that bring together financial items with similar characteristics from the perspective of liquidity risk. These categories are modeled separately and reported in cash flows.

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(iii) Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR)

In line with international risk management practices, the Bank uses the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) to manage liquidity risk.

The LCR aims to measure the sufficiency of high-quality assets to face a 30-day funding stress scenario. At a minimum, the Bank must survive until the 30th day of the stress scenario with funding from liquid assets in its portfolio because, as described in the standard, managers and/or supervisors would have been able to establish timely corrective measures. The indicator also recognizes differentiated behavior for wholesale versus retail counterparties, which in the Bank’s case represent 59% and 41%, respectively, for the 30-day band. On the other hand, the NSFR focuses on maintaining sufficient stable funding to meet (long-term) stable funding needs. We calculate LCR and NSFR using the methodologies defined by the SBIF and the Brazilian Central Bank (BACEN). Both regulators set a limit for LCR, while only the BACEN establishes a limit for NSFR. The methodology used to estimate LCR and NSFR consists of liquidity ratios proposed by the “Basel III Committee on Banking Supervision” (“BIS III”) that were adopted by the SBIF and the BACEN.

Starting in April 2019, Chilean banks will begin reporting their local LCR figures with a minimum level set by SBIF at 60%. This minimum will gradually rise to 100% by 2023. As of December 31, 2018, the Bank’s LCR was 118%. The BACEN limit for NSFR is set at 85% and as of December 31, 2018, the Bank’s NSFR was higher than 85%.

(iv) Deposits / Loans

Structurally, the Bank’s liquidity can be quantified based on the level of assets and liabilities in its balance sheet. In particular, the following table shows the ratio of deposits / loans in Itaú Corpbanca’s balance sheet. Deposits refer to the carrying amount of funds (demand and time deposits) that customers deposit in the Bank, while loans are credits that the Bank grants. This is a measurement of the reciprocity between the Bank’s commercial activity and the stability of its funding.

	Dec 2016			Dec 2017			Dec 2018
Year-End		78.4	%		71.9	%		69.2	%
Minimum		71.0	%		70.2	%		68.5	%
Maximum		81.5	%		78.4	%		72.7	%
Average		77.5	%		72.3	%		70.6	%

Note 1: loans are reported net of provisions

(v) Liquidity Warning Levels

Warning levels seek to provide evidence or signs of potential adverse liquidity events. The most relevant warning levels include: counterparty and maturity concentration, currency concentration, product concentration, reserve management, evolution of funding rates and diversification of Liquid Assets.

(vi) Analysis of Pledged and Unpledged Assets

The following presents an analysis of the Bank’s pledged and uncommitted assets that will be available to generate additional funding as fixed-income instruments. For this, pledged assets are.

• Assets that have been committed or received in guarantee.

• Assets that an entity considers that it are restricted from using.

The following table sets forth our available assets and investments adjusted for the delivery or receipt of guarantees as of December 31, 2016, 2017 and 2018:

	Amount		Guarantees Furnished		Guarantees Received		Cash
	MCh$ (i)		MCh$ (ii)		MCh$ (iii)		MCh$ (i-ii+iii)
Year
2016		1,980,930		423,655		383,424		1,940,699
2017		1,712,806		356,881		172,881		1,528,806
2018		2,347,920		955,979		85,709		1,477,650

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(vii) Counterparty Risk

Exposure to derivative counterparty risk is measured by recognizing the different contracts maintained with the Bank’s customers, including contracts without mitigating clauses, contracts with netting, contracts with Credit Support Annex (CSA) and with clearing houses, which receive a differentiated treatment.

The following table details the netting of these transactions:

	12/31/2016									12/31/2017								12/31/2018
	Gross amount assets			Gross amount liabilities			Net amounts			Gross amount assets			Gross amount liabilities			Net amounts		Gross amount assets			Gross amount liabilities			Net amounts
	(a)			(b)			(c) = (a) + (b)			(a)			(b)			(c) = (a) + (b)		(a)			(b)			(c) = (a) + (b)
	MCh$			MCh$			MCh$			MCh$			MCh$			MCh$		MCh$			MCh$			MCh$
Derivatives with netting agreement		776,613			(885,158	)		(108,545	)		127,293			(96,942	)		30,351		148,410			(154,578	)		(6,168	)
Derivatives without netting agreement		326,156			(22,176	)		303,980			1,121,482			(998,212	)		123,270		1,220,547			(958,228	)		262,319
Total Derivatives		1,102,769			(907,334	)		195,435			1,248,775			(1,095,154	)		153,621		1,368,957			(1,112,806	)		256,151
Net guarantees delivered in compensation houses (*)		—			56,818			56,818			—			78,097			78,097		—			23,145			23,145
Net guarantees delivered in bilateral agreements (*)		(49,776	)		167,148			117,372			(79,589	)		88,520			8,931		(85,789	)		90,098			4,308
Net guarantees		(49,776	)		223,966			174,190			(79,589	)		166,617			87,028		(85,789	)		113,243			27,453
Derivatives net of guarantees		1,052,993			(683,368	)		369,625			1,169,186			(928,537	)		240,649		1,283,168			(999,563	)		283,604

(*) Clearing Houses: centralized counterparties that play the counterparty role for all participants

(**) Bilateral agreements: contractual agreements between both parties for delivery of guarantees under certain conditions

Market values of derivatives that are reported in accounting do not reflect counterparty risk management using guarantees as they do not reveal the true exposures with the counterparties. The guarantees delivered (received) must be added (subtracted) from the market value in order to correctly reflect these exposures.

It is important to highlight that counterparty risk management is framed within the Bank’s corporate credit policies.

3) Monitoring and Governance of Financial Risks

Our board of directors is the body in charge of the Bank’s management. Its duties include defining the institution’s strategic guidelines and supervising its risk management structure.

Risk management policies are established with the objective of identifying and analyzing the risks faced by the Bank, setting adequate limits and controls and monitoring risks and compliance with limits. Risk management policies and structures are reviewed regularly so that they reflect changes in the Bank’s activities. The Bank, through its standards and procedures, aims to develop an appropriate control environment in which all employees understand their roles and responsibilities.

The Audit Committee supervises the way in which the Bank monitors and manages risk and compliance with the Bank’s risk management policies and procedures and checks that the risk management framework is appropriate for the risks faced by the Bank. This committee is assisted by the Internal Audit Department in its supervisory role. Internal Audit performs reviews of risk management controls and procedures, whose results are reported to the Audit Committee.

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In accordance with the Bank’s governance outlook, the Financial Risk Department is responsible for identifying, quantifying, analyzing, controlling and monitoring financial risk at the Bank. The Credit Risk Division is responsible for managing credit risk for the Corporate Banking, Treasury, Companies and Retail divisions. The Financial Risk Department is part of the Planning and Control Division. The other departments within this division include Accounting, Management Control, Planning and Development, Capital Management and Investor Relations. The main objective of this corporate division is to provide accurate, timely and high-quality information to support decision making by internal and external stakeholders.

The Corporate Treasury Division is charged with managing financial risk in the Bank’s Trading and Banking Books. In the Banking Book, this consists of managing inflation, interest rate and liquidity risk in the bank’s balance sheet in order to maximize returns in compliance with corporate policies and current laws and regulations. The Trading Book refers to the portfolio of financial instruments acquired to obtain short-term gains from increases in fair value arising from changes in the values of underlying variables. This book is responsible for managing currency risk for the entire balance sheet. Management of the Bank’s funding structure is an important component of managing liquidity and interest rate risk within the Banking Book or balance sheet.

The Financial Risk Department is independent from the business areas and is responsible for controlling and measuring the Bank’s financial risks (market and liquidity risk) as well as supplying, along with the Treasury Division, the ALCO with the metrics and limits for those risks, which are established in the respective policies.

The Bank’s financial risk management efforts are framed within the Financial Risk Policy, which is comprised of the Liquidity Management Policy, the Market Risk Management Policy and the Valuation Policy.

a) Financial Risk Management Principles

• Risk is monitored and controlled by parties independent from those managing risk, thus correctly aligning incentives.

• Management efforts should be flexible, within the framework permitted by policies, rules and current regulations.

• Senior management establishes the guidelines for risk appetite and is informed periodically on risk levels assumed, contingencies and instances when limits are exceeded.

b) Financial Risk Management Committees

In order to guarantee the flexibility of management efforts and communication of risk levels to senior management, the following network of committees has been established:

• Daily Committees: Meets daily to review financial conditions and the latest market movements. This committee reviews the relevance of positions on a daily basis in order to detect in advance any scenarios that could negatively impact returns and liquidity. It also monitors the performance of strategies used for each of the portfolios.

• Proprietary Trading and Market Making Committees: Meets weekly to analyze strategies for managing investment portfolio or directional positions. This committee reviews local and global economic conditions and projections in order to analyze the potential benefits and risks of the strategies executed and evaluate new strategies.

• ALM Committees: This committee meets biweekly to analyze management of structural interest rate and indexation risk in the banking book.

• Liquidity and Market Committee: This committee meets biweekly to analyze management of funding liquidity risk.

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• Treasury Committee: This committee meets monthly to analyze matters related to treasury activity and establish agreements and strategies on related matters, always in line with current ALCO policies and guidelines.

• Assets-Liabilities Committee (ALCO): This committee meets monthly to analyze economic and financial conditions and inform senior management of market and liquidity risk levels assumed by presenting indexes of market and funding liquidity risk, limit consumption and results of stress tests.

• Board of Directors: Our board of directors is informed each quarter of the market and funding liquidity risk levels assumed by presenting established risk indexes, limit consumption and results of stress tests.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

AMERICAN DEPOSITARY SHARES

Fees and Expenses

Effective as of June 4, 2018, The Bank of New York Mellon serves as the depositary for our ADSs. Holders of the ADSs are required to pay the fees set forth in the table below to the depositary, and the depositary may refuse to provide any service for which a fee is assessed until the applicable fee has been paid. The depositary may decide, in its sole discretion, to seek payment by either billing holders or by deducting the fee from one or more cash dividends or other cash distributions.

Depositary service	Fee payable by ADS holders
Issuance and delivery of ADSs, including in connection with share distributions, stock splits or other distributions (except when converted to cash); exercise rights; cancellation or withdrawal of ADSs, including cash distributions in connection with a cancellation or withdrawal.	US$5.00 (or less) per 100 ADSs (or fraction thereof)
Any distribution of cash proceeds to ADS registered holders, including cash dividends or sale of rights and other entitlements not made pursuant to a cancellation or withdrawal.	US$0.05 (or less) per ADS (or fraction thereof)
Operation and maintenance costs.	US$0.05 (or less) per ADS (or fraction thereof)
Direct and indirect payments by the depositary
Transfer and registration of shares on our share register to or from the name of the Depositary or its agent when you deposit or withdraw shares	—
Cable, telex and facsimile transmissions and electronic transmissions (when expressly provided in the deposit agreement).	—
Any fees, charges and expenses incurred in connection with the conversion of foreign currency, compliance with exchange control regulations and other regulatory requirements.	—
Taxes and other governmental charges the depositary or the custodian have to pay on any ADS or share underlying an ADS, for example, stock transfer taxes, stamp duty, or withholding taxes.	—
Any fees and expenses incurred by the depositary in connection with the delivery of deposited securities, including any fees of a central depositary for securities in the local market, where applicable.	—
Any other fees, charges costs or expenses incurred by the depositary or its agents for servicing the deposited securities.	—

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Any other charges and expenses of the depositary under the deposit agreement will be paid by Itaú Corpbanca upon agreement between the depositary and Itaú Corpbanca. All fees and charges may, at any time and from time to time, be changed by agreement between the depositary and the Company but, in the case of fees and charges payable by ADS holders and beneficial owners, only in the manner contemplated by Article 20 of the ADS.

The depositary reimburses Itaú Corpbanca for certain expenses incurred by Itaú Corpbanca that are related to the ADS facility upon such terms and conditions as Itaú Corpbanca and the depositary have agreed and may hereinafter agree from time to time. The depositary may make available to Itaú Corpbanca a set amount or a portion of the depositary fees charged in respect of the ADS facility or otherwise upon such terms and conditions as Itaú Corpbanca and the depositary may agree from time to time.

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

There have been no defaults, dividend arrearages or delinquencies in any payments for the year ended December 31, 2018.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

There have been no material modifications to the rights of security holders for the year ended December 31, 2018.

ITEM 15. CONTROLS AND PROCEDURES

DISCLOSURE CONTROLS AND PROCEDURES

As of December 31, 2018, we carried out an evaluation, under the supervision and with the participation of our management, including our CEO, and our CFO, of the effectiveness of our “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as required by paragraph (b) of Rules 13a-15 and 15d-15 under the Exchange Act.

A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Therefore, our management does not expect that the controls will prevent all errors and all fraud.

Based upon the evaluation performed, our CEO and CFO have concluded that as of December 31, 2018, our disclosure controls and procedures were effective to provide reasonable assurance that material information relating to us and our consolidated subsidiaries is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our principal executive officers and principal financial officers, to allow timely decisions regarding required disclosure.

MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes, in accordance with IFRS, and includes those policies and procedures that:

• pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Bank;

• provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS, and that our receipts and expenditures are being made only in accordance with authorizations of the Bank’s management and directors; and

• provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

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All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that a decline in the level of compliance with policies or procedures may occur.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2018. In making this assessment, our management used the criteria set forth in “Internal Control—Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on its evaluation and those criteria, our management has concluded that our internal control over financial reporting was effective as of December 31, 2018.

The effectiveness of our Company’s internal control over financial reporting as of December 31, 2018 has been audited by PricewaterhouseCoopers Consultores Auditores SpA, an independent registered public accounting firm.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

In connection with the evaluation required by Rule 13a-15(d) under the Exchange Act, our management, including our CEO and CFO, concluded that the changes that occurred during the year ended December 31, 2018 have not materially affected, and are not reasonably likely to materially affect, our internal control over financial reporting.

REPORT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The report of PricewaterhouseCoopers Consultores Auditores SpA, our independent registered public accounting firm, dated April 24, 2019, on the effectiveness of our internal control over financial reporting as of December 31, 2018 is presented on pages F-1 and F-2 of this Annual Report.

ITEM 16. RESERVED

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

Our board of directors has determined that Diego Fresco Gutiérrez and Juan Echeverría González qualify as “audit committee financial experts” within the meaning of this Item 16A, in that: (i) each has an understanding of IFRS and financial statements; (ii) the ability to assess the general application of such principles in connection with the accounting for estimates, accruals and reserves; (iii) significant experience auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the financial statements and experience supervising persons engaged in such activities; (iv) an understanding of internal control over financial accounting and reporting; and (v) an understanding of the functions of an audit committee.

Both Diego Fresco Gutiérrez and Juan Echeverría González meet the independence requirements set forth in Rule 10A-3(b)(1) under the Exchange Act.

ITEM 16B. ETHICS

We have adopted a code of ethics, as defined in Item 16B of Form 20-F under the Exchange Act. Our code of ethics applies to our CEO, CFO, principal accounting officer and persons performing similar functions, as well as to our directors and other employees without exception. A copy of our code of ethics, as amended, along with our Code of Conduct in the Securities Market, is attached as an exhibit to this Annual Report.

Our code of ethics is available on our website, at www.itau.cl under the heading “Sobre Itaú Corpbanca—Políticas, Manuales y Códigos.”

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No waivers have been granted to the code of ethics since its adoption that applies to the persons indicated above.

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table sets forth the fees billed to us by our independent auditors during the fiscal years ended December 31, 2017 and 2018 following the accounting form:

	Year Ended December 31
	2017		2018
	(in millions of constant Ch$)
Principal accountant fees and services
Audit fees		1,966		1,565
Audit-related fees		425		97
Tax fees		—		—
All other fees		—		—
Total		2,391		1,662

Audit fees in the above table are the aggregate fees billed by PwC for 2017 and 2018, in connection with the audit of our consolidated financial statements and services that are normally provided by PwC in connection with statutory and regulatory filings or engagements.

Audit-related fees in the above table are the aggregate fees billed by PwC for 2017 and 2018, for assurance services required by regulators on internal control and certain accounting requirements, agreed upon procedures on quarterly disclosures to investors, and procedures in connection with implementation of accounting standards, as well as the issuance of consents in connection with filings.

PRE-APPROVAL POLICIES AND PROCEDURES

Our audit committee approves all audit, audit-related services, tax services and other services provided by PwC. Any services provided by PwC that are not specifically included within the scope of the audit must be pre-approved by the audit committee prior to any engagement.

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Itaú Corpbanca’s audit committee meets the requirements of Exchange Act Rule 10A-3. However, Itaú Corpbanca is subject to the general exemption contained in Exchange Act Rule 10A-3, which provides an exemption from NYSE’s listing standards relating to audit committees for foreign companies like Itaú Corpbanca.

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

The following table sets out certain information concerning purchases of our shares registered under Section 12 of the Exchange Act by us or any affiliated purchaser during fiscal year 2018:

Period (*)	(a) Total number of shares purchased		(b) Average price paid per share (in Ch$)		(c) Total number of shares purchased as part of publicly announced plans or programs		(d) Maximum number of shares that may yet be purchased under the plan or programs
January 2018		—		—		—		—
February 2018		—		—		—		—
March 2018		—		—		—		—
April 2018		—		—		—		—
May 2018		—		—		—		—
June 2018		—		—		—		—
July 2018		—		—		—		—
August 2018		—		—		—		—
September 2018		—		—		—		—
October 2018		10,651,555,020		6.167		—		—
November 2018		—		—		—		—
December 2018		—		—		—		—
Total		10,651,555,020		—		—		—

(*) Itaú Corpbanca and our affiliates did not purchase any of our shares registered under Section 12 of the Exchange Act.

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ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

Not applicable.

ITEM 16G. CORPORATE GOVERNANCE

Pursuant to Section 303A.11 of the Listed Company Manual of the New York Stock Exchange, “foreign private issuers” are required to provide a summary of the significant ways in which their corporate governance practices differ from those corporate governance standards required of U.S. companies by the New York Stock Exchange. As a Chilean bank, our corporate governance standards are governed by our by-laws, the Chilean General Banking Act, the Chilean Securities Market Act, the Chilean Corporations Act and the Regulations of the SBIF. The following chart notes these differences:

NYSE Corporate Governance Standards	Chilean Corporate Governance Standards
Listed companies must have a majority of independent directors and independence test.	Publicly traded companies (sociedades anónimas abiertas) must designate at least one independent director and a directors committee, if they have a market capitalization equal to or greater than the equivalent of 1,500,000 unidades de fomento, and at least 12.5% of its issued shares with voting rights are held by shareholders who individually control or own less than 10% of such shares. Under Chilean law, directors elected by a group or class of shareholders have the same duties to the company and to the shareholders as do the remaining directors, and all transactions with the company in which a director has an interest, either personally (which includes the director’s spouse and certain relatives) or as a representative of a third party, requires a report from the directors committee and the prior approval by the board of directors and must be entered into the interest of the Company and on market terms and conditions. Such transactions must be reviewed by the directors committee and disclosed at the subsequent shareholders’ meeting.
Non-management directors must meet at regularly scheduled executive sessions without management.	Chilean law establishes that our executive officers may not serve as directors and therefore, all of our directors are non-management. Our board of directors meets regularly on a monthly basis.
Listed companies must have a nominating/corporate governance committee composed entirely of independent directors. The committee must have a written charter addressing the committee’s purpose and responsibilities, which must include (i) identifying, and selecting or recommending, qualified individuals to serve as board members, (ii) developing and recommending corporate governance guidelines; and (iii) overseeing the evaluation of the board and management.	Under Chilean law, we are not required to have, and do not have, a nominating/corporate governance committee. Under Chilean law, the only committees that are required are the audit committee, the directors committee, the anti-money laundering committee and the anti-terrorism finance committee.

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NYSE Corporate Governance Standards	Chilean Corporate Governance Standards
Listed companies must have a compensation committee composed entirely of independent directors. The committee must have a written charter addressing an annual performance evaluation of the committee and addressing the committee’s purpose and responsibilities, which must include (i) determining and approving the CEO’s compensation level based on an evaluation of the CEO’s performance in light of relevant corporate goals and objectives, (ii) making recommendations with respect to non-CEO executive officer compensation and (iii) producing a committee report on executive officer compensation.	Under Chilean law we are not required to have a compensation committee. Our board of directors establishes the compensation of our CEO and does a performance evaluation. The Directors Committee examines the compensation program of executive officers.
Shareholders must have the opportunity to vote on all equity-compensation plans and material revisions thereto, subject to limited exemptions.	Our compensation policies do not provide for equity compensation plans.
Listed companies must adopt and disclose corporate governance guidelines. The guidelines must address (i) director qualification standards, (ii) director responsibilities, (iii) director access to management, (iv) director compensation, (v) director orientation and continuing education, (vi) management succession, and (vii) annual performance evaluation of the board.	We follow corporate governance guidelines established by Chilean laws and by the Regulations of the SBIF which include, among others (i) active participation of directors in our main committees, (ii) the requirement that all employees sign and be knowledgeable of our code of ethics, (iii) a separation of functions — our commercial unit is separated from the back office and risk segments and main credit decisions are taken in committee, (iv) monthly review by the audit committee of internal audit reports and (v) the appointment of an officer who oversees compliance with the code of ethics.
Listed companies must adopt and disclose a code of business conduct and ethics for directors, officers and employees, and promptly disclose waivers thereof for directors or executive officers.	We have a code of business and ethics conduct which drives business and ethical conduct of our CEO, CFO and each employee. This code must be signed by each of our employees and is published in our intranet; it is included as an exhibit in this Annual Report.
Listed companies must have an audit committee that meets the requirements of Exchange Act Rule 10A-3 or be exempt therefrom. If the company has an audit committee, each member must meet Exchange Act Rule 10A-3(b)(1) independence requirements or be exempt therefrom. In particular, Exchange Act Rule 10A-3(b)(1) requires that each member of the audit committee be a member of the board of directors of the issuer, and must otherwise be independent.	Under Chilean law, all Chilean banks must establish an audit committee composed of two or more members, two of whom must be directors appointed by the board of directors. The SBIF recommends that at least one of the members of the audit committee, who must also be a member of the board of directors, be experienced with respect to the accounting procedures and financial aspects of banking operations. The members of the audit committee appointed by the board of directors must be independent according to the criteria set by the board of directors. In furtherance of the independence of the audit committee, the board of directors has determined that audit committee members should not, for the last three years, have held positions as our principal executive officers, have performed professional services for us, have commercial commitments with us or with any of our affiliates or related persons or have relations with other entities related to us from which they have received material payments. Moreover, they may not accept any payment or other compensatory fee from us, other than in their capacity as members of the audit committee or of other committees. All the members of the audit committee receive a monthly remuneration.

238

ITEM  16H. MINE SAFETY DISCLOSURE

Not applicable.

PART III

ITEM 17.  FINANCIAL STATEMENTS

Not applicable.

ITEM 18.  FINANCIAL STATEMENTS

See the following items starting at page F-3:

(a) Report of independent registered public accounting firm;

(b) Consolidated statements of financial position as of 2018 and 2017;

(c) Consolidated statements of income for the years ended December 31, 2018 and 2017;

(d) Consolidated statements of other comprehensive income for the years ended December 31, 2018 and 2017;

(e) Consolidated statements of changes in Equity for the years ended December 31, 2018 and 2017;

(f) Consolidated statements of cash flows for the years ended December 31, 2018 and 2017; and

(g) Notes to the consolidated financial statements.

ITEM 19.  EXHIBITS

The following exhibits are filed as part of this Annual Report:

Exhibit 1.1	Articles of Incorporation and By-laws (Estatutos Sociales) of Itaú Corpbanca, including amendments thereto (English language translation) (filed as an exhibit to our annual report on Form 20-F (File No. 001-32305) for the year ended December 31, 2016 and incorporated herein by reference).
Exhibit 2.(a).1	Form of Amended and Restated Deposit Agreement, dated as of May  30, 2018, by and among Itaú Corpbanca, The Bank of New York Mellon, as depositary, and the registered holders and beneficial owners from time to time of American Depositary Shares evidenced by American Depositary Receipts issued thereunder, including a form of American Depositary Receipt (filed as an exhibit to our registration statement on Form F-6 (File No. 333-225409) filed on June 4, 2018, and incorporated herein by reference).
Exhibit 2.(a).2	Form of Itaú Corpbanca Share Certificate (English language translation) (filed as an exhibit to our annual report on Form 20-F (File No. 001-32305) filed on September 24, 2004, and incorporated herein by reference).
Exhibit 2.(b).1	Indenture dated January  15, 2013, between Itaú Corpbanca and Deutsche Bank Trust Company Americas, as Trustee, related to Itaú Corpbanca’s 3.125% Senior Notes due 2018 (filed as an exhibit to our annual report on Form  20-F (File No. 001-32305) for the year ended December 31, 2012 and incorporated herein by reference).

239

Exhibit 2.(b).2	First Supplemental Indenture dated January  15, 2013, between Itaú Corpbanca and Deutsche Bank Trust Company Americas, as Trustee, related to Itaú Corpbanca’s 3.125% Senior Notes due 2018 (filed as an exhibit to our annual report on Form  20-F (File No. 001-32305) for the year ended December 31, 2012 and incorporated herein by reference).
Exhibit 2.(b).3	Form of Global Note due 2018 (included in Exhibit 2.(b).1) (filed as an exhibit to our annual report on Form 20-F (File No. 001-32305) for the year ended December 31, 2012 and incorporated herein by reference).
Exhibit 3.1	Amendment dated January  10, 2017 to the Data Processing Master Agreement entered into by and between Itaú Corpbanca Colombia and Produban Servicios Informáticos Generales S.L. (English language translation) (filed as an exhibit to our annual report on Form 20-F (File No. 001-32305) for the year ended December 31, 2016 and incorporated herein by reference).
Exhibit 3.2	Amendment dated January  25, 2017 to the Software License Agreement entered into by and between Itaú Corpbanca Colombia and Ingeniería de Software Bancario S.L. (English language translation) (filed as an exhibit to our annual report on Form 20-F (File No. 001-32305) for the year ended December 31, 2016 and incorporated herein by reference).
Exhibit 4.(a).1	Systems Operations Services Agreement, dated as of March 30, 2001, between IBM de Chile S.A.C. and Itaú  Corpbanca (English language translation) (filed as an exhibit to our annual report on Form 20-F (File No. 001-32305) filed on September  24, 2004, and incorporated herein by reference).
Exhibit 4.(a).2(i)	Service Contract, dated as of July 6, 2001, between Inversiones CorpGroup Interhold Limitada and Itaú  Corpbanca, as amended (English language translation) (filed as an exhibit to our annual report on Form 20-F (File No.  001-32305) for the year ended December 31, 2013 and incorporated herein by reference).
Exhibit 4.(a).2.(i)(a)	Amendment, dated as of January 27, 2014, to the Service Contract dated as of July  6, 2001, between Inversiones CorpGroup Interhold Limitada and Itaú Corpbanca (English language translation) (filed as an exhibit to our annual report on Form 20-F (File No. 001-32305) for the year ended December 31, 2016 and incorporated herein by reference).
Exhibit 4.(a).2(ii)	Service Contract, dated as of April 10, 2008, between Inversiones CorpGroup Interhold Limitada and Itaú  Corpbanca, as amended (English language translation) (filed as an exhibit to our annual report on Form 20-F (File No.  001-32305) for the year ended December 31, 2013, and incorporated herein by reference).
Exhibit 4.(a).2.(ii)(a)	Amendment, dated as of January 27, 2014, to the Service Contract, dated as of April  10, 2008, between Inversiones CorpGroup Interhold Limitada and Itaú Corpbanca, as amended (English language translation) (filed as an exhibit to our annual report on Form 20-F (File No. 001-32305) for the year ended December 31, 2016 and incorporated herein by reference).
Exhibit 4.(a).2(iii)	Service Contract, dated as of March 27, 2012, between CorpGroup Holding Inversiones Limitada, Alvaro  Saieh Bendeck and Itaú Corpbanca, as amended (English language translation) (filed as an exhibit to our annual report on Form 20-F (File No.  001-32305) for the year ended December 31, 2013, and incorporated herein by reference).
Exhibit 4.(a).2(iii)(a)	Amendment, dated as of January 27, 2014 of the Service Contract, dated as of March  27, 2012, between CorpGroup Holding Inversiones Limitada, Alvaro Saieh Bendeck and Itaú Corpbanca, as amended (English language translation) (filed as an exhibit to our annual report on Form  20-F (File No. 001-32305) for the year ended December 31, 2015 and incorporated herein by reference).

240

Exhibit 4.(a).3.1	Amendment to the Agreement to Participate in the Automated Teller Machine Network Operated by Redbanc S.A., dated as of October  11, 2016, among Redbanc S.A. and Itaú Corpbanca (English language translation) (filed as an exhibit to our annual report on Form 20-F (File No.  001-32305) for the year ended December 31, 2016 and incorporated herein by reference).
Exhibit 4.(a).4.1	Sublease Automatic Teller Machine Contract, dated as of November  26, 2008 (the “Sublease ATM Contract”), entered into by and between SMU S.A., Rendic Hermanos S.A., Supermercados Bryc S.A. and Distribuidora Super Diez S.A. and Itaú Corpbanca (English language translation) (filed as an exhibit to our annual report on Form 20-F (File No. 001-32305) for the year ended December 31, 2008 and incorporated herein by reference).
Exhibit 4.(a).4.2	Amendment to the Sublease ATM Contract, dated as of June  4, 2014, entered into by and between SMU S.A., Rendic Hermanos S.A., Supermercados Bryc S.A. and Distribuidora Super Diez S.A. and Itaú Corpbanca (English language translation) (filed as an exhibit to our annual report on Form 20-F (File No. 001-32305) for the year ended December 31, 2016 and incorporated herein by reference).
Exhibit 4.(a).5	Amended and Restated Credit Agreement, dated as of April  10, 2017, by and among Itaú Corpbanca, as borrower, Wells Fargo Bank, N.A., as administrative agent and BNP Paribas Securities Corp, Mizuho Bank,  Ltd. Standard Chartered Bank and Wells Fargo Securities, LLC, as joint lead arrangers and bookrunners (filed as an exhibit to our annual report on Form 20-F (File No.  001-32305) for the year ended December 31, 2016 and incorporated herein by reference).
Exhibit 4.(a).6(i)	Transaction Agreement dated as of January  29, 2014, entered into by and between Itaú Corpbanca, Inversiones CorpGroup Interhold Limitada, Inversiones Gasa Limitada, Itaú Unibanco and Itaú Chile (filed as an exhibit to our annual report on Form 20-F (File No. 001-32305) for the year ended December 31, 2013, and incorporated herein by reference).
Exhibit 4.(a).6(ii)	Amendment to the Transaction Agreement, dated as of June 2, 2015, entered into by and between Itaú Corpbanca,  Inversiones CorpGroup Interhold Limitada, Inversiones Gasa Limitada, Itaú Unibanco and Itaú Chile (filed as an exhibit to our annual report on Form 20-F (File No.  001-32305) for the year ended December 31, 2015 and incorporated herein by reference).
Exhibit 4.(a).6(iii)	Amended and Restated Transaction Agreement, dated as of January 20, 2017, entered into by and between Itaú Corpbanca,  Inversiones CorpGroup Interhold Limitada, Inversiones Gasa Limitada, Itaú Unibanco and Itaú Chile (filed as an exhibit to our Amendment No. 5 to Schedule 13-D Form  SC 13 D/A (File No. 0001193125-17-022064) on January 27, 2017, and incorporated herein by reference).
Exhibit 4.(b).1	Lease agreement, dated as of July  27, 2015, entered into by and between Itaú Corpbanca as tenant and Compañía de Seguros Corpseguros S.A. as landlord (filed as an exhibit to our annual report on Form 20-F (File No. 001-32305) for the year ended December 31, 2015 and incorporated herein by reference).
Exhibit 4.(b).2	Lease agreement, dated as of July  27, 2015, entered into by and between Itaú Corpbanca as tenant and Compañía de Seguros CorpVida S.A. as landlord (filed as an exhibit to our annual report on Form 20-F (File No. 001-32305) for the year ended December 31, 2015 and incorporated herein by reference).

241

Exhibit 4.(b).3	Lease Agreement, dated as of June  21, 2016, entered into by and between Itaú Corpbanca as tenant and Compañía de Seguros Confuturo S.A. as landlord (filed as an exhibit to our annual report on Form 20-F (File No. 001-32305) for the year ended December 31, 2016 and incorporated herein by reference).
Exhibit 4.(b).4	Lease Agreement, dated as of June  21, 2016, entered into by and between Itaú Corpbanca as tenant and Compañía de Seguros Corpseguros S.A. as landlord (filed as an exhibit to our annual report on Form 20-F (File No. 001-32305) for the year ended December 31, 2016 and incorporated herein by reference).
Exhibit 8.1*	List of subsidiaries of Itaú Corpbanca.
Exhibit 11.1	Itaú Corpbanca’s Code of Ethics (General code of conduct. English language translation) (filed as an exhibit to our annual report on Form 20-F (File No. 001-32305) for the year ended December 31, 2016 and incorporated herein by reference).
Exhibit 11.2	Itaú Corpbanca’s Code of Conduct in the Securities Market (English language translation) (filed as an exhibit to our annual report on Form 20-F (File No. 001-32305) for the year ended December 31, 2016 and incorporated herein by reference).
Exhibit 12.1*	Certification of the CEO of Itaú Corpbanca required under Rule 13a-14(a) or Rule  15d-14(a), pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
Exhibit 12.2*	Certification of the CFO of Itaú Corpbanca required under Rule 13a-14(a) or Rule  15d-14(a), pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
Exhibit 13.1*	Certification of the CEO of Itaú Corpbanca required under Rule 13a-14(a) or Rule  15d-14(a), pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 13.2*	Certification of the CFO of Itaú Corpbanca required under Rule 13a-14(a) or Rule  15d-14(a), pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 101.INS*	XBRL Instance Document.
Exhibit 101.SCH*	XBRL Taxonomy Extension Schema Document.
Exhibit 101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document.
Exhibit 101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document.
Exhibit 101.LAB*	XBRL Taxonomy Extension Labels Linkbase Document.
Exhibit101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document.

* Filed herewith.

242

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

ITAÚ CORPBANCA
	/s/ Manuel Olivares
Name:	Manuel Olivares
Title:	Chief Executive Officer
	/s/ Gabriel Moura
Name:	Gabriel Moura
Title:	Chief Financial Officer

Date: April 29, 2019

243

Itaú Corpbanca and subsidiaries
Consolidated Financial Statements as of December 31, 2018 and 2017
and for the years ended December 31, 2018, 2017 and 2016.

Content

Report of independent registered public accounting firm	F-3
Consolidated Statements of Financial Position	F-5
Consolidated Statements of Income	F-6
Consolidated Statements of Other Comprehensive Income	F-7
Consolidated Statements of Changes in Equity	F-8
Consolidated Statements of Cash Flows	F-9
Notes to the Consolidated Financial Statements	F-11

$	=	Amounts expressed in Chilean pesos.
MCh$	=	Amounts expressed in millions of Chilean pesos.
US$	=	Amounts expressed in US dollars.
ThUS$	=	Amounts expressed in thousands of US dollars.
MUS$	=	Amounts expressed in millions of US dollars.
COP$	=	Amounts expressed in Colombian pesos.
MCOP$	=	Amounts expressed in millions of Colombian pesos.
UF	=	Amounts expressed in Unidades de Fomento
		(a Chilean inflation-indexed, peso-denominated monetary unit that is set daily based on changes in the Chilean Consumer Price Index).

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Santiago, April 24, 2019

To the Board of Directors and Shareholders of Itaú Corpbanca

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated statements of financial position of Itaú Corpbanca and its subsidiaries (“the Company”) as of December 31, 2018 and 2017, and the related consolidated statements of income, other comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2018, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for financial instruments in 2018.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 15. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-3

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers Consultores Auditores SpA

Santiago, April 24, 2019

We have served as the Company’s auditor since 2006.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-4

Itaú Corpbanca and subsidiaries

Consolidated Statements of Financial Position

(In millions of Chilean pesos - MCh$)

		As of December 31,
	Notes	2018			2017
		MCh$			MCh$
ASSETS
Cash and deposits in banks	5a)		987,680			964,030
Cash items in process of collection	5b)		318,658			157,017
Financial instruments at fair value through profit or loss	6		96,943			—
Financial instruments at fair value through other comprehensive income	11		2,657,154			—
Interbank loans at amortized cost	9		341,244			—
Loans and accounts receivable from customers at amortized cost	10		20,714,370			—
Financial instruments at amortized cost	11		198,923			—
Investments under resale agreements	7		109,467			28,524
Financial derivative contracts	8		1,368,957			1,248,775
Interbank loans, net	9		—			70,077
Trading investments	6		—			415,061
Loans and accounts receivable from customers, net	10		—			19,764,078
Available for sale investments	11		—			2,663,478
Held to maturity investments	11		—			202,030
Intangible assets	12		1,570,964			1,562,654
Property, plant, and equipment	13		95,564			130,579
Current taxes	14		123,129			238,452
Deferred taxes	14		178,686			140,685
Other assets	15a)		501,797			429,025
Other non-current assets held for sale	15b)		59,802			18,308
TOTAL ASSETS			29,323,338			28,032,773
LIABILITIES
Deposits and other demand liabilities	16a)		4,300,475			4,141,667
Cash in process of being cleared	5b)		247,165			109,496
Obligations under repurchase agreements	7b)		1,015,614			420,920
Time deposits and other time liabilities	16b)		10,121,111			10,065,243
Financial derivative contracts	8		1,112,806			1,095,154
Interbank borrowings	17		2,327,723			2,196,130
Debt instruments issued	18		6,010,124			5,950,038
Other financial liabilities	18		12,400			17,066
Current taxes	14		1,191			624
Deferred taxes	14		471			26,354
Provisions	19		214,903			117,889
Other liabilities	20a)		521,795			463,435
Liabilities directly associated with non-current assets held for sale	20b)		—			—
TOTAL LIABILITIES			25,885,778			24,604,016
EQUITY
Attributable to equity holders of the Bank:
Capital	22		1,862,826			1,862,826
Reserves	22		1,290,131			1,290,131
Valuation accounts	22		16,159			(4,735	)
Retained earnings:			50,362			63,255
Retained earnings (accumulated losses) from prior years	22		(69,355	)		12,668
Net income for the year	22		171,331			67,821
Less: Provision for mandatory dividends	19, 22		(51,614	)		(17,234	)
Total equity attributable to equity holders of the Bank			3,219,478			3,211,477
Non-controlling interest	22		218,082			217,280
TOTAL EQUITY			3,437,560			3,428,757
TOTAL LIABILITIES AND EQUITY			29,323,338			28,032,773

The accompanying notes are an integral part of these Consolidated Financial Statements.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-5

Itaú Corpbanca and subsidiaries

Consolidated Statements of Income

(In millions of Chilean pesos - MCh$)

		For the years ended December 31,
	Notes	2018			2017			2016
		MCh$			MCh$			MCh$
Interest income	23a)		1,739,317			1,646,329			1,509,203
Interest expense	23b)		(851,654	)		(863,347	)		(870,028	)
Net interest income			887,663			782,982			639,175
Fee and commission income	24a)		237,956			216,420			193,801
Fee and commission expense	24b)		(51,827	)		(38,849	)		(43,005	)
Net fee and commission income			186,129			177,571			150,796
Net income from financial operations	25		172,755			8,268			112,952
Net foreign exchange gain (loss)	26		(17,965	)		46,165			(48,848	)
Other operating income	31a)		26,656			41,532			19,447
Net operating profit before provision for loan losses			1,255,238			1,056,518			873,522
Provision for loan losses	27		(279,798	)		(315,417	)		(245,990	)
NET OPERATING PROFIT			975,440			741,101			627,532
Personnel salaries and expenses	28		(294,747	)		(281,323	)		(245,665	)
Administrative expenses	29		(291,736	)		(305,622	)		(235,204	)
Depreciation and amortization	30a)		(86,817	)		(81,845	)		(63,692	)
Impairment	30a)		(28	)		(27	)		(351	)
Other operating expenses	31b)		(68,199	)		(62,330	)		(71,715	)
Total operating expenses			(741,527	)		(731,147	)		(616,627	)
Operating income before income taxes			233,913			9,954			10,905
Income taxes	14		(67,059	)		52,871			3,568
Consolidated income from continuing operations			166,854			62,825			14,473
Loss from discontinued operations			—			—			(504	)
TOTAL CONSOLIDATED INCOME FOR THE YEAR			166,854			62,825			13,969
Attributable to:
Equity holders of the Bank			171,331			67,821			14,407
Non-controlling interest	22c)		(4,477	)		(4,996	)		(438	)
Earnings per share attributable to equity holders of the Bank (in Chilean pesos)
Basic earnings per share	22a)		0.334			0.132			0.035
Diluted earnings per share	22a)		0.334			0.132			0.035

The accompanying notes are an integral part of these Consolidated Financial Statements.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-6

Itaú Corpbanca and subsidiaries

Consolidated Statements of Other Comprehensive Income

(In millions of Chilean pesos - MCh$)

		For the years ended December 31,
	Notes	2018			2017			2016
		MCh$			MCh$			MCh$
CONSOLIDATED INCOME FOR THE YEAR	22d)		166,854			62,825			13,969
OTHER COMPREHENSIVE INCOME (LOSS) WHICH MAY BE
RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS:
Financial instruments at FVTOCI	22d)		(959	)		—			—
Available for sale investments			—			9,966			15,418
Exchange differences on investment in Colombia and New York branch	22d)		48,610			(78,302	)		(7,101	)
Gain (loss) from hedge of net investments in foreign operations	22d)		(36,533	)		49,197			13,458
Gain (loss) from cash flow hedge	22d)		11,289			(127	)		(5,603	)
Other comprehensive income (loss) before income taxes			22,407			(19,266	)		16,172
Income taxes related to financial instruments at FVTOCI			(2,172	)		—			—
Income taxes related to available for sale investments	22d)		—			(3,333	)		(4,025	)
Income taxes related to hedge of net investment in foreign operations	22d)		10,565			(14,211	)		(2,685	)
Income taxes related to cash flow hedge	22d)		(1,669	)		44			1,345
Income taxes on other comprehensive income (loss)			6,724			(17,500	)		(5,365	)
Other comprehensive income (loss) which may be reclassified			29,131			(36,766	)		10,807
subsequently to profit or loss, net of income taxes
OTHER COMPREHENSIVE INCOME (LOSS) WHICH MAY NOT BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS:
Defined benefits obligations	22d)		(754	)		(208	)		(3,920	)
Income taxes related to defined benefits obligations	22d)		(44	)		(6	)		1,090
Other comprehensive loss which may not be reclassified subsequently to profit or loss, net of income taxes			(798	)		(214	)		(2,830	)
TOTAL OTHER COMPREHENSIVE INCOME (LOSS) FOR THE YEAR			28,333			(36,980	)		7,977
CONSOLIDATED COMPREHENSIVE INCOME FOR THE YEAR			195,187			25,845			21,946
Attributable to:
Equity holders of the Bank	22d)		191,228			47,534			30,903
Non-controlling interest	22d)		3,959			(21,689	)		(8,957	)

The accompanying notes are an integral part of these Consolidated Financial Statements.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-7

Itaú Corpbanca and subsidiaries

Consolidated Statements of Changes in Equity

(In millions of Chilean pesos - MCh$)

	Number of shares		Capital			Reserves								Retained earnings									Total attributable to equity holders of the Bank			Non-controlling interest			Total equity
						Reserves from earnings		Other non-earnings reserves			Valuation accounts			Retained earnings from prior years			Income for the year			Provision for mandatory dividends
	Millions		MCh$			MCh$		MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$
Equity as of January 1, 2016		115,040		344,569			398,843		(2,133	)		(944	)		103,215			—			(52,168	)		791,382			59			791,441
Increase or decrease of capital and reserves		57,009		392,813			52,168		—			—			(52,168	)		—			—			392,813			—			392,813
Dividens paid		—		—			—		—			—			(52,168	)		—			52,168			—			—			—
Merger with Corpbanca
Elimination of legal capital Banco Itaú Chile		—		(737,382	)		—		737,382			—			—			—			—			—			—			—
Legal capital Corpbanca before business combination		—		781,559			—		(781,559	)		—			—			—			—			—			—			—
Increase of capital in Corpbanca		—		401,424			—		(401,424	)		—			—			—			—			—			—			—
Fair value Corpbanca and subsidiaries		340,358		679,843			—		1,290,831			—			—			—			—			1,970,674			247,867			2,218,541
Provision for mandatory dividends		—		—			—		—			—			—			—			(1,029	)		(1,029	)		—			(1,029	)
Comprehensive income (loss) for the year		—		—			—		—			16,496			—			14,407			—			30,903			(8,957	)		21,946
Equity as of December 31, 2016		512,407		1,862,826			451,011		843,097			15,552			(1,121	)		14,407			(1,029	)		3,184,743			238,969			3,423,712
Distribution of income from previous year		—		—			—		—			—			14,407			(14,407	)		—			—			—			—
Equity as of January 1, 2017		512,407		1,862,826			451,011		843,097			15,552			13,286			—			(1,029	)		3,184,743			238,969			3,423,712
Dividends paid		—		—			—		—			—			(618	)		—			1,029			411			—			411
Other movements		—		—			—		(3,977	)		—			—			—			—			(3,977	)		—			(3,977	)
Provision for mandatory dividends		—		—			—		—			—			—			—			(17,234	)		(17,234	)		—			(17,234	)
Comprehensive income (loss) for the year		—		—			—		—			(20,287	)		—			67,821			—			47,534			(21,689	)		25,845
Equity as of December 31, 2017		512,407		1,862,826			451,011		839,120			(4,735	)		12,668			67,821			(17,234	)		3,211,477			217,280			3,428,757
Distribution of income from previous year		—		—			—		—			—			67,821			(67,821	)		—			—			—			—
Equity as of January 1, 2018		512,407		1,862,826			451,011		839,120			(4,735	)		80,489			—			(17,234	)		3,211,477			217,280			3,428,757
Changes due to initial application of IFRS 9		—		—			—		—			997			(126,865	)		—			—			(125,868	)		(3,157	)		(129,025	)
Equity as of January 1, 2018 - Restated		512,407		1,862,826			451,011		839,120			(3,738	)		(46,376	)		—			(17,234	)		3,085,609			214,123			3,299,732
Distribution of prior year’s net income		—		—			—		—			—			(22,979	)		—			17,234			(5,745	)		—			(5,745	)
Provision for mandatory dividends		—		—			—		—			—			—			—			(51,614	)		(51,614	)		—			(51,614	)
Comprehensive income for the year		—		—			—		—			19,897			—			171,331			—			191,228			3,959			195,187
Equity as of December 31, 2018		512,407		1,862,826			451,011		839,120			16,159			(69,355	)		171,331			(51,614	)		3,219,478			218,082			3,437,560

The accompanying notes are an integral part of these Consolidated Financial Statements.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-8

Itaú Corpbanca and subsidiaries

Consolidated Statements of Cash Flows

(In millions of Chilean pesos - MCh$)

		For the years ended December 31,
	Notes	2018			2017			2016
		MCh$			MCh$			MCh$
CASH FLOWS FROM OPERATING ACTIVITIES:
Operating income before income taxes			233,913			9,954			10,905
Debits (credits) to income that do not represent cash flows
Depreciation and amortization	30		86,817			81,845			63,692
Provisions for loans and accounts receivable from customers and interbank loans	27		328,266			346,980			269,261
Provisions and write-offs for assets received in lieu of payment	31b)		16,132			14,472			9,463
Provisions for contingencies	31b)		1,998			586			8,952
Impairment	30		28			27			351
Net gain on sale of loans and accounts receivable from customers	25		(1,602	)		(15,121	)		(18,863	)
Income received from FVTPL / Trading and derivative activities			(74,071	)		63,625			51,276
Income received from sale of FVTOCI / Available for sale	25		(13,765	)		(13,641	)		(7,998	)
Net interest income	23		(887,663	)		(782,982	)		(639,175	)
Fee and commission income	24		(237,956	)		(216,420	)		(193,801	)
Fee and commission expense	24		51,827			38,849			43,005
Net foreign exchange gain (loss)	26		17,965			(46,165	)		48,848
Net gain on sale of property, plant and equipment	31		(5,212	)		(13,020	)		34
Other charges (credits) that do not represent cash flows			20,684			8,887			16,294
Subtotal			(462,639	)		(522,124	)		(337,756	)
Loans and accounts receivable from customers and interbank loans			(1,610,676	)		393,967			701,084
Investments under resale agreements	5c) i		(80,943	)		(10,784	)		45,113
Obligations under repurchase agreements	5c) i		594,694			47,041			(428,466	)
Financial instruments at FVTPL / Trading investments	5c) ii		326,131			207,263			(165,957	)
Financial instruments at FVTOCI / Available for sale investments	5c) ii		166,753			(933,263	)		555,051
Financial instruments at amortized cost / Held to maturity investments	5c) ii		3,120			24,392			(60,038	)
Other assets and liabilities			(99,717	)		319,624			(2,053	)
Penalty fee recover			—			21,765			—
Time deposits and other time liabilities			430,141			(1,521,753	)		(642,318	)
Deposits and other demand liabilities			159,296			(312,332	)		(787,998	)
Foreign borrowings obtained	5c) iii		2,741,786			3,911,800			3,570,163
Repayment of foreign borrowings	5c) iii		(2,636,867	)		(3,839,035	)		(3,953,640	)
Interest paid			(873,121	)		(875,702	)		(835,043	)
Interest received			1,951,250			1,661,537			1,420,179
Net fee and commission income			186,258			177,660			150,935
Taxes paid			(105,683	)		(136,184	)		(201,884	)
Repayment of other borrowings	5c) iv		(4,666	)		(8,497	)		(8,330	)
Proceeds from sale of assets received in lieu of payment			10,638			3,762			2,060
Net cash flows provided by (used in) operating activities			695,755			(1,390,863	)		(978,898	)
CASH FLOWS FROM INVESTMENT ACTIVITIES:
Purchase of property, plant and equipment and intangible assets	12-13		(82,952	)		(87,155	)		(105,157	)
Sales of property, plant and equipment			41,078			—			—
Cash and cash equivalents from CorpBanca integration			—			—			1,694,231
Net cash flows provided by (used in) investing activities			(41,874	)		(87,155	)		1,589,074
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt instruments issued			484,754			1,076,452			810,270
Redemption of debt issued			(911,047	)		(726,232	)		(276,131	)
Capital increase	22		—			—			392,813
Dividends paid	22c)		(22,979	)		(618	)		(52,168	)
Net cash flows provided by financing activities			(449,272	)		349,602			874,784
Effect of changes in exchange rates			83,354			86,761			6,176
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			287,963			(1,041,655	)		1,491,136
Cash and cash equivalents at the beginning of the year			1,075,089			2,116,744			625,608
Cash and cash equivalents at end of the year	5		1,363,052			1,075,089			2,116,744
Net increase (decrease) in cash and cash equivalents			287,963			(1,041,655	)		1,491,136

			Cash flows						Changes other than cash
Item	As of December 31, 2017		Received			Paid			Changes other than cash		Acquisition		Interest and readjustment		Currency exchange effects		Fair value changes		As of December 31, 2018
	MCh$		MCh$			MCh$			MCh$		MCh$		MCh$		MCh$		MCh$		MCh$
Debt instruments issued
Mortgage finance bonds		67,938		—			(17,438	)		—		—		2,963		—		—		53,463
Bonds (senior and subordinated)		5,882,100		484,754			(893,609	)		—		—		319,289		164,127		—		5,956,661
Totals		5,950,038		484,754			(911,047	)		—		—		322,252		164,127		—		6,010,124
Dividends paid		—		—			(22,979	)		—		—		—		—		—		—
Capital increase		—		—			—			—		—		—		—		—		—
Subtotal cash flows from financing activities		—		484,754			(934,026	)		—		—		—		—		—		—
Total cash flows from financing activities (net)		—		(449,272	)		—			—		—		—		—		—		—

The accompanying notes are an integral part of these Consolidated Financial Statements.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-9

Index

		Page
Note 1	GENERAL INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES		F-11
Note 2	ACCOUNTING CHANGES		F-53
Note 3	SIGNIFICANT EVENTS		F-57
Note 4	REPORTING SEGMENTS		F-59
Note 5	CASH AND CASH EQUIVALENTS		F-62
Note 6	FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS AND TRADING INVESTMENTS		F-64
Note 7	INVESTMENTS UNDER RESALE AGREEMENTS AND OBLIGATIONS UNDER REPURCHASE AGREEMENTS		F-65
Note 8	FINANCIAL DERIVATIVE CONTRACTS AND HEDGE ACCOUNTING		F-66
Note 9	INTERBANK LOANS		F-77
Note 10	LOANS AND ACCOUNTS RECEIVABLE FROM CUSTOMERS		F-79
Note 11	INVESTMENT INSTRUMENTS		F-85
Note 12	INTANGIBLE ASSETS		F-89
Note 13	PROPERTY, PLANT AND EQUIPMENT		F-91
Note 14	CURRENT TAXES AND DEFERRED TAXES		F-93
Note 15	OTHER ASSETS AND ASSETS NON-CURRENT ASSETS HELD FOR SALE		F-96
Note 16	DEPOSITS AND OTHER DEMAND LIABILITIES AND TIME DEPOSITS		F-97
Note 17	INTERBANK BORROWINGS		F-98
Note 18	DEBT INSTRUMENTS ISSUED AND OTHER FINANCIAL LIABILITIES		F-99
Note 19	PROVISIONS		F-103
Note 20	OTHER LIABILITIES AND LIABILITIES DIRECTLY ASSOCIATED WITH NON-CURRENT ASSETS HELD FOR SALE		F-109
Note 21	CONTINGENCIES, COMMITMENTS AND RESPONSIBILITIES		F-110
Note 22	EQUITY		F-115
Note 23	INTEREST INCOME AND INTEREST EXPENSE		F-123
Note 24	FEE AND COMMISSION INCOME AND EXPENSE		F-124
Note 25	NET INCOME (EXPENSE) FROM FINANCIAL OPERATIONS		F-126
Note 26	NET FOREIGN EXCHANGE GAIN (LOSS)		F-127
Note 27	PROVISIONS FOR IMPAIRMENT OF FINANCIAL ASSETS		F-128
Note 28	PERSONNEL SALARIES AND EXPENSES		F-130
Note 29	ADMINISTRATIVE EXPENSES		F-131
Note 30	DEPRECIATION, AMORTIZATION, AND IMPAIRMENT		F-132
Note 31	OTHER OPERATING INCOME AND EXPENSES		F-137
Note 32	RELATED PARTY TRANSACTIONS		F-139
Note 33	FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES		F-143
Note 34	RISK MANAGEMENT		F-158
Note 35	MATURITY OF ASSETS AND LIABILITIES		F-183
Note 36	FOREIGN CURRENCY POSITION		F-184
Note 37	SUBSEQUENT EVENTS		F-186

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-10

Notes to the Consolidated Financial Statements

As of December 31, 2018, 2017 and 2016.

(In millions of Chilean pesos, except for the number of shares)

Note 1 – General Information and Summary of Significant Accounting Policies

General Information – Background of Itaú Corpbanca and subsidiaries

Itaú Corpbanca (the “Bank”) is a corporation incorporated under the laws of the Republic of Chile and regulated by the Superintendency of Banks and Financial Institutions (SBIF) as a consequence of the merger of Itaú Chile and Corpbanca (the latter is the legal successor) which was consummated on April 1, 2016, the date on which the Bank was renamed “Itaú Corpbanca”¹.

The current ownership structure is 38.14% owned by Itaú Unibanco, 28.57% owned by CorpGroup (Saieh Family) and 33.29% owned by minority shareholders. Itaú Unibanco is the sole controlling shareholder of the merged bank. Within this context and without limiting the above, Itaú Unibanco and CorpGroup have signed a shareholders’ agreement relating to corporate governance, dividend policy (based on performance and capital metrics), transfer of shares, liquidity, and other matters.

Itaú Corpbanca is headquartered in Chile and has operations in Colombia and Panama. In addition, Itaú Corpbanca has a branch in New York and representative offices in Madrid and Lima. The Bank has total consolidated assets for MCh$29,323,338 (MMUS$42,208) and total equity attributable to holders of the Bank for MCh$3,219,478 (MMUS$4,634).

The legal address of Itaú Corpbanca is Rosario Norte N° 660, Las Condes, Santiago, Chile, and its web site is www.itau.cl

The Consolidated Financial Statements as of December 31, 2018, were approved by the Board of Directors on April 24, 2019.

Significant Accounting Policies and Others

a) Accounting period

The Consolidated Financial Statements are referred as of December 31, 2018 and 2017 and comprise the years ended December 31, 2018, 2017 and 2016.

b) Basis of preparation of the Consolidated Financial Statements

These Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS-IASB”).

The Bank had a significant accounting change due to IFRS 9 adoption. Please see new accounting policies in letters k) and u) in this section and Note 2 “Accounting changes”.

Notes to these Consolidated Financial Statements contain information additional to that disclosed in the Consolidated Statements of Financial Position, Consolidated Statements of Income, Consolidated Statements of Other Comprehensive Income, Consolidated Statements of Changes in Equity, and Consolidated Statements of Cash Flows.

¹  The business combination was a “reverse acquisition” as established in IFRS 3, “Business Combinations”, in which Itaú Chile is the successor for accounting purposes and Corpbanca is the legal successor.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-11

Note 1 – General Information and Summary of Significant Accounting Policies, continued

c) Consolidation criteria

These Consolidated Financial Statements comprise the preparation of the Financial Statements of the Bank and the controlled entities which participate in the consolidation as of December 31, 2018 and 2017 and for the years ended December 31, 2018, 2017 and 2016, and include the necessary adjustments and reclassifications to standardize the accounting policies and valuation criteria applied by the Bank, in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS-IASB”).

Intercompany balances and any unrealized income or loss arising from intercompany transactions are eliminated upon consolidation during the preparation of the Consolidated Financial Statements.

(i) Controlled entities

The Bank, regardless of the nature of its involvement with an entity (the investee), shall determine whether it is a parent by assessing whether it controls the investee.

The Bank controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

Thus, the Bank controls an investee if and only if has all the following:

1) Power over the investee, which is related to the existing rights that give the Bank the current ability to direct the relevant activities, these being those that significantly affect the investee’s returns;

2) Exposure, or rights, to variable returns from its involvement with the investee;

3) Ability to use its power over the investee to affect the amount of the Bank’s returns;

When the Bank has less than a majority of the voting rights over an investee, but such voting rights are sufficient to have the actual ability to direct the relevant activities, then it will be concluded that the Bank has control over the investee.

The Bank considers all relevant factors and circumstances when assessing if the voting rights are sufficient to obtain control, these include:

• The amount of voting rights held by the Bank in relation to the amount and dispersion of those held by other vote holders.

• Potential voting rights held by the Bank, other voting holders or other parties.

• Rights that arise from other contractual agreements.

• Any additional facts and circumstances that indicate that the Bank has, or does not have, the current ability to direct the relevant activities at the time those decisions need to be made, including the patterns of voting behavior in previous shareholders meetings.

The Bank reassesses whether or not it has control over an investee when facts and circumstances indicate that there are changes in one or more of the control elements listed above.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-12

Note 1 – General Information and Summary of Significant Accounting Policies, continued

The financial statements of the controlled companies are consolidated by combining like items of assets, liabilities, equity, income, expenses and cash flows of the parent with those of its subsidiaries; offsetting (eliminate) the carrying amount of the parent’s investment in each subsidiary and the parent’s portion of equity of each subsidiary, and; by eliminating in full intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between entities. Therefore, the Consolidated Financial Statements refer to assets, liabilities, equity, income, expenses, and cash flows of the parent and its subsidiaries presented as if they were a single economic entity. The Bank prepares Consolidated Financial Statements using uniform accounting policies for transactions and other events that, being similar, have occurred in similar circumstances.

The Bank attributes income for the year and each component of other comprehensive income to owners of the Bank and to the non-controlling interests. The Bank also attributes total comprehensive income to the owners of the Bank and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

The following are the entities controlled by Itaú Corpbanca:

				Ownership percentage
	Market	Country	Functional currency	As of December 31, 2018						As of December 31, 2017
				Direct		Indirect		Total		Direct		Indirect		Total
				%		%		%		%		%		%
Itaú Corredores de Bolsa Limitada (ex - CorpBanca Corredores de Bolsa S.A.) (1) (6) (12) (15)	National	Chile	$		99.990		0.010		100.000		99.990		0.010		100.000
Itaú Administradora General de Fondos S.A. (ex - Itaú Chile Administradora General de Fondos S.A.) (1) (7) (14)		Chile	$		99.994		0.006		100.000		99.988		0.006		99.994
CorpBanca Administradora General de Fondos S.A. (1) (7)		Chile	$		—		—		—		—		—		—
Itaú Corredores de Seguros S.A. (ex-Corpbanca Corredores de Seguros S.A) (1) (8) (13)		Chile	$		99.900		0.100		100.000		99.990		0.010		100.000
Itaú Chile Corredora de Seguro Ltda. (1) (8)		Chile	$		—		—		—		99.900		0.100		100.000
Itaú Asesorías Financieras S.A. (2)		Chile	$		99.990		0.010		100.000		99.990		0.010		100.000
CorpLegal S.A. (2)		Chile	$		99.990		0.010		100.000		99.990		0.010		100.000
Recaudaciones y Cobranzas Limitada (Ex- Itaú Corpbanca Recaudaciones y Cobranzas S.A.) (2) (9)		Chile	$		99.999		0.001		100.000		99.999		0.001		100.000
Itaú Corpbanca New York Branch (2) (10)	Foreign	USA	US$		100.000		—		100.000		100.000		—		100.000
Corpbanca Securities Inc (2) (11)		USA	US$		—		—		—		—		—		—
Itaú Corpbanca Colombia S.A. (Ex-Banco CorpBanca Colombia S.A.) (3)		Colombia	COP$		66.279		—		66.279		66.279		—		66.279
Itaú Corredor de Seguro Colombia S.A. (Ex-Helm Corredor de Seguros S.A) (3)		Colombia	COP$		80.000		—		80.000		80.000		—		80.000
Itaú Securities Services Colombia S.A. Sociedad Fiduciaria (Ex-CorpBanca Investment Trust Colombia S.A.) (3)		Colombia	COP$		5.499		62.634		68.133		5.499		62.634		68.133
Itaú Comisionista de Bolsa Colombia S.A (Ex-Helm Comisionista de Bolsa S.A.) (3)		Colombia	COP$		2.219		64.807		67.026		2.219		64.807		67.026
Itaú Asset Management Colombia S.A. Sociedad Fiduciaria (Ex-Helm Fiduciaria S.A) (3)		Colombia	COP$		—		66.266		66.266		—		66.266		66.266
Itaú (Panamá) S.A. (Ex-Helm Bank (Panamá) S.A.) (4)		Panama	US$		—		66.279		66.279		—		66.279		66.279
Itaú Casa de Valores S.A (ex-Helm Casa de Valores (Panama) S.A.) (5)		Panama	US$		—		66.279		66.279		—		66.279		66.279

(1) Companies regulated by the Chilean Financial Market Commission, hereinafter CMF (formerly Superintendency of Securities and Insurance – SVS)

(2) Companies regulated by the Superintendency of Banks and Financial Institutions (SBIF) of Chile.

(3) Companies regulated by the Colombian Financial Superintendency (SFC), which has entered into a supervision agreement with the SBIF.

(4) Company regulated by the Superintendency of Banks of Panama.

(5) Company regulated by the Superintendency of the Securities Market of Panama.

(6) On January 1, 2017, the merger of Corpbanca Corredores de Bolsa S.A. and Itaú BBA Corredor de Bolsa Ltda. took place, by which the latter absorbed the first, and its new corporate name is Itaú Corpbanca Corredores de Bolsa S.A.

(7) On December 29, 2017, the merger of Corpbanca Administradora General de Fondos S.A. and Itaú Chile Administradora General de Fondos, took place, by which the latter absorbed the first and its new corporate name is Itaú Administradora General de Fondos S.A.

(8) On April 1, 2018, the merger of Corpbanca Corredores de Seguros S.A. and Itaú Chile Corredora de Seguros Limitada took place, by which the latter absorbed the first, and its new corporate name is Itaú Corpbanca Corredores de Seguros S.A.

(9) On November 5, 2018, Itaú Corpbanca Recaudaciones y Cobranzas S.A. changed its legal name to Recaudaciones y Cobranzas Limitada.

(10) Company regulated by the Office of the Comptroller of the Currency (OCC) and the Federal Reserve (FED).

(11) On December 18, 2017, the dissolution of the branch located in New York was authorized.

(12) On July 4, 2018, Itaú Asesorías Financieras S.A. acquired 2 shares of the company to minority shareholders, therefore Itaú Corpbanca and subsidiaries controls, directly and indirectly, 100% of the company’s shares.

(13) On September 10, 2018, Itaú Corpbanca acquired 127,901 shares of the company to minority shareholders, therefore Itaú Corpbanca controls, directly and indirectly, 100% of the company´s shares.

(14) On December 10, 2018, Itaú Corpbanca acquired 1 share from a minority investor, with what passes and directly controls 100% of the entity.

(15) On August 1, 2018, the corporate name of Itaú Corpbanca Corredores de Bolsa S.A. was changed to Itaú Corredores de Bolsa Limitada.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-13

Note 1 – General Information and Summary of Significant Accounting Policies, continued

(i) Funds management, trust business and other related businesses

The Bank and its subsidiaries manage assets held in publicly offered investment funds and other investment vehicles on behalf of investors and receive market-rate compensation for providing this type of services. Managed funds belong to third parties and, therefore, are not included in the Consolidated Statement of Financial Position.

The Bank provides trust commissions and other fiduciary services that result in the participation or investment of assets by clients. Assets held in a fiduciary activity are not reported in the Consolidated Financial Statements, since they are not Bank assets and there is no control over them. Contingencies and commitments arising from this activity are disclosed in Note N°22 “Contingencies, Commitments, and Responsibilities”, letter c), related to Responsibilities recorded in off-balance-sheet accounts.

In accordance to IFRS 10 “Consolidated Financial Statements,” for consolidation purposes, the role of the Bank and its subsidiaries with respect to the managed funds must be evaluated to determine whether it is acting as Agent or Principal. According to this standard, an Agent is a party primarily engaged in acting on behalf and for the benefit of another party or parties (the Principal or Principals) and, therefore, it does not control the investee when it exercises decision-making authority. This evaluation must take into account the following aspects:

• Scope of its decision-making authority over the investee.

• Rights held by other parties

• The remuneration to which it is entitled to in accordance with the remuneration agreements.

• Decision-maker’s exposure to variability of returns from other interests that it holds in the investee.

The Bank does not control or consolidate any trusts or other entities related to this type of business.

The Bank manages the funds on behalf and for the benefit of investors, acting solely as an Agent. The assets managed by the Bank and its subsidiaries are owned by third parties. Under this category, and in accordance with the aforementioned standard, they do not control the assets when they exercise their decision-making authority. Therefore, as of December 31, 2018 and 2017 they act as Agent and none of these investment vehicles is consolidated.

d) Non-controlling interest

Non-controlling interest represents the portion of net income and net assets which the Bank does not own, either directly or indirectly. It is presented as “Attributable to non-controlling interest” separately in the Consolidated Statement of Income, and separately from shareholders’ equity in the Consolidated Statement of Financial Position.

e) Business combination and goodwill

Business combinations are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Bank, liabilities incurred by the Bank to the former owners of the acquiree and the equity interests issued by the Bank in exchange for control of the acquiree. Acquisition costs incurred are expensed and included in administrative expenses.

When Itaú Corpbanca and its subsidiaries (the Group) acquires a business, evaluates the identifiable assets acquired and liabilities assumed to determine proper classification and designation based on contractual conditions, economic circumstances, and other relevant conditions as of the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-14

Note 1 – General Information and Summary of Significant Accounting Policies, continued

Goodwill, defined as the difference between the consideration transferred and the amount recognized for the non-controlling interest in the net identifiable assets acquired and liabilities assumed, is measured initially at cost. If this consideration is less than the fair value of the net assets of the acquired subsidiary, the difference is recognized directly in profit or loss as of the acquisition date.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill acquired in a business combination is assigned, from the date of acquisition, to each of the Group’s cash generating units (CGU) that are expected to benefit from the combination, independently of whether other assets or liabilities of the acquiree are assigned to those units.

When goodwill is allocated to a CGU and an operation within that unit is sold, the goodwill associated with that operation is included in the carrying amount of the operation sold when determining the gain or loss on disposal. Goodwill that is derecognized under such circumstances is measured on the basis of the relative values of the operation disposed of and the retained portion of the CGU.

f) Functional and presentation currency

The Bank has defined as its functional and presentation currency the Chilean peso, which is the currency of the primary economic environment in which the Bank operates and the currency that influences its costs and revenue structure. Therefore, all balances and transactions denominated in currencies other than the Chilean peso are treated as “foreign currency”.

The Bank translates accounting records of its subsidiaries in New York and in Colombia into Chilean pesos from US dollars and Colombian pesos, respectively, in accordance with IAS 21 “Effects of the Variations in the Exchange Rates of the Foreign Currency”. All amounts in the Consolidated Statements of Income, Consolidated Statements of Other Comprehensive Income and the Consolidated Statement of Financial Position are translated into Chilean pesos according to the exchange rate indicated in letter g) below. None of the markets in which Itaú Corpbanca and subsidiaries operate qualify as a hyperinflationary economy.

g) Foreign currency

Transactions in foreign currency are initially recorded by the Bank at the exchange rates of their respective functional currencies at the date these transactions first meet the conditions for their recognition.

Monetary assets and liabilities denominated in foreign currency are converted at the closing exchange rate of the functional currency in force at the closing date of the reporting period.

All differences arising from the settlement or conversion of monetary items are recorded in income, except for those that correspond to monetary items that are part of the hedge of a net investment in a foreign operation, for which the cumulative difference is recorded in equity and subsequently reclassified to profit and loss (on disposal). Tax effects attributable to the exchange differences on such monetary items are also recorded in Other Comprehensive Income.

Non-monetary items in foreign currency, which are measured in terms of historical cost, are converted using the exchange rate on the date of the transaction. Non-monetary items that are measured at their fair value in foreign currency are translated using the exchange rates on the date on which that fair value is measured. Gains or losses arising from the translation of non-monetary items measured at their fair value are recognized based on how the gains and losses arising from the change in fair value are recognized in Other Comprehensive Income or in Income, in accordance with IAS 21.

The Bank grants loans and receives deposits in amounts denominated in foreign currency, mainly in US dollars and Colombian pesos.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-15

Note 1 – General Information and Summary of Significant Accounting Policies, continued

The balances of the Financial Statements of the consolidated entities whose functional currency is different from the Chilean peso are converted to the presentation currency, according to the following:

• Assets and liabilities, by using exchange rates as of the date of the Consolidated Financial Statements.

• Income and expenses and cash flows, by using the exchange rates as of the date of each transaction.

Exchange differences arising from translating balances in functional currencies of the consolidated entities other than Chilean pesos into Chilean pesos, are recorded as “Exchange differences” in Equity under the line item “Valuation accounts”, until they meet the derecognition criteria for the Consolidated Statement of Financial Position, and is subsequently recorded in profit or loss.

The net amount of foreign exchange gains and losses includes the recognition of the effects of changes in the exchange rate over assets and liabilities denominated in foreign currencies and gains and losses arising from exchange rate changes affecting current and future transactions (highly probable transactions) entered into by the Bank.

Assets and liabilities in foreign currencies are shown at their equivalent amount in pesos, calculated using the exchange rate of $694.73 per US$1 (US dollar) as of December 31, 2018 ($614.48 as of December 31, 2017 and $669.81 as of December 31, 2016) and the exchange rate of $0.2139 per COP$1 (Colombian peso) as of December 31, 2018 ($0.2058 as of December 31, 2017 and $0.2231 as of December 31, 2016). The financial statements of the New York branch, as well as the Colombian subsidiaries, have been translated using these exchange rates for consolidation purposes, in accordance with IAS 21, related to the valuation of investments abroad in countries with stable economy.

h) Use of estimates and judgments

The preparation of the Consolidated Financial Statements requires Bank’s management to make estimates, judgments and assumptions that affect the application of the accounting policies and the reported balances of assets and liabilities, disclosures of contingencies with respect to assets and liabilities as of the date of the Consolidated Financial Statements, as well as income and expenses during the year. Actual results may differ from these estimates.

Estimates and relevant assumptions are regularly reviewed by Management in order to properly measure some assets, liabilities, income, and expenses. Accounting estimates changes due to reviews are recognized in the year in which the estimate is reviewed and in any future period affected.

In certain cases, International Financial Reporting Standards requires that assets and liabilities be recorded or disclosed at their fair values. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions (i.e. an exit price) regardless of whether that price is directly observable or estimated using another valuation technique. When market prices in active markets are available, they have been used as a basis for valuation. When market prices in active markets are not available, the Bank has estimated those values as values based on the best available information, including the use of modeling and other valuation techniques.

In particular, information on most significant areas of estimate due to uncertainties and critical judgments in the application of accounting policies that have the most important effect on the amounts recorded in the Consolidated Financial Statements are the following:

• Useful lives of property, plant and equipment and intangible assets (Notes 12, 13, and 30).

• Goodwill - Impairment test (Notes 12 and 30).

• Allowances for loan losses (Notes 9, 10 and 27).

• Fair value of financial assets and liabilities (Note 33).

• Provisions (Note 19).

• Contingencies and commitments (Note 21).

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-16

Note 1 – General Information and Summary of Significant Accounting Policies, continued

• Impairment losses of certain assets (Notes 12, 13, and 30).

• Current taxes and deferred taxes (Note 14).

• Perimeter of consolidation and control assessment for consolidation purposes (Note 1, letter c).

During the year ended December 31, 2018, there have been no significant changes compared with the prior period, other than those indicated in these Consolidated Financial Statements (see Note 2).

i) Operating segments

The Bank provides financial information for each operating segment in conformity with IFRS 8 “Operating Segments” in order to disclose information that enables financial statement users to evaluate the nature and financial effects of the business activities in which the Bank engages and the economic environments in which it operates and to allow them to:

• Better understand the Bank’s performance.

• Better evaluate its future cash flow projections.

• Form better opinions regarding the Bank as a whole.

To comply with IFRS 8, Itaú Corpbanca identifies operating segments (Chile and Colombia) used by the Executive Committee to analyze and make decisions regarding operating, financing and investment matters, based on the following elements:

(1) The nature of the products and services;

(2) The nature of the processes;

(3) The type or class of customer for their products and services;

(4) The methods used to distribute their products or provide their services; and

(5) If applicable, the nature of the regulatory environment, for example, banking, insurance or public utilities.

The Executive Committee manages these segments using an in-house system of internal profitability reports and reviews its segments on the basis of the operating results and uses efficiency, profitability and other indicators to evaluate performance and allocate resources. The Bank has also included geographic disclosures on its operations in New York and Colombia.

More information on each segment is presented in Note 4 Reporting Segments.

j) Operations with repurchase and resale agreements

Transactions with resale agreements are entered into as a form of investment. Under these agreements, financial instruments are sold, which are included as assets under “Investments under resale agreement”, which are valued according to the effective interest rate of the agreement.

There are also sales transactions with a repurchase agreement as a form of financing. In this regard, the investments that are sold subject to a repurchase obligation and that serve as collateral for the loan, form part of the investment items of “Financial instruments at fair value through profit or loss” or “Financial instruments at fair value through profit or loss”. The obligation to repurchase the investment is classified in the liability as “repurchase agreements and securities loans”, recognizing interest and adjustments accrued as of the closing date.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-17

Note 1 – General Information and Summary of Significant Accounting Policies, continued

k) Classification and measurement of financial instruments – under IFRS 9 (first adoption)

Financial instruments must be classified and measured in accordance with IFRS 9 starting from January 1, 2018, which established guidance for the financial reporting of financial assets and financial liabilities that will present relevant and useful information to users of financial statements for their assessment of the amounts, timing and uncertainty of an entity’s future cash flows.

I. Classification of financial instrument

i) Classification of financial assets

Financial assets are classified into a measurement category based on both the Bank’s business model for managing the financial asset and the contractual cash flow characteristics of the financial asset.

Contractual cash flow assessment determine if the cash flows from the financial asset meet the SPPI (solely payment of principal and interest) criterion, i.e. whether the contractual terms of the financial asset give rise, on specific dates, to cash flows that are solely payments of principal and interest. Principal is the fair value of the financial assets at initial recognition, and interest is the consideration for the time value of money, the credit risk associated with the principal outstanding, and also may include liquidity risk, administrative cost and profit margin.

For classification process the Bank perform the SPPI test, which assesses the contractual term to identify whether they meet SPPI criterion, the contract is a basic lending arrangement. The Bank applies judgment and considers relevant factors such as currency in which the financial asset is denominated, and period for which the interest rate is set.

Business model refers to how the Bank manages its financial assets in order to generate cash flows. The Bank determined its business model on initial application of IFRS 9 at the level that best reflects how it manages groups of financial assets to achieve its business objective.

The Bank’s business model represents how financial assets are managed to generate cash flows and does not depend on the Management’s intention regarding an individual instrument, but at a higher level of aggregated portfolio and is based on observable factors such as: risks that affect the performance of business model; how business managers are compensated; how the performance of business model is assessed and reported to Management.

In addition, the Banks’s business model is not assessed on an instrument-by- instrument basis, but at a higher level of aggregated portfolio and is based on observable factors such as: performance of the financial assets, the risk that affect the performance, and the expected frequency, value and timing of sales, among others.

In accordance with IFRS 9 the business models are:

• Held to collect business model (HTC) - financial assets that are held within a business model whose objective is to hold assets in order to collect contractual cash flows are managed to realize cash flows by collecting contractual payments over the life of the instrument, under this business model sales made when there is an increase in the credit risk, or to manage credit concentration risk are not inconsistent with a business model whose objective is to hold financial assets to collect contractual cash flows.

• Held to collect and sell (HTC&S) - financial assets under this business model achieve the objective by both collecting contractual cash flows and selling financial assets, then involve a greater frequency and value of sales than HTC business model.

• Other business model - financial assets held in this business has the objective of realizing cash flows through the sale of the assets. The Bank makes decisions based on the assets’ fair values and manages the assets to realize those fair values.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-18

Note 1 – General Information and Summary of Significant Accounting Policies, continued

ii) Reclassification

Reclassification of financial assets is required if, and only if, the objective of the Bank’s business model for managing those financial assets changes. Financial liabilities cannot be reclassified.

II. Measurement of financial instruments

i) Initial measurement

On initial recognition, financial assets and financial liabilities are measured at the transaction price, i.e. the fair value of the consideration given or received (IFRS 13). In the case of financial instruments not at fair value through profit or loss, transaction costs of financial assets and financial liabilities carried at fair value are expensed in profit or loss.

ii) Subsequent measurement- financial assets

After initial recognition, the Bank shall measures a financial asset at:

(a) Amortized cost

Financial assets that are held in a business model to collect the contractual cash flows and contain contractual terms that give rise on specific dates to cash flows that are SPPI, are measured at amortized cost.

The effective interest method is used in the calculation of the amortized cost of a financial asset or a financial liability and in the allocation and recognition of the interest revenue or interest expense in profit or loss over the relevant period. The effective interest rate (EIR) is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial asset or financial liability to the gross carrying amount of a financial asset or to the amortized cost of a financial liability.

(b) Fair value through other comprehensive income (FVOCI)

Financial assets that are debt instruments held in a business model that is achieved by both collecting contractual cash flows and selling, and that contain contractual terms that give rise on specific dates to cash flows that are SPPI, are measured at FVOCI. They are subsequently remeasured at fair value and changes therein (except for those relating to impairment, interest income and foreign currency exchange gains and losses) are recognized in other comprehensive income, until the assets are sold. Upon disposal, the cumulative gain and losses in OCI are recognized in the income statements.

(c) Fair value through profit or loss (FVTPL)

Financial assets that do not contain contractual terms that give rise on specified dates to cash flows that are SPPI, or if the financial assets, or if the financial asset is not held in a business model that is either (i) a business model to collect the contractual cash flows or (ii) a business model that is achieved by both collecting contractual cash flows and selling.

Financial assets held for trading are recognized at fair value through profit or loss, likewise derivatives contracts for trading purposes.

For certain equity instruments, the Bank may make an irrevocable election to present subsequent changes in the fair value of the instrument in other comprehensive income, except for dividend income which is recognized in profit or loss. Gains or losses on derecognition of these equity instruments are not transferred to profit or loss.

iii) Subsequent measurement- financial liabilities

After initial recognition, the Bank shall measure a financial liability at amortized cost, except for derivatives that are measured at fair value through profit or loss.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-19

Note 1 – General Information and Summary of Significant Accounting Policies, continued

III. Derecognition of financial assets and liabilities

Financial assets are derecognized when, and only when:

• the contractual rights to the cash flows from the financial asset expire, or

• the Bank transfers substantially all the risks and rewards of ownership of the financial asset, and therefore the Bank derecognizes the financial asset and recognize separately any rights and obligations created or retained in the transfer.

In some cases, the Bank enters into transactions for which it retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows in an arrangement that meets all the conditions required, i.e. the Bank only transfers collected amounts from original assets, selling or pledging original assets is prohibited, and the Bank has the obligation to remit cash flows collected without material delay.

When a financial asset is sold and the Bank simultaneously agrees to repurchase it (or an asset that is substantially the same) at a fixed price on a future date, the Bank continues to recognize the financial assets in their entirety in the statements of financial position because it retains substantially all of the risks and rewards of ownership. The cash consideration received is recognized as a financial asset and a financial liability is recognized for the obligation to pay the repurchase price.

Financial liabilities are derecognized when, and only when, they are extinguished, cancelled or expired.

IV. Contingent loans

The Bank issues contingent loans (including letters of credit, foreign letters of credit and performance guarantee) and loan commitments.

Contingent loans and undrawn loan commitments are commitments under which, over the duration of the commitment, the Bank is required to provide a loan with pre-specified term to the customer.

The nominal contractual loan value, when the loan agreed to be provided is on market terms, is not recorded in the statements of financial position. The related expected credit losses allowances are disclosed in Note 19.

V. Offsetting

Financial assets and financial liabilities are offset in the balance sheet only when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously. As of December 31, 2018, the Bank does not have balance offsetting of financial instruments.

l) Classification and measurement of financial instruments – under IAS 39 (for years ended up to December 31, 2017)

I. Definitions

A “financial instrument” is any contract that gives rise to a financial asset of one entity, and a financial liability or equity instrument of another entity.

An “equity instrument” is a legal transaction that evidences a residual interest in the assets of an entity deducting all of its liabilities.

A “financial derivative” is a financial instrument whose value changes in response to the changes in an underlying observable market variable (such as an interest rate, a foreign exchange rate, a financial instrument’s price, or a market index, including credit ratings), whose initial investment is very small compared with other financial instruments having a similar response to changes in market factors, and which is generally settled at a future date.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-20

Note 1 – General Information and Summary of Significant Accounting Policies, continued

“Hybrid financial instruments” are contracts that simultaneously include a non-derivative host contract together with a financial derivative, known as an embedded derivative, which is not separately transferable and has the effect that some of the cash flows of the hybrid contract vary in a way similar to a stand-alone derivative.

II. Classification of financial assets for measurements purposes

Financial assets were classified into the following specified categories: trading investments at fair value through profit or loss (FVTPL), ‘held to maturity investments’, ‘available for sale investments (AFS)’ and ‘loans and accounts receivable from customers’. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. All regular purchases or sales of financial asset were recognized and derecognized on a trade basis.

Regular way purchases or sales of financial assets required delivery of the asset within the time frame established by regulation or convention in the marketplace.

Effective interest method

The effective interest method is a method of calculating the amortized cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

Income was recognized on an effective interest basis for loans and accounts receivables other than those financial assets classified as at fair value through profit or loss.

Trading investment

Financial assets were classified as FVTPL when the financial asset is either held for trading or they are designated as at fair value through profit or loss.

A financial asset was classified as held for trading if:

• it has been acquired principally for the purpose of selling it in the near term; or

• on initial recognition it is part of a portfolio of identified financial instruments that the Bank manages together and has a recent actual pattern of short-term profit-taking; or

• it is a derivative that is not designated and effective as a hedging instrument.

A financial asset other than a financial asset held for trading may be designated as FVTPL upon initial recognition if:

• such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or

• the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Bank’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

• it forms part of a contract containing one or more embedded derivatives, and IAS 39 permits the entire combined contract to be designated as FVTPL.

Financial assets at FVTPL were stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any dividend or interest earned on the financial asset and was included in the ‘net income (expense) from financial operations’ line item.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-21

Note 1 – General Information and Summary of Significant Accounting Policies, continued

Held to maturity investments

Held-to-maturity investments were non-derivative financial assets with fixed or determinable payments and fixed maturity dates that the Bank had the positive intent and ability to hold to maturity. Subsequent to initial recognition, held-to-maturity investments were measured at amortized cost using the effective interest method less any impairment.

Available for sale investments (AFS investments)

AFS investments were non-derivatives that were either designated as AFS or were not classified as (a) loans and accounts receivable from customers, (b) held-to-maturity investments or (c) financial assets at fair value through profit or loss (trading investments).

Financial instruments held by the Bank that were traded in an active market were classified as AFS and were stated at fair value at the end of each reporting period. The Bank also had investments in financial instruments that were not traded in an active market but that were also classified as AFS investments and stated at fair value at the end of each reporting period (because the Bank considered that fair value can be reliably measured). Changes in the carrying amount of AFS monetary financial assets relating to changes in foreign currency rates, interest income calculated using the effective interest method and dividends on AFS equity investments were recognized in profit or loss.

Other changes in the carrying amount of available for sale investments were recognized in other comprehensive income and accumulated under the heading of “Valuation Adjustment”. When the investment was disposed of or it was determined to be impaired, the cumulative gain or loss previously accumulated in the investments revaluation reserve was reclassified to profit or loss.

Dividends on AFS equity instruments were recognized in profit or loss when the Bank’s right to receive the dividends was established.

The fair value of AFS monetary financial assets denominated in a foreign currency was determined in that foreign currency and translated as the described in f) above. The foreign exchange gains and losses that were recognized in profit or loss were determined based on the amortized cost of the monetary asset.

Loans and accounts receivable from customers

Loans and accounts receivable from customers were non-derivative financial assets with fixed or determinable payments that were not quoted in an active market. Loans and accounts receivables from customers (including loans and accounts receivable from customers and interbank loans) were measured at amortized cost using the effective interest method, less any impairment.

Interest income was recognized by applying the effective interest rate, except for short-term receivables when the effect of discounting is immaterial.

III. Classification of financial assets for presentation purposes

For presentation purposes, the financial assets were classified by their nature into the following line items in the Consolidated Financial Statements:

• Cash and deposits in banks: this line included cash balances, checking accounts and on-demand deposits with the Central Bank of Chile and other domestic and foreign financial institutions. Amounts invested as overnight deposits are included in this item.

• Cash items in process of collection: this item represented domestic transactions in the process of transfer through a central domestic clearinghouse or international transactions which may be delayed in settlement due to timing differences.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-22

Note 1 – General Information and Summary of Significant Accounting Policies, continued

• Trading investments: this item included financial instruments held for trading and investments in mutual funds which must be adjusted to their fair value in the same way as instruments acquired for trading.

• Investments under resale agreements: included balances of financial instruments purchased under resale agreement.

• Interbank loans: this item included the balances of transactions with domestic and foreign banks, including the Central Bank of Chile, other than those reflected in certain other financial asset classifications listed above.

• Loans and accounts receivables from customers: these loans were non-derivative financial assets for which fixed or determined amounts are charged, that were not listed on an active market and which the Bank does not intend to sell immediately or in the short term. When the Bank was the lessor in a lease, and it substantially transferred the risks and rewards incidental to the leased asset, the transaction was presented in loans and accounts receivable from customers while the leased asset is derecognized in the Bank’s statements of financial position.

• Investment instruments: were classified into two categories: held-to-maturity investments, and available-for-sale investments. The held-to-maturity investment classification included only those instruments for which the Bank had the ability and intent to hold to maturity. The remaining investments were treated as available for sale.

IV. Classification of financial liabilities for measurement purposes

The Bank classified all financial liabilities as subsequently measured at amortized cost, except for:

Financial liabilities at FVTPL

As of December 31, 2017 the Bank did not maintain financial liabilities at FVTPL.

Other financial liabilities

Other financial liabilities (including interbank borrowings, issued debt instruments and other payables) were initially recorded at fair value and subsequently measured at amortized cost using the effective interest method.

V. Classification of financial liabilities for presentation purposes

The financial liabilities were classified by their nature into the following line items in the consolidated statements of financial position:

• Deposits and other on- demand liabilities: this included all on-demand obligations except for term savings accounts, which were not considered on-demand instruments in view of their special characteristics. Obligations whose payment may be required during the period were deemed to be on-demand obligations. Operations which became callable the day after the closing date were not treated as on-demand obligations.

• Cash items in process of being cleared: this represented domestic transactions in the process of transfer through a central domestic clearing house or international transactions which may be delayed in settlement due to timing differences, etc.

• Obligations under repurchase agreements: this included the balances of sales of financial instruments under securities repurchase and loan agreements. The Bank did not record in its own portfolio instruments acquired under repurchase agreements.

• Time deposits and other time liabilities: this showed the balances of deposit transactions in which a term at the end of which they became callable has been stipulated.

• Interbank borrowings: this included obligations due to other domestic banks, foreign banks, or the Central Bank of Chile, other than those reflected in certain other financial liability classifications listed above.

• Issued debt instruments: there are three types of instruments issued by the Bank: Obligations under letters of credit, Subordinated bonds and Senior bonds placed in the local and foreign market.

• Other financial liabilities: this item included credit obligations to persons other than domestic banks, foreign banks, or the Central Bank of Chile, for financing purposes or operations in the normal course of business.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-23

Note 1 – General Information and Summary of Significant Accounting Policies, continued

VI. Offsetting of financial instruments

Financial asset and liability balances were offset, i.e., reported in the Consolidated Statements of Financial Position at their net amount, only if there was a legally enforceable right to offset the recorded amounts and the Bank intended either to settle them on a net basis or to realize the asset and settle the liability simultaneously. As of December 31, 2017 the Bank did not have balance offsetting of financial instruments.

VII. Derecognition of financial assets and liabilities

The accounting treatment of transfers of financial assets was determined by the extent and the manner in which the risks and rewards associated with the transferred assets are transferred to third parties:

i. If the Bank transferred substantially all the risks and rewards of ownership to third parties, as in the case of unconditional sales of financial assets, sales under repurchase agreements at fair value at the date of repurchase, sales of financial assets with a purchased call option or written put option deeply out of the money, utilization of assets in which the transferor did not retain subordinated debt nor grants any credit enhancement to the new holders, and other similar cases, the transferred financial asset was derecognized from the Consolidated Statements of

Financial Position and any rights or obligations retained or created in the transfer were simultaneously recorded.

ii. If the Bank retained substantially all the risks and rewards of ownership associated with the transferred financial asset, as in the case of sales of financial assets under repurchase agreements at a fixed price or at the sale price plus interest, securities lending agreements under which the borrower undertake to return the same or similar assets, and other similar cases, the transferred financial asset was not derecognized from the Consolidated Statements of Financial Position and continued to be measured by the same criteria as those used before the transfer.

However, the following items were recorded:

• An associated financial liability for an amount equal to the consideration received; this liability was subsequently measured at amortized cost.

• Both the income from the transferred (but not removed) financial asset as well as any expenses incurred due to the new financial liability.

iii. If the Bank neither transferred nor substantially retained all the risks and rewards of ownership associated with the transferred financial asset—as in the case of sales of financial assets with a purchased call option or written put option that was not deeply in or out of the money, securitization of assets in which the transferor retained a subordinated debt or other type of credit enhancement for a portion of the transferred asset, and other similar cases—the following distinction was made:

a. If the transferor did not retain control of the transferred financial asset: the asset was derecognized from the Consolidated Statements of Financial Position and any rights or obligations retained or created in the transfer were recognized.

b. If the transferor retained control of the transferred financial asset: it continued to be recognized in the Consolidated Statements of Financial Position for an amount equal to its exposure to changes in value and a financial liability associated with the transferred financial asset is recorded. The net carrying amount of the transferred asset and the associated liability was the amortized cost of the rights and obligations retained, if the transferred asset was measured at amortized cost, or the fair value of the rights and obligations retained, if the transferred asset was measured at fair value.

Accordingly, financial assets were only derecognized from the Consolidated Statements of Financial Position when the rights over the cash flows they generated have terminated or when all the inherent risks and rewards of ownership had been substantially transferred to third parties. Similarly, financial liabilities were only derecognized from the Consolidated Statements of Financial Position when the obligations specified in the contract were discharged or cancelled or the contract matured.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-24

Note 1 – General Information and Summary of Significant Accounting Policies, continued

m) Derivatives and hedging activities

The Bank has elected to continue applying the hedge accounting requirements of IAS 39 on adoption of IFRS 9.

The Bank has not provided comparative information for prior periods on the date of initial application of IFRS 9 for the new disclosures introduces by IFRS 9 as a consequential amendment to IFRS 7, as permitted by IFRS 7 paragraph 44z.

For presentation purposes, derivatives are presented in accordance with its positive or negative fair value as assets or liabilities, respectively, and include trading and hedging instruments separately (see Note 8).

Hedging transactions

The Bank has elected to continue applying the hedge accounting requirements in IAS 39 instead of the requirements of IFRS 9, thus the Bank uses financial derivatives for the following purposes:

i. to sell to customers who request these instruments in the management of their market and credit risks;

ii. to use these derivatives in the management of the risks of the Bank entities’ own positions and assets and liabilities (“hedging derivatives”), and

iii. to obtain profits from changes in the price of these derivatives (trading derivatives).

All financial derivatives that are not held for hedging purposes are accounted for as trading derivatives.

A derivative qualifies for hedge accounting if all the following conditions are met:

1. The derivative hedges one of the following three types of exposure:

a. Changes in the value of assets and liabilities due to fluctuations, among others, in the interest rate and/or exchange rate to which the position or balance to be hedged is subject (“fair value hedge”);

b. Changes in the estimated cash flows arising from financial assets and liabilities, and highly probable forecasted transactions (“cash flow hedge”);

c. The net investment in a foreign operation (“hedge of a net investment in a foreign operation”).

2. It is effective in offsetting exposure inherent in the hedged item or position throughout the expected term of the hedge, which means that:

a. At the date of arrangement the hedge is expected, under normal conditions, to be highly effective (“prospective effectiveness”).

b. There is sufficient evidence that the hedge was actually effective during the life of the hedged item or position (“retrospective effectiveness”).

3. There must be adequate documentation evidencing the specific designation of the financial derivative to hedge certain balances or transactions and how this effective hedge was expected to be achieved and measured, provided that this is consistent with the Bank’s management of own risks.

The changes in the value of financial instruments qualifying for hedge accounting are recorded as follows:

a. For fair value hedges, the gains or losses arising on both hedging instruments and the hedged items (attributable to the type of risk being hedged) are included as “Net income (expense) from financial operations” in the Consolidated Statements of Income.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-25

Note 1 – General Information and Summary of Significant Accounting Policies, continued

b. For fair value hedges of interest rate risk on a portfolio of financial instruments, gains or losses that arise in measuring hedging instruments within “Interest income and expense”, and other gains or losses due to changes in fair value of the underlying hedged item (attributable to the hedged risk) are recorded in the Consolidated Statements of Income under “Net income (expense) from financial operations”.

c. For cash flow hedges, the change in fair value of the hedging instrument is included as “Cash flow hedge” in “Other comprehensive income”.

d. The differences in valuation of the hedging instrument corresponding to the ineffective portion of the cash flow hedging transactions are recorded directly in the Consolidated Statements of Income under “Net income (expense) from financial operations”.

If a derivative designated as a hedging instrument no longer meets the conditions described above due to expiration, ineffectiveness or for any other reason, hedge accounting treatment is discontinued. When “fair value hedging” is discontinued, the fair value adjustments to the carrying amount of the hedged item arising from the hedged risk are amortized to gain or loss from that date, where applicable.

Sources of hedge ineffectiveness may arise from basis risk, including but not limited to the discount rates used for calculating the fair value of derivatives, hedges using instruments with a non-zero fair value, and notional and timing differences between the hedged items and hedging instruments.

When cash flow hedges are discontinued, any cumulative gain or loss of the hedging instrument recognized under “Other comprehensive income” (from the period when the hedge was effective) remains recorded in equity until the hedged transaction occurs, at which time it is recorded in the Consolidated Statements of Income, unless the transaction is no longer expected to occur, in which case any cumulative gain or loss is recorded immediately in the Consolidated Statements of Income.

n) Fair value measurement

In general, financial assets and liabilities are initially recognized at fair value which, in the absence of evidence to the contrary, is deemed to be the transaction price. Financial instruments, other than those measured at fair value through profit or loss, are initially recognized at fair value plus transaction costs. Subsequently, and at the end of each reporting period, financial instruments are measured pursuant to the following criteria:

i. Valuation of financial instruments

Financial assets are measured according to their fair value, gross of any transaction costs that may be incurred in the course of a sale, except for loans and accounts receivable from customers.

“Fair value” is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions (i.e. an exit price) regardless of whether that price is directly observable or estimated using another valuation technique. When measuring fair value an entity shall take into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date.

The fair value measurement assumes that the transaction to sell the asset or transfer the liability takes place either: (a) in the principal market for the asset or liability, or (b) in the absence of a principal market, the most advantageous market for the asset or liability.

Even when there is no observable market to provide pricing information in connection with the sale of an asset or the transfer of a liability at the measurement date, the fair value measurement shall assume that the transaction takes place, considered from the perspective of a potential market participant who intends to maximize value associated with the asset or liability.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-26

Note 1 – General Information and Summary of Significant Accounting Policies, continued

When using valuation techniques, the Bank shall maximize the use of relevant observable inputs and minimize the use of unobservable inputs as available. If an asset or a liability measured at fair value has a bid price and an ask price, the price within the bid-ask spread that is most representative of fair value in the circumstances shall be used to measure fair value regardless of where the input is categorized within the fair value hierarchy (i.e. Level 1, 2 or 3). IFRS 13 establishes a fair value hierarchy that categorizes into three levels the inputs to valuation techniques used to measure fair value.

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1 inputs) and the lowest priority to unobservable inputs (Level 3 inputs).

All derivatives are recorded in the Consolidated Statements of Financial Position at the fair value previously described. This value is compared to the valuation as at the trade date. If the fair value is subsequently measured positive, this is recorded as an asset. If the fair value is subsequently measured negative, this is recorded as a liability. The fair value on the trade date is deemed, in the absence of evidence to the contrary, to be the transaction price.

The changes in the fair value of derivatives from the trade date are recorded in “Net income (expense) from financial operations” in the Consolidated Statements of Income.

Specifically, the fair value of financial derivatives included in the portfolios of financial assets or liabilities held for trading is deemed to be their daily quoted price. If, for exceptional reasons, the quoted price cannot be determined on a given date, the fair value is determined using similar methods to those used to measure over the counter (OTC) derivatives. The fair value of OTC derivatives is the sum of the future cash flows resulting from the instrument, discounted to present value at the date of valuation (“present value” or “theoretical close”) using valuation techniques commonly used by the financial markets: “net present value” (NPV) and option pricing models, among other methods. Also, within the fair value of derivatives are included Credit Valuation Adjustment (CVA) and Debit Valuation Adjustment (DVA), all with the objective that the fair value of each instrument includes the credit risk of its counterparty and Bank’s own risk. The Credit valuation adjustment (CVA) is a valuation adjustment to OTC derivatives as a result of the risk associated with the credit exposure assumed by each counterparty. The CVA is calculated taking into account potential exposure to each counterparty in each future period. The debit valuation adjustment (DVA) is a valuation adjustment similar to the CVA but, in this case, it arises as a result of the Bank’s own risk assumed by its counterparties in OTC derivatives. As of December 31, 2018, CVA and DVA amount to MCh$38,821 and MCh$340, respectively (MCh$53,398 and MCh$1,369 as of December 31, 2017, respectively and MCh$51,997 and MCh$1,247 as of December 31, 2016, respectively).

ii. Valuation techniques

Financial instruments at fair value, determined on the basis of price quotations in active markets, include government debt securities, private sector debt securities, equity shares, short positions, and fixed-income securities issued.

In cases where price quotations cannot be observed in available markets, the Bank’s management determines a best estimate of the price that the market would set using its own internal models. In most cases, these models use data based on observable market parameters as significant inputs however for some valuations of financial instruments, significant inputs are unobservable in the market. To determine a value for those instruments, various techniques are employed to make these estimates, including the extrapolation of observable market data.

The most reliable evidence of the fair value of a financial instrument on initial recognition usually is the transaction price, however due to lack of availability of market information, the value of the instrument may be derived from other market transactions performed with the same or similar instruments or may be measured by using a valuation technique in which the variables used include only observable market data, mainly interest rates.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-27

Note 1 – General Information and Summary of Significant Accounting Policies, continued

The main techniques used as of December 31, 2018 and 2017 by the Bank’s internal models to determine the fair value of the financial instruments are as follows:

i. In the valuation of financial instruments permitting static hedging (mainly forwards and swaps), the present value method is used. Estimated future cash flows are discounted using the interest rate curves of the related currencies. The interest rate curves are generally observable market data.

ii. In the valuation of financial instruments requiring dynamic hedging (mainly structured options and other structured instruments), the Black- Scholes model is normally used. Where appropriate, observable market inputs are used to obtain factors such as the bid-offer spread, exchange rates, volatility, correlation indexes and market liquidity.

iii. In the valuation of certain financial instruments exposed to interest rate risk, such as interest rate futures, caps and floors, the present value method (futures) and the Black-Scholes model (plain vanilla options) are used. The main inputs used in these models are observable market data, including the related interest rate curves, volatilities, correlations and exchange rates.

The fair value of the financial instruments calculated by the aforementioned internal models considers contractual terms and observable market data, which include interest rates, credit risk, exchange rates, quoted market price of shares, volatility and prepayments, among others. The Bank’s management considers that its valuation models are not significantly subjective, since these methodologies can be adjusted and evaluated, as appropriate, through the internal calculation of fair value and the subsequent comparison with the related actively traded price.

o) Recognizing income and expenses

The most significant criteria used by the Bank to recognize its revenues and expenses are summarized as follows:

i. Interest revenue, interest expense, and similar items

Interest income is calculated by applying the effective interest rate to the gross carrying amount of financial assets, except for financial assets that have subsequently become credit-impaired (or ‘stage 3’), for which interest revenue is calculated by applying the effective interest rate to their amortized cost (i.e. net of the ECL provision).

ii. Commissions, fees, and similar items

Fee and commission income and expenses are recognized in the Consolidated Statements of Income using criteria established in IFRS 15 “Revenue from contracts with customers”. See disclosure in Note 2 relating adoption and impact of IFRS 15.

Under IFRS 15, the Bank recognizes revenue when (or as) satisfied a performance obligations by transferring a service (i.e. an asset) to a customer; under this definition an asset is transferred when (or as) the customer obtains control of that asset. The Bank considers the terms of the contract and its customary business practices to determine the transaction price. The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties.

The Bank transfers control of a good or service over time and, therefore, satisfies a performance obligation and recognizes revenue over time, and/or the Bank satisfies the performance obligation at a point in time.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-28

Note 1 – General Information and Summary of Significant Accounting Policies, continued

The main revenues arising from commissions, fees and similar items correspond to:

• Fees and commissions for lines of credits and overdrafts: includes accrued fees related to granting lines of credit and overdrafts in checking accounts.

• Fees and commissions for guarantees and letters of credit: includes accrued fees in the period relating to granting of guarantee payment for current and contingent third party obligations.

• Fees and commissions for card services: includes accrued and earned commissions in the period related to use of credit cards, debit cards and other cards

• Fees and commissions for management of accounts: includes accrued commissions for the maintenance of checking, savings and other accounts

• Fees and commissions for collections and payments: includes income arising from collections and payments services provided by the Bank.

• Fees and commissions for intermediation and management of securities: includes income from brokerage, placements, administration and securities’ custody services.

• Fees and commissions for insurance brokerage fees: includes income arising for insurances distribution.

• Other fees and commissions: includes income arising from currency changes, financial advisory, cashier check issuance, placement of financial products and online banking services.

The main expenses arising from commissions, fees and similar items correspond to:

• Compensation for card operation: includes commission expenses for credit and debit card operations related to income commissions’ card services.

• Fees and commissions for securities transactions: includes commissions’ expense for deposits, securities custody service and securities’ brokerage.

• Other fees and commissions: includes mainly expenses generated from online services.

The Bank has incorporated disaggregated revenue and expense disclosures and reportable segment relationship in Note 28.

Additionally, the Bank maintains certain loyalty programs associated to its credit cards services, for which it has deferred a percentage of the consideration received in the statements of financial position to comply with its related performance obligation, or has liquidated on a monthly basis as far they arise.

Revenue recognition accounting and disclosures for the year 2017 and 2016, was under IAS 18 “Revenue recognition”, fees and commission income and expense were recognized in according to their nature. The main criteria was:

• Fee and commission income and expenses on financial assets and liabilities were recognized when they are earned.

• Those arising from transactions or services that were performed over a period of time, were recognized over the life of these transactions or services.

• Those relating to services provided in a single transaction were recognized when the single transaction was performed.

iii. Loan arrangement fees

Fees that arise as a result of the origination of a loan, mainly application and analysis-related fees, are deferred and charged to the Consolidated Statement of Income over the term of the loan. In the case of commitment fees these are immediately recorded in the Consolidated Statement of Income when it is unlikely that a specific lending arrangement will be entered into and the loan commitment is not measured at FVTPL.

p) Impairment

Assets are acquired or purchased based on the future economic benefits they produce. Accordingly, impairment is recorded when the carrying amount of those assets is lower than the recoverable amount, Assets are subject to impairment tests in order to properly reflect the future economic benefits that assets are capable to produce when used by the Bank.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-29

Note 1 – General Information and Summary of Significant Accounting Policies, continued

The Bank assesses on a forward-looking basis the expected credit losses (ECL) associated with its debt instrument assets carried at amortized cost and FVOCI and with the exposure arising from loan commitments and financial guarantee contracts. The Bank recognizes a loss allowance for such losses at each reporting date. The measurement of ECL reflects:

• An unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;

• The time value of money; and

Reasonable and supportable information that is available without undue cost or effort at the repotting date about past events, current conditions and forecasts of future economic conditions.

The Bank follows the criteria described below in order to assess impairment, when applicable:

(i) Financial assets

A financial asset, other than those recorded at fair value through profit and loss, is evaluated on each financial statement reporting date in order to determine whether objective evidence of impairment exists. At the end of each reporting period the Bank assesses if objective evidence exist for a financial asset or group of financial assets to be impaired.

A financial asset or group of financial assets will be impaired if, and only if, objective evidence of impairment exists as a result of one or more events that occurred after initial recognition of the asset (“event causing the loss”), and this event or events causing the loss have an impact on the estimated future cash flows of a financial asset or group of financial assets.

An impairment loss relating to financial assets recorded at amortized cost is calculated as the difference between the recorded amount of the asset and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.

Objective evidence for an asset or group of assets to be impaired includes the following events that cause losses: (i) significant financial difficulties of the issuer or debtor; (ii) noncompliance of the terms of the contract; (iii) the lender, due to economic or legal reasons related to financial difficulties of the debtor, grants waivers or give unusual conditions that will not be granted in normal circumstances; (iv) it is probable that the debtor is in bankruptcy or in another form of financial reorganization; (v) there is no longer a market for the financial asset due to financial difficulties; or (vi) observable data indicates that since initial recognition of a group of financial assets there is a decrease in the estimated future cash flows regardless of individual identification for each asset, including data about: (a) adverse changes in the payment behavior of debtors in the group; or (b) local or national economic conditions correlated to non-compliant in the group.

Individually significant financial assets are individually assessed to determine their impairment. The remaining financial assets are collectively evaluated in groups that share similar credit risk characteristics.

Impairment loss for available for sale investments is calculated as the difference between the acquisition cost (net of any principal reimbursement) and the current fair value less any impairment loss previously recorded in income. For equity investments classified as available for sale investment, objective evidence includes a significant and extended decrease under the initial fair value of the invested amount. In the case of debt instruments classified as available for sale investments, the Bank assess if objective evidence for impairment exist based on the criteria used for assessing loans impairment losses.

If impairment evidence exists, any amount previously recorded in equity is transferred from equity to the Consolidated Statement of Income, presented as available for sale investments net gains or losses. This amount is calculated as the difference between acquisition cost (net of any amortization and reimbursement) and the current fair value of the asset, less any impairment loss on the investment previously recorded in the Consolidated Statement of Income.

In respect to equity financial investments, impairment losses previously recognized in the Consolidated Statement of Income are not reversed through income. Any increase in fair value subsequent to an impairment loss is recognized in other comprehensive income and accumulated under available for sale investments as part of “Valuation accounts”.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-30

Note 1 – General Information and Summary of Significant Accounting Policies, continued

All impairment losses are recorded in income. Any impairment loss relating to a financial asset available for sale previously recorded in equity is transferred to profit or loss. The reversal of an impairment loss occurs only if it can be objectively related to an event occurring after the initial impairment loss was recorded. The reversal of an impairment loss shall not exceed the carrying amount that would have been determined if no impairment loss has been recognized for the asset in prior years. The reversal is recorded in income with the exception of available for sale equity financial assets, in which case it is recorded in other comprehensive income.

(ii) Non-financial assets

The Bank’s non-financial assets, are reviewed at each reporting date to determine whether they show signs of impairment (i.e. its carrying amount exceeds its recoverable amount). If any such evidence exists, the recoverable amount of the asset is estimated, in order to determine the extent of the impairment loss.

If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognized immediately in profit or loss.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

In connection with other assets, impairment losses recorded in prior periods are assessed at each reporting date to determine whether the loss has decreased and should be reversed. The increased carrying amount of an asset other than goodwill attributable to a reversal of an impairment loss shall not exceed the carrying amount that would have been determined (net of amortization or depreciation) had no impairment loss been recognized for the asset in prior years. Goodwill impairment is not reversed.

The Bank shall assess at the end of each reporting period whether there is any indication that an impairment loss recognized in prior periods for an asset other than goodwill may no longer exist or may have decreased.

If any such indication exists, the entity shall estimate the recoverable amount of that asset.

In assessing whether there is any indication that an impairment loss recognized in prior periods for an asset other than goodwill may no longer exist or may have decreased, an entity shall consider, as a minimum, external sources of information, such as there are observable indications that the asset’s value has increased significantly during the period; significant changes with a favorable effect on the entity have taken place during the period, or will take place in the near future, in the technological, market, economic or legal environment in which the entity operates or in the market to which the asset is dedicated; market interest rates or other market rates of return on investments have decreased during the period, and those decreases are likely to affect the discount rate used in calculating the asset’s value in use and increase the asset’s recoverable amount materially and internal sources of information such as significant changes with a favorable effect on the entity have taken place during the period, or are expected to take place in the near future, in the extent to which, or manner in which, the asset is used or is expected to be used. These changes include costs incurred during the period to improve or enhance the asset’s performance or restructure the operation to which the asset belongs.

In the case of goodwill and indefinite useful life intangible assets or not yet available for use the recoverable amount is estimated at least annually.

When impairment exists the carrying amount of the asset shall be reduced to its recoverable amount if, and only if, the recoverable amount of an asset is less than its carrying amount. This reduction is an impairment loss.

An impairment loss shall be recognized immediately in profit or loss, unless the asset is carried at revalued amount in accordance with another standard. Any impairment loss of a revalued asset shall be treated as a revaluation decrease in accordance with that other standard.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-31

Note 1 – General Information and Summary of Significant Accounting Policies, continued

When the amount estimated for an impairment loss is greater than the carrying amount of the asset to which it relates, an entity shall recognize a liability if, and only if, that is required by another standard. After the recognition of an impairment loss, the depreciation (amortization) charge for the asset shall be adjusted in future periods to allocate the asset’s revised carrying amount, less its residual value (if any), on a systematic basis over its remaining useful life.

If an impairment loss is recognized, any related deferred tax assets or liabilities are determined in accordance with IAS 12 “Income Taxes” by comparing the revised carrying amount of the asset with its tax base.

Impairment losses recognized in previous years are assessed at the end of each reporting period in order to identify any indication for impairment reduction or disappearance. The increased carrying amount of an asset other than goodwill attributable to a reversal of an impairment loss shall not exceed the carrying amount that would have been determined (net of amortization or depreciation) had no impairment loss been recognized for the asset in prior years.

(iii) Goodwill

Goodwill is tested annually in order to determine if impairment losses exist and whenever there is an indication that the carrying value may be impaired. The impairment of goodwill is determined by evaluating the recoverable amount of each CGU (or group of CGUs) to which the goodwill relates. An impairment loss is recognized when the recoverable amount of the CGU is less than its carrying amount.

For the purpose of impairment testing, goodwill acquired in a business combination shall, from the acquisition date, be allocated to each of the acquirer’s cash-generating units, or groups of cash-generating units irrespective of whether other assets or liabilities of the acquire are assigned to those units or groups of units. An impairment loss recognized for goodwill shall not be reversed in a subsequent period.

According to IAS 36 “Impairment of Assets” the annual impairment test for a cash-generating unit to which goodwill has been allocated or for intangible assets with indefinite useful lives may be performed at any time during an annual period, provided the test is performed at the same time every year. Different cash-generating units may be tested for impairment at different times.

q) Property, plant and equipment

Items of property, plant and equipment are measured at acquisition cost, net of accumulated depreciation and impairment, if any.

In addition to the price paid to acquire each item, the cost also includes, where applicable, the capitalized cost. The capitalized cost includes expenses attributed directly to the asset acquisition and any other costs directly attributable to the process of placing the asset in conditions to be used.

When some part of an item of the plan and equipment are measured has a different useful life to that fixed asset, it is recognized as a separate component (significant components of plan and equipment are measured).

This item includes the amounts of property, land, furniture, vehicles, technological equipment and other facilities own by the consolidated entities or acquired under financial leases. These assets are classified based on their use in:

(i) Property, plant and equipment for own use

Property, plant and equipment for own use includes but is not limited to tangible assets received by the consolidated entities in full or partial satisfaction of financial assets representing accounts receivable from third parties which are intended to be held for continuing own use and tangible assets acquired under finance leases. These assets are presented at acquisition cost less the related accumulated depreciation and, if applicable, any impairment losses (when net carrying amount was higher than recoverable amount). For accounting purposes, acquisition cost of the received asset is considered to be its net amount.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-32

Note 1 – General Information and Summary of Significant Accounting Policies, continued

Depreciation is calculated using the straight line method over the acquisition cost of assets less their residual value, assuming that the land on which buildings and other structures stand has an indefinite life and, therefore, is not subject to depreciation. Property, plant and equipment in leased properties are depreciated over the shorter period of time between their useful lives or the term of the lease, unless it is certain that the Bank will acquire the property at the end of the lease.

Maintenance expenses relating to tangible assets held for own use are recorded as an expense in the period in which they are incurred.

(ii) Assets leased out under operating leases

The criteria used to record the acquisition cost of assets leased out under operating leases, to calculate their depreciation and their respective estimated useful lives, and to record the impairment losses thereof, are consistent with those described in relation to property, plant and equipment held for own use.

r) Intangible assets

Intangible assets are identified as non-monetary assets (separately identifiable from other assets) without physical substance which arise as a result of legal or contractual rights or it is separable. The Bank recognizes an intangible asset, whether purchased or self-created (at cost), when the cost of the asset can be measured reliably and it is probable that the future economic benefits that are attributable to the asset will flow to the Bank. The cost of intangible assets acquired in a business combination correspond to its fair value at the acquisition date.

Intangible assets are recorded initially at acquisition or production cost and are subsequently measured at cost less any accumulated amortization and any accumulated impairment losses.

An entity shall assess whether the useful life of an intangible asset is finite or indefinite and, if finite, the length of, or number of production or similar units constituting, that useful life. An intangible asset shall be regarded by the entity as having an indefinite useful life when, based on an analysis of all of the relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows for the entity.

The accounting for an intangible asset is based on its useful life. An intangible asset with a finite useful life is amortized over its useful life, and it is reviewed in order to determine if the asset is impaired, the amortization period and the amortization method shall be reviewed at least at each financial year-end. An intangible asset with an indefinite useful life are not amortized and the entity tests for impairment by comparing its recoverable amount with its carrying amount annually and whenever there is an indication that the intangible asset may be impaired.

Internally developed computer software is recorded as an intangible asset if, among other requirements (basically the Bank’s ability to use or sell it), it can be identified and its ability to generate future economic benefits can be demonstrated.

Expenditure on research activities is recorded as an expense in the year in which it is incurred and cannot be subsequently capitalized.

(i) Software

The software acquired by the Bank is recognized at cost less the accumulated amortization and impairment, if any.

The expenses in software developed internally are recorded as assets when the Bank is capable of proving its intention and ability to complete development, when internal use will generate future economic benefits, and when the cost of completing its development can be reliably measured. The capitalized costs of the software developed internally include all the direct costs attributable to the development of the software, and it is amortized over the course of its useful life. Software developed internally is recorded at cost less the accumulated amortization and losses from impairment.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-33

Note 1 – General Information and Summary of Significant Accounting Policies, continued

The subsequent expenditures associated with the asset are capitalized only when future economic benefits from them will flow to the entity. The rest of the expenditures are recognized in income. Intangible assets are amortized on a straight-line basis over their estimated useful life; starting on the date it is ready for use.

(ii) Generated in a business combination

According to IFRS 3 “Business combinations”, when an intangible asset is acquired or generated in a business combination it cost will be the fair value at the acquisition date. The fair value of an intangible asset represents expectations of market participants at the acquisition date over the probability that future economic benefits from the asset will flow to the entity. In other words, the entity expects that economic benefits flows to it, even though there is uncertainty about the date or the amount of them.

As set forth by IAS 38 “Intangibles Assets” and IFRS 3 “Business combinations”, the acquirer will recognize an intangible asset from the acquiree at the acquisition date separately from Goodwill independently if the asset was previously recognized by the acquiree before the business combination.

In connection with the aforementioned, the business combination between Itaú Chile y Corpbanca gave rise to intangible assets and Goodwill as indicated in Note 13 “Intangible Assets”.

(iii) Other identifiable intangibles

Correspond to those intangible assets that can be identified, the Bank controls them, can be reliably measured and it is probable that future benefits will flow to the Bank.

s) Factoring transactions

The Bank performs operations with their clients, in which they receive invoices and other credit representative trading instruments with or without recourse to the transferor, anticipating a percentage of the total amount receivable of the borrower upon collection. These transactions are valued at the disbursed amounts by the Bank in exchange for invoices or other credit representative trading instruments.

The price differences between the disbursed amounts and the nominal amount of the documents are recorded in the Consolidated Statement of Income as interest income applying the effective interest rate method, over the term of the transaction. The responsibility of payment remains with the client (assignor).

t) Leasing transactions

Accounts receivable for lease contracts, included as “Loans and accounts receivable form customers” correspond to installments for contracts that qualify as financial leases and are presented at nominal amounts net of unearned interest at year end. When the Bank is the lessor in a lease contract and transfers substantially all risks and rewards of the asset, the transaction is included as a loan.

Leased assets between consolidated entities are considered as assets for own use in the Consolidated Financial Statements.

(i) Finance leases

Finance leases are leases that substantially transfer all the risks and rewards incidental to ownership of the leased asset to the lessee.

The Bank recognized as lending to third parties under “Loans and accounts receivable from customers” in the Consolidated Statement of Financial Position the sum of the present value of the lease payments receivable from the lessee, including the exercise price of the lessee’s purchase option at the end of the lease term, when at the inception of the lease it is reasonably certain that the lessee will exercise the option.

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When consolidated entities act as lessees, the leased assets are classified based on their nature in the Consolidated Statement of Financial Position, and recognizing an asset and liability at the same amount (the lower between the fair value of the leased property and the present value of the minimum lease payments, plus purchase option). These assets are depreciated in accordance with property, plant and equipment for own use criteria.

In both cases, income and expenses arising from these contracts are recorded under “Interest income” and “Interest expense”, respectively, in Consolidated Statement of Income to achieve constant return rate over the lease term.

(ii) Operating leases

In operating leases, ownership of the leased asset and substantially all the risks and rewards incidental thereto remain with the lessor.

When the consolidated entities act as lessor, the leased assets are classified at their acquisition cost under “Property, plant and equipment”. The depreciation criterion for these assets is consistent with that for similar items of property, plant and equipment held for own use and revenues from operating leases is recorded on a straight line basis under “Other operating income” in the Consolidated Statement of Income.

When the consolidated entities act as the lessees, the lease expenses, including any incentives granted by the lessor, are charged on a straight line basis to “Administrative expenses” in the Consolidated Statement of Income.

u) Expected credit losses allowance – under IFRS 9

Starting from January 1, 2018, the Bank replaced the “incurred loss” model of IAS 39 with an “expected credit loss (ECL)” model established by IFRS 9. The new impairment model applies to all financial assets measured at amortized cost and debt securities measured at fair value through other comprehensive income (FVOCI), including commitment and contingent loans. Investments in equity are outside of the scope of the new impairment requirements.

The Bank accounted ECL related to financial assets measured at amortized cost as a loss allowance in the statements of financial position, but the carrying amount of these assets is stated net of the loss allowance. ECL related to contingent loans is accounted for as a provision in the statements of financial position. The Bank recognizes in profit or loss, as an impairment gain or loss, the amount of ECL (or reversal) that was required to adjust the loss allowance at the reporting date to the amount that is required to be recognized in accordance IFRS 9, for financial assets measured at amortized cost and contingent loans.

The new model uses a dual measurement approach, under which the loss allowance is measured as either:

• 12-month expected credit losses

• Lifetime expected credit losses

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The Bank has defined default on an individual or collective basis as follows:

• Individual: when exposure is more than 89 days past due, it has been restructured, it is in judicial collection, or it has been written-off.

• Collective: when exposure is more than 89 days past due, it has been restructured, or has been identified as impaired by an internal risk committee.

For collective assessment purposes, financial assets are grouped based on characteristics of shared credit risk, considering the type of instrument, credit risk classifications, initial recognition date, remaining term, industry, geographical location of the counterparty, among other significant factors.

An instrument is considered to be no longer in default when it no longer meets the default criteria for a consecutive period between 4-11 months, depending on the type of loan.

The ECL measurement basis depends on whether there has been a significant increase in credit risk since initial recognition. Based on changes in credit quality since initial recognition, IFRS 9 outlines a “three-stage” model impairment in accordance with the following diagram:

Change in credit quality since initial recognition
Stage 1	Stage 2	Stage 3
Initial recognition	Significant increase in credit risk (“SICR”) since initial recognition	Credit impaired assets
12-month expected credit losses	Lifetime expected credit losses	Lifetime expected credit losses

The Bank, at the end of each reporting period, evaluates whether a financial instrument’s credit risk has significantly increased since initial recognition or whether an asset is considered to be credit-impaired, and consequently classify financial instrument in the respective stage:

• Stage 1: When loans are first recognized, the Bank recognizes an allowance based on 12 months ECL. Stage 1 loans also include facilities where the credit risk has improved and the loan has been returned to Stage 1.

• Stage 2: When a loan has shown a significant increase in credit risk since origination, the Bank records an allowance based on lifetime ECL. Stage loans also include facilities where the credit risk has improved and the loan has been returned to stage 2.

• Stage 3: Loans considered credit-impaired. The Bank records an allowance based on lifetime ECL, setting the Probability of Default (“PD”) at 100%.

The Banks assessment of a SICR and the calculation of ECL both incorporate forward-looking information. The Bank performs historical analysis and identify the key economic variables that impacts credit risk and ECL for each portfolio. These can include GDP, inflation, interest rates, and unemployment, among others. Where applicable, we incorporate these economic variables and their associated impacts into our models.

Credit risk assessment and forward looking information (including macro-economic factors), includes quantitative and qualitative information based on the Bank’s historical experience, some examples are:

a. Financial or economic conditions that are expected to cause a significant change in the borrower’s ability to meet its debt obligations

b. An actual or expected internal credit rating downgrade for the borrower or decrease in behavioral scoring

c. An actual or expected significant change in the operating results of the borrower.

d. Significant increases in credit risk on other financial instruments of the same borrower.

e. Significant changes in the value of the collateral supporting the obligation or in the quality of third-party guarantees or credit enhancements.

f. Reductions in financial support from a parent entity or other affiliate.

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g. Expected changes in the loan documentation including an expected breach of contract that may lead to covenant waivers or amendments, interest payment holidays, interest rate step-ups, requiring additional collateral or guarantees, or other changes to the contractual framework of the instrument.

The Bank has considered that if contractual payments are more than 30 days past due, the credit risk is deemed to have increased significantly since initial credit recognition, but is not an absolute indicator. The bank did not rebut the backstop presumption of IFRS 9 relating to SICR or default.

i. Expected credit loss measurement

The ECL are the probability-weighted estimate of credit losses, i.e. the present value of all cash shortfalls. A cash shortfall is the difference between the cash flows that are due to an entity in accordance with the contract and the cash flows that the entity expects to receive. The three main components to measure the ECL are:

PD: The Probability of default is an estimate of the likelihood of default over a given time horizon. A default may only happen at a certain time over the assessed period, if the facility has not been previously derecognized and is still in the portfolio.

LGD: The loss given default is an estimate of the loss arising in the case where a default occurs at a given time. It is based on the difference between the contractual cash flows due and those that the lender would expect to receive, including from the realization of any collateral.

EAD: The Exposure at default is an estimate of the exposure at a future default date, taking into account expected changes in the exposure after the reporting date, including repayments of principal and interest, whether scheduled by contract or otherwise, expected drawdown on committed facilities, and accrued interest from missed payments.

For measuring 12-month and lifetime ECL, cash shortfalls are identified as follows:

• 12-month expected credit losses: the portion of lifetime expected credit losses that represents the expected credit losses that result from default events on the financial instruments that are possible within the 12 months after the reporting date.

• Lifetime expected credit losses: the expected credit losses that result from all possible default events over the expected life of the financial instrument.

The Bank considered a multi-factor analysis to perform credit risk analysis. The type of portfolio or transactions, and whether individually or collectivelly assessed.

The Bank divides its portfolio in commercial loans, mortgage loans, consumer loans and contingent loans.

The Bank assesses individually whether objective evidence of impairment exists for loans that are individually significant, then collectively assesses loans that are not individually significant and loans which are significant but for which there is no objective evidence of impairment available under individually assessment.

ii. Contingent loans

The Bank enters into various irrevocable loan commitments and contingent liabilities. Even though these obligations may not be recognized on the statements of financial position, they contain credit risk and, therefore, form part of the overall risk of the Bank.

When the Bank estimates the ECL for contingent loans, it estimates the expected portion of the loan commitment that will be drawn down over its expected life.

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iii. Forward looking information

The ECL model includes a broad range of forward looking information as economic inputs, such as:

• GDP growth

• Unemployment rates

• Central Banks interest rates

• Real estate prices

iv. Modifications of financial assets

When a loan measured at amortized cost has been renegotiated or modified but not derecognized, the Bank recognizes the resulting gains or losses as the difference between the carrying amount of the original loans, and modified contractual cash flows discounted using the EIR before modification.

For ECL estimation purposes of financial assets that have been modified, the Bank is required to distinguish between modification that result in derecognition from those that does not result in derecognition. If the modification does not result in derecognition, then the subsequent assessment of whether there is a significant increase in credit risk is made comparing the risk at the reporting date based on the modified contractual term and the risk at initial recognition based on the original, unmodified contractual term.

If the modification results in derecognition, then the modified asset is considered to be a new asset. Accordingly, the date of modification is treated as the date of initial recognition for the purposes of the impairment requirements.

v. Collateral

The Banks seeks to use collateral to mitigate its credit risks on financial assets, where possible. Types of collateral are cash, securities, letters of credit, real estate and inventories. The Bank’s accounting policy for collateral assigned to it through its lending arrangements under IFRS 9 is the same is it was under IAS 39. Collateral, unless repossessed, is not recorded on the Bank’s statements of financial position. However, the fair value of collateral affects the calculation of ECLs. The main collateral associated to mortgage loans are real estate, which are valued based on data provided by specialized third parties.

The estimation of ECL reflects the cash flows expected from collateral and other credit enhancement that are part of the contractual terms of the financial instruments.

According to the Bank’s policy when an asset (real estate) is repossessed, it is transferred to assets held for sale at its fair value less cost to sell and classified as non-financial assets at the repossession date.

i) Guarantees

Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it occurs because a specified debtor fails to make payments when due, in accordance with the terms of a debt instruments. Such financial guarantees are given to banks, financial institutions and others on behalf of customers to secure loans, overdrafts and other banking facilities.

Financial guarantee contracts are initially measured at fair value and subsequently measured at the higher of:

• The amount of the loss allowance (calculated as described in note 28); and

• The premium received on initial recognition less income recognized in accordance with the principles of IFRS 15.

Loan commitments provided by the Bank are measured as the amount of the loss allowance (calculated as described in note 28). The Bank has not provided any commitment to provide loans at a below-market interest rate, or that can be settled net in cash or by delivering or issuing another financial instrument.

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For loan commitments and financial guarantee contracts, the loss allowance is recognized as a provision. However, for contracts that include both a loan and an undrawn commitment and the Bank cannot separately identify the expected credit losses on the undrawn commitment component from those on the loan component, the expected credit losses on the undrawn commitment are recognized together with the loss allowance for the loan. To the extent that the combined expected credit losses exceed the gross carrying amount on the loan, the expected credit losses are recognized as a provision.

vi. Charge-offs

The gross carrying amount of a financial asset is reduced when there is no reasonable expectation of recovery. A charge-off constitutes a derecognition event of the corresponding loan transaction in its entirety, and therefore, include portions not past-due for installments loans or leasing operation (no partial charge-off).

Subsequent recoveries of amounts previously charge-off are credited to the income statements, as recovery of loans previously charged-off, as a deduction from provisions for loan losses.

Loan and accounts receivable charge-offs are recorded for overdue and current installments based on the time periods expired since reaching overdue status, as described below:

Type of loan	Term
Consumer loans with or without collateral Other transactions without collateral Commercial loans with collateral Mortgage loans Consumer leasing Other non-mortgage leasing transactions Mortgage leasing (household and business)	6 months 24 months 36 months 48 months 6 months 12 months 36 months

v) Allowance for loan losses – under IAS 39

Up to December 31, 2017, the Bank established allowances to cover incurred losses on loans and account receivables from customers in accordance with its internal models and risk assessment.

The Bank performed an assessment of the risk associated with loans and accounts receivable from customers to determine their allowance for loan losses as described below:

• Individual assessment - represented cases where the Bank assesses a debtor as individually significant, or when he/she could not be classified within a group of financial assets with similar credit risk characteristics, due to their size, complexity or level of exposure.

• Group assessment - a group assessment was relevant for analyzing a large number of transactions with small individual balances from individuals or small companies. The Bank grouped debtors with similar credit risk characteristics giving to each group a default probability and recovery rate based on a historical analysis.

The Bank models determined allowances and provisions for loan losses according to the type of portfolio or transactions. Loans and accounts receivables from customers were divided into three categories:

i. Commercial loans,

ii. Mortgage loans, and

iii. Consumer loans.

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The models used to determine credit risk allowances are described as follows:

I. Allowances for individual assessment

An individual assessment of commercial debtors was necessary in the case of companies which, due to their size, complexity or level of exposure regarding the entity, must be known and analyzed in detail.

For the purposes of establishing its provisions, the Bank assigned a risk category to each debtor, their loans and contingent loans. The risk factors considered were: industry or economic sector of the borrower, owners or managers of the borrower, their financial situation and payment capacity, and payment behavior.

For individually analyzed commercial loans, we used a risk classification process that combined parametrical variables with expert judgment, to assign risk categories to each individually analyzed customer. This process considered financial risk factors such as profitability, payment ability and financial indebtedness, and qualitative risk factors such as the economic sector in which the customer develops its activities, the management and experience of the owners, and its historical payment behavior.

As a result of this classification process, we differentiated the normal loans from the impaired ones, identifying three mayor categories:

1. Customers classified in risk categories A1, A2, A3, A4, A5 or A6. These customers were current or have less than 30 days overdue on their payment obligations and showed no significant signs of deterioration in their credit quality.

2. Customers classified in risk categories B1, B2, B3 or B4. These customers were overdue between 30 and 89 days on their payment obligations, thus showing a certain level of deterioration in their credit quality.

3. Customers classified as C1, C2, C3, C4, C5 or C6. This portfolio included customers whose loans with us have been in default (over 90) or were managed by a specialized collection area.

For loans classified as A1, A2, A3, A4, A5, A6, B1, B2, B3 and B4, we assigned a specific allowance percentage on an individual basis to each rating. The amount of the allowance for loan losses was determined based on debt servicing capacity, the company’s financial history, solvency and capacity of shareholders and management and projections for the industry sector in which the customer operates. There was a determined allowance percentage by group of customers with similar characteristics (i.e., A1, A2, A3, A4, A5, A6, B1, B2, B3 and B4).

Estimated Incurred Loan Loss = Allowance for Loan Losses

The Estimated Incurred Loan Loss (EIL) was determined by multiplying the risk factors as defined in the following equation:

EIL	=	EAD X PD X LGD X LIP
EAD	=	Exposure at Default
PD	=	Probability of Default
LGD	=	Loss Given Default
LIP	=	Loss Identification Period

Estimated Incurred Loss (EIL) meant the amount of impairment losses that were incurred, only if there was objective evidence that the estimated future cash flows of the financial asset or group of financial assets was impaired as a result of a loss event.

Exposure at Default (EAD) was the loan amount outstanding at the balance sheet date that was considered in the calculation and not any future movements and drawdowns.

Probability of Default (PD) meant the probability, expressed as a percentage that a customer will default within the next 12 months. This percentage was associated with the rating that given to each client.

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Loss Identification Period (LIP) meant the period between the time at which the event occurred and the date when the entity identified it.

Loss Given Default (LGD) meant the effective loss rate given for default to customers in the same risk category, which was determined statistically based on the historical effective losses.

Allowances for loan losses for each C risk category were based mainly on the value of the collateral, adjusted for the estimated expenses associated with the recovery and asset sale discounted by the effective interest rate. The allowance percentage for each category was then based mostly on the level of collateral.

II. Allowances for group assessments

The Bank used the concept of estimation of incurred loss to quantify the allowances levels over the group-evaluated portfolios, considering the risk and the guarantees associated with each transaction.

Following the Bank’s definition, the Bank used a group evaluation to approach transactions that have similar credit risk features, which indicated the debtor’s payment capacity over the entire debt, principal and interests, pursuant to the contract’s terms. In addition, this allowed us to assess a high number of transactions with low individual amounts, whether they belong to individuals or SMEs (small and medium sized companies).

Therefore, debtors and loans with similar features were grouped together and each group has a risk level assigned to it.

These models were meant to be used mainly to analyze loans granted to individuals (including consumer loans, credit lines, mortgage loans and commercial loans) and commercial loans to small to middle-sized entities (SMEs).

Allowances were established using these models, taking into account the historical Impairment and other known circumstances at the time of evaluation. After this, a historical loss rate was assigned to each portfolio profile constituting each evaluated group.

Allowances for group-evaluated loans were established based on the credit risk of the profile to which the loan belongs. The method for assigning a profile was based on statistical building method, establishing a relation through logistic regression of various variables, such as payment behavior in the Bank, payment behavior outside the Bank, various sociodemographic data, among others, and a response variable that determined a client’s risk level, which in this case was 90 days of non-performance (the chosen features are relevant when calculating future cash flows per group of assets). Afterwards, common profiles were established and with differentiated default rates, applying the real historical loss the Bank had with that portfolio.

The different risk categories were constructed and updated periodically based on the payment behavior of the client’s profile to which they belong, as well as his or her sociodemographic characteristics. Therefore, when a customer had past due balance or has missed some payments, the outcome was that the customer will move to a different segment with a higher loss rate, therefore capturing current trends for each risk profile.

Allowance quantification, once the customers were classified, was the product of three factors: exposure (EXP), Probability of Non- Performance (PNP) and Severity (SEV), the same equation used for individual assessment mentioned above.

The estimated incurred loss rates for group-evaluated loans corresponded to charge-offs net of recoveries. The methodology established the period in which the estimated incurred loss for each risk profile emerges. Once the was considered as incurred, the estimated incurred loss rates were applied to the corresponding risk profile to obtain the net charge-off level associated with this period. The loss rates applied to each risk profile were based only on the historical net charge-off data for that specific profile within one of the four groups of loans (consumer loans, credit lines, mortgage loans and commercial loans). No other statistical or other information other than net charge-offs was used to determine the loss rates.

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To determine the estimated incurred loss for commercial and mortgage loans collectively evaluated for impairment, we mainly analyzed the payment behavior of clients, particularly the payment behavior of clients with payments that are more than 90 days overdue, clients with other weaknesses, such as early nonperformance (i.e., payments that are past-due, though by less than 90 days), clients with modified loans and clients with renegotiated loans, as well as success in recovery against these clients. We also took into account whether the loan is supported by collateral.

In connection with mortgage loans, historical net charge-offs were considered in the model to calculate loss rates for loans collectively evaluated for impairment. The risk categories were such that when a customer has a past-due balance or has missed some payments, the outcome was that the customer will move to a different risk category with a higher loss rate, therefore capturing current trends of the customer and, when aggregate, current trends in the market.

Our models for loans analyzed on a group basis (consumer loans, residential mortgage loans and small-and-mid- sized commercial loans) were monitored on a monthly basis with respect to predictability and stability, using indicators that seek to capture the underlying need to update the models for current loss trends. Therefore, the periods of historical net charge-offs used in the allowance model may were more than a year old as we only updated the historical net charge-offs when our assessment of predictability and stability indicators determine it was necessary.

For allowances calculation purposes, guarantees were treated according to the following, as applicable:

1) Collateral and guarantees. Could be considered when the legal documentation for the guarantee can be directly linked to specific loans in a way that the coverage was clear and the rights over the guarantor is unquestionable.

2) Property guarantees. In order to apply the deduction method to determine recovery rates, valuation of property and other guarantees (mortgages or financial instruments guarantees) must reflect the net inflow that will be obtained in the assets sale, debts instruments or shares, in case of the debtor defaulting and a secondary source of payment is required. According to this, the recovery amount for a loan by guaranties execution corresponded to the present value of the amount if the asset was sold in current market conditions at disposal, minus expenses required to keep the asset in its current conditions and to sell them, all this in accordance with the Bank policies and terms established by Law for assets disposal.

3) Financial guarantees. The adjusted fair value of this type of guarantees could be deducted from the exposition amount only when the guarantee can be established with the unique aim to guarantee compliance with the related loans.

Leased assets

Estimated losses when establishing allowances based on the assessment method corresponding to each debtor, considered the amount that would have been obtained if the leased asset was sold, taking into account any potential impairment for the assets in case of debtor’s default and the related recovery and relocation expenses.

Factoring operations

Establishing allowances for factoring operations considered as counterparty the entity ceding rights over the endorsed in favor of the Bank when the cession was recourse for the latter, and to the debtor when the cession has been made without recourse.

III. Charge-offs

As a general rule, charge-offs should be done when all collection efforts have been exhausted. These charge-offs consisted of derecognition from the Consolidated Statements of Financial Position of the corresponding loans transactions in its entirety, and, therefore, included portions not past due of a loan in the case of installments loans or leasing transactions (no partial charge-offs exist).

Subsequent payments obtained from charged-off loans were recognized in the Consolidated Statements of Income as a recovery of loans previously charged-off.

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Loan and accounts receivable charge-offs were recorded for overdue and current installments based on the time periods expired since reaching overdue status, as described below:

Type of loan	Term
Consumer loans with or without collateral Other transactions without collateral Commercial loans with collateral Mortgage loans Consumer leasing Other non-mortgage leasing transactions Mortgage leasing (household and business)	6 months 24 months 36 months 48 months 6 months 12 months 36 months

IV. Recovery of loans previously charged off and accounts receivable from customers

Any payment agreement of an already charged-off loan did not give rise to income—as long as the operation was in an impaired status—and the effective payments received were accounted for as a recovery from loans previously charged-off.

Recovery of previously charged-off loans and accounts receivable from customers, were recorded in the Consolidated Statements of Income as a deduction from provisions for loan losses.

In accordance with our charge-off policy described in iii) above, we may subsequently recovered a portion of the amount charged-off (at 100%). The allowance for loan losses on our collectively evaluated loans incorporates an expected recovery rate based on historical information. At the time we charged-off the carrying amount of any loans which have been collectively evaluated for impairment, the allowance for loan losses on collectively evaluated loans was replenished to reflect incurred losses based on statistical models developed in compliance with IAS 39 on the remaining pool of loans. The amounts required for replenishment were recorded in the financial statements as provision established.

w) Income taxes and deferred taxes

The Bank has recognized an expense (income) arising from gains or losses for each year, according to the applicable taxation rules for each country or jurisdiction it operates.

The Bank records, when appropriate, deferred tax assets and liabilities for the estimated future tax effects attributable to differences between the carrying amount of assets and liabilities and their tax bases. The measurement of deferred tax assets and liabilities is based on the tax rate, in accordance with the applicable tax laws, using the tax rate that applies to the period when the deferred asset and liability will be settled. The future effects of changes in tax legislation or tax rates are recorded in deferred taxes beginning on the date on which the law is enacted or substantially enacted.

x) Provisions and contingent assets and liabilities

When preparing the financial statements of the consolidated entities, the Bank’s directors made a distinction between:

Provisions: credit balances covering present obligations at the reporting date arising from past events which could give rise to a loss for the consolidated entities, which is considered to be more likely than not to occur and certain as to its nature but uncertain as to its amount and/or timing.

Contingent liabilities: possible obligations that arise from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more future events not wholly within the control of the consolidated entities. They include the present obligations of the consolidated entities when it is not probable that an outflow of resources embodying economic benefits will be required to settle them. The Group does not recognize the contingent liability. The Group will disclose a contingent liability, unless the possibility of an outflow of resources embodying economic benefits is remote.

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Contingent assets: possible assets that arise from past events and whose existence is conditional on, and will be confirmed only by, the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group. Contingent assets are not recognized in the consolidated balance sheet or in the consolidated income statement, but rather are disclosed in the notes, provided that it is probable that these assets will give rise to an increase in resources embodying economic benefits.

The Group’s consolidated financial statements include all the material provisions with respect to which it is considered that it is more likely than not the obligation will have to be settled. In accordance with accounting standards, contingent liabilities must not be recognized in the consolidated financial statements, but must rather be disclosed in the notes.

Provisions, which are quantified on the basis of the best information available on the consequences of the event giving rise to them and are reviewed and adjusted at the end of each year, are used to cater for the specific obligations for which they were originally recognized. Provisions are fully or partially reversed when such obligations cease to exist or are reduced.

Provisions are classified according to the obligations covered as follows (See Note 20):

Provision for pensions and similar obligations: includes the amount of all the provisions made to cover post-employment benefits, including obligations to pre-retirees and similar obligations.

Provisions for contingent liabilities and commitments: include the amount of the provisions made to cover contingent liabilities -defined as those transactions in which the Group guarantees the obligations of a third party, arising as a result of financial guarantees granted or contracts of another kind- and contingent commitments -defined as irrevocable commitments that may give rise to the recognition of financial assets.

Provisions for taxes and other legal contingencies and other provisions: include the amount of the provisions recognized to cover tax and legal contingencies and litigation and the other provisions recognized by the consolidated entities. Other provisions includes, inter alia, any provisions for restructuring costs and environmental measures.

y) Employee benefits

Short-term benefits

Correspond to personnel benefits (other than termination benefits) that are expected to be settled within twelve months after year end over which the employees have rendered their services.

These are recognized when the employee has rendered the service and are measured at the undiscounted amount of benefits expected to be paid in exchange for that service:

• as a liability (accrued expense), after deducting any obligation already satisfied. If the amount already paid is higher than the gross amount of the benefits, the Bank will recognize this excess as an asset (amount paid in advance), when it represents a reduction of future payments or a recoverable amount in cash.

• as an expense when the entity consumes the economic benefit arising from the service provided by an employee in exchange for employee benefits, unless other IFRS requires or allows the recognition of those disbursements as part of the cost of an asset.

Personnel vacations

The annual cost of personnel vacations and benefits are recognized on an accrual basis.

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Post-employment benefits

Correspond to employee benefits (other than termination benefits and short-term employee benefits) that are expected to be settled after the completion of employment. Post-employment benefits plans are agreements, formal and informal, in which the Bank is committed to provide benefits to one or more employees after termination of their employment. Plans providing these benefits are classified as either defined contribution plans or defined benefit plans, depending on the economic substance of the plan as derived from its principal terms and conditions.

Other long-term benefits

These are all employee benefits other than short-term employee benefits, post-employment benefits and termination benefits. Measurement is similar to defined benefit plans.

Termination benefits

Termination benefits are employee benefits provided in exchange for the termination of an employee’s employment, as a consequence of:

• a decision of the entity to terminate the employee’s employment before the normal termination date; or

• the decision of an employee to accept an offer with benefits in order to terminate the employment before the normal termination date.

An entity recognizes a liability and expense for termination benefits at the earlier of the following dates:

• when the entity can no longer withdraw the offer of those benefits; and

• when the entity recognizes costs for a restructuring that is within the scope of IAS 37 “Provisions, Contingent Liabilities and Contingent Assets” and involves the payment of termination benefits.

z) Provision for mandatory dividends

The Bank recorded a provision for mandatory dividends calculated as a portion of income for the year in order to comply with dispositions of the Chilean Corporations Act (Ley de Sociedades Anónimas) which requires to distribute at least 30% of income of the year, consistent with the Bank’s internal policy. As of December 31, 2018 and 2017 the Bank provisioned 30% of its income for the year. This provision is recorded, as a deducting item, under the “Retained earnings – provision for mandatory dividends” line of the Consolidated Statement of Changes in Equity.

In the Bank’s bylaws, title VII, it is established that the Bank should distribute annually as a dividend to its shareholders, as a proposal of the Board of Directors and based on the number of shares, at least thirty percent (30%) of the net income of the year. Furthermore, no dividends distribution will take place if there are equity losses (negative reserves) until these losses are recovered or if a dividend distribution will cause a non-compliance of the capital requirements established by the Ley General de Bancos (General Bank Law).

For all matters related to dividends distributions, the Bank is subject to the terms incorporated in the Transaction Agreement (dated January 29, 2014 and its subsequent modifications), which was approved by the Ordinary Shareholders Meeting (dated March 11, 2016).

aa) Assets received or awarded in lieu of payment

Assets received or awarded in lieu of payment of loans and accounts receivable from clients are recognized at their fair value (as determined by an independent appraisal). A price is agreed upon by the parties through negotiation or, when the parties do not reach an agreement, at the amount at which the Bank is awarded those assets at a judicial auction. In both cases, an independent appraisal is performed.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-45

Note 1 – General Information and Summary of Significant Accounting Policies, continued

The excess of the outstanding loan balance over the fair value is charged to net income for the year, under “Provision for loan losses”.

Any excess of the fair value over the outstanding loan balance, less costs to sell of the collateral, is returned to the client. These assets are subsequently adjusted to their net realizable value less cost to sale, and the difference between the carrying value of the asset and the estimated fair value less costs to sell is charged to income, under “Other operating expenses”.

bb) Customer loyalty programs

The Bank maintains a loyalty program to provide incentives to its customers, allowing them to purchase goods or services with certain benefits which are granted through credit cards issued by the Bank when they purchase according to the conditions established for each loyalty program.

The Bank has an adequate level of provisions in order comply with its current obligations and to properly reflect the associated expense when providing the benefits.

cc) Non- current assets held for sale (in “Other Assets”)

Non-current assets (or a group holding assets and liabilities for disposal) expected to be recovered mainly through the sale of these items rather than through the continued use, are classified as held for sale. Immediately prior to this classification, assets (or elements of a disposable group) are re-measured in accordance with the Bank’s policies. The assets (or disposal group) are measured at the lower of carrying amount and fair value less cost to sell.

Impairment losses in initial classification of non-current assets held for sale and with subsequent gains and losses are recorded in income. Gains are not recorded over previously recorded losses.

dd) Earnings per share

Basic earnings per share are determined by dividing the net income attributable to the equity holders of the Bank for the reported period by the weighted average number of shares outstanding during the reported period.

Diluted earnings per share are determined in the same way as basic earnings, but the weighted average number of outstanding shares is adjusted to take into consideration the potential diluting effect of stock options, warrants, and convertible debt.

As of December 31, 2018, 2017 and 2016 the Bank did not have any instruments that generated dilution.

ee) Consolidated Statement of Cash Flows

The Bank presents cash flows from operating activities, investing activities, and financing activities in a manner that best represent the nature of its activities. The classification of cash flows into the aforementioned categories provides information that allows users to evaluate the impact of the transactions in the financial position of the Bank, as well as over the ending balance of cash and cash equivalents. This information can be also useful when evaluating the relation between those activities (IAS 7).

For the preparation of the cash flow statement, the indirect method was used, starting with the Bank’s consolidated pre-tax income and incorporating non-cash transactions, as well as income and expenses associated with cash flows, which are classified as operating, investment or financing activities.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-46

Note 1 – General Information and Summary of Significant Accounting Policies, continued

For the preparation of the cash flow statement, the following items are considered:

• Cash flows: Inflows and outflows of cash and cash equivalents, such as deposits with the Central Bank of Chile, deposits in domestic banks, and deposits in foreign banks.

• Operating activities: Principal revenue-producing activities performed by banks and other activities that cannot be classified as investing or financing activities. This section includes, among others, foreign loans obtained, dividends received, available for sale investments and held to maturity.

• Investing activities: Correspond to the acquisition and disposal of long-term assets and other investments not included in cash and cash equivalents.

Financing activities: Activities that result in changes in the size and composition of the equity and liabilities that are not part of operating activities nor investing activities.

For cash flow statement purposes, it has been considered as cash and cash equivalents amounts included in “Cash and deposits in Banks” plus the net amount of cash items in process of collection, plus trading investment and FVTOCI / available for sale investment instruments highly liquid and minimal value change risk which due date is less than three months since the acquisition date and investments under resale agreements under the same terms.

Includes also investments in fixed income mutual funds which are presented under FVTPL / trading investments in the Consolidated Statement of Financial Position. The amounts for cash and cash equivalents and the corresponding reconciliation to the Consolidated Statement of Cash Flows are detailed in Note 5 “Cash and Cash Equivalents”.

The provision for loan losses included under the operating activities section differs from the amount presented in the Consolidated Statement of Income, because such amount excludes recoveries of transactions previously charged-off for cash flows purposes.

ff) Consolidated Statement of Changes in Equity

The Consolidated Statement of Changes in Equity presents all movements affecting net equity, including those originated by accounting changes or errors recognition. This statement shows a conciliation between opening and ending balances for the year for all items that form part of consolidated equity, grouping transactions based on their nature, according to the following:

• Adjustments due to accounting changes and errors recognition: Includes changes in equity arising as a consequence of restating amounts previously reported in the Consolidated Financial Statements resulting from accounting changes or error recognition.

• Net comprehensive income for the year: Includes, in an aggregated manner, net income for the year and other comprehensive income for the year.

• Other changes in equity: Includes retained earnings distributions, equity increases, provision for mandatory dividends, dividends paid, among other increases or decreases in consolidated equity.

This information is presented in two statements: The Consolidated Statement of Other Comprehensive Income and the Consolidated Statement of Changes in Equity.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-47

Note 1 – General Information and Summary of Significant Accounting Policies, continued

gg) Consolidated Statement of Other Comprehensive Income

In the Consolidated Statement of Other Comprehensive Income are presented income and expenses generated by the Bank as a consequence of its regular activities during the year, clearly identifying those recorded in profit and loss from those recorded in net equity.

Due to this, in this statement the following is shown:

• Income for the year.

• Net amount of income and expenses recorded in equity as “Valuation accounts”.

• Deferred income taxes originated by transactions described above, except for those amounts related to exchange differences from foreign net investments.

Total amount of consolidated income and expenses recorded attributable to the equity holders of the Bank, calculated as the sum of the items listed above, is presented separately from non-controlling interest.

hh) New accounting pronouncements introduced by IASB

1) Standards and interpretations that have been adopted in these Consolidated Financial Statements

1.1 IFRS 9 “Financial Instruments”

On 1 January 2018, Itaú Corpbanca and subsidiaries adopted IFRS 9 ‘Financial Instruments’ (IFRS 9). The new or revised accounting policies are set out below.

The impact of applying IFRS 9 is disclosed in Note 2. The accounting policy changes for IFRS 9, set out below, have been applied from 1 January 2018. Comparatives have not been restated. As a result of the change from IAS 39 to IFRS 9, some disclosures presented in respect of certain financial assets are not comparable because their classification may have changed between as a result of the adoption of the new standard. This means that some IFRS 9 disclosures are not directly comparable and some disclosures that relate to information presented on an IAS 39 basis are no longer relevant in the current period. As explained in Note 2, the classification and measurement changes to financial assets that arose on adoption of IFRS 9 are aligned to the presentation in the Consolidated Statement of Financial Position. The Bank decided to continue adopting IAS 39 hedge accounting requirements and consequently there have been no changes to the hedge accounting policies and practices following the adoption of IFRS 9. However, additional hedge accounting disclosure requirements of IFRS 7 ‘Financial Instruments: Disclosures’ (IFRS 7) were included in these Consolidated Financial Statements.

In addition, new categories of financial instruments in accordance with IFRS 9 are presented in the Consolidated Statement of Financial Position as of December 31, 2018, as explained in detail in Note 2 to the Consolidated Financial Statements.

1.2 IFRS 15 “Revenues from contracts with customers”

On May 28, 2014, the IASB issued IFRS 15, which provides a single model to account for revenues from contracts with customers based on principles, through five steps that will be applied to all contracts with customers, i) contract identification, ii) performance obligations identification, iii) transaction price determination, iv) allocating the transaction price to performance obligations, v) recognize income when (or as) the entity satisfies a performance obligation.

Initially, IFRS 15 was to be applied in the first annual financial statements under IFRS for the year beginning on or after January 1, 2017, however, its entry into force has been deferred for annual periods beginning on or after January 1, 2018. The application of the standard is mandatory and its early adoption is permitted.

The adoption of this standard had no significant impact on the Consolidated Financial Statements. See Note 2.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-48

Note 1 – General Information and Summary of Significant Accounting Policies, continued

1.2 Clarifications to IFRS 15 “Revenues from contracts with customers”

Issued on April 12, 2016, clarifies and offers some alternatives for the transition process. The subject are related with identification of performance obligations, principal and agent considerations and licenses.

This modifications shall be applied to annual periods beginning on January 1, 2018. Early adoption is allowed.

The adoption of this standard had no significant impact in the Consolidated Financial Statements.

1.3 Amendment to IFRS 2, “Share-based Payment” – Classification and measurement of transactions

Issued on June 20, 2018, it presents the following subjects:

• Accounting of payments transactions based on shares settled in cash that includes a performance condition.

• Classification of payment transactions based on shares with balance compensation features.

• Accounting for changes in payment transactions based on shares that have been settled in cash and settled in equity instruments.

This amendment applies prospectively since January 1, 2018. The early adoption is allowed.

The adoption of this standard had no significant impact in the Consolidated Financial Statements.

1.4 IFRIC 22 “Foreign Currency Transactions and Advance Consideration”

Issued on December 8, 2016, it is applies to a transaction in foreign currency (or a part of it) when an entity recognizes a non-financial asset or non-financial liability arising from the payment or receipt of an advance consideration before the entity recognizes the related asset, expense or income (or the part of these that corresponds). The interpretation provides a guide for a payment/ receipt, as well as for situations in which multiple payment/ receipt are made. It has as objective to reduce diversity in practice.

Its adoption is mandatory for periods beginning on or after January 1, 2018.

The adoption of this standard had no significant impact in the Consolidated Financial Statements.

1.5 Amendment to IAS 40 “Investment Property”, in relation to investments property transfers.

Issued in December 2016, it clarifies when there is a transfer to, or from, investment property.

This amendment is effective for periods beginning in or after January 1, 2018.

The adoption of this standard had no significant impact in the Consolidated Financial Statements.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-49

Note 1 – General Information and Summary of Significant Accounting Policies, continued

1.6 Annual improvements - Cycle 2014 - 2016

The document covers the following standards, which begin after January 1, 2018:

• Amendment to IFRS 1 “First-time Adoption of International Financial Reporting Standards”

It is related to the suspension of short-term exceptions for adopters for the first time with respect to IFRS 7, IAS 19 and IFRS 10.

The Bank’s Administration analyzed in detail this amendments and concludes that it does not apply, since the IFRS will not be transitioned for the first time in the mandatory year of the amendment.

• Amendment to IAS 28, “Investments in Associates and Join Ventures”

In relation to the measurement of the associate or joint venture at fair value. The Bank’s Management concluded that this amendment does not apply, since neither the Bank nor its subsidiaries have joint ventures.

The adoption of this standard had no significant impact in the Consolidated Financial Statements.

2) Standards and interpretations that have not been adopted in these Consolidated Financial Statements

2.1 IFRS 16 “Leases”

On January 13, 2016, the IASB published a new standard, IFRS 16 “Leases”. The new standard shall imply that most leases are presented in the lessee’s balance under a single model, eliminating the distinction between operating and financial leases. However, the accounting for the lessors remains largely unchanged and the distinction between operating and financial leases is retained. IFRS 16 replaces IAS 17 “Leases” and related interpretations and is effective for periods beginning on or after January 1, 2019. Its early application is allowed, provided that IFRS 15 “Income from Contracts with Customers” is also applied.

The Bank’s management evaluated the impact of the adoption of this new standard through the valuation of its lease agreements, recording an asset for right-of-use for an amount equal to the lease liability for an amount of MCh$176,795, which will generate a negative impact on the solvency indicator of 11 basis points going from 14.62% to 14.53% on January 1, 2019.

2.2 IFRIC 23 “Uncertainly over Income Tax Treatments”

Issued on June 7, 2017, it aims to reduce the diversity in how companies recognize and measure a tax liability or a tax asset when there is uncertainty about the treatment of income tax. The Interpretation deals with how to reflect the uncertainty in accounting for income taxes being applicable to the determination of the tax base (tax loss), tax bases, unused tax losses, tax credits not used and tax rates when there is uncertainty about tax treatments under IAS 12.

An entity shall apply this Interpretation for the annual reporting periods as of January 1, 2019. Early application is permitted, and this fact must be disclosed.

Management do not expect that the adoption of this standard will have significant impact in the Consolidated Financial Statements.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-50

Note 1 – General Information and Summary of Significant Accounting Policies, continued

2.3 Amendment to IFRS 9 “Financial instruments”

Issued on October 17, 2017, this amendment allows more assets to be measured at amortized cost than in the previous version of IFRS 9, in particular some prepaid financial assets with negative compensation. Qualifying assets, which include some loans and debt securities that would otherwise have been measured at fair value through profit or loss (FVTPL). To qualify for the amortized cost, the negative compensation must be “reasonable compensation for the early termination of the contract”.

The amendments are effective for annual periods beginning on January 1, 2019.

According to Management the adoption of this amendment is not expected to have significant impact in the Consolidated Financial Statements.

2.4 Amendment to IAS 28 “Investments in Associates and Join Ventures”

Issued on October 17, 2017, this amendment clarifies that companies that account for long-term investments in an associate or joint venture -where the equity method is not applied- using IFRS 9. The Board has published an example which illustrates how companies apply the requirements of IFRS 9 and IAS 28 to long-term interests in an associate or a joint venture.

The amendments are effective for annual periods beginning on January 1, 2019.

These modifications do not apply because neither the Bank nor its subsidiaries have joint ventures.

2.5 Annual improvements – Cycle 2015- 2017

Amendment issued on December 2017 introduces the following improvements:

• IFRS 3 “Business Combinations”/ IFRS 11 “Joint Arrangements” – Deals with the prior interest in a joint operation, as a business combination in stages.

• IAS 12 “Income Taxes” – Deals with the consequences in income taxes of financial instruments payments classifies as equity.

• IAS 23 “Borrowing Costs” – Deals with eligible costs for capitalization.

This amendment is effective for annual periods beginning on or after January 1, 2019.

These amendments / new pronouncements have no impact in the Consolidated Financial Statements.

2.6 Amendment to Conceptual Framework

In March, 2018, the International Accounting Standards Board (IASB) issued a complete set of concepts for the presentation of financial reports, the revised Conceptual Framework for financial information, replacing the previous version of the Conceptual Framework issued in 2010.

The revised Conceptual Framework has an effective date from January 1, 2020.

The Bank’s Management is evaluating the potential impact of the adoption of these amendments/ new pronouncements in its Consolidated Financial Statements.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-51

Note 1 – General Information and Summary of Significant Accounting Policies, continued

2.7 Amendment to IAS 19 “Employees benefits” – Reduction or liquidation

In February 2018, the International Accounting Standards Board (IASB) issued the Amendment, Reduction or Settlement of the Plan (Amendments to IAS 19). Modifications to accounting when a modification, reduction or liquidation of the plan occurs.

The amendments are effective for annual periods beginning on January 1, 2019.

These amendments/new pronouncements had no impact in the Consolidated Financial Statements.

2.8 Amendment to IFRS 3 “Business Combination” – Business definition

In October 2018, the International Accounting Standards Board (IASB) issued the Definition of a business to enable companies to decide whether the activities and assets they acquire are a business or simply a group of assets. Reducing the definitions of a company by focusing the definition of products on goods and services provided to customers and other income from ordinary activities, instead of providing dividends or other economic benefits directly to investors or reducing costs. Amendment to IFRS 3 or has a validity date from January 1, 2020.

The Bank’s Management is evaluating the potential impact of these amendments / new pronouncements in its Consolidated Financial Statements.

2.9 Amendment to IAS 1 “Presentation of Financial Statements” and IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors”

In October, 2018, the IASB issued amendments to the aforementioned standards to align the definition of materiality across the standards and the Conceptual Framework for Financial Information. These amendments clarity the explanation of the definition of material and incorporate some of the guidance in IAS 1 on intangible information.

The amendments are effective for annual periods beginning on January 1, 2020.

The Bank’s Management is evaluating the potential impact of the adoption of these amendments / new pronouncements in its Consolidated Financial Statements.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-52

Note 2 – Accounting Changes

IFRS 9 “Financial instruments” adoption

The Bank has adopted IFRS 9 as issued by the IASB in July 2014 with a date of transition of January 1, 2018, which resulted in changes in accounting policies.

The adoption of IFRS 9 has resulted in changes in our accounting policies for recognition, classification and measurement of financial assets and financial liabilities and impairment of financial assets. IFRS 9 also significantly amends other standards dealing with financial instruments such as IFRS 7 “Financial Instruments: Disclosures”.

As per the permitted transitional provisions of IFRS 9, the Bank elected not to revise comparative figures and thus some IFRS 9 disclosures presented in respect to certain financial assets are not comparable because their classification may have changed between both standards.

Any adjustments to the carrying amounts of financial assets and liabilities as of the date of transition were recognized as an adjustment to the opening balance of retained earnings. The Bank has also elected to continue to apply the hedge accounting requirements of IAS 39 on the adoption of IFRS 9.

Consequently, for disclosures purposes, the amendments to IFRS 7 have also been applied to the current period only. The comparative period disclosures shows those disclosures made in the prior year.

Set out below are disclosures regarding the impact of the adoption of IFRS 9 on the Bank and further details of the specific IFRS 9 accounting policies applied in the current period (as well as the previous IAS 39 accounting policies applied in the comparative period).

a) Classification and measurement of financial instrument

	IAS 39 as of December 31, 2017			IFRS 9 as of January 1, 2018
Balance	Measurement category	Portfolio	Book Value MCh$	Measurement category	Portfolio	Book Value MCh$
Trading investments	Fair value through profit or loss	Financial instruments classified as trading investments	415,061	Financial instruments at fair value through profit or loss	Financial instruments at fair value through profit or loss	423,855
Investments instruments	Fair value through profit or loss	Financial assets available for sale (including those that were valued at cost at December)	2,663,478	Financial instruments at fair value through other comprehensive income	Financial instruments at fair value through other comprehensive income	2,658,739
	Amortized cost	Financial assets classified as held to maturity	202,030	Amortized cost	Financial instruments at fair value through profit or loss	201,993
Loans and accounts receivable from customers	Amortized cost	Loans and accounts receivable from customers, net of allowances for loan losses according to IAS 39.	19,764,078	Amortized cost	Loans and accounts receivable from customers, net of allowances for loan losses according to IFRS 9.	19,642,032
Interbank loans	Amortized cost	Interbank loans, net of allowances for loan losses according to IAS 39.	70,077	Amortized cost	Interbank loans, net of allowances for loan losses according to IFRS 9.	70,077

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-53

Note 2 – Accounting Changes, continued

b) The following table shows in detail the reconciliation the consolidated balance sheet under IAS 39 as of December 31, 2017 to IFRS 9 as of January 1, 2018 distinguishing between the impacts due to classification and measurement and due to impairment once adopted IFRS9:

	IAS 39 Carrying amount			Reclassifications			Remeasurements			IFRS 9 Carrying amount
	As of December 31, 2017									As of January 1, 2018
	MCh$			MCh$			MCh$			MCh$
ASSETS
Cash and deposits in banks		964,030			—			—			964,030
Cash items in process of collection		157,017			—			—			157,017
Financial instruments at fair value through profit or loss		—			421,331			2,524			423,855		(i	)
Financial instruments at fair value through other comprehensive income		—			2,657,208			1,531			2,658,739		(ii	)
Interbank loans at amortized cost		—			70,077			—			70,077		(iii	)
Loans and accounts receivable from customers at amortized cost		—			19,764,078			(122,046	)		19,642,032		(iv	)
Financial instruments at amortized cost		—			202,030			(37	)		201,993		(v	)
Investments under resale agreements		28,524			—			—			28,524
Financial derivative contracts		1,248,775			—			—			1,248,775
Interbank loans, net		70,077			(70,077	)		—			—
Trading investments		415,061			(415,061	)					—
Loans and accounts receivable from customers, net		19,764,078			(19,764,078	)		—			—
Available for sale investments		2,663,478			(2,663,478	)		—			—
Held to maturity investments		202,030			(202,030	)		—			—
Intangible assets		1,562,654			—			—			1,562,654
Property, plant, and equipment		130,579			—			—			130,579
Current taxes		238,452			—			—			238,452
Deferred taxes		140,685			—			46,144			186,829		(vi	)
Other assets		429,025			—			—			429,025
Other non-current assets held for sale		18,308			—			—			18,308
TOTAL ASSETS		28,032,773			—			(71,884	)		27,960,889
LIABILITIES											—
Deposits and other demand liabilities		4,141,667			—			—			4,141,667
Cash in process of being cleared		109,496			—			—			109,496
Obligations under repurchase agreements		420,920			—			—			420,920
Time deposits and other time liabilities		10,065,243			—			—			10,065,243
Financial derivative contracts		1,095,154			—			—			1,095,154
Interbank borrowings		2,196,130			—			—			2,196,130
Debt instruments issued		5,950,038			—			—			5,950,038
Other financial liabilities		17,066			—			—			17,066
Current taxes		624			—			—			624
Deferred taxes		26,354			—			(2,550	)		23,804		(vii	)
Provisions		117,889			—			59,691			177,580		(viii	)
Other liabilities		463,435			—			—			463,435
Liabilities directly associated with non-current assets held for sale		—			—			—			—
TOTAL LIABILITIES		24,604,016			—			57,141			24,661,157
EQUITY
Attributable to equity holders of the Bank:
Capital		1,862,826			—			—			1,862,826
Reserves		1,290,131			—			—			1,290,131
Valuation accounts		(4,735	)		—			997			(3,738	)	(ix	)
Retained earnings:		63,255			—			(126,865	)		(63,610	)
Retained earnings from prior years		12,668			—			(59,044	)		(46,376	)	(x	)
Net income for the year		67,821			—			(67,821	)		—
Less: Provision for mandatory dividends		(17,234	)		—			—			(17,234	)
Total equity attributable to equity holders of the Bank		3,211,477			—			(125,868	)		3,085,609
Non-controlling interest		217,280			—			(3,157	)		214,123		(xi	)
TOTAL EQUITY		3,428,757			—			(129,025	)		3,299,732
TOTAL LIABILITIES AND EQUITY		28,032,773			—			(71,884	)		27,960,889

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-54

Note 2 – Accounting Changes, continued

(i) Includes reclassifications and remeasurements of instruments previously classified as trading investments and investments in equity instruments previously classified as Available for sale investments according to IAS 39.

(ii) Includes reclassifications and remeasurements of financial assets previously classified as Available for sale instruments according to IAS 39.

(iii) Includes reclassifications of financial instruments previously classified as interbank loans according to IAS 39 and remeasurement of the allowances for expected credit losses under the new model according to IFRS 9.

(iv) Includes reclassifications of financial instruments previously classified as loans and accounts receivable from customers according to IAS 39 and remeasurement of the allowances for expected credit losses under the new model according to IFRS 9.

(v) Includes reclassifications of financial instruments previously classified as held to maturity investments according to IAS 39 and remeasurement due to allowances for expected credit losses under the new model according to IFRS 9.

(vi) Recognition of deferred taxes according to IAS 12 due to IFRS 9 adoption.

(vii) Recognition of deferred taxes according to IAS 12 due to IFRS 9 adoption.

(viii) Includes the recognition of provision for expected credit losses related to contingent loans under the new model according to IFRS 9.

(ix) Includes remeasurement due to recognition of credit risk related to financial assets classified as FVTOCI.

(x) Includes all the effects due to IFRS 9 first application.

(xi) Includes the non-controlling portion of the effects arising from IFRS 9 first application.

There were no changes to the classification and measurement of financial liabilities.

The composition of the loan portfolio classified as loans and accounts receivable at amortized cost as of January 1, 2018 is as follows:

	Individual								Group
	Stage 1		Stage 2		Stage 3		Subtotals		Stage 1		Stage 2		Stage 3		Subtotals		Total loans
	12-Month ECL		Lifetime ECL		Lifetime ECL				12-Month ECL		Lifetime ECL		Lifetime ECL
Balances as of December 31, 2017		—		432,862		73,894		506,756		16,235,974		2,892,547		747,328		19,875,849		20,382,605
Restatement of the prior year		—		—		—		—		—		—		—		—		—
Balances as of January 1, 2018		—		432,862		73,894		506,756		16,235,974		2,892,547		747,328		19,875,849		20,382,605

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-55

Note 2 – Accounting Changes, continued

IFRS 15 “Revenue from Contracts with Customers” adoption

On January 1, 2018, IFRS 15 “Revenues from contracts with customers” has become effective. In accordance with the Bank’s activities, income and expenses arising from fees and commission are under the scope of this new standard. Consequently a review over fees and commissions has been performed, to ensure the five step approach is fully met.

The Bank has elected to adopt IFRS 15 using a modified retrospective approach where the cumulative effect of initially applying it is recognized as an adjustment to the opening balance of retained earnings and comparatives are not restated.

The Bank concluded that there is no impact as of January 1, 2018, however new disclosure requirements must be adopted. See Note 1 and Note 24.

Changes in CVA and DVA accounting estimate

In June, 2018, improvements were made to the methodology for the determination of the CVA (Credit Value Adjustment) and DVA (Debit Value Adjustment), mainly in the determination of the Exposure and LGD (loss given default), which is part of the valuation of the Bank’s financial derivative contracts. These improvements generated a positive effect producing a lower loss of MCh$5,809 related to CVA and a negative effect producing a lower income of MCh$1,089 related to DVA, which has been recognized as a change in an estimate in accordance with IAS 8 “Accounting policies, changes in accounting estimates and errors”.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-56

Note 3 – Significant Events

As of December 31, 2018, the following significant events have influenced the operations of the Bank and its subsidiaries or the Consolidated Financial Statements:

ITAÚ CORPBANCA

Dividend Distributions

On March 15, 2018, the Bank’s Board of Directors (the “Board”) agreed to propose to the Bank’s shareholders at the Annual Ordinary Meeting held on March 27, 2018 the distribution of 40% of the income for the year ended December 31, 2017 (as filed with the SBIF) equivalent to MCh$22,979, as a dividend to the shareholders of all 512,406,760,091 shares validly issued by the Bank, resulting in a dividend of Ch$0.04484469 per share.

At the Annual Ordinary Shareholders Meeting of Itaú Corpbanca, held on March 27, 2018, the shareholders approved the following:

1. Distribution of 40% of the income for the year ended December 31, 2017 (as filed with the SBIF) equivalent to MCh$22,979, as dividends to shareholders, resulting in a dividend of Ch$0.04484469 per share.

2. The official appointment of Bernard Pasquier as Board of Directors Member, in accordance with article 50 bis of the Chilean Corporations Act who shall hold office until the next Annual General Meeting of Shareholders, when all board members must be renewed.

Chief Executive Officer Appointment

On August 1, 2018 the Bank’s Board of Directors (the “Board”) agree to appoint Mr. Manuel Olivares Rossetti as Chief Executive Officer, starting January 1, 2019. Until December 31, 2018 Mr. Milton Maluhy Filho served as the Bank’s Chief Executive Officer.

Change of Directors

In the ordinary session held on November 27, 2018, the Board of Directors of Itaú Corpbanca accepted the resignations of directors Eduardo Vassimon and Boris Buvinic Guerovic, which became effective as of December 31, 2018.

As of January 1, 2019, Caio Ibrahim David and Milton Maluhy Filho, respectively, assume as Directors, who will remain in office until the next Ordinary General Shareholders’ Meeting, at which final appointments will be made.

Participation increase of the shareholder Itaú Unibanco Holding S.A.

On October 12, 2018 the shareholder Itaú Unibanco Holding S.A. (“Itaú Unibanco”) announced that through its subsidiary ITB Holding Brasil Participações Ltda., indirectly acquired the amount of 10,651,555,020 shares (“Shares”) of Itaú Corpbanca, at the price of MCh$65,686. This type of operation is part of the Itaú Corpbanca shareholders’ agreement signed by Itaú Unibanco and Corp Group and its related entities, on April 1, 2016. As a result of this acquisition, Itaú Unibanco’s share has increased from approximately 36.06% to 38.14%, without any changes in the corporate governance of Itaú Corpbanca (see Note 23, letter a).

This operation was implemented through the acquisition of 100% of the shares of the companies named Saga II SpA and Saga III SpA, which are the actual owners of the Shares.

All regulatory approvals to carry out this operation were duly obtained.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-57

Note 3 – Significant Events, continued

SBIF Administrative procedure

By resolution dated June 30, 2017, notified to Itaú Corpbanca on July 17, 2017, the SBIF resolved, among other matters, to order the continuation of a sanctioning administrative procedure against the Bank, for supposed transgressions of the individual credit limits in granting certain loans to Norte Grande S.A., Potasios de Chile S.A. and Sociedad de Inversiones Pampa Calichera S.A., same operations that had motivated fines annulled by the First Court of Appeals of Santiago by legal sentence dated August 31, 2016.

On July 19, 2017, the Bank appealed for a reversal against the resolution, considering it contrary to Law, among other reasons, considering that there is no administrative procedure instructed by the SBIF against the Bank that can be continued, as declared by the aforementioned procedure and by the ruling of the Supreme Court, which dismissed the appeal required by the SBIF against it. By resolution dated July 24, 2017, the SBIF rejected the aforementioned appeal for reconsideration, arguing that the proceeding was in the investigative stage, without the Bank being formally a forming part of a sanctioning administrative proceeding.

On October 23, 2017, the Bank received a letter from the SBIF, charging Itaú Corpbanca with a procedure for the same operations. The Bank has the conviction that this procedure does not comply with the Law, giving it the right to take action, as a consequence, that the legal order grants. On November 22, 2017, the Bank proceeded to formulate its corresponding releases.

Subsequently, through a letter dated December 27, 2018, the SBIF informed the conclusion of the investigation phase of the aforementioned sanctioning administrative procedure.

The results of this procedure and the Bank’s decision in this regard are detailed in Note 37 “Subsequent Events”

INSURANCE BROKERAGE SUBSIDIARIES

Merge of subsidiaries

On March 29, 2018, the partners of Itaú Chile Corredora de Seguros Limitada considered the conditions of the merger with Corpbanca Corredores de Seguros S.A. were successfully executed according to what was agreed by the partners on September 30, 2017. On April 1, 2018, the merger of Itaú Chile Corredora de Seguros Limitada into Corpbanca Corredores de Seguros S.A. was completed. For all legal purposes the legal continuation name is Itaú Corredores de Seguros S.A.

COMPANIES TRANSFORMATION

Itaú Corredores de Bolsa Limitada

Through an Extraordinary Shareholders Meeting held on July 11, 2018, reduced to a public document dated August 1, 2018 at the Santiago Notary Office of Mr. Juan Ricardo San Martin Urrejola, the shareholders approved the transformation of the company into a limited liability company under the Itaú Corredores de Bolsa Limitada corporate name, which will be governed by its bylaws and by the provisions of Law No. 3,918 and its subsequent amendments and the relevant regulations of the Civil Code and the Commercial Code.

Itaú Asesorías Financieras S.A.

On July 5, 2018, authorization was requested from the SBIF to transform Itaú Asesorías Financieras S.A. into a limited liability company. As of the date of these Consolidated Financial Statements, there is still no pronouncement from the regulator on this matter.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-58

Note 4 – Reporting Segments

The information reported by segments is determined by the Bank on the basis of its operating segments (Chile, that includes the New York Branch, and Colombia), which are mainly differentiated by the risks and rewards that affect them.

The reporting segments and the criteria used to inform the highest authority of the Bank on the decision making of the operation are in accordance with what is set forth in IFRS 8 “Operating Segments

a) Segments

According to the above, the descriptions of each operating segment are as follows:

i) Chile

The Bank’s business activities in Chile take place mainly in the local market. It has strategically aligned its operations into the following five business areas that are directly related to its customers’ needs and the Bank’s strategy: 1) Wholesale Banking (a) Corporate Banking, (b) Large Companies, and (c) Real Estate and Construction; 2) Retail Banking (a) Itaú Private Bank, (b) Itaú Companies, (c) Itaú Personal Bank (d) Itaú and (e) Banco Condell; 3) Treasury; 4) Corporate; and 5) Other Financial Services.

The Bank manages these business areas using a reporting system for internal profitability. The operating results are reviewed regularly by the entity’s highest decision-making authority for operating decisions as one single cash generating unit, to decide about resource allocation for the segment and evaluate its performance.

The Bank did not enter into transactions with a particular customer or third party that exceed 10% of its total revenue in 2018, 2017 and 2016.

ii) Colombia

Colombia has been identified as a separate operating segment based on the business activities. Its operating results are regularly reviewed by the entity’s highest decision-making authority for operating decisions as one single CGU, to decide on the resource allocation for the segment and evaluate its performance. Separate financial information is available for this segment.

The commercial activities of this segment are carried out by Itaú Corpbanca Colombia S.A. and subsidiaries

b) Geographical information

The segments reported by Itaú Corpbanca, discloses revenue from ordinary activities from external clients:

(i) attributed to the entity’s country of domicile and

(ii) Attributed, in aggregate, to all foreign countries where the entity obtains revenue.

When revenue from external customers attributed to a particular foreign country is significant, it is disclosed separately. Pursuant to the foregoing, the Bank operates in two main geographic areas: Chile and Colombia.

Chile segment includes operations carried out by Itaú Corpbanca New York Branch and the Colombia segment includes the operations carried out by Itaú S.A. (Panama) and Itaú Casa de Valores S.A.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-59

Note 4 – Reporting Segments, continued

The information on interest income and interest expenses for the years ended December 31, 2018, 2017 and 2016 of the aforementioned geographic areas is presented below:

	2018									2017									2016
	Chile			Colombia			Total			Chile			Colombia						Chile			Colombia			Total
	MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$
Interest income		1,208,481			530,836			1,739,317			1,067,124			579,205			1,646,329			1,013,951			495,252			1,509,203
Interest expense		(593,796	)		(257,858	)		(851,654	)		(529,584	)		(333,763	)		(863,347	)		(554,246	)		(315,782	)		(870,028	)
Net interest income		614,685			272,978			887,663			537,540			245,442			782,982			459,705			179,470			639,175

c) Information on assets, liabilities and income

Segment information on assets and liabilities is presented as of December 31, 2018 and 2017.

c.1 Assets and Liabilities

	As of December 31, 2018
	Chile		Colombia		Total
	MCh$		MCh$		MCh$
Cash and deposits in banks		483,416		504,264		987,680
Cash items in process of collection		318,433		225		318,658
Financial instruments at fair value through profit or loss		54,162		42,781		96,943
Financial instruments at fair value through other comprehensive income		1,594,955		1,062,199		2,657,154
Loans and accounts receivable at amortized cost and interbank loans		16,616,358		4,439,256		21,055,614
Financial instruments at amortized cost		122,385		76,538		198,923
Investments under resale agreements		91,510		17,957		109,467
Financial derivative contracts		1,266,218		102,739		1,368,957
Intangible assets		1,432,529		138,435		1,570,964
Property, plant, and equipment		78,430		17,134		95,564
Current taxes		70,255		52,874		123,129
Deferred taxes		151,194		27,492		178,686
Other assets		378,691		123,106		501,797
Other non-current assets held for sale		59,802		—		59,802
TOTAL ASSETS		22,718,338		6,605,000		29,323,338
	As of December 31, 2018
	Chile		Colombia		Total
	MCh$		MCh$		MCh$
LIABILITIES
Deposits and other demand liabilities		2,463,722		1,836,753		4,300,475
Cash in process of being cleared		247,165		—		247,165
Obligations under repurchase agreements		370,623		644,991		1,015,614
Time deposits and other time liabilities		8,104,729		2,016,382		10,121,111
Financial derivative contracts		1,035,394		77,412		1,112,806
Interbank borrowings		1,602,125		725,598		2,327,723
Debt instruments issued		5,445,000		565,124		6,010,124
Other financial liabilities		12,400		—		12,400
Current taxes		528		663		1,191
Deferred taxes		—		471		471
Provisions		140,663		74,240		214,903
Other liabilities		471,672		50,123		521,795
Liabilities directly associated with non-current assets held for sale		—		—		—
TOTAL LIABILITIES		19,894,021		5,991,757		25,885,778

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-60

Note 4 – Reporting Segments, continued

				As of December 31, 2017
	Note			Chile		Colombia		Total
				MCh$		MCh$		MCh$
Cash and deposits in banks					609,279		354,751		964,030
Cash items in process of collection					155,950		1,067		157,017
Investments under resale agreements					2,292		26,232		28,524
Financial derivative contracts					1,158,002		90,773		1,248,775
Trading investments					25,652		389,409		415,061
Loans and accounts receivable from customers, net and interbank loans					15,599,269		4,234,886		19,834,155
Available for sale instruments					1,937,909		725,569		2,663,478
Held to maturity investments					95,652		106,378		202,030
Intangible assets					1,378,942		183,712		1,562,654
Property, plant, and equipment					82,481		48,098		130,579
Current taxes					202,093		36,359		238,452
Deferred taxes					140,685		—		140,685
Other assets					348,717		80,308		429,025
Other non-current assets held for sale					18,308		—		18,308
TOTAL ASSETS					21,755,231		6,277,542		28,032,773
				As of December 31, 2017
	Note			Chile		Colombia		Total
				MCh$		MCh$		MCh$
LIABILITIES
Deposits and other demand liabilities		16			2,399,159		1,742,508		4,141,667
Cash in process of being cleared		5b	)		109,496		—		109,496
Obligations under repurchase agreements		7			44,264		376,656		420,920
Time deposits and other time liabilities		16			7,868,572		2,196,671		10,065,243
Financial derivative contracts		8			1,036,024		59,130		1,095,154
Interbank borrowings		17			1,545,143		650,987		2,196,130
Debt instruments issued		18			5,484,562		465,476		5,950,038
Other financial liabilities		18			16,255		811		17,066
Current taxes		14			624		—		624
Deferred taxes		14			53		26,301		26,354
Provisions		19			61,038		56,851		117,889
Other liabilities		20			399,760		63,675		463,435
Liabilities directly associated with non-current assets held for sale		20			—		—		—
TOTAL LIABILITIES					18,964,950		5,639,066		24,604,016

(*) This includes goodwill generated in business combinations between Itaú Chile and Corpbanca totaling MCh$1,135,392 as of December 31, 2018 (MCh$1,126,663 in 2017).

c.2 Income for the years ended December 31, 2018, 2017, and 2016

	2018									2017									2016
	Chile			Colombia			Total			Chile			Colombia			Total			Chile			Colombia			Total
	MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$
Net interest income		591,575			296,088			887,663			537,540			245,442			782,982			459,705			179,470			639,175
Net fee and commission income		149,673			36,456			186,129			135,624			41,947			177,571			112,147			38,649			150,796
Net income from financial operations		128,264			44,491			172,755			(49,615	)		57,883			8,268			38,642			74,310			112,952
Net foreign exchange gain (loss)		5,726			(23,691	)		(17,965	)		34,661			11,504			46,165			(26,744	)		(22,104	)		(48,848	)
Other operating income		14,337			12,319			26,656			33,398			8,134			41,532			9,058			10,389			19,447
Provision for loan losses		(127,804	)		(151,994	)		(279,798	)		(169,233	)		(146,184	)		(315,417	)		(146,812	)		(99,178	)		(245,990	)
NET OPERATING PROFIT		761,771			213,669			(975,440	)		522,375			218,726			741,101			445,996			181,536			627,532
Depreciation and amortization		(53,544	)		(33,273	)		(86,817	)		(51,213	)		(30,632	)		(81,845	)		(40,610	)		(23,082	)		(63,692	)
Operating expenses (*)		(442,943	)		(211,767	)		(654,710	)		(424,733	)		(224,569	)		(649,302	)		(397,060	)		(155,875	)		(552,935	)
OPERATING INCOME		265,284			(31,371	)		233,913			46,429			(36,475	)		9,954			8,326			2,579			10,905
Income taxes		(85,269	)		18,210			(67,059	)		31,188			21,683			52,871			(84	)		3,652			3,568
Income from discontinued operations		—			—			—			—			—			—			(504	)		—			(504	)
CONSOLIDATED INCOME FOR THE YEAR		180,015			(13,161	)		166,854			77,617			(14,792	)		62,825			7,738			6,231			13,969
(*)   Includes personnel salaries and expenses, administrative expenses, impairment, and other operating expenses

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-61

Note 5 – Cash and Cash Equivalents

a) Detail of cash and cash equivalents

The detail of the balances included under cash and cash equivalents is as follows:

	As of December 31,
	2018		2017
	MCh$		MCh$
Cash and deposits in banks
Cash		255,449		254,824
Deposits in the Central Bank of Chile		70,444		53,187
Deposits in local banks		4,422		9,389
Deposits in foreign banks		657,365		646,630
Subtotals cash and deposits in banks		987,680		964,030
Cash items in process of collection, net		71,493		47,521
Highly liquid financial instruments (1)		194,412		35,014
Investments under resale agreements (2)		109,467		28,524
Totals cash and cash equivalents		1,363,052		1,075,089

(1) Highly liquid financial instruments: Corresponds to those financial instruments included in the Financial instruments at fair value through profit or loss Financial trading and available-for-sale portfolios with maturities that do not exceed three months from the acquisition date and the detail is as follows:

			As of December 31,
	Notes		2018		2017
			MCh$		MCh$
Highly liquid financial instruments
Financial instruments at fair value through profit or loss		6		15,741		—
Trading investments		6		—		19,239
Financial instruments at fair value through other comprehensive income		11		178,671		—
Available for sale investments		11		—		15,775
Totals				194,412		35,014

(2) Investments under resale agreements: corresponds to resale agreements with maturities that do not exceed three months from the acquisition date, which are presented under the item “Investments under resale agreements” in the Consolidated Statement of Financial Position. The detail is as follows:

				As of December 31,
	Notes			2018		2017
				MCh$		MCh$
Investment under resale agreements		7a	)		109,467		28,524

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-62

Note 5 – Cash and Cash Equivalents, continued

b) Cash in the process of collection

a. Cash in process of collection and in process of being cleared

Cash items in process of collection and in process of being cleared represent domestic transactions, which have not been processed through the central domestic clearinghouse, or international transactions that may be delayed in settlement due to timing differences. The detail of these balances is as follows:

	As of December, 31
	2018		2017
	MCh$		MCh$
Assets
Documents held by other banks (documents to be cleared)		77,085		66,996
Funds receivable		241,573		90,021
Subtotals assets		318,658		157,017
Liabilities
Funds payable		247,165		109,496
Subtotals liabilities		247,165		109,496
Cash items in process of collection, net		71,493		47,521

b. Other operating cash flows

Based on the nature of its activities, the Bank considers that its funding has a direct relationship with its loan and investing portfolio; for such purpose all those activities are taken into consideration to determine, approve and monitor the financial strategies that guide the Bank with respect to the composition of its assets and liabilities, cash inflows and outflows and transactions with financial instruments.

Finally, the Bank, based on its overall business strategy, considers that gains and losses derived from these transactions are part of the main revenue generating activities and core business, and that the presentation of the cash flows from those items under operating activities consequently shows consistency between our Consolidated Statement of Income and our Consolidated Statement of Cash Flows.

Examples of cash flows from operating activities are:

i. Investments under resale agreements and obligations under repurchase agreements. These items represent the cash flows (collections and payments) corresponding to the purchase and sale of obligations and securities lending associated with financial intermediation activities (see Note 7).

ii. Investments portfolio. This item represents the cash flows (collections and payments) of our trading and investment portfolios (see Notes 6 and 11).

iii. Foreign borrowings and repayment of foreign borrowings. These items represent the cash flows (funds received and payments made) from interbank borrowings (see note 17) which are mainly used in the financing of customers through foreign trade loans, which are included as part of the following items: “Interbank loans” (see Note 9) and “Loans and accounts receivable from customers” (see Note 10).

iv. Increase and repayment of other borrowings. These items represent the cash flows (collections and payments) arising from the obligations corresponding to financing or operations specific to the business (see Note 18).

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-63

Note 6 – Financial Instruments at Fair Value through Profit or Loss and Trading Investments

a. The detail of the financial instruments at fair value through profit or loss according to IFRS 9 is as follows:

	As of December 31, 2018
	MCh$
Chilean Central Bank and Government securities
Chilean Central Bank securities		21,736
Other Chilean Central Bank and Government securities		14,872
Other Chilean securities
Bonds		3
Notes		4,014
Foreign financial securities
Bonds		23,276
Other securities		19,505
Investments in mutual funds
Funds managed by related entities		3,532
Other investments
Other financial instruments at FVTPL		10,005
Totals		96,943

As of December 31, 2018, the financial instruments at fair value through profit or loss include MCh$15,741 in instruments with maturities which do not exceed three months from the acquisition date and are considered as cash equivalents (see Note 5).

b. The detail of the trading investments according to IAS 39 is as follows:

	As of December 31, 2017
	MCh$
Chilean Central Bank and Government securities
Chilean Central Bank securities		3,963
Other Chilean Central Bank and Government securities		3,163
Other Chilean securities
Bonds		5
Other securities		—
Foreign financial securities
Bonds		381,262
Other securities		8,147
Investments in mutual funds
Funds managed by related entities		18,521
Other investments
Other trading investments		—
Totals		415,061

As of December 31, 2017 trading investments include MCh$19,239 in instruments with maturities which do not exceed three months from the acquisition date and are considered as cash equivalents (see Note 5).

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-64

Note 7 – Investments under Resale Agreements and Obligations under Repurchase Agreements

a. The Bank purchases financial instruments agreeing to resell them at a future date. As of December 31, 2018 and 2017 the instruments acquired under resale agreements are as follows:

	As of December 31, 2018								As of December 31, 2017
	Up to 3 months		Between 3 months and 1 year		Over 1 year		Totals		Up to 3 months		Between 3 months and 1 year		Over 1 year		Totals
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$
Chilean Central Bank and Government securities
Chilean Central Bank securities		14,533		—		—		14,533		2,292		—		—		2,292
Government securities		76,977		—		—		76,977		—		—		—		—
Other Chilean Central Bank and Government securities		—		—		—		—		—		—		—		—
Other Chilean securities
Bonds		—		—		—		—		—		—		—		—
Notes		—		—		—		—		—		—		—		—
Other securities
Foreign financial securities		—		—		—		—		—		—		—		—
Central Banks and Government securities		17,351		—		—		17,351		21,248		—		—		21,248
Other foreign instruments		606		—		—		606		4,984		—		—		4,984
Totals		109,467		—		—		109,467		28,524		—		—		28,524

b. As of December 31, 2018 and 2017, the instruments acquired under agreements to repurchase are as follows:

	As of December 31, 2018								As of December 31, 2017
	Up to 3 months		Between 3 months and 1 year		Over 1 year		Totals		Up to 3 months		Between 3 months and 1 year		Over 1 year		Totals
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$
Chilean Central Bank and Government securities
Chilean Central Bank securities		21,018		—		—		21,018		—		—		—		—
Government securities		283,898		—		—		283,898		11,703		—		—		11,703
Other Chilean Central Bank and Government securities		—		—		—		—		—		—		—		—
Other Chilean securities
Bonds		—		—		—		—		26,573		—		—		26,573
Notes		—		—		—		—		5,988		—		—		5,988
Other Chilean securities		65,707		—		—		65,707		—		—		—		—
Foreign financial securities
Central Banks and Government securities		—		—		—		—		—		—		—		—
Other foreign instruments		644,991		—		—		644,991		376,656		—		—		376,656
Totals		1,015,614		—		—		1,015,614		420,920		—		—		420,920

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-65

Note 8 – Financial Derivative Contracts and Hedge Accounting

The Bank and subsidiaries use the following derivative financial instruments for hedge accounting and trading purposes, which, in order to capture the credit risk in the valuation, are adjusted to reflect the CVA (Credit Value Adjustment). The detail of these instruments is presented below:

	As of December 31, 2018				As of December 31, 2017
	Assets		Liabilities		Assets		Liabilities
	MCh$		MCh$		MCh$		MCh$
Derivatives held for hedge accounting		86,562		75,615		51,409		121,378
Derivatives held for trading		1,282,395		1,037,191		1,197,366		973,776
Totals		1,368,957		1,112,806		1,248,775		1,095,154

a.1 Financial derivative assets

	As of December 31, 2018
	Notional						Fair value
	Up to 3 months		Between 3 months and 1 year		Over 1 year
	MCh$		MCh$		MCh$		MCh$
Currency forwards		3,643,505		703,790		419,833		342,993
Currency swaps		168,254		1,817,002		6,449,984		468,093
Interest rate swaps		3,061,784		8,933,622		34,958,699		553,608
Call currency options		26,435		102,163		17,750		4,217
Put currency options		1,119		33,260		—		46
Totals		6,901,097		11,589,837		41,846,266		1,368,957

	As of December 31, 2017
	Notional						Fair value
	Up to 3 months		Between 3 months and 1 year		Over 1 year
	MCh$		MCh$		MCh$		MCh$
Currency forwards		8,855,360		5,728,141		700,252		316,901
Currency swaps		92,772		299,288		3,260,432		396,239
Interest rate swaps		5,781,923		10,258,903		23,469,906		534,505
Call currency options		33,709		47,300		26,223		421
Put currency options		6,675		9,827		25,808		709
Totals		14,770,439		16,343,459		27,482,621		1,248,775

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-66

Note 8 – Financial Derivative Contracts and Hedge Accounting, continued

a.2 Financial derivative liabilities

	As of December 31, 2018
	Notional						Fair value
	Up to 3 months		Between 3 months and 1 year		Over 1 year
	MCh$		MCh$		MCh$		MCh$
Currency forwards		1,406,262		550,427		113,872		322,241
Currency swaps		658,937		1,035,357		3,169,546		298,415
Interest rate swaps		3,111,787		5,826,465		26,522,433		489,718
Call currency options		11,540		35,344		—		1,493
Put currency options		16,367		38,172		11,115		939
Totals		5,204,893		7,485,765		29,816,966		1,112,806
	As of December 31, 2017
	Notional						Fair value
	Up to 3 months		Between 3 months and 1 year		Over 1 year
	MCh$		MCh$		MCh$		MCh$
Currency forwards		9,023,102		5,821,573		807,071		333,482
Currency swaps		109,275		414,355		2,822,789		290,288
Interest rate swaps		5,481,548		8,843,640		20,720,506		468,928
Call currency options		6,675		7,369		—		86
Put currency options		17,629		25,459		415		2,370
Totals		14,638,229		15,112,396		24,350,781		1,095,154

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-67

Note 8 – Financial Derivative Contracts and Hedge Accounting, continued

a.3 Portfolio detail

As of December 31, 2018 and 2017, the portfolio of financial derivative instruments held for hedge accounting and trading purposes is as follows:

	As of December 31, 2018
	Notional						Fair value
	Up to 3 months		Between 3 months and 1 year		Over 1 year		Assets		Liabilities
	MCh$		MCh$		MCh$		MCh$		MCh$
Derivatives held for hedge accounting		3,661,557		1,323,671		2,527,255		86,562		75,615
Fair value hedge
Currency forwards		32,639		17,421		102,847		16,461		5,814
Currency swaps		610,980		192,926		—		7,697		11,038
Interest rate swaps		1,231		52,105		2,194,956		15,492		16,995
Subtotals		644,850		262,452		2,297,803		39,650		33,847
Cash flow hedge
Currency forwards		2,188,426		—		130,191		4,835		1,283
Currency swaps		—		330,033		—		13,363		17,593
Interest rate swaps		—		198,573		99,261		1,119		1,892
Subtotals		2,188,426		528,606		229,452		19,317		20,768
Hedge of net investment in a foreign operation
Currency forwards		828,281		532,613		—		27,595		21,000
Subtotals		828,281		532,613		—		27,595		21,000
Derivatives held for trading		8,444,433		17,751,931		69,135,977		1,282,395		1,037,191
Currency forwards		2,000,421		704,183		300,667		294,102		294,144
Currency swaps		216,211		2,329,400		9,619,530		447,033		269,784
Interest rate swaps		6,172,340		14,509,409		59,186,915		536,997		470,831
Call currency options		37,975		137,507		17,750		4,217		1,493
Put currency options		17,486		71,432		11,115		46		939
Subtotals		8,444,433		17,751,931		69,135,977		1,282,395		1,037,191
Totals		12,105,990		19,075,602		71,663,232		1,368,957		1,112,806

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-68

Note 8 – Financial Derivative Contracts and Hedge Accounting, continued

	As of December 31, 2017
	Notional						Fair value
	Up to 3 months		Between 3 months and 1 year		Over 1 year
	MCh$		MCh$		MCh$		MCh$		MCh$
Derivatives held for hedge accounting		2,950,441		1,195,024		3,516,621		51,409		121,378
Fair value hedge
Currency forwards		—		—				1,417		78
Currency swaps		—		—		264,226		2,735		40,441
Interest rate swaps		442,426		7,567		2,186,949		7,832		39,327
Subtotals		442,426		7,567		2,451,175		11,984		79,846
Cash flow hedge
Currency forwards		1,401,144		590,463		219,453		8,787		3,946
Currency swaps		—		—		309,970		—		22,315
Interest rate swaps		—		305,800		536,023		1,680		6,481
Subtotals		1,401,144		896,263		1,065,446		10,467		32,742
Hedge of net investment in a foreign operation
Currency forwards		1,106,871		291,194		—		28,958		8,790
Subtotal		1,106,871		291,194		—		28,958		8,790
Derivatives held for trading		26,458,227		30,260,831		48,316,781		1,197,366		973,776
Currency forwards		15,370,447		10,668,057		1,287,870		277,739		320,668
Currency swaps		202,047		713,643		5,509,025		393,504		227,532
Interest rate swaps		10,821,045		18,789,176		41,467,440		524,993		423,120
Call currency options		40,384		54,669		26,223		421		86
Put currency options		24,304		35,286		26,223		709		2,370
Subtotals		26,458,227		30,260,831		48,316,781		1,197,366		973,776
Totals		29,408,668		31,455,855		51,833,402		1,248,775		1,095,154

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-69

Note 8 – Financial Derivative Contracts and Hedge Accounting, continued

b. Hedge accounting

b.1) Fair value hedges:

The Bank uses interest rate derivatives to manage its structural risk by minimizing accounting asymmetries in the Statement of Financial Position. Through different hedging strategies, it redenominates an element originally at a fixed rate to a floating rate, thus decreasing the financial duration and consequently risk, aligning the balance sheet structure with expected movements in the yield curve.

The following table presents the hedged items and the hedging instrument at fair value as of December 31, 2018 and 2017, detailed by maturity:

	As of December 31, 2018
	Notional
	Up to 1 year		Between 1 and 3 years		Between 3 and 6 years		Over 6 years		Totals
	MCh$		MCh$		MCh$		MCh$		MCh$
Hedged items
Loans and accounts receivable from customers
Commercial and mortgage loans		1,232		156,772		261,860		289,724		709,588
Financial instruments at FVTPL
Treasury bonds		666,388		52,132		35,297		42,189		796,006
Debt instruments issued
Current bonds		239,682		55,132		94,000		1,310,697		1,699,511
Totals		907,302		264,036		391,157		1,642,610		3,205,105
Hedging instruments										—
Currency forwards		—		—		—		—		—
Currency swaps		187,578		—		—		—		187,578
Interest rate swaps		719,724		264,036		391,157		1,642,610		3,017,527
Totals		907,302		264,036		391,157		1,642,610		3,205,105

	As of December 31, 2017
	Notional
	Up to 1 year		Between 1 and 3 years		Between 3 and 6 years		Over 6 years		Totals
	MCh$		MCh$		MCh$		MCh$		MCh$
Hedged items
Loans and accounts receivable from customers
Commercial and mortgage loans		12,978		7,704		402,977		320,539		744,198
Available for sale investments
Treasury bonds		—		57,003		1,629		183,675		242,307
Debt instruments issued
Current bonds		437,015		488,291		77,728		1,009,468		2,012,502
Totals		449,993		552,998		482,334		1,513,682		2,999,007
Hedging instruments
Currency swaps		—		264,226		—		—		264,226
Interest rate swaps		449,993		288,772		482,334		1,513,682		2,734,781
Totals		449,993		552,998		482,334		1,513,682		2,999,007

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-70

Note 8 – Financial Derivative Contracts and Hedge Accounting, continued

Below is an estimate of the periods in which flows are expected to be produced:

Forecasted cash flows by interest rate risk:

	As of December 31, 2018
	Notional
	Up to 1 year			Between 1 and 3 years			Between 3 and 6 years			Over 6 years			Totals
	MCh$			MCh$			MCh$			MCh$			MCh$
Hedged items
Inflows		9,678			17,366			15,632			7,728			50,404
Outflows		(24,604	)		(37,185	)		(50,215	)		(70,615	)		(182,619	)
Net Flows		(14,926	)		(19,819	)		(34,583	)		(62,887	)		(132,215	)
Hedging instruments (*)
Outflows		(9,678	)		(17,366	)		(15,632	)		(7,728	)		(50,404	)
Inflows		24,604			37,185			50,215			70,615			182,619
Net flows		14,926			19,819			34,583			62,887			132,215
	As of December 31, 2017
	Notional
	Up to 1 year			Between 1 and 3 years			Between 3 and 6 years			Over 6 years			Totals
	MCh$			MCh$			MCh$			MCh$			MCh$
Hedged items
Inflows		14,981			27,525			32,376			18,608			93,490
Outflows		(25,575	)		(37,197	)		(39,863	)		(76,755	)		(179,390	)
Net flows		(10,594	)		(9,672	)		(7,487	)		(58,147	)		(85,900	)
Hedging instruments (*)
Outflows		(14,981	)		(27,525	)		(32,376	)		(18,608	)		(93,490	)
Inflows		25,575			37,197			39,863			76,755			179,390
Net flows		10,594			9,672			7,487			58,147			85,900

(*) Only includes cash flows forecast portion of the hedge instruments used to cover interest rate risk.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-71

Note 8 – Financial Derivative Contracts and Hedge Accounting, continued

b.2) Cash flow hedges:

Cash flow hedge is used by the Bank mainly to:

• Reduce the volatility of cash flows in items in the Statement of Financial position that are indexed to inflation through the use of inflation forwards and combinations of swaps in pesos and indexed units.

• Set the rate of a portion of the pool of short-term liabilities in pesos, thus reducing the risk of an important part of the Bank’s cost of funding, although still maintaining the liquidity risk of the pool. This is achieved by setting the cash flows of the hedged items equal to those of the derivative instruments, modifying uncertain cash flows for certain cash flows.

• It also sets the rate of funding sources at a floating rate, decreasing the risk that its funding costs increase.

The following table presents the nominal values of the hedged item as of December 31, 2018 and 2017:

	As of December 31, 2018
	Notional
	Up to 1 year		Between 1 and 3 years		Between 3 and 6 years		Over 6 years		Totals
	MCh$		MCh$		MCh$		MCh$		MCh$
Hedged item
Loans and accounts at amortized cost
Loans (inflation-indexed)		2,015,643		9,961		—		—		2,025,604
Commercial loans (interest rate)		—		28,000		20,000		—		48,000
Time deposits and other time liabilities
Time deposits		129,100		52,027		—		46,698		227,825
Debt instruments issued
Current bonds		173,683		—		—		—		173,683
Interbank borrowings
Interbank loans		398,606		—		72,766		—		471,372
Totals		2,717,032		89,988		92,766		46,698		2,946,484
Hedging instruments
Currency forwards		2,073,971		—		—		—		2,073,971
Currency swaps		444,488		—		72,766		—		517,254
Interest rate swaps		198,573		89,988		20,000		46,698		355,259
Totals		2,717,032		89,988		92,766		46,698		2,946,484
	As of December 31, 2017
	Notional
	Up to 1 year		Between 1 and 3 years		Between 3 and 6 years		Over 6 years		Totals
	MCh$		MCh$		MCh$		MCh$		MCh$
Hedged item
Loans and accounts receivables from customers
Loans (inflation-indexed)		1,991,607		188,730		—		—		2,180,337
Commercial loans (interest rate)		—		30,723		57,823		174,300		262,846
Time deposits and other time liabilities
Time deposits		305,800		303,900		—		—		609,700
Debt instruments issued
Current bonds		—		309,970		—		—		309,970
Interbank borrowings
Interbank loans		—		—		—		—		—
Totals		2,297,407		833,323		57,823		174,300		3,362,853
Hedging instruments
Currency forwards		1,991,607		219,453		—		—		2,211,060
Currency swaps		—		309,970		—		—		309,970
Interest rate swaps		305,800		303,900		57,823		174,300		841,823
Totals		2,297,407		833,323		57,823		174,300		3,362,853

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-72

Note 8 – Financial Derivative Contracts and Hedge Accounting, continued

Below is an estimate of the periods in which flows are expected to occur.

Forecasted cash flows by interest rate risk:

	As of December 31, 2018
	Notional
	Up to 1 year			Between 1 and 3 years			Between 3 and 6 years			Over 6 years			Totals
	MCh$			MCh$			MCh$			MCh$			MCh$
Hedged items
Inflows		1,848,702			169,442			521			—			2,018,665
Outflows		(11,046	)		(3,797	)		(5,693	)		(2,837	)		(23,373	)
Net Flows		1,837,656			165,645			(5,172	)		(2,837	)		1,995,292
Hedging instruments (*)
Outflows		(1,848,702	)		(169,442	)		(521	)		—			(2,018,665	)
Inflows		11,046			3,797			5,693			2,837			23,373
Net flows		(1,837,656	)		(165,645	)		5,172			2,837			(1,995,292	)
	As of December 31, 2017
	Notional
	Up to 1 year			Between 1 and 3 years			Between 3 and 6 years			Over 6 years			Totals
	MCh$			MCh$			MCh$			MCh$			MCh$
Hedged items
Inflows		1,982,371			225,180			2,459			—			2,210,010
Outflows		(29,873	)		(33,024	)		(21,918	)		(15,460	)		(100,275	)
Net Flows		1,952,498			192,156			(19,459	)		(15,460	)		2,109,735
Hedging instruments (*)
Outflows		(1,982,371	)		(225,180	)		(2,459	)		—			(2,210,010	)
Inflows		29,873			33,024			21,918			15,460			100,275
Net flows		(1,952,498	)		(192,156	)		19,459			15,460			(2,109,735	)

(*) Only includes cash flows forecast portion of the hedge instruments used to cover interest rate risk.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-73

Note 8 – Financial Derivative Contracts and Hedge Accounting, continued

	As of December 31,
	2018						2017
	Effective portion			Ineffective portion			Effective portion			Ineffective portion
	MCh$			MCh$			MCh$			MCh$
Hedged item
Loans and accounts receivables from customers
Loans (inflation-indexed)		8,557			2,032			—			—
Commercial loans (interest rate)		1,024			270			1,890			155
Time deposits and other time liabilities
Time deposits		(236	)		—			(3,037	)		(126	)
Debt instruments issued
Current bonds		(3,829	)		(2,718	)		(4,583	)		(1,329	)
Interbank borrowings
Interbank loans		43			—			—			—
Totals		5,559			(416	)		(5,730	)		(1,300	)

The effective portion generated by cash flow derivatives recorded in the Consolidated Statement of Changes in Equity as of December 31, 2018 and 2017.

The income generated by cash flow hedge derivatives whose effect was transferred from Other Comprehensive Income to Income for the year, is as follow:

	As of December 31,
	2018		2017
	MCh$		MCh$
Hedged item
Loans and accounts receivables from customers
Loans (inflation-indexed)		—		—
Commercial loans (interest rate)		—		—
Time deposits and other time liabilities
Time deposits		200		72
Debt instruments issued
Current bonds		—		—
Interbank borrowings
Interbank loans		—		—
Totals		200		72

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-74

Note 8 – Financial Derivative Contracts and Hedge Accounting, continued

b.3) Hedge of net investment in foreign operations:

Itaú Corpbanca, the parent company whose functional currency is the Chilean peso, has foreign business investments consisting of a branch in New York and subsidiaries in Colombia. As a result of the proper accounting treatment for these investments, fluctuations in the value of the investments as a result of changes in the Chilean peso-Colombian peso exchange rate alter the parent company’s equity. The objective of these hedges is to safeguard the value of equity by managing exchange rate risk affecting the investments.

Hedges of a net investment in a foreign operation, including hedges of monetary items that are accounted for as part of a net investment, are recorded to cash flow hedges, where:

• The portion of the gain or loss from the hedge instrument that is determined to be an effective hedge is recognized in equity. As of December 31, 2018, this was a debit of MCh$19,791 (credit of MCh$45,759 net of deferred taxes as of December 31, 2017).

•

The ineffective portion is recognized in profit or loss. No such amounts were recorded in 2018 and 2017.

			As of December 31,
	Notes		2018			2017
			MCh$			MCh$
Opening balances				45,759			10,773
Gains (losses) on hedge of net investment in foreign operation, before tax		22 j		(36,533	)		49,197
Income tax relating to hedges of net investment in foreign operations		22 j		10,565			(14,211	)
Ending balances				19,791			45,759

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-75

Note 8 – Financial Derivative Contracts and Hedge Accounting, continued

Each hedge is detailed in the table below:

b.3.1) Hedge of net investment in New York Branch

	Notional		Market value of hedging instruments			Gain or loss on hedging instruments recognized in equity for the year			Ineffectiveness recognized in profit or loss
	MUSD		MCh$			MCh$			MCh$
As of December 31, 2018		168		(5,151	)		(10,354	)		—
As of December 31, 2017		150		4,698			4,698			—

b.3.2) Hedge of net investment in Itaú Corpbanca Colombia

As of December 31, 2018

Notional

Statements of Changes in Equity

Statement of Income

Up to 1 year

Between 1 and 3 years

Between 3 and 6 years

Over 6 years

Effective portion for the year

Ineffective portion

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

Hedged items

Equity

Foreign investments

1,360,894

—

—

74,648

(26,179

)

—

Hedging instrument

Foreign currency forwards

1,360,894

—

—

—

(26,179

)

—

As of December 31, 2017

Notional

Statements of Changes in Equity

Statement of Income

Up to 1 year

Between 1 and 3 years

Between 3 and 6 years

Over 6 years

Effective portion for the year

Ineffective portion

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

Hedged items

Equity

Foreign investments

1,398,065

—

—

—

44,499

—

Hedging instrument

Foreign currency forwards

1,398,065

—

—

—

44,499

—

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-76

Note 9 – Interbank Loans

As of December 31, 2018, the balances presented under the item “Interbank loans, net”, according to IFRS 9 are as follows:

	As of December 31, 2018
	MCh$
Local banks
Loans to local banks		—
Allowances for loans losses		—
Subtotals		—
Foreign banks
Interbank cash loans		30,507
Loans to foreign banks		5,594
Non-transferable deposits with foreign banks		65,556
Allowances for loans losses		(463	)
Subtotals		101,194
Chilean Central Bank
Deposits with the Chilean Central Bank not available (*)		240,050
Subtotals		240,050
Totals		341,244

(*) These are deposits that do not qualify as time deposits

Movements in allowances and impairment for interbanks loans during the year ended December 31, 2018 are detailed as follows:

	Foreign banks
	Stage 1			Stage 2		Stage 3		Totals
	12-Month ECL			Lifetime ECL		Lifetime ECL
	MCh$			MCh$		MCh$		MCh$
Balances as of December 31, 2017		208			—		—		208
Restatement of the prior year		—			—		—		—
Balances as of January 1, 2018		208			—		—		208
Changes in the allowances
- Transfer to stage 1		—			—		—		—
- Transfer to stage 2		—			—		—		—
- Transfer to stage 3		—			—		—		—
- Increases due to change in credit risk		—			—		—		—
- Decreases due to change in credit risk		—			—		—		—
- Charge-offs		—			—		—		—
- Changes due to modifications that did not result in derecognition		—			—		—		—
New financial assets originated or purchased		344			—		—		344
Financial assets that have been derecognized		(131	)		—		—		(131	)
Changes in models/risk parameters		—			—		—		—
Foreign exchange and other movements		42			—		—		42
Balances as of December 31, 2018		463			—		—		463

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-77

Note 9 - Interbank Loans, continued

As of December 31, 2017, the balances presented under the item “Interbank loans, net”, according to IAS 39 are as follows:

	As of December 31, 2017
	MCh$
Local banks
Loans to local banks		—
Allowances for loans losses		—
Subtotals		—
Foreign banks
Interbank cash loans		862
Loans to foreign banks		13,875
Non-transferable deposits with foreign banks		21,544
Allowances for loans losses		(208	)
Subtotals		36,073
Chilean Central Bank
Deposits with the Chilean Central Bank not available (*)		34,004
Subtotals		34,004
Totals		70,077

(*) These are deposits that do not qualify as time deposits

Movements in allowances and impairment for loans with domestic and foreign Banks during as of December 31, 2017 are detailed as follows:

	Notes		Local banks		Foreign banks			Totals
			MCh$		MCh$			MCh$
Balances as of January 1, 2017				—		(212	)		(212	)
Charge-offs				—		—			—
Allowances established		27		—		(226	)		(226	)
Allowances released		27		—		209			209
Impairment				—		—			—
Exchange differences				—		21			21
Balances as of December 31, 2017				—		(208	)		(208	)

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-78

Note 10 – Loans and Accounts Receivable from Customers

a. Loans and account receivables from customers

As of December 31, 2018, the composition of the loan portfolio under IFRS 9 is as follows:

			Allowances for loan losses
As of December 31, 2018	Gross assets		Individual allowances		Group allowances		Totals		Net assets
	MCh$		MCh$		MCh$		MCh$		MCh$
Commercial loans:
Commercial loans		11,457,388		133,610		258,177		391,787		11,065,601
Foreign trade loans		928,443		—		7,964		7,964		920,479
Checking account debtors		131,100		—		6,801		6,801		124,299
Factoring transactions		210,567		—		9		9		210,558
Student loans		676,689		—		51,091		51,091		625,598
Leasing transactions		928,160		—		25,113		25,113		903,047
Other commercial loans and receivables		34,553		—		1,942		1,942		32,611
Subtotals		14,366,900		133,610		351,097		484,707		13,882,193
Mortgage loans:
Loans with mortgage finance bonds		38,364		—		472		472		37,892
Endorsable mutual mortgage loans		118,668		—		8,016		8,016		110,652
Other mutual mortgage loans		3,953,245		—		52,138		52,138		3,901,107
Mortgage leasing transactions		312,118		—		4,395		4,395		307,723
Other mortgage loans and receivables		23,432		—		1,096		1,096		22,336
Subtotals		4,445,827		—		66,117		66,117		4,379,710
Consumer loans:
Installment consumer loans		1,921,785		—		155,472		155,472		1,766,313
Checking account debtors		209,492		—		17,579		17,579		191,913
Credit card balances		481,567		—		38,426		38,426		443,141
Consumer leasing transactions		6,203		—		476		476		5,727
Other consumer loans and receivables		50,716		—		5,343		5,343		45,373
Subtotals		2,669,763		—		217,296		217,296		2,452,467
Totals		21,482,490		133,610		634,510		768,120		20,714,370

Movements in the loan portfolio for the year ended December 31, 2018 is as follows:

	Loans
	Stage 1			Stage 2			Stage 3
	12-Month ECL			Lifetime ECL			Lifetime ECL			Totals
Balances as of December 31, 2017		16,235,974			3,325,409			821,222			20,382,605
Restatement of the prior year		—			—			—			—
Balances as of January 1, 2018		16,235,974			3,325,409			821,222			20,382,605
Changes in the allowances											—
- Transfer to stage 1		—			159,276			108,329			267,605
- Transfer to stage 2		(284,179	)		—			134,222			(149,957	)
- Transfer to stage 3		(109,278	)		(153,171	)		—			(262,449	)
- Charge-offs		(25,209	)		(24,473	)		(131,943	)		(181,625	)
- Changes due to modifications that did not result in derecognition		—			—			—			—
New financial assets originated or purchased		7,894,302			700,572			322,298			8,917,172
Financial assets that have been derecognized		(6,165,474	)		(1,126,300	)		(375,859	)		(7,667,633	)
Foreign exchange and other movements		151,638			18,426			6,708			176,772
Balances as of December 31, 2018		17,697,774			2,899,739			884,977			21,482,490

	Assets before allowances								ECL allowance
As of December 31, 2018	Stage 1		Stage 2		Stage 3				Stage 1		Stage 2		Stage 3				Net
	MCh$		MCh$		MCh$		Total		MCh$		MCh$		MCh$		Total		Assets
Commercial loans		11,935,270		1,796,562		635,068		14,366,900		61,971		155,958		266,778		484,707		13,882,193
Mortgage loans		3,626,811		659,119		159,897		4,445,827		5,756		37,800		22,561		66,117		4,379,710
Consumer loans		2,135,693		444,058		90,012		2,669,763		70,765		84,842		61,689		217,296		2,452,467
Total		17,697,774		2,899,739		884,977		21,482,490		138,492		278,600		351,028		768,120		20,714,370

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-79

Note 10 – Loans and Accounts Receivable from Customers, continued

As of December 31, 2017, the composition of the loan portfolio under IAS 39 is as follows:

	Gross assets						Allowances for loan losses
As of December 31, 2017	Normal portfolio		Impaired portfolio		Totals		Individual allowances		Group allowances		Totals		Net assets
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$
Commercial loans:
Commercial loans		10,345,995		770,081		11,116,076		263,552		117,666		381,218		10,734,858
Foreign trade loans		650,959		49,774		700,733		21,617		7,638		29,255		671,478
Checking accounts debtors		131,332		8,016		139,348		1,903		2,848		4,751		134,597
Factoring transactions		140,375		363		140,738		270		93		363		140,375
Student loans		598,108		54,895		653,003		—		12,794		12,794		640,209
Leasing transactions		851,882		88,907		940,789		10,445		6,837		17,282		923,507
Other commercial loans and receivables		24,261		1,598		25,859		365		886		1,251		24,608
Subtotals		12,742,912		973,634		13,716,546		298,152		148,762		446,914		13,269,632
Mortgage loans:
Loans with mortgage finance bonds		44,432		2,968		47,400		—		140		140		47,260
Endorsable mortgage mutual loans		127,153		8,766		135,919		—		1,816		1,816		134,103
Other mortgage mutual loans		3,507,384		153,516		3,660,900		—		23,736		23,736		3,637,164
Mortgage leasing transactions		272,544		9,591		282,135		—		8,960		8,960		273,175
Other mortgage loans and receivables		24,231		2,168		26,399		—		367		367		26,032
Subtotals		3,975,744		177,009		4,152,753		—		35,019		35,019		4,117,734
Consumer loans:
Installment consumer loans		1,725,652		84,397		1,810,049		—		100,068		100,068		1,709,981
Checking account debtors		193,325		14,176		207,501		—		11,840		11,840		195,661
Credit card balances		405,786		15,383		421,169		—		19,664		19,664		401,505
Consumer leasing transactions		10,832		344		11,176		—		398		398		10,778
Other consumer loans and receivables		60,651		2,760		63,411		—		4,624		4,624		58,787
Subtotals		2,396,246		117,060		2,513,306		—		136,594		136,594		2,376,712
Totals		19,114,902		1,267,703		20,382,605		298,152		320,375		618,527		19,764,078

Normal portfolio

This includes individual debtors in the Normal portfolio (A1 to A6) and in the Substandard portfolio (categories B1 and B2, only). For collectively assessed loans, it includes the Normal portfolio.

Impaired Portfolio

This includes individual debtors in the Non-compliant portfolio (C1 to C6) and in the Substandard portfolio (categories B3 and B4, only). For collectively assessed loans, it includes the Non-compliant portfolio.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-80

Note 10 – Loans and Accounts Receivable from Customers, continued

Guarantees taken by the Bank to secure collections of rights reflected in its loan portfolios are real mortgage-type guarantees (urban and rural property, farm land, ships and aircraft, mining claims and other assets) and pledges (inventory, farm assets, industrial assets, plantings and other pledged assets). As of December 31, 2018 and 2017, the fair value of guarantees taken corresponds to 136.48% and 126.76% of the assets covered, respectively.

In the case of mortgage guarantees, as of December 31, 2018 and 2017, the fair value of the guarantees taken corresponds to 90.10% and 85.38% of the balance receivable on loans, respectively.

The Bank finances its customers’ purchases of assets, including real estate and other personal property, through finance lease agreements that are presented within this item. As of December 31, 2018, the Bank recorded MCh$436,654 in finance leases for property (MCh$306,931 as of December 31, 2017) and MCh$809,826 in finance leases for real estate property (MCh$927,168 as of December 31, 2017).

b. Portfolio characteristics

As of December 31, 2018 and 2017, the loan portfolio before allowances for loan losses by customer economic activity was as follows:

	As of December 31, 2018
	Local loans		Foreign loans		Totals		Distribution percentage
	MCh$		MCh$		MCh$		%
Commercial loans
Manufacturing		982,497		114,714		1,097,211		5.11	%
Mining		424,883		252,894		677,777		3.16	%
Electricity, gas and water		600,667		356,706		957,373		4.46	%
Agriculture and livestock		207,271		139,098		346,369		1.61	%
Forestry and wood extraction		24,511		5,172		29,683		0.14	%
Fishing		1,945		1,530		3,475		0.02	%
Transport		509,354		191,047		700,401		3.26	%
Communications		23,886		62,191		86,077		0.40	%
Construction		1,436,096		310,530		1,746,626		8.13	%
Commerce		861,291		758,817		1,620,108		7.54	%
Services		2,735,023		1,137,037		3,872,060		18.02	%
Others		2,436,337		793,403		3,229,740		15.03	%
Subtotals		10,243,761		4,123,139		14,366,900		66.88	%
Mortgage loans		3,852,962		592,865		4,445,827		20.70	%
Consumer loans		1,750,986		918,777		2,669,763		12.43	%
Total		15,847,709		5,634,781		21,482,490		100	%
	As of December 31, 2017
	Local loans		Foreign loans		Totals		Distribution percentage
	MCh$		MCh$		MCh$		%
Commercial loans
Manufacturing		784,608		255,883		1,040,491		5.10	%
Mining		363,065		280,996		644,061		3.16	%
Electricity, gas and water		589,067		347,416		936,483		4.59	%
Agriculture and livestock		205,333		210,597		415,930		2.04	%
Forestry and wood extraction		22,975		15,832		38,807		0.19	%
Fishing		1,527		12,385		13,912		0.07	%
Transport		461,486		206,991		668,477		3.28	%
Communications		29,296		65,143		94,439		0.46	%
Construction		1,368,057		270,063		1,638,120		8.04	%
Commerce		815,184		897,666		1,712,850		8.40	%
Services		2,616,171		1,164,562		3,780,733		18.55	%
Others		2,322,773		409,470		2,732,243		13.40	%
Subtotals		9,579,542		4,137,004		13,716,546		67.30	%
Mortgage loans		3,635,993		516,760		4,152,753		20.37	%
Consumer loans		1,544,062		969,244		2,513,306		12.33	%
Total		14,759,597		5,623,008		20,382,605		100	%

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-81

Note 10 – Loans and Accounts Receivable from Customers, continued

c. Allowances for loans losses

Movements in allowances for loan losses during the year ended December 31, 2018, under IFRS 9, detailed as follows:

	Individually assessed											Group assessed
	Stage 1		Stage 2			Stage 3			Subtotals			Stage 1			Stage 2			Stage 3			Subtotals			Totals
	12-Month ECL		Lifetime ECL			Lifetime ECL						12-Month ECL			Lifetime ECL			Lifetime ECL
Balances as of January 1, 2018		—		49,389			32,736			82,125			126,230			248,129			284,089			658,448			740,573
Changes in the allowances
- Net transfers to stage 1		—		—			—			—			—			36,325			41,471			77,796			77,796
- Net transfer to stage 2		—		—			—			—			(5,233	)		—			49,097			43,864			43,864
- Net transfer to stage 3		—		—			—			—			(4,354	)		(22,811	)		—			(27,165	)		(27,165	)
- Increases due to change in credit risk		—		3,732			16,587			20,319			18,307			18,459			28,670			65,436			85,755
- Decreases due to change in credit risk		—		(532	)		(1,706	)		(2,238	)		(23,460	)		(27,162	)		(9,105	)		(59,727	)		(61,965	)
- Charge-offs													(21,316	)		(18,559	)		(95,091	)		(134,966	)		(134,966	)
- Changes due to modifications that did not result in derecognition																									—
New financial assets originated or purchased		—		6,428			17,037			23,465			66,074			54,568			77,069			197,711			221,176
Financial assets that have been derecognized		—		(20,636	)		(15,355	)		(35,991	)		(19,950	)		(58,405	)		(78,728	)		(157,083	)		(193,074	)
Net transfer from (to) group assessed		—		7,772			38,158			45,930			138			(1,761	)		(38,158	)		(39,781	)		6,149
Foreign exchange and other movements													2,056			3,664			4,257			9,977			9,977
Balances as of December 31, 2018		—		46,153			87,457			133,610			138,492			232,447			263,571			634,510			768,120

The detail by type of portfolio (commercial, mortgage and consumer) is as follow:

	Individually assessed											Group assessed
	Stage 1		Stage 2			Stage 3			Subtotals			Stage 1			Stage 2			Stage 3			Subtotals			Totals
Commercial	12-Month ECL		Lifetime ECL			Lifetime ECL						12-Month ECL			Lifetime ECL			Lifetime ECL
Balances as of January 1, 2018		—		49,389			32,736			82,125			63,093			131,854			211,463			406,410			488,535
Changes in the allowances
- Net transfers to stage 1		—		—			—			—			—			14,148			24,174			38,322			38,322
- Net transfer to stage 2		—		—			—			—			(1,047	)		—			39,461			38,414			38,414
- Net transfer to stage 3		—		—			—			—			(3,426	)		(18,176	)		—			(21,602	)		(21,602	)
- Increases due to change in credit risk		—		3,732			16,587			20,319			8,594			6,716			12,823			28,133			48,452
- Decreases due to change in credit risk		—		(532	)		(1,706	)		(2,238	)		(12,651	)		(10,713	)		(8,321	)		(31,685	)		(33,923	)
- Charge-offs													(10,983	)		(7,447	)		(57,566	)		(75,996	)		(75,996	)
- Changes due to modifications that did not result in derecognition																									—
New financial assets originated or purchased		—		6,428			17,037			23,465			27,419			16,594			42,544			86,557			110,022
Financial assets that have been derecognized		—		(20,636	)		(15,355	)		(35,991	)		(10,395	)		(23,782	)		(50,516	)		(84,693	)		(120,684	)
Net transfer from (to) group assessed		—		7,772			38,158			45,930			138			(1,761	)		(38,158	)		(39,781	)		6,149
Foreign exchange and other movements													1,229			2,372			3,417			7,018			7,018
Balances as of December 31, 2018		—		46,153			87,457			133,610			61,971			109,805			179,321			351,097			484,707

	Stage 1			Stage 2			Stage 3
Mortgage	12-Month ECL			Lifetime ECL			Lifetime ECL			Totals
Balances as of January 1, 2018		3,962			37,460			19,049			60,471
Changes in the allowances
- Transfer to stage 1		—			5,344			2,644			7,988
- Transfer to stage 2		(206	)		—			4,253			4,047
- Transfer to stage 3		(73	)		(2,918	)		—			(2,991	)
- Increases due to change in credit risk		1,203			5,921			1,619			8,743
- Decreases due to change in credit risk		(394	)		(7,002	)		(321	)		(7,717	)
- Write-Offs		—			(13	)		(2,491	)		(2,504	)
- Changes due to modifications that did not result in derecognition											—
New financial assets originated or purchased		1,639			1,577			405			3,621
Financial assets that have been derecognized		(399	)		(2,792	)		(2,710	)		(5,901	)
Changes in models/risk parameters											—
Foreign exchange and other movements		24			223			113			360
Balances as of December 31, 2018		5,756			37,800			22,561			66,117

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-82

Note 10—Loans and Accounts Receivable from Customers, continued

Consumer	Stage 1			Stage 2			Stage 3			Totals
	12-Month ECL			Lifetime ECL			Lifetime ECL
Balances as of January 1, 2018		59,175			78,815			53,577			191,567
Changes in the allowances
- Transfer to stage 1		—			16,833			14,653			31,486
- Transfer to stage 2		(3,980	)		—			5,383			1,403
- Transfer to stage 3		(855	)		(1,717	)		—			(2,572	)
- Increases due to change in credit risk		8,510			5,822			14,228			28,560
- Decreases due to change in credit risk		(10,415	)		(9,447	)		(463	)		(20,325	)
- Write-Offs		(10,333	)		(11,099	)		(35,034	)		(56,466	)
- Changes due to modifications that did not result in derecognition
New financial assets originated or purchased		37,016			36,397			34,120			107,533
Financial assets that have been derecognized		(9,156	)		(31,831	)		(25,502	)		(66,489	)
Changes in models/risk parameters
Foreign exchange and other movements		803			1,069			727			2,599
Balances as of December 31, 2018		70,765			84,842			61,689			217,296

Movements in credit risk provisions during the years ended December 31, 2017, under IAS 39, detailed as follows:

	Note			Individual allowances			Group allowances			Total
				MCh$			MCh$			MCh$
Balances as of January 1, 2017					366,058			193,246			559,304
Portfolio charge-offs
Commercial loans					(69,702	)		(39,648	)		(109,350	)
Mortgage loans					—			(8,303	)		(8,303	)
Consumer loans					—			(115,708	)		(115,708	)
Total charge-offs					(69,702	)		(163,659	)		(233,361	)
Allowances established					338,701			480,567			819,268
Allowances released					(302,504	)		(169,801	)		(472,305	)
Application of provisions					(9,760	)		—			(9,760	)
Exchange rate differences					(24,641	)		(19,978	)		(44,619	)
Balances as of December 31, 2017		10a	)		298,152			320,375			618,527

d. Portfolio sales

As of December 31, 2018 and 2017, the Bank and its subsidiaries engaged in portfolio purchases and sales. The effect on result of these transactions amounts to MCh$1,602 as of December 31, 2018 (MCh$15,121 as of December 31, 2017), the effect on income of these transactions as a whole does not exceed 5% of before tax profit for the year, and is recorded within net gains from trading and investment income activities in the consolidated statement of income for the year, disclosed in Note 25 “Net income (expense) from financial operations” within “Sale of loans and accounts receivable from customers”.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-83

Note 10 – Loans and Accounts Receivable from Customers, continued

d.1 Current and charged-off portfolios sales

As of December 31, 2018 and 2017, the Bank and its subsidiaries derecognized 100% of its sold portfolio, thus complying with the requirements of the accounting policy for derecognizing financial assets and liabilities in Note 1, letter l), point iv) of the annual Consolidated Financial Statements. The main sales during 2018 and 2017 were of loans related to Law 20,027, which are detailed in point d.2).

	For the year ended December 31, 2018											For the year ended December 31, 2017
Portfolio	Loan value		Allowances		Sale price		Adjustment to EIR		Net effect on income			Loan value		Allowances		Sale price		Adjustment to EIR		Net effect on income
	MCh$		MCh$		MCh$		MCh$		MCh$			MCh$		MCh$		MCh$		MCh$		MCh$
Current		62,261		24,797		24,662		—		(12,802	)		22,739		5,619		14,715		—		(2,405	)
Charged-off		—		—		1,132		—		1,132			—		—		1,674		—		1,674
Totals		62,261		24,797		25,794		—		(11,670	)		22,739		5,619		16,389		—		(731	)

d.2 CAE portfolio sale

For the year ended December 31, 2018, a gain was recognized amounting to MCh$13,272 (MCh$15,852 for the year ended December 31, 2017) corresponding to the income generated in the sale included directly in the Consolidated Statement of Income under “Net income from financial operations”. An adjustment to the effective interest rate for MCh$11,768 as of December 31, 2018 (MCh$14,058 as of December 31, 2017) is allocated to the portion of the CAE portfolio that was classified as loans at amortized cost, recognizing an effective interest rate equivalent for all these operations, according to IFRS 9 (IAS 39 in 2017).

For the year ended December 31, 2018

For the year ended December 31, 2017

Portfolio

Loan value

Allowances

Sale price

Adjustment to EIR

Net effect on income

Loan value

Allowances

Sale price

Adjustment to EIR

Net effect on income

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

CAE

95,521

119

120,442

11,768

13,272

118,027

212

147,725

14,058

15,852

e. Lease

As of December 31, 2018 and 2017, the Bank’s scheduled cash flows to be received from finance lease contracts have the following maturities:

	Total receivable				Unearned income				Net lease receivable
	As of December 31,				As of December 31,				As of December 31,
	2018		2017		2018		2017		2018		2017
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$
Up to 1 month		29,177		29,846		1,310		3,677		27,867		26,169
More than 1 month to 3 months		31,278		32,672		2,636		2,857		28,642		29,815
More than 3 months up to 1 year		116,526		120,691		10,621		11,596		105,905		109,095
More than 1 year up to 3 years		257,976		262,576		31,491		33,717		226,485		228,859
More than 3 years up to 6 years		284,920		283,010		54,922		57,453		229,998		225,557
More than 6 years		1,077,447		1,062,625		449,864		448,020		627,584		614,605
Totals		1,797,324		1,791,420		550,844		557,320		1,246,481		1,234,100

	As of December 31,
	2018		2017
Leasing transactions	MCh$		MCh$
Commercial		928,160		940,789
Mortgage		312,118		282,135
Consumer		6,203		11,176
Totals		1,246,481		1,234,100

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-84

Note 11 – Investment instruments

a) Financial instruments at fair value through other comprehensive income and at amortized cost—under IFRS 9

As of December 31, 2018, the detail of financial instruments measured at FVOCI and at amortized cost is as follows:

	As of December 31, 2018
	At FVTOCI		At amortized cost		Totals
	MCh$		MCh$		MCh$
Securities quoted in active markets
Chilean Central Bank and Government securities
Chilean Central Bank securities		411,431		—		411,431
Chilean Treasury bonds		913,041		—		913,041
Other government securities		27,612		—		27,612
Other local institutions financial instruments
Time deposits in local banks		185,501		—		185,501
Mortgage finance bonds		50		—		50
Chilean financial institutions bonds		—		—		—
Other local financial investments		5,979		—		5,979
Foreign institutions financial instruments
Foreign Governments and Central Banks financial instruments		769,693		198,923		968,616
Other foreign financial instruments		332,560		—		332,560
Investments not quoted in active markets
Corporate bonds		4,909		—		4,909
Other financial instruments at FVOCI		6,378		—		6,378
Totals		2,657,154		198,923		2,856,077

As of December 31, 2018 this total includes MCh$178,671, included in Note 5 “Cash and cash equivalents,” which corresponds to those financial instruments with maturities that do not exceed three months from their dates of acquisition.

As of December 31, 2018, the portfolio at FVTOCI includes an unrealized gain of MCh$25,450, presented in Equity as valuation accounts, distributed among a gain of MCh$17,793 attributable to equity holders and a gain of MCh$7,657 attributable to non-controlling interest.

Impairment

As of December 31, 2018 the portfolio of debt securities classified as investment instruments at fair value through other comprehensive income includes impairment movements as summarized below:

	Financial instruments at FVOCI
	Stage 1			Stage 2		Stage 3		Totals
	12-Month ECL			Lifetime ECL		Lifetime ECL
Balances as of December 31, 2017		—			—		—		—
Restatement of the prior year due to IFRS 9 adoption		520			—		—		520
Balances as of January 1, 2018		520			—		—		520
Changes in the allowances
- Transfer to stage 1		—			—		—		—
- Transfer to stage 2		—			—		—		—
- Transfer to stage 3		—			—		—		—
- Increases due to change in credit risk		—			—		—		—
- Decreases due to change in credit risk		—			—		—		—
- Charge-offs		—			—		—		—
- Changes due to modifications that did not result in derecognition		—			—		—		—
New financial assets originated or purchased		25			—		—		25
Financial assets that have been derecognized		(411	)		—		—		(411	)
Changes in models/risk parameters		—			—		—		—
Foreign exchange and other movements		—			—		—		—
Balances as of December 31, 2018		134			—		—		134

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-85

Note 11 – Investment instruments, continued

As of December 31, 2018 the portfolio of investment instruments at amortized cost includes impairment movements as summarized below:

	Financial instruments at Amortized cost
	Stage 1			Stage 2		Stage 3		Totals
	12-Month ECL			Lifetime ECL		Lifetime ECL
Balances as of December 31, 2017		—			—		—		—
Restatement of the prior year due to IFRS 9 adoption		37			—		—		37
Balances as of January 1, 2018		37			—		—		37
Changes in the allowances
- Transfer to stage 1		—			—		—		—
- Transfer to stage 2		—			—		—		—
- Transfer to stage 3		—			—		—		—
- Increases due to change in credit risk		—			—		—		—
- Decreases due to change in credit risk		(50	)		—		—		(50	)
- Charge-offs		—			—		—		—
- Changes due to modifications that did not result in derecognition		—			—		—		—
New financial assets originated or purchased		—			—		—		—
Financial assets that have been derecognized		—			—		—		—
Changes in models/risk parameters		—			—		—		—
Foreign exchange and other movements		—			—		—		—
Balances as of December 31, 2018		(13	)		—		—		(13	)

Unrealized gains and losses of the portfolio at FVTOCI

Unrealized gains and losses of the FVTOCI portfolio as of December 31, 2018 are detailed as follows:

	As of December 31, 2018
	Acquisition cost		Unrealized					Fair value
			Gain		Losses
Securities quoted in active markets
Chilean Central Bank and Government securities
Chilean Central Bank instruments		411,223		533		(325	)		411,431
Chilean Treasury bonds		911,596		2,458		(1,013	)		913,041
Other government securities		28,131		—		(519	)		27,612
Other local institutions financial instruments
Time deposits in local banks		185,468		70		(37	)		185,501
Mortgage finance bonds		50		—		—			50
Chilean financial institutions bonds		—		—		—			—
Other local financial investments		4,001		1,978		—			5,979
Foreign institutions financial instruments
Foreign governments and Central Banks financial instruments		752,791		24,505		(7,603	)		769,693
Other foreign financial instruments		329,196		5,741		(2,377	)		332,560
Investments not quoted in active markets
Corporate bonds		4,924		5		(20	)		4,909
Other financial instruments at FVOCI		4,324		2,054		—			6,378
Totals		2,631,704		37,344		(11,894	)		2,657,154

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-86

Note 11 – Investment instruments, continued

b) Investment instruments - under IAS 39

As of December 31, 2017, the detail of available for sale and held to maturity financial instruments is as follows:

	As of December 31, 2017
	Available for sale		Held to maturity		Total
	MCh$		MCh$		MCh$
Securities quoted in active markets
Chilean Central Bank and Government securities
Chilean Central Bank securities		687,945		—		687,945
Chilean Treasury bonds		1,081,879		—		1,081,879
Other government securities		14,053		—		14,053
Other local institutions financial instruments
Time deposits in local banks		114,038		—		114,038
Mortgage finance bonds		64		—		64
Chilean financial institutions bonds		9,032		—		9,032
Other local financial investments		6,159		—		6,159
Foreign institutions financial instruments
Foreign governments and Central Banks financial instruments		420,687		—		420,687
Other foreign financial instruments		300,740		202,030		502,770
Investments not quoted in active markets
Corporate bonds		18,469		—		18,469
Other financial instruments		10,412		—		10,412
Total		2,663,478		202,030		2,865,508

As of December 31, 2017 this total includes MCh$15,775, included in Note 5 “Cash and cash equivalents,” which corresponds to those financial instruments with maturities that do not exceed three months from their dates of acquisition.

As of December 31, 2017, the portfolio of available for sale includes an unrealized gain of MCh$24,552, presented as equity reserve accounts, distributed among a profit of MCh$16,592 attributable to equity holders and a gain of MCh$7,960 attributable to non-controlling interest.

Impairment of investment instruments

The Bank’s portfolio of fair value through other comprehensive income does not present impairment as of December 31, 2017.

The detail of investments quoted in non-active markets classified as available for sale has been recorded at fair value.

Itaú Corpbanca reviewed the instruments with unrealized losses as of December 31, 2017, concluding that they were not impairments other than temporary. Therefore, they do not imply adjustments to results of the fiscal year.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-87

Note 11 – Investment instruments, continued

Unrealized gains and losses of the available for sale portfolio

Unrealized gains and losses of the available for sale portfolio as of December 31, 2017 are detailed as follows:

	As of December 31, 2017
	Amortized cost		Unrealized					Fair value
			Gain		Losses
Securities quoted in active markets
Chilean Central Bank and Government securities
Chilean Central Bank securities		688,770		806		(1,631	)		687,945
Chilean Treasury bonds		1,081,633		3,526		(3,280	)		1,081,879
Other government securities		14,206		—		(153	)		14,053
Other local institutions financial instruments
Time deposits in local banks		114,073		—		(35	)		114,038
Mortgage finance bonds		64		—		—			64
Chilean financial institutions bonds		9,034		25		(27	)		9,032
Other local financial investments		3,942		2,217		—			6,159
Foreign institutions financial instruments
Foreign Governments and Central Banks financial instruments		416,995		3,921		(229	)		420,687
Other foreign financial instruments		281,833		19,090		(183	)		300,740
Investments not quoted in active markets
Corporate bonds		17,964		505		—			18,469
Other financial instruments		10,412		—		—			10,412
Totals		2,638,926		30,090		(5,538	)		2,663,478

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-88

Note 12 – Intangible assets

a. Composition of intangibles assets as of December 31, 2018 and 2017 is as follows:

Concept	Useful life years		Remaining amortization years		Net assets as of January 1, 2018		Gross balance		Accumulated amortization			Net assets as of December 31, 2018
					MCh$		MCh$		MCh$			MCh$
Computer equipment system or software		6		3		113,355		263,179		(111,339	)		151,840
IT projects and licenses		6		2		16,663		42,601		(29,987	)		12,614
Assets generated in business combination						1,431,990		1,518,599		(112,583	)		1,406,016
Goodwill		—		—		1,126,663		1,135,392		—			1,135,392
Trademarks		10		8		42,106		51,432		(14,430	)		37,002
Customer relationship		12		10		76,038		93,591		(24,332	)		69,259
Core deposits		9		7		187,183		238,184		(73,821	)		164,363
Other projects		10		1		646		3,645		(3,151	)		494
Totals						1,562,654		1,828,024		(257,060	)		1,570,964
Concept	Useful life years		Remaining amortization years		Net assets as of January 1, 2017		Gross balance		Accumulated amortization			Net assets as of December 31, 2017
					MCh$		MCh$		MCh$			MCh$
Computer equipment system or software		6		5		87,324		203,080		(89,725	)		113,355
IT projects and licenses		6		5		21,300		42,474		(25,811	)		16,663
Assets generated in business combination						1,505,034		1,502,615		(70,625	)		1,431,990
Goodwill						1,145,308		1,126,663		—			1,126,663
Trademarks		10		9		47,209		51,417		(9,311	)		42,106
Customer relationship		12		11		89,827		91,046		(15,008	)		76,038
Core deposits		9		8		222,690		233,489		(46,306	)		187,183
Other projects		10		1		817		3,645		(2,999	)		646
Totals						1,614,475		1,751,814		(189,160	)		1,562,654

b. Movements on gross balances of intangible assets as of December 31, 2018 and 2017 are as follows:

	Computer equipment system or software			IT projects and licenses			Assets generated in business combination			Goodwill			Other projects		Total
	MCh$			MCh$			MCh$			MCh$			MCh$		MCh$
Balances as of January 1, 2018		203,080			42,474			375,952			1,126,663			3,645		1,751,814
Acquisitions		58,085			111			—			—			—		58,196
Disposals		(147	)		—			—			—			—		(147	)
Exchange differences		2,161			16			7,255			8,729			—		18,161
Balances as of December 31, 2018		263,179			42,601			383,207			1,135,392			3,645		1,828,024
	Computer equipment system or software			IT projects and licenses			Assets generated in business combination			Goodwill			Other projects		Total
	MCh$			MCh$			MCh$			MCh$			MCh$		MCh$
Balances as of January 1, 2017		162,385			42,447			391,583			1,145,308			3,645		1,745,368
Acquisitions		42,867			36			—			—			—		42,903
Disposals		(123	)		—			—			—			—		(123	)
Exchange differences		(2,049	)		(9	)		(15,631	)		(18,645	)		—		(36,334	)
Balances as of December 31, 2017		203,080			42,474			375,952			1,126,663			3,645		1,751,814

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-89

Note 12 – Intangible assets, continued

c.    Movements on accumulated amortization of intangible assets for the years ended December 31, 2018 and 2017 are as follows:

	Computer equipment system or software			IT projects and licenses			Assets generated in business combination			Other projects			Totals
	MCh$			MCh$			MCh$			MCh$			MCh$
Balances as of January 1, 2018		(89,725	)		(25,811	)		(70,625	)		(2,999	)		(189,160	)
Amortization for the year		(20,868	)		(4,164	)		(40,976	)		(150	)		(66,158	)
Exchange differences		(746	)		(12	)		(982	)		(2	)		(1,742	)
Balances as of December 31, 2018		(111,339	)		(29,987	)		(112,583	)		(3,151	)		(257,060	)
	Computer equipment system or software			IT projects and licenses			Assets generated in business combination			Other projects			Totals
	MCh$			MCh$			MCh$			MCh$			MCh$
Balances as of January 1, 2017		(75,061	)		(21,147	)		(31,857	)		(2,828	)		(130,893	)
Amortization for the year		(16,607	)		(4,672	)		(41,038	)		(158	)		(62,475	)
Exchange differences		1,943			8			2,270			(13	)		4,208
Balances as of December 31, 2017		(89,725	)		(25,811	)		(70,625	)		(2,999	)		(189,160	)

d. Impairment

Itaú Corpbanca evaluates, at the end of each reporting period, whether there is any indication of impairment of any asset (including Goodwill). If this indication exists, or when an impairment test is required, the Bank estimates the recoverable amount of the asset.

As of December 31, 2018 and 2017 there is no indication nor concrete evidence of impairment (see details in note 30). As of the date of these Consolidated Financial Statements, there have been no events that require the recognition of impairment.

e. Restrictions

Itaú Corpbanca and its subsidiaries have no restrictions on intangible assets as of December 31, 2018 and 2017. In addition, no intangible assets have been pledged as collateral to secure the fulfillment of any obligations. Moreover, there are no amounts owed by the Bank on intangible assets as of the aforementioned dates.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-90

Note 13 – Property, plant and equipment

a. Property, plant and equipment as of December 31, 2018 and 2017 are broken down as follows.

	Useful life years		Remaining depreciation years		Net assets as of January 1, 2018		Gross Balance		Accumulated depreciation			Net assets as of December 31, 2018
					MCh$		MCh$		MCh$			MCh$
Land and buildings		19		14		83,151		65,843		(22,778	)		43,065
Equipment		3		1		25,160		80,383		(47,776	)		32,607
Others		3		2		22,268		50,248		(30,356	)		19,892
Furniture						10,357		27,440		(18,067	)		9,373
Leased assets						—		28		(28	)		—
Others						11,911		22,780		(12,261	)		10,519
Totals						130,579		196,474		(100,910	)		95,564
	Useful life years		Remaining depreciation years		Net assets as of January 1, 2017		Gross Balance		Accumulated depreciation			Net assets as of December 31, 2017
					MCh$		MCh$		MCh$			MCh$
Land and buildings		25		16		78,034		118,481		(35,330	)		83,151
Equipment		5		1		25,997		65,018		(39,858	)		25,160
Others		8		3		17,012		50,773		(28,505	)		22,268
Furniture						8,418		27,860		(17,503	)		10,357
Leased assets						50		28		(28	)		—
Others						8,544		22,885		(10,974	)		11,911
Totals						121,043		234,272		(103,693	)		130,579

The useful life presented in the preceding tables, corresponds to the total useful life and residual useful life for the property, plant and equipment. Total useful lives have been determined based on our expected use of the assets, considering quality of the original construction, the environment in which the assets are located, quality and degree of maintenance carried out, and appraisals performed by external experts of the Bank.

b. Movements on gross balances as of December 31, 2018, and 2017, are as follows:

	Land and buildings			Equipment			Other			Totals
	MCh$			MCh$			MCh$			MCh$
Balances as of January 1, 2018		118,481			65,018			50,773			234,272
Acquisitions		6,207			16,253			2,296			24,756
Sales and/or disposals for the year		(14,010	)		(2,334	)		(3,187	)		(19,531	)
Reclassification to assets held for sale (*)		(45,123	)		(101	)		(101	)		(45,325	)
Exchange differences		288			1,547			467			2,302
Balances as of December 31, 2018		65,843			80,383			50,248			196,474

(*) See detail in Note 15 “Other assets and non-current assets held for sale”.

	Land and buildings			Equipment			Other			Totals
	MCh$			MCh$			MCh$			MCh$
Balances as of January 1, 2017		107,989			62,007			42,726			212,722
Acquisitions		27,125			7,853			9,274			44,252
Sales and/or disposals for the year		(12,636	)		(2,241	)		(952	)		(15,829	)
Exchange differences		(3,997	)		(2,601	)		(275	)		(6,873	)
Balances as of December 31, 2017		118,481			65,018			50,773			234,272

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-91

Note 13 – Property, plant and equipment, continued

c. Movements of accumulated depreciation of property, plant and equipment for years ended December 31, 2018 and 2017, are as follows:

	Land and buildings			Equipment			Other			Total
	MCh$			MCh$			MCh$			MCh$
Balances as of January 1, 2018		(35,330	)		(39,858	)		(28,505	)		(103,693	)
Depreciation for the year		(7,833	)		(9,182	)		(3,644	)		(20,659	)
Sales and/or disposals for the year		6,796			2,237			2,429			11,462
Reclassification to assets held for sale (*)		(883	)		(987	)		(705	)		(2,575	)
Exchange differences		14,472			42			69			14,583
Impairment		—			(28	)		—			(28	)
Balances as of December 31, 2018		(22,778	)		(47,776	)		(30,356	)		(100,910	)

(*) See detail in Note 15 “Other assets and non-current assets held for sale”.

	Land and buildings			Equipment			Other			Total
	MCh$			MCh$			MCh$			MCh$
Balances as of January 1, 2017		(29,955	)		(36,010	)		(25,714	)		(91,679	)
Depreciation of the year		(7,218	)		(8,054	)		(4,098	)		(19,370	)
Sales and/or disposals for the year		—			2,178			481			2,659
Exchange Differences		1,843			2,055			826			4,724
Impairment		—			(27	)		—			(27	)
Balances as of December 31, 2017		(35,330	)		(39,858	)		(28,505	)		(103,693	)

d. As of December 31, 2018 and 2017, the Bank has contracts of operating lease that cannot be cancel unilaterally. The information for future payments is as follows:

Future operating lease payments for land, buildings and equipment
	Up to 1 year		Between 1 and 5 years		Over 5 years		Totals
	MCh$		MCh$		MCh$		MCh$
As of December 31, 2018		23,140		59,171		54,892		137,203
As of December 31, 2017		23,021		76,949		103,195		203,165

e. As of December 31, 2018 and 2017, the Bank holds finance lease contracts that cannot be rescinded or unilaterally terminated. The future payment information is detailed as follows:

Future financial leasing payments for land, buildings and equipment
	Up to 1 year		Between 1 and 5 years		Over 5 years		Totals
	MCh$		MCh$		MCh$		MCh$
As of December 31, 2018		9,373		181,804		45,451		236,628
As of December 31, 2017		9,078		43,730		43,730		96,538

f. The Bank and subsidiaries have no restrictions on property, plant and equipment as of December 31, 2018 and 2017. Additionally, property, plant and equipment has not been pledged to ensure compliance with obligations. Furthermore, there are no amounts owed by the Bank on property, plant and equipment as of the aforementioned dates.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-92

Note 14 – Current Taxes and Deferred Taxes

a) Current taxes

At the end of each reporting period, the Bank and subsidiaries recognize a First Category Income Tax Provision, which is determined based on currently enacted tax legislation. The net provision for current taxes recognized as of December 31, 2018 was MCh$121,938 (MCh$237,828 as of December 31, 2017), according to the following detail:

a.1) Current taxes assets and liabilities by geographical area:

	As of December 31, 2018											As of December 31, 2017
	Chile			USA (*)		Colombia			Totals			Chile			USA (*)		Colombia			Totals
	MCh$			MCh$		MCh$			MCh$			MCh$			MCh$		MCh$			MCh$
Current tax assets		68,094			2,161		52,874			123,129			202,093			—		36,359			238,452
Current tax liabilities		(528	)		—		(663	)		(1,191	)		(624	)		—		—			(624	)
Totas, net		67,566			2,161		52,211			121,938			201,469			—		36,359			237,828
a.2) Details of current tax items by geographical area:
	As of December 31, 2018											As of December 31, 2017
	Chile			USA (*)		Colombia			Total			Chile			USA (*)		Colombia			Total
	MCh$			MCh$		MCh$			MCh$			MCh$			MCh$		MCh$			MCh$
Income tax		(81,487	)		—		(14,273	)		(95,760	)		(8,332	)		—		(11,357	)		(19,689	)
													—			—		—			—
Less:													—			—		—			—
Monthly Provisional Payment		21,424			—		1,544			22,968			49,529			—		2,940			52,469
Tax Credit for Training Costs		800			—		—			800			—			—		—			—
Tax Credit Donations		745			—		—			745			831			—		—			831
Other taxes to be recovered (**)		126,084			2,161		64,940			193,185			159,441			—		44,776			204,217
Totals		67,566			2,161		52,211			121,938			201,469			—		36,359			237,828

(*) Corresponds to the subsidiary located in New York.

(**) The other taxes to be recovered correspond mainly to monthly provisional payments paid in previous years, credits for training expenses, provisional payments for absorbed utilities with right to return, among others.

b) Effect on income

The tax expense for the years ended December 31, 2018, 2017 and 2016 is comprised of the following items:

	2018			2017			2016
	MCh$			MCh$			MCh$
Income tax expense
Current tax expense		(95,760	)		(19,689	)		(19,326	)
Deferred taxes
Deferred tax expenses		28,110			74,611			23,105
Subtotals		(67,650	)		54,922			3,779
Others		591			(2,051	)		(211	)
Net expense for income taxes		(67,059	)		52,871			3,568

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-93

Note 14 – Current Taxes and Deferred Taxes, continued

c) Effective tax rate reconciliation

The following table reconciles the income tax rate to the effective rate applied to determine the Bank’s income tax expense as of December 31, 2018, 2017 and 2016.

The nominal tax rates of the countries where consolidated subsidiaries are located are:

	2018			2017			2016
	Tax rates			Tax rates			Tax rates
Chile		27.0	%		25.5	%		24.0	%
Colombia		37.0	%		40.0	%		40.0	%
USA		21.0	%		35.0	%		35.0	%

	For the years ended December 31,
	2018						2017						2016
	Tax rate			Amount			Tax rate			Amount			Tax rate			Amount
	%			MCh$			%			MCh$			%			MCh$
Amount calculated by using the statutory rates		27.00			(63,157	)		25.50			(2,538	)		24.00			(2,617	)
Exchange differences due to investments in Colombia		13.47			(31,499	)		(204.84	)		20,390			(1.06	)		116
Equity price level restatement for tax purposes		(9.49	)		22,188			(141.93	)		14,128			(129.59	)		14,132
Local tax for USA and Panama income		0.02			(54	)		(98.46	)		9,801			57.55			(6,276	)
Effect of rate change Chile		—			—			(51.68	)		5,144			(36.27	)		3,955
Tax Reform USA 35%-21%		—			—			95.21			(9,477	)		—			—
Effect of rate change Colombia		(0.01	)		20			47.07			(4,685	)		(21.57	)		2,352
Effect of rates New York subsidiary (**)		(0.18	)		433			14.65			(1,458	)		(20.52	)		2,238
Effect of rates Colombia subsidiary (**)		0.50			(1,173	)		(54.55	)		5,430			(34.06	)		3,714
Penalty fee SBIF		0.69			(1,616	)		—			—			—			—
Permanent and other differences (*)		(3.33	)		7,799			(162.11	)		16,136			128.80			(14,046	)
Totals		28.67			(67,059	)		(531.14	)		52,871			(32.72	)		3,568

(*) Other includes, mainly, a) benefits derived from the tax effect of goodwill from business combinations in Colombia made by Corpbanca prior to the acquisition of Itaú, amounting to MCh$ 11,276 in 2018, MCh$20,568 in 2017, and MCh$14,276 in 2016 and b) the 2016 period includes effects of wealth tax in Colombia and one-time effects derived from the business combination between Itaú and Corpbanca.

(**) This line reflects the differences in tax rates in other jurisdictions, based on the Bank’s consolidated results.

d) Other comprehensive income – tax effects

The table below sets for a summary of the deferred tax effect on other comprehensive income for the years ended December 31, 2018, 2017 and 2016, which consists of the following items:

d.1 Tax effect of “OCI” that may be reclassified subsequently to profit or loss:

	2018			2017			2016
	MCh$			MCh$			MCh$
Financial instruments at fair value through other comprehensive income		(2,172	)		—			—
Available for sale investments		—			(3,333	)		(4,025	)
Hedge of a net investment in foreign operations		10,565			(14,211	)		(2,685	)
Cash flow hedge		(1,669	)		44			1,345
Total charge to other comprehensive income		6,724			(17,500	)		(5,365	)

d.2 “OCI” that may not be reclassified subsequently to profit or loss:

	2018			2017			2016
	MCh$			MCh$			MCh$
Income tax relating to defined benefit obligation		(44	)		(6	)		1,090
Total charge to other comprehensive income		(44	)		(6	)		1,090

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-94

Note 14 – Current Taxes and Deferred Taxes, continued

e) Effect of deferred taxes

e.1) Totals deferred taxes

Detail of effects for deferred taxes presented in assets and liabilities is as follows:

	As of December 31, 2018									As of December 31, 2017
	Assets (*)			Liabilities (*)			Net			Assets (*)			Liabilities (*)			Net
	MCh$			MCh$			MCh$			MCh$			MCh$			MCh$
Allowances for loan losses		124,408			—			124,408			105,479			17,621			123,100
Accrued interest on past due portfolio		7,377			—			7,377			6,970			—			6,970
Unearned price differences		288			—			288			220			—			220
Personnel provisions		18,220			(155	)		18,065			7,891			4,659			12,550
Miscellaneous provisions		51,033			—			51,033			29,803			4,225			34,028
Tax losses		62,685			—			62,685			25,753			46,166			71,919
Net tax value of amortizable assets		14,739			—			14,739			20,683			—			20,683
Depreciation of property, plant and equipment		(42,581	)		—			(42,581	)		(34,169	)		(11,687	)		(45,856	)
Lease division and others		19,261			—			19,261			25,392			4,175			29,567
Mark to market of financial instruments		(26,821	)		138			(26,683	)		(12,259	)		(26,730	)		(38,989	)
Itaú-Corpbanca business combination		(61,521	)		—			(61,521	)		(18,139	)		(50,158	)		(68,297	)
Others		11,598			(454	)		11,144			(16,939	)		(14,625	)		(31,564	)
Totals assets (liabilities) for deferred taxes		178,686			(471	)		178,215			140,685			(26,354	)		114,331

e.2 Deferred taxes by geographic area:

	As of December 31, 2018										As of December 31, 2017
	Chile		USA		Colombia			Total			Chile			USA		Colombia			Total
	MCh$		MCh$		MCh$			MCh$			MCh$			MCh$		MCh$			MCh$
Deferred tax assets		130,883		20,311		27,492			178,686			125,917			14,768		—			140,685
Deferred tax liabilities		—		—		(471	)		(471	)		(53	)		—		(26,301	)		(26,354	)
Net by geographic area		130,883		20,311		27,021			178,215			125,864			14,768		(26,301	)		114,331

Effects of deferred taxes on assets and liabilities arising from temporary differences (by geographic area) are as follows:

	As of December 31, 2018												As of December 31, 2017
	Chile			USA			Colombia			Total			Chile			USA			Colombia			Total
	MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$
Allowances for loan losses		99,621			(4,531	)		29,318			124,408			93,864			11,615			17,621			123,100
Accrued interest on past due portfolio		7,377			—			—			7,377			6,970			—			—			6,970
Unearned price differences		288			—			—			288			220			—			—			220
Personnel provisions		13,871			139			4,055			18,065			7,829			282			4,439			12,550
Miscellaneous provisions		43,824			3,843			3,366			51,033			28,582			1,221			4,225			34,028
Tax losses		2,460			11,034			49,191			62,685			16,607			9,146			46,166			71,919
Net tax value of amortizable assets		14,739			—			—			14,739			20,683			—			—			20,683
Depreciation of property, plant and equipment		(37,513	)		—			(5,068	)		(42,581	)		(34,308	)		—			(11,548	)		(45,856	)
Lease division and others		9,422			—			9,839			19,261			25,392			—			4,175			29,567
Mark to market of financial instruments		(6,535	)		—			(20,148	)		(26,683	)		(12,259	)		—			(26,730	)		(38,989	)
Itaú-Corpbanca business combination		(16,613	)		—			(44,908	)		(61,521	)		(18,139	)		—			(50,158	)		(68,297	)
Others		(58	)		9,826			1,376			11,144			(9,577	)		(7,496	)		(14,491	)		(31,564	)
Totals assets (liabilities), net		130,883			20,311			27,021			178,215			125,864			14,768			(26,301	)		114,331

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-95

Note 15 – Other assets and assets non-current assets held for sale

a) The detail of other assets is as follows:

	As of December 31,
	2018		2017
	MCh$		MCh$
Assets for leasing (1)		33,991		25,741
Other assets		467,806		403,284
Deposits in guarantee		30,016		28,539
Accounts and notes receivable (2)		147,248		167,450
Rights on brokerage transactions		52,361		33,247
Repossessed assets from leasing transactions		5,368		9,733
Hedge accounting valuation adjustments		12,800		13,980
Rentals paid in advance (3)		5,698		7,960
Prepaid expenses (4)		19,674		13,501
Collateral for financial transactions (threshold)		155,641		88,520
Claims receivable from insurance companies		360		690
Asset management fees receivable		1,496		986
Insurance brokerage fees receivable		6,537		4,236
Other assets		30,607		34,442
Totals		501,797		429,025

(1) Property, plant and equipment acquired to be ceded under financial leases.

(2) This includes rights and accounts receivable that fall outside the Bank’s line of business such as tax credits, cash guarantee deposits and other balances pending of collection.

(3) Leases paid in advance to SMU S.A. in connection with ATM locations (see Note 32, letter b)

(4) Includes payments made in advance for different services that will be received (leases, insurance, and others).

b) The detail of non-currents assets held for sale is as follows:

	As of December 31,
	2018		2017
	MCh$		MCh$
Assets received in lieu of payment		29,060		18,308
Property, plant and equipment held for sale (1)		30,742		—
Totals		59,802		18,308

(1) Corresponds to buildings owned by Itaú Corpbanca Colombia S.A. held for sale, as approved by the Board of Directors of the entity, during the meeting held on July 31, 2018.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-96

Note 16 – Deposits and Other Demand Liabilities and Time Deposits

a) As of December 31, 2018 and 2017 deposits and other demand liabilities are as follow:

	As of December 31,
	2018		2017
	MCh$		MCh$
Checking accounts		2,570,436		2,473,283
Other deposits and demand accounts		1,396,573		1,363,017
Advance payments received from customers		79,801		131,169
Other demand liabilities		253,665		174,198
Totals		4,300,475		4,141,667

b) As of December 31, 2018 and 2017 the composition of time deposits and other time liabilities is as follows:

	As of December 31,
	2018		2017
	MCh$		MCh$
Time deposits		10,093,703		10,036,583
Time savings accounts		27,156		28,410
Other time liabilities		252		250
Totals		10,121,111		10,065,243

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-97

Note 17 – Interbank Borrowings

a. As of December 31, 2018 and 2017, interbank borrowings are as follows:

	As of December 31,
	2018		2017
	MCh$		MCh$
Loans obtained from local financial institutions
Banco de Chile		—		21,958
Banco BTG Pactual Chile		5,863		—
Subtotals		5,863		21,958
Loans obtained from foreign financial institutions
Sumitomo Mitsui Banking Corporation		242,883		145,156
Wells Fargo Bank, N.A.		209,615		157,029
Credicorp Capital SASAF		175,326		125,706
Bank of America, N.A.		153,546		248,514
IFC Corporación Financiera Internacional		145,817		187,507
Citibank N.A.		118,975		168,232
Scotia Fondos Sociedad Administradora de Fondos S.A.		108,979		62,205
Bank of Montreal		106,586		42,836
Corporación Andina de Fomento		104,273		30,724
BNP Paribas		91,072		39,480
Banco Crédito del Perú		90,022		31,031
Bancoldex S.A. (Colombia)		80,394		100,834
Commerzbank A.G.		75,032		89,274
BBVA Asset Management Continental S.A. (Perú)		73,481		39,791
Standard Chartered Bank		68,169		140,397
Bank of Nova Scotia		65,802		65,442
Banco Latinoamericano de Exportación		52,817		57,132
Interfondos S.A. Sociedad Administradora de Fondos		45,149		19,906
HSBC USA		43,214		15,362
Findeter S.A. Financiera del Desarrollo Territorial		38,364		49,528
Cobank C.B.		33,850		9,108
Mizuho Corporate Bank		31,763		39,480
Ing Bank NV		30,874		16,965
Apple Bank for Saving		18,147		12,290
Bancaribe Curacao Bank N.V.		12,694		13,831
Export Development Canada		11,199		30,724
Banco de Bogotá		8,560		4,118
China Construction Bank		5,155		14,133
Fondos SURA SAF S.A.C.		2,827		25,436
Shanghai Commercial & Savings Bank		2,244		6,145
The Export-IM Apple Bank for Saving		2,244		6,145
Bayern Landesbank		2,237		11,245
Banco República		1,805		15,119
Scotiabank Perú S.A		1,457		—
Corporación Financiera de Desarrollo S.A (Cofide)		—		10,407
Mercantil CA Banco Universal		—		17,395
Deg Deutsche Investitions		—		21,410
Kookmin Bank of New York		—		12,324
Other banks		67,288		91,811
Subtotals		2,321,860		2,174,172
Totals		2,327,723		2,196,130

c. Interbank borrowings from financial institutions by maturity is as follows:

	As of December 31,
	2018		2017
	MCh$		MCh$
Within 1 year		1,829,814		1,475,588
After 1 year but within 2 years		319,870		422,911
After 2 years but within 3 years		17,595		106,260
After 3 years but within 4 years		77,993		15,154
After 4 years but within 5 years		11,644		73,536
After 5 years		70,807		102,681
Totals		2,327,723		2,196,130

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-98

Note 18 - Debt Instruments Issued and Other Financial Liabilities

As of December 31, 2018 and 2017, composition of debt instruments issued and other financial liabilities is as follows:

	As of December 31,
	2018		2017
	MCh$		MCh$
Debt instruments issued
Mortgage finance bonds		53,463		67,938
Senior bonds		4,882,341		4,840,918
Subordinated bonds		1,074,320		1,041,182
Subtotals		6,010,124		5,950,038
Other financial liabilities
Liabilities with the public sector		10		—
Borrowings from local financial institutions		12,390		16,255
Foreign borrowings		—		811
Subtotals		12,400		17,066
Totals		6,022,524		5,967,104

Debt classified as short term includes demand obligations or obligations that will mature in less than one year. All other debt is classified as long term, and is detailed as follows:

	As of December 31, 2018
	Long term		Short term		Totals
	MCh$		MCh$		MCh$
Mortgage finance bonds		43,029		10,434		53,463
Senior bonds		4,220,626		661,715		4,882,341
Subordinated bonds		1,052,111		22,209		1,074,320
Debt instruments issued		5,315,766		694,358		6,010,124
Other financial liabilities		—		12,400		12,400
	As of December 31, 2017
	Long term		Short term		Totals
	MCh$		MCh$		MCh$
Mortgage finance bonds		55,678		12,260		67,938
Senior bonds		4,178,313		662,605		4,840,918
Subordinated bonds		1,041,182		—		1,041,182
Debt instruments issued		5,275,173		674,865		5,950,038
Other financial liabilities		—		17,066		17,066

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-99

Note 18 - Debt Instruments Issued and Other Financial Liabilities, continued

The following tables provide with additional information, including maturities, for each type of debt issued as of December 31, 2018 and 2017.

a. Mortgage finance bonds

Detail of maturities for mortgage finance bonds is as follows:

	As of December 31,
	2018		2017
	MCh$		MCh$
Within 1 year		10,434		12,260
After 1 year but within 2 years		7,612		9,965
After 2 years but within 3 years		7,092		8,114
After 3 years but within 4 years		6,516		7,554
After 4 years but within 5 years		5,908		6,952
After 5 years		15,901		23,093
Totals		53,463		67,938

b. Senior bonds

Details for senior bonds, by currency, are as follows:

	As of December 31,
	2018		2017
	MCh$		MCh$
Bonds in UF		3,568,532		3,258,201
Bonds in CLP		416,116		373,135
Bonds in USD		529,363		923,718
Bonds in COP		368,330		285,864
Totals		4,882,341		4,840,918

Detail of maturities for senior bonds is as follows:

	As of December 31,
	2018		2017
	MCh$		MCh$
Due within 1 year		661,715		662,605
After 1 year but within 2 years		637,595		516,061
After 2 years but within 3 years		216,695		653,601
After 3 years but within 4 years		446,323		199,908
After 4 years but within 5 years		276,047		312,597
After 5 years		2,643,966		2,496,146
Totals		4,882,341		4,840,918

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-100

Note 18 - Debt Instruments Issued and Other Financial Liabilities, continued

The following table presents details for senior bonds issued:

Senior bonds issued during the year ended December 31, 2018

Serie	Currency	Amount		Term	Issuance rate	Placement date	Maturity date
BCORAQ0710	UF		2,000,000	10 years and 4 months	3% annual	02/06/2018	07/01/2028
BCORAR0710	UF		2,450,000	11 years and 4 months	3% annual	02/21/2018	07/01/2029
BCORAR0710	UF		5,000,000	11 years and 4 months	3% annual	03/14/2018	07/01/2029
BCORAN0710	UF		2,000,000	7 years and 5 months	3% annual	06/05/2018	07/01/2025
Totals			11,450,000
Serie	Currency	Amount		Term	Issuance rate	Placement date	Maturity date
BCORBY0914	CLP		70,000,000,000	4 years and 5 months	5% annual	04/13/2018	09/01/2022
Totals			70,000,000,000
Serie	Currency	Amount		Term	Issuance rate	Placement date	Maturity date
SUBSERIE B30	COP		55,470,000,000	3 years and 6 months	1.20% annual	11/22/2018	05/10/2021
SUBSERIE C48	COP		258,706,000,000	4 years	2.91% annual	11/22/2018	11/01/2022
Totals			314,176,000,000

Senior bonds issued during the year ended December 31, 2017

Serie	Currency	Amount		Term	Issuance rate	Placement date	Maturity date
BCORAO0710	UF		2,900,000	9 years and 6 months	3% annual	01/03/2017	07/01/2026
BCORAP0710	UF		5,000,000	10 years and 6 months	3% annual	01/05/2017	07/01/2027
BCORAP0710	UF		5,000,000	10 years and 6 months	3% annual	01/10/2017	07/01/2027
BCORAQ0710	UF		3,000,000	11 years and 6 months	3% annual	01/16/2017	07/01/2028
BCORAQ0710	UF		4,000,000	11 years and 6 months	3% annual	01/20/2017	07/01/2028
BCORAQ0710	UF		3,000,000	11 years and 6 months	3% annual	01/25/2017	07/01/2028
BCORAP0710	UF		3,000,000	10 years and 5 months	3% annual	02/10/2017	07/01/2027
BCORAO0710	UF		100,000	9 years and 5 months	3% annual	02/16/2017	07/01/2026
BCORAK0710	UF		6,000,000	5 years and 3 months	3% annual	04/04/2017	07/01/2022
BCORAJ0710	UF		1,000,000	3 years and 9 months	3% annual	08/25/2017	07/01/2021
Totals			33,000,000
Serie	Currency	Amount		Term	Issuance rate	Placement date	Maturity date
BCORBY0914	CLP		30,000,000,000	5 years	5% annual	09/25/2017	09/01/2022
BCORBZ0914	CLP		100,000,000,000	6 years	5% annual	10/17/2017	09/01/2023
Totals			130,000,000,000

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-101

Note 18 - Debt Instruments Issued and Other Financial Liabilities, continued

c. Subordinated bonds

Details of subordinated bonds, by currency, are as follows

	As of December 31,
	2018		2017
	MCh$		MCh$
Bonds in UF		95,599		95,485
Bonds in CLP		781,925		766,086
Bonds in COP		196,796		179,611
Totals		1,074,320		1,041,182

Detail of maturities for subordinated bonds is as follows

	As of December 31,
	2018		2017
	MCh$		MCh$
Within 1 year		22,209		—
After 1 year but within 2 years		—		21,500
After 2 years but within 3 years		—		—
After 3 years but within 4 years		18,604		—
After 4 years but within 5 years		22,484		22,303
After 5 years		1,011,023		997,379
Totals		1,074,320		1,041,182

For the years ended December 31, 2018 and 2017 no issuance of subordinated bonds took place.

d. Others financial obligations

	As of December 31,
	2018		2017
	MCh$		MCh$
Within 1 year		—		811
After 1 year but within 2 years		—		—
After 2 years but within 3 years		—		—
After 3 years but within 4 years		—		—
After 4 years but within 5 years		—		—
After 5 years		—		—
Totals financial liabilities		—		811
Short-term financial liabilities
Amounts due to credit card transactions		12,390		16,255
Others		10		—
Totals short-term financial liabilities		12,400		16,255
Totals other financial liabilities		12,400		17,066

As of December 31, 2018 and 2017, the Bank has no financial debt covenants to comply with.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-102

Note 19 – Provisions

As of December 31, 2018 and 2017, the Bank has registered the following movements in its provisions:

a. Other provisions

Provisions disclosed in liabilities as of December 31, 2018 and 2017 present the following detail:

	As of December 31,
	2018		2017
	MCh$		MCh$
Provisions for personnel salaries and expenses		99,945		90,559
Provisions for mandatory dividends		51,614		17,234
Provisions for contingent loans risk		45,848		—
Provisions for contingencies		17,496		10,096
Totals		214,903		117,889

b. Movements in the provisions for contingent loans risk according to IFRS 9, for the year ended December 31, 2018 are as follows:

	Contingent loans risk
	Stage 1			Stage 2			Stage 3			Totals
	12-Month ECL			Lifetime ECL			Lifetime ECL
Balances as of December 31, 2017		—			—			—			—
Restatement of the prior year due to IFRS 9 adoption		13,485			44,107			2,099			59,691
Balances as of January 1, 2018		13,485			44,107			2,099			59,691
Changes in the allowances
- Transfers to stage 1		—			(504	)		116			(388	)
- Transfers to stage 2		(155	)		—			268			113
- Transfers to stage 3		(42	)		(66	)		—			(108	)
- Increases due to change in credit risk		2,283			5,528			38			7,849
- Decreases due to change in credit risk		(1,298	)		(446	)		(39	)		(1,783	)
- Charge-offs
- Changes due to modifications that did not result in derecognition
New financial assets originated or purchased		5,104			965			126			6,195
Financial assets that have been derecognized		(3,763	)		(21,558	)		(754	)		(26,075	)
Changes in models/risk parameters											—
Foreign exchange and other movements		265			86			3			354
Balances as of December 31, 2018		15,879			28,112			1,857			45,848

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-103

Note 19 – Provisions, continued

c. The provision balance changes during 2018 and 2017, were as follows:

	Provisions for personnel salaries and expenses (i)			Provisions for mandatory dividends (ii)			Provisions for contingent loans risk			Provisions for contingencies (iii)			Totals
	MCh$			MCh$			MCh$						MCh$
Balances as of January 1, 2018		90,559			17,234			—			10,096			117,889
Provisions established due to IFRS 9 adoption		—			—			59,691			—			59,691
Provisions applied		(27,026	)		(17,234	)		—			—			(44,260	)
Provisions recorded		53,156			51,614			14,511			8,993			128,274
Provisions released		(25,561	)		—			(28,354	)		(1,347	)		(55,262	)
Other movements		8,817			—			—			(246	)		8,571
Balances as of December 31, 2018		99,945			51,614			45,848			17,496			214,903

	Provisions for personnel salaries and expenses (i)			Provisions for mandatory dividends (ii)			Provisions for contingencies (iii)			Totals
	MCh$			MCh$			MCh$			MCh$
Balances as of January 1, 2017		89,295			1,029			9,724			100,048
Provisions applied		(23,815	)		—			—			(23,815	)
Provisions recorded		91,722			17,234			586			109,542
Provisions released		(62,231	)		(1,029	)		—			(63,260	)
Other movements		(4,412	)		—			(214	)		(4,626	)
Balances as of December 31, 2017		90,559			17,234			10,096			117,889

(i) Employee benefits and staff salaries are recorded in “Personnel salaries expenses.”

(ii) Mandatory dividends are recorded in the Consolidated Statement of Changes in Equity, against “Provision for mandatory dividends.”

(iii) The contingency provisions/ (releases) are included in Other operating (expenses)/income, depending on whether they are debit or a credit.

d. Provisions for payroll and employee benefits

		As of December 31,
		2018		2017
		MCh$		MCh$
Provision for long-term termination benefits	(e.1)		8,298		7,914
Provision for pension plan	(e.2)		30,908		31,761
Provision for retroactive unemployment plan	(e.3)		373		371
Provision for retirements bonus plan	(e.4)		542		476
Provision for other employee benefits	(*)		46,249		36,811
Vacation accrual	(*)		13,575		13,226
Totals			99,945		90,559

(*) Short-term benefits

e. The main aspects of the Bank’s long term employee benefits are detailed below

e.1) Other long-term employee benefits

Description: Annual payment during the month in which the employee completes a given number of years of service (in five-year intervals from 5 to 50).

Measurement: The projected unit credit method was used to determine the present value of the defined-benefit obligation and the corresponding service cost. For all active plan participants, the “projected accrued benefit” is based on the plan formula and years of service as of the date of calculation, but using assumptions such an average salary and social security benefits, projected to the age at which it is assumed that the employee will stop providing services. The total benefit is used for inactive members. The plan does not have any related policies (and therefore no reimbursements) or assets, but rather uses structured funding based on the entity’s financial conditions.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-104

Note 19 – Provisions, continued

The economic assumptions are summarized as follows:

	As of December 31,
	2018		2017
	%		%
Summary of economic assumptions
Discount rate		6.25		7.25
Expected rate of salary increase		5.70		6.50

The movements of the present value of the obligation for this type of benefit and the amounts recognized in the Consolidated Statements of Income are determined using the projected credit unit method and it consist of the following:

	As of December 31,
	2018			2017
	MCh$			MCh$
Balances as of January 1,		7,914			7,950
Net cost of benefits (*)		1,397			1,487
Payments		(973	)		(856	)
Provisions recorded		(350	)		(51	)
Exchange differences		310			(616	)
Balances as of December 31,		8,298			7,914

(*) Detail of net cost of benefit is as follows:

	As of December 31,
	2018		2017
	MCh$		MCh$
Current services cost		836		866
Interest expense on obligation		561		621
Total		1,397		1,487

e.2) Pension plan

Description: Old-age pension or Survivors in accordance with the Social Security Law in Colombia and benefits acquired with the Entity.

Measurement: The projected unit credit method is using for the determination of present value of the obligation by benefit and the associated cost to that. Using this method the obligation by benefit is the present value of current benefits for past services, but calculating the plan benefit basing on the salary projected to the date on which it is assumed that the participant receives the benefit. The plan has no policy (without refund) or associated assets, being a structured financing according to the financial conditions of the entity.

The summary of the economic assumptions is as follows:

	As of December 31,
	2018		2017
	%		%
Assumptions
Discount rate		6.75		7.25
Expected rate of salary increases		3.20		4.00
Inflation rate		3.20		4.00

  Itaú Corpbanca and Subsidiaries – Consolidated Financial Statements – December 31, 2018   F-105

Note 19 – Provisions, continued

The detail of Pension plan balances movements is as follows:

	2018			2017
	MCh$			MCh$
Balances as of January 1,		31,761			34,768
Interest expense on obligation		2,359			2,742
Payments		(3,802	)		(3,581	)
Actuarial losses (gains)		(698	)		223
Exchange differences		1,288			(2,391	)
Balances as of December 31,		30,908			31,761

e.3) Retroactive unemployment plan

Description: Retroactive unemployment plan prior to Law 50 from 1990 in Colombia.

Measurement: The projected unit credit method was used to determine the present value of the defined-benefit obligation and the corresponding service cost. For all active plan participants, the “projected accrued benefit” is based on the plan formula and years of service as of the date of calculation, but using an average salary and social security benefits, etc., projected to the age at which it is assumed that the employee will stop providing services. The total benefit is used for inactive members. The plan does not have any related policies (and therefore no reimbursements) or assets, but rather uses structured funding based on the entity’s financial conditions.

The economic assumptions are summarized as follows:

	As of December 31,
	2018		2017
	%		%
Assumptions
Discount rate		5.75		7.25
Expected rate of salary increases		5.70		6.50
Inflation rate		3.20		4.00

The details of movements for this benefits during years ended December 31, 2018 and 2017 are as follows:

	2018			2017
	MCh$			MCh$
Balances as of January 1,		371			472
Current services costs		108			13
Interest expense on obligations		24			36
Actuarial gains		(32	)		(19	)
Payments of benefits		(115	)		(93	)
Exchange differences		17			(38	)
Balances as of December 31,		373			371

e.4) Retirement Bonus Plan

Description: Fixed payment upon retirement

Measurement: The projected unit credit method is used to determine the present value of the benefit obligation and the corresponding cost. Under this method, the benefit obligation is the present value of the current benefits for past service but calculating the plan benefit based on the projected salary as of the date in which it is assumed that the participant will receive the benefit.

  Itaú Corpbanca and Subsidiaries – Consolidated Financial Statements – December 31, 2018   F-106

Note 19 – Provisions, continued

The economic assumptions are summarized as follows:

	As of December 31,
	2018		2017
	%		%
Summary of economic hypothesis
Discount rate(s)		6.75		7.50
Expected rate(s) of salary increase		5.20		6.00
Inflation rate		3.20		4.00

The amounts recognized for this benefit are as follows:

	2018			2017
	MCh$			MCh$
Balances as of January 1,		476			439
Current service costs		39			34
Interest expense on obligation		37			36
Actuarial (gains) losses		(24	)		4
Payments of benefits		(5	)		(3	)
Exchange differences		19			(34	)
Balances as of December 31,		542			476

The effect on Other Comprehensive Income is summarized as follows:

			For the years ended December 31,
			2018			2017			2016
			MCh$			MCh$			MCh$
Pension plan	(e.2	)		(698	)		223			3,761
Retroactive unemployment plan	(e.3	)		(32	)		(19	)		159
Retirement bonus plan	(e.4	)		(24	)		4			—
Total recognition of obligations for defined benefits				(754	)		208			3,920

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-107

Note 19 – Provisions, continued

Future payments

• Future actuarial calculations may differ with respect to the calculations presented, due to the following factors: The experience of the plans differs from those anticipated by the selected economic and demographic hypotheses.

• Changes in economic and demographic assumptions.

• Expected increases or decreases as a natural part of the functioning of the methodology for these calculations (for example, the end of the amortization period or additional costs based on the financing situation of the plan).

• Changes in the characteristics of the applicable plan or law, and with respect thereto, there are no significant events affecting the results presented since the last assessment.

The following is a detail of future payments for the year 2018 and 2017:

	Long-term termination benefits		Pension plan		Retroactive unemployment plan		Retirement benefit plan
2018	MCh$		MCh$		MCh$		MCh$
Fiscal year 2019		783		2,995		66		40
Fiscal year 2020		842		2,858		38		22
Fiscal year 2021		1,003		2,682		20		26
Fiscal year 2022		1,147		2,527		70		40
Fiscal year 2023-2031 (combined)		1,160		2,457		102		43
Fiscal year 2024-2031 (combined)		4,749		11,751		94		203

	Long-term termination benefits		Pension plan		Retroactive unemployment plan		Retirement bonus plan
2017	MCh$		MCh$		MCh$		MCh$
Fiscal year 2018		944		2,996		55		36
Fiscal year 2019		752		2,922		32		12
Fiscal year 2020		868		2,757		38		21
Fiscal year 2021		1,038		2,586		22		26
Fiscal year 2022		1,177		2,434		68		42
Fiscal year 2023-2027 (combined)		5,384		11,512		177		246

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-108

Note 20 – Other liabilities and liabilities directly associated with non-current assets held for sale

a) As of December 31, 2018 and 2017 the other liabilities are as follows:

	As of December 31,
	2018		2017
	MCh$		MCh$
Accounts and notes payable (1)(2)		317,703		348,036
Dividends payable		270		703
Unearned income (3)		9,089		7,850
Valuation adjustment for hedge accounting		2,102		3,091
Payables due to brokerage transactions		75,872		21,933
Collateral for financial transactions (threshold)		91,223		79,589
Other liabilities		25,536		2,233
Totals		521,795		463,435

(1) Obligations other than those directly related to the business operations, such as payable withholding taxes, payable social security contributions, balances due on purchases of materials, balances due on obligations under lease agreements for the acquisition of Bank, accounts payable for expenses, and others.

(2) It includes MCh$5,985 correspondent to a penalty fee payable to the SBIF. For additional information see Note 37 “Subsequent events”.

(3) It corresponds to commissions associated with financial advisory and insurance brokerage businesses that must be deferred in accordance with applicable regulations.

b) As of December 31, 2018 and 2017 there are no liabilities directly associated with non-current assets held for sale.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-109

Note 21 – Contingencies, Commitments, and Responsibilities

a) Lawsuits and Legal Proceedings

As of the date of issuance of these Financial Statements, legal actions have been filed against the Bank and its subsidiaries involving its transactions in the ordinary course of business. They are mainly lawsuits pending against the Bank related to loans and other matters, most of which, according to the Bank’s Legal Services Divisions involved in the suits, present no risk of significant loss. Notwithstanding the above, provisions for MCh$956 and MCh$1,191 as of December 31, 2018 and December 31, 2017, respectively have been recorded in the Consolidated Financial Statements.

Lawsuit of Helm LLC against Itaú Corpbanca

On December 20, 2016, Helm LLC filed a lawsuit in the New York State Supreme Court (“the State Court Lawsuit”) and a Request for Arbitration before the ICC International Arbitration Court (the “Arbitration”), against Itaú Corpbanca, CorpBank Holding Inversiones Lade e Itaú Corpbanca Colombia, the latter as nominal defendant, alleging certain breaches of the shareholders’ agreement of Itaú Corpbanca Colombia as amended and restated of HB Acquisition S.A.S. on July 31, 2013 (“SHA”).

In its lawsuit, Helm LLC seeks, among other things, compensation that would correspond to the value it estimates and claims in exchange for its shares in Itaú Corpbanca Colombia, plus interest. On February 14, 2017 the defendants answered to the complaint of Helm LLC, rejecting their claims in full. Moreover, Itaú Corpbanca and CorpBank Holding Inversiones Ltda. filed a counterclaim against Helm LLC for breach of the SHA, according to which they request the court, among other things, to declare the termination of the aforementioned SHA.

On April 19, 2017, Helm LLC answered such counterclaim. The arbitration procedure has continued in accordance with the judicial proceedings and the evidentiary period is expected to take place in July 2018. Itaú Corpbanca estimates that the claim of Helm LLC has no merit and will proceed to defend its rights under the SHA and the applicable legislation.

Other lawsuits

Other legal actions have been filed against the Bank and its subsidiaries involving its transactions carried out in the ordinary course of business. The Bank’s maximum exposure for these lawsuits amounts to approximately MCh$26,995 as of December 31, 2018 and MCh$36,309 as of December 31, 2017. However, in Management’s opinion based on reports from the Legal Division as of December 31, 2018, it is more likely than not that these lawsuits will not result in significant losses not contemplated by the Bank in these Consolidated Financial.

Itaú Corpbanca Colombia S.A.

The Bank and its subsidiaries are involved in civil, administrative and labor proceedings. The outstanding civil and administrative proceedings, them are related to Banking transactions, and the remaining ones derive from the ownership of leased assets.

Such claims amount, in the aggregate, to MCh$32,375 as of December 31, 2018 (MCh$13,748 as of December, 2018). According to the evaluation of the expected results in each lawsuits the Bank has recorded a provision of MCh$152 as of December 31, 2018 (MCh$977 as of December 31, 2017).

There are labor processes of which amounted to MCh$2,527, for which the Bank has recorded a provision of MCh$1,057 as of December 31, 2018. (MCh$865 as of December 31, 2017)

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-110

Note 21 – Contingencies, Commitments, and Responsibilities, continued

Recovery of fine for exceeding credit margins

Via Ruling No. 16,191 dated December 30, 2015, the SBIF fined Corpbanca MCh$21,765 for violations of credit margins established in articles 84-1 and 85 of the Chilean General Banking Law (“GBL”) related to Chapter 12-3 of the SBIF’s Updated Standards. On January 18, 2016, Corpbanca filed an appeal with the Santiago Court of Appeals to challenge the fine in accordance with the GBL. On August 31, 2016, the Court of Appeals ruled in favor of Corpbanca and rendered all fines null and void. Five business days thereafter, the SBIF filed an appeal complaining against the appellate court ministers, which was heard by the Supreme Court under Case No. 62,128-2016.

On May 9, 2017, the Supreme Court dismissed such appeal filed by the SBIF disagreeing with the aforementioned final ruling issued by the Santiago Court of Appeals. Therefore, the appeal filed by the Bank to render the SBIF fines null and void was accepted, consequently declaring the fines unlawful.

As previously reported, the aforementioned fines were recognized as an expense in the result of the 2015 fiscal year. Pursuant to this decision of the Supreme Court, the reverse of such expense and the other corresponding financial effects.

SBIF Ruling

Through a resolution dated June 30, 2017, served to Itaú Corpbanca (the “Bank”) on July 17, 2017, the Chilean Superintendence of Banks and Financial Institutions (“SBIF”) resolved, among other matters, the continuation of the administrative proceeding against the Bank for alleged violations of individual credit limits in granting certain loans to Norte Grande S.A., Potasios de Chile S.A. and Sociedad de Inversiones Pampa Calichera S.A., the same transactions which were the basis for the fines rendered null and void by the Santiago Court of Appeals on August 31, 2016.

On July 19, 2017, the Bank filed a motion against that resolution for considering it against the law, among other reasons, because there is no administrative proceeding in existence to be continued by the SBIF against the Bank, as resolved by the Santiago Court of Appeals and by Chilean Supreme Court, which dismissed the complaint filed by the SBIF against that resolution. In accordance with a resolution dated July 24, 2017, the SBIF dismissed the aforementioned motion, claiming that the proceeding is in the investigation stage and that the Bank is not formally a party to any administrative proceedings.

On October 23, 2017, the Bank received a communication from the SBIF, filing charges against Itaú Corpbanca for the same operations mentioned above. The Bank has the conviction that this administrative procedure is not in accordance with the applicable law and the Bank will exercise the defenses granted by the law to that extent. On November 22, 2017, the Bank filed its response with the SBIF. Subsequently, on December 27, 2018 through communication the SBIF report the conclusion of the investigation phase of the referred sanctioning administrative procedure. For details see Note 37 “Subsequent events”.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-111

Note 21 – Contingencies, Commitments, and Responsibilities, continued

Transaction Agreement

On January 29, 2014, Inversiones Corp Bank Limitada, Inversiones Saga Limitada (CorpBank), Itaú-Unibanco Holding S.A., Corpbanca and Bank Itaú, subscribed a contract called “Transaction Agreement”, in accordance to the contract, they agreed a strategic association of its operations in Chile and Colombia. This strategic association gave rise at April 1, 2016 the merger of Corpbanca and Itaú, which was be renamed “Itaú Corpbanca”.

Additionally, the Transaction Agreement also included the postponement of the date for Itaú Corpbanca to purchase the shares that CorpBank holds in Corpbanca Colombia. The purchase of those shares of Corpbanca Colombia held by CorpBank (currently representing 12.36% of shares outstanding), which was previously agreed to be carried out no later than January 29, 2017, was postponed until January 28, 2022, subject to receipt of the applicable regulatory approvals. The purchase price for the shares has not changed and will be US$3.5367 per share plus interest from August 4, 2015 until the payment date at an annual interest rate equal to Libor plus 2.7% minus the sum of the aggregate amount of dividends paid by Corpbanca Colombia to CorpBank since the date of the Transaction Agreement.

According to article 76 of the General Banking Law, investments in shares of Banks established abroad are subject to the prior approval of the Superintendency of Banks and Financial Institutions in Chile (SBIF), as well as the Central Bank of Chile (BCCH), which in turn is subject to compliance with the conditions set forth in article 78 of said legal corp. Additionally, in the case of Banks incorporated in Colombia, an eventual acquisition of shares in Itaú Corpbanca Colombia by Itaú Corpbanca is also subject to the prior authorization of the Financial Superintendency of Colombia (SFC).

Consequently, the aforementioned transaction must be confirmed only by the occurrence of one or more future and uncertain events that are not entirely under the control of the Bank.

b) Contingent loans

The following table contains the amounts for which the Bank and its subsidiaries are contractually obliged to grant loans:

	Contingent loans
	As of December 31,
	2018		2017
	MCh$		MCh$
Collateral and guarantees		411,023		262,924
Confirmed foreign letters of credit		—		3,824
Letters of credit issued		95,476		88,940
Documented guarantees		1,286,805		1,286,807
Available on demand credit lines		2,143,333		2,349,626
Other credit commitments		1,447,277		1,299,494
Totals		5,383,914		5,291,615

For information on provisions for contingent loans, see Note 19, letter b.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-112

Note 21 – Contingencies, Commitments, and Responsibilities, continued

c) Responsibilities

The Bank and its subsidiaries have the following responsibilities arising from their regular course of business:

	As of December 31,
	2018		2017
	MCh$		MCh$
Third party operations
Collections		17,030		26,143
Transferred financial assets managed by the Bank		1,101,327		997,530
Third party funds under management		2,306,154		2,215,038
Subtotals		3,424,511		3,238,711
Custody of securities
Securities held in custody		5,896,162		8,675,906
Securities held in custody deposited in other entities		315,347		549,848
Securities issued by the Bank held in custody		148,193		163,713
Subtotals		6,359,702		9,389,467
Totals		9,784,213		12,628,178

c) Guarantees, Contingencies and other

Itaú Corredores de Seguros S.A.

In order to comply with Article 58, letter d) of the Chilean Decree with Force of Law (“DFL”) 251 of 1930, which states that, “Insurance Brokers, in order to conduct business, must comply with the requirement of contracting insurance policies as determined by the Commission for the Financial Market (Ex- Superintendency of Securities and Insurance or “SVS”), in order to correctly and fully comply with the obligations arising from its activities and especially regarding damages that may be incurred by insured parties taking policies through the brokerage house,” the subsidiary has renewed the following (civil liability and guarantee) insurance policies:

Entity	From		To		Amount (UF)		Beneficiary
Consorcio Nacional de Seguros S.A.		04-15-2018		04-15-2019		60,000 and 500		Itaú Corredores de Seguros S.A.

Itaú Corredores de Bolsa Limitada

In order to comply with articles 30 and 31 of Chilean Law 18,045, this subsidiary kept a Bank guarantee certificate with the Chilean Electronic Stock Exchange and Santiago Stock Exchange, to ensure the correct and complete fulfillment of its obligations as stockbroker. The beneficiaries are the current or future creditors that the subsidiary has or will have derived from its transactions. The detail of the Bank guarantee certificate is as follows:

Entity	From		To		Amount (UF)		Beneficiary
Itaú Chile		04-22-2018		04-22-2019		16,000		Bolsa Electrónica de Chile
Mapfre Compañía de Seguros S.A		04-22-2018		04-22-2019		4,000		Bolsa de Comercio de Santiago

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-113

Note 21 – Contingencies, Commitments, and Responsibilities, continued

In addition, the company has taken out a comprehensive insurance policy to comply with Law No. 52 of the Chilean Electronic Stock Exchange. Amounts recorded with respect to the comprehensive insurance policy are as follows:

Entity	From		To		Amount (UF)		Beneficiary
Orión Seguros Generales S.A		04-30-2018		06-21-2019		5,000 and 10,000		Bolsa Electrónica de Chile

The company pledged its shares of the Santiago Stock Exchange in favor of said company, to secure the fulfillment of the Obligations related to the transactions carried out with other brokers. This amounts to MCh$12,630 as of December 31, 2018.

As of December 31, 2018, this subsidiary is under guarantee with Bolsa de Comercio de Santiago, Bolsa de Valores in cash and financial assets ceded to guarantee transactions in Cámara de Compensación y Liquidación de Valores for MCh$5,042 (MCh$4,101 as of December 31, 2017).

The Company granted a Bank guarantee certificate, as a representative of the beneficiaries the guarantee pursuant to Articles 98 and 99 of Chilean Law 20,172 to secure its obligations as Portfolio Manager. The detail of the Bank guarantee certificate is as follows

Entity	From		To		Amount (UF)		Beneficiary
Itaú Chile		06-21-2018		06-21-2019		10,000		Itaú Chile

Itaú Administradora General de Fondos S.A.

On August 14, 2017, Corpbanca Administradora General de Fondos S.A. replaced the documented guarantee in Banco Santander Chile, at sight for MCh$14, equivalent to UF500, originally issued on June 6, 2017, in favor of the Production Development Corporation to ensure CORFO’s faithful and timely compliance with the obligations of the Portfolio Management contract, its Committees and Funds, and the payment of labor and social obligations with the contracting party’s employees, its expiration date is August 30, 2021.

On June 2, 2017, Corpbanca Administradora General de Fondos S.A. took a documented guarantee at Banco Santander Chile, at sight, for UF15,000 equivalent to MCh$400 in favor of the Production Development Corporation to ensure CORFO the faithful fulfillment of CORFO’s portfolio management contract, its Committees and Funds, and the payment of labor and social obligations with the workers of the contracting party. Its expiration date is August 31, 2021.

On April 30, 2018, Itaú Administradora General de Fondos S.A. contract the policy called Bankers Blanket Bond with Orión Seguros Generales.

On April 30, 2018, Itaú Administradora General de Fondos SA contracted the Global Banking Policy (Bankers Blanket Bond) with Orión Seguros Generales Company, in order to foresee possible situations of official infidelity, its maturity date being May 31, 2019. The insured amount of the policy amounts to US$5,000,000 for each individual loss event and US$10,000,000 in the combined aggregate.

During the year ended December 31, 2018, the Company has contracted Documented Guarantees in Itaú Corpbanca, for the funds it manages in order to guarantee the faithful fulfillment of the obligations of the Asset Manager, in connection with the management of the funds of third parties and required compensation in case of failure to comply with the provisions established by articles N°12 and N°13 of Law N°20,712, for UF773,051 as of December 31, 2018.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-114

Note 22 – Equity

Movements in equity accounts and reserves (attributable to the equity holders of the Bank):

As of December 31, 2018, 2017 and 2016, the paid-in capital of the Bank is represented by common shares subscribed and paid, with no par value, and its motion presented below:

	Common shares
	2018		2017		2016
	(number)		(number)		(number)
Issued as of January 1,		512,406,760,091		512,406,760,091		115,039,690,651
Issuance of paid shares		—		—		57,008,875,206
Increase in share for Itaú-Corpbanca business combination		—		—		340,358,194,234
Issuance of shares pending payment		—		—		—
Repurchase of own shares		—		—		—
Sale of own shares		—		—		—
Totals		512,406,760,091		512,406,760,091		512,406,760,091

• Subscribed and paid shares

As of December 31, 2018, 2017 and 2016, the Bank has a capital in the amount of MCh$1,862,826, consisting of 512,406,760,091 common shares subscribed and paid, with no par value.

• Purchase and sale of own shares

During the years ended December 31, 2018 and 2017, there were no transactions to buy and sell shares of own issuance.

• List of major shareholders

The shareholders list as of December 31, 2018, 2017 and 2016, is as follows:

	Shares
	2018					2017					2016
Company name or shareholder name	Number of shares		Ownership %			Number of shares		Ownership %			Number of shares		Ownership %
Itaú Unibanco		195,408,043,473		38.14	%		184,756,488,453		36.06	%		184,756,488,453		36.06	%
Itaú Unibanco Holding S.A.		115,039,610,411		22.45	%		115,039,610,411		22.45	%		115,039,610,411		22.45	%
ITB Holding Brasil Participaçoes Ltda.		57,008,875,206		11.13	%		57,008,875,206		11.13	%		57,008,875,206		11.13	%
CGB II SpA		10,908,002,836		2.13	%		10,908,002,836		2.13	%		10,908,002,836		2.13	%
CGB III SpA		1,800,000,000		0.35	%		1,800,000,000		0.35	%		1,800,000,000		0.35	%
Saga II SpA		7,000,000,000		1.37	%		—		0.00	%		—		0.00	%
Saga III SpA (1)		3,651,555,020		0.71	%		—		0.00	%		—		0.00	%
Saieh Family		146,394,540,608		28.57	%		157,046,095,628		30.65	%		157,046,095,628		30.65	%
Corp Group Banking S.A.		136,127,850,073		26.57	%		136,127,850,073		26.57	%		136,127,850,073		26.57	%
Compañía Inmobiliaria y de Inversiones Saga SpA (2)		10,266,690,535		2.00	%		20,918,245,555		4.08	%		20,918,245,555		4.08	%
International Finance Corporation		17,017,909,711		3.32	%		17,017,909,711		3.32	%		17,017,909,711		3.32	%
Others		153,586,266,299		29.97	%		153,586,266,299		29.97	%		153,586,266,299		29.98	%
Stock brokers		55,791,614,655		10.89	%		53,400,666,996		10.42	%		33,053,299,686		6.45	%
ADR holders and foreign investors		42,838,887,354		8.36	%		50,064,467,904		9.77	%		72,134,243,118		14.08	%
Asset management companies		17,778,018,941		3.47	%		16,892,054,779		3.30	%		—		—
Santo Domingo Group		9,817,092,180		1.92	%		9,817,092,180		1.92	%		9,817,092,180		1.92	%
Insurance companies		5,220,388,512		1.02	%		5,212,338,243		1.02	%		6,758,473,530		1.32	%
Pension funds management companies		3,981,075,117		0.77	%		944,399,401		0.18	%		2,761,470,587		0.54	%
Other minority shareholders		18,159,189,540		3.54	%		17,255,246,796		3.36	%		29,061,687,198		5.67	%
Totals		512,406,760,091		100	%		512,406,760,091		100	%		512,406,760,091		100	%

(1) Shares in custody of a third party.

(2) Includes 640,844,096 shares in custody of a third party.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-115

Note 22 – Equity, continued

a. Dividends

At the Ordinary Meeting of the Shareholders of Itaú Corpbanca held on March 27, 2018, the shareholders agreed to distribute net income for MCh$22,979 representing 40% of the profits for 2017 (as filed with the SBIF) and at an Ordinary Meeting of the Shareholders of Itaú Corpbanca held on March 27, 2017, the shareholders agreed to distribute profits for MCh$618, representing 30% of the 2016 net income (as filed with the SBIF). See Note 37 “Subsequent events” for 2018 dividends distribution decision.

	Income attributable to equity holders (*)		Allocated to reserves and retained earnings (*)		Allocated to dividends		Percentage distributed		Number of shares		Dividend per share (in pesos)
Years	MCh$		MCh$		MCh$		%
Year 2017 (Shareholders’ Meeting March 2018)		57,447		34,468		22,979		0.40		512,406,760,091		0.04485
Year 2016 (Shareholders’ Meeting March 2017)		2,059		1,441		618		0.30		512,406,760,091		0.00121

(*) According to the Consolidated Financial Statements filed with the SBIF.

As of December 31, 2018 and 2017 and for the year ended December 31, 2018, 2017 and 2016, the basic earnings and diluted earnings are as follows:

	As of and for the years ended December 31,
	2018				2017				2016
	N° of Shares		Amount		N° of Shares		Amount		N° of Shares		Amount
	Millions		MCh$		Millions		MCh$		Millions		MCh$
Basic earnings per share
Net income for the period		—		171,331		—		67,821		—		14,407
Weighted average number of outstanding shares		512,407		—		512,407		—		415,165		—
Assumed convertible debt conversion		—		—		—		—		—		—
Adjusted number of outstanding shares		512,407		—		—		—		415,165		—
Basic earnings per share (Chilean pesos)		—		—		—		0.132		—		0.035
Diluted earnings per share
Net income for the period		—		171,331		—		67,821		—		14,407
Weighted average number of outstanding shares		512,407		—		512,407		—		415,165
Dilutive effects
Assumed convertible debt conversion		—		—		—		—		—		—
Conversion of common shares		—		—		—		—		—		—
Options rights		—		—		—		—		—		—
Adjusted number of shares		512,407				512,407				415,165
Diluted earnings per share (Chilean pesos)		—		0.334		—		0.132				0.035

During the years ended December 31, 2018, 2017 and 2016, there were no dilutive effects.

b. Valuation accounts

Financial instruments at FVTOCI/available for sale investments: It includes accumulated net changes in the fair value of investments at FVTOVI in 2018 and available for sale investment up to December 31, 2017 until de investment is disposed of or there is a significant or prolonged decline in value.

Hedge of net investment in foreign operations: Corresponds to adjustments for hedges of net investments in foreign operations.

Cash flow hedge: It includes the effects of hedges on the Bank’s exposure to variations in cash flows that are attributed to a particular risk related to a recognized asset and/or liability, which may affect the results of the period.

Exchange differences on investments in Colombia and New York branch: It includes the effects of converting the financial statements of the New York Branch and Colombian subsidiaries, whose functional currencies are the US dollar and Colombian peso, respectively, to the presentation currency of Bank Itaú Corpbanca (Chilean peso).

Defined benefits obligations: This includes the effects of complying with IAS 19 “Employees Benefit”.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-116

Note 22 – Equity, continued

The following are the equity effects and income taxes for years ended December 31, 2018 and 2017:

	Investments at FVTOCI			Hedge of net investments in foreign operations			Cash flow hedge			Exchange differences on investment in Colombia and New York branch			Defined benefits obligations			Totals
As of December 31, 2018	MCh$			MCh$			MCh$			MCh$			MCh$			MCh$
Other comprehensive income (loss) before income taxes
Balances as of January 1, 2018		16,592			(5,730	)		64,741			(57,485	)		(2,736	)		15,382
Changes due initial adoption IFRS 9		1,496			—			—			—			—			1,496
Restated balances as of January 1, 2018		18,088			(5,730	)		64,741			(57,485	)		(2,736	)		16,878
Effects for the year		(295	)		11,289			(35,338	)		38,366			(500	)		13,522
Balances as of December 31, 2018		17,793			5,559			29,403			(19,119	)		(3,236	)		30,400
Income taxes related to components of other comprehensive income (loss)
Balances as of January 1, 2018		(4,937	)		1,389			(17,287	)		—			718			(20,117	)
Changes due initial adoption IFRS 9		(499	)		—			—			—			—			(499	)
Restated balances as of January 1, 2018		(5,436	)		1,389			(17,287	)		—			718			(20,616	)
Effects for the year		(1,468	)		(1,669	)		9,541			—			(29	)		6,375
Balances as of December 31, 2018		(6,904	)		(280	)		(7,746	)		—			689			(14,241	)
Net balances as of December 31, 2018		10,889			5,279			21,657			(19,119	)		(2,547	)		16,159

	Available for sale investments			Hedge of net investments in foreign operations			Cash flow hedge			Exchange differences on investment in Colombia and New York branch			Defined benefits obligations			Totals
As of December 31, 2017	MCh$			MCh$			MCh$			MCh$			MCh$			MCh$
Other comprehensive income (loss) before income taxes
Balances as of January 1, 2017		10,372			(5,603	)		14,917			2,380			(2,598	)		19,468
Effects for the period		6,220			(127	)		49,824			(59,865	)		(138	)		(4,086	)
Balances as of December 31, 2017		16,592			(5,730	)		64,741			(57,485	)		(2,736	)		15,382
Income taxes related to components of other comprehensive income (loss)
Balances as of January 1, 2017		(2,764	)		1,345			(3,219	)		—			722			(3,916	)
Effects for the period		(2,173	)		44			(14,068	)		—			(4	)		(16,201	)
Balances as of December 31, 2017		(4,937	)		1,389			(17,287	)		—			718			(20,117	)
Net balances as of December 31, 2017		11,655			(4,341	)		47,454			(57,485	)		(2,018	)		(4,735	)

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-117

Note 22 – Equity, continued

	Available for sale investments			Net investments in foreign operations hedges			Cash flows hedges			Exchange differences on investment in Colombia and New York branch		Defined benefits obligations			Totals
As of December 31, 2016	MCh$			MCh$			MCh$			MCh$		MCh$			MCh$
Other comprehensive income (loss) before income taxes
Balances as of January 1, 2016		(1,170	)		—			—			—		—			(1,170	)
Effects for the period		11,542			(5,603	)		14,917			2,380		(2,598	)		20,638
Balances as of December 31, 2016		10,372			(5,603	)		14,917			2,380		(2,598	)		19,468
Income taxes related to components of other comprehensive income loss)
Balances as of January 1, 2016		226			—			—			—		—			226
Effects for the period		(2,990	)		1,345			(3,219	)		—		722			(4,142	)
Balances as of December 31, 2016		(2,764	)		1,345			(3,219	)		—		722			(3,916	)
Net balances as of December 31, 2016		7,608			(4,258	)		11,698			2,380		(1,876	)		15,552

a) Reserves

This item corresponds to “Other non-earnings reserves” corresponding to the adjustments recorded as a result of the business combination between Itaú Chile and Corpbanca for MCh$839,120 as of December 31, 2018 and 2017, and reserves from Itaú Chile before the business combination for MCh$451,011 as of December 31, 2018 and 2017.

b) Retained earnings from prior years

Corresponds to accumulated losses for the year ended December 31, 2018 for a total of MCh$69,355 and retained earnings for the year ended December 31, 2017 for a total of MCh$12,668, not distributed to shareholders.

  Itaú Corpbanca and Subsidiaries – Consolidated Financial Statements – December 31, 2018   F-118

Note 22 – Equity, continued

c) Non-controlling interest:

This corresponds to the net amount of equity in the consolidated subsidiaries attributable to capital that does not belong, directly or indirectly, to the Bank, including the part of profit for the period that is attributed to them. Non-controlling interest in the subsidiary’s equity and profit for the year is detailed as follows:

As of December 31, 2018									Other Comprehensive Income
Subsidiaries	Non-controlling			Equity		Net income			Financial instruments at FVTOCI			Exchange differences on translation		Hedge of net investment in foreign operations			Cash flow hedge		Defined benefits obligations			Deferred Tax		Total other comprehensive income		Total comprehensive income
	%			MCh$		MCh$			MCh$			MCh$		MCh$			MCh$					MCh$		MCh$		MCh$
Itaú Corredor de Seguro Colombia S.A.		20.000	%		409		15			—			—		—			—					—		—		15
Itaú Corpbanca Colombia S.A. y filiales		33.721	%		217,673		(4,500	)		(664	)		10,244		(1,195	)		—		(254	)		305		8,436		3,936
Itaú Corredores de Seguros S.A. (Ex -Corpbanca Corredores de Seguros S.A.) (*)		0.000	%		—		8			—			—		—			—					—		—		8
Itaú Administradora General de Fondos S.A. (**)		0.000	%		—		—			—			—		—			—					—		—		—
Itaú Corpbanca Corredores de Bolsa Limitada (***)		0.000	%		—		—			—			—		—			—					—		—		—
Totals					218,082		(4,477	)		(664	)		10,244		(1,195	)		—		(254	)		305		8,436		3,959

(*) On April 1, 2018, the merger of Corpbanca Corredores de Seguro S.A. and Itaú Chile Corredora de Seguros Limitada through the absorption of this last entity in the first took place, being its new name Itaú Corredores de Seguros S.A. On September 10, 2018, Itaú Corpbanca acquired 127,901 shares from minority investors. As a result, the Bank and its subsidiaries own a 100% of the Company shares.

(**) On December 10, 2018, Itaú Corpbanca acquired 1 share from minority investors. As a result, the Bank and its subsidiaries own a 100% of the Company shares.

(***) On July 4, 2018, Itaú Asesorías Financieras S.A. acquired 2 shares from minority investors. As a result, the Bank and its subsidiaries own a 100% of the Company shares.

As of December 31, 2017									Other Comprehensive Income
	Non-controlling			Equity		Net income			Available for sale investments		Exchange differences on translation			Hedge of net investment in foreign operations			Cash Flow hedges		Defined benefits obligations			Deferred Tax			Total other comprehensive income			Comprehensive income
Subsidiaries	%			MCh$		MCh$			MCh$		MCh$			MCh$			MCh$		MCh$			MCh$			MCh$			MCh$
Itaú Corredor de Seguros S.A (ex-Helm Corredor de Seguros S.A)		20.000	%		380		(5	)		—		—			—			—		—			—			—			(5	)
Itaú Corpbanca Colombia S.A (ex-Banco Corpbanca Colombia S.A.)		33.721	%		216,883		(5,001	)		3,746		(18,437	)		(627	)		—		(70	)		(1,305	)		(16,693	)		(21,694	)
Itaú Chile Corredores de Seguros Ltda.		0.029	%		12		10			—		—			—			—		—			—			—			10
Itaú Administradora General de Fondos S.A.		0.600	%		1		—			—		—			—			—		—			—			—			—
Itaú Corpbanca Corredores de Bolsa Ltda.		0.000	%		4		—			—		—			—			—		—			—			—			—
Totals					217,280		(4,996	)		3,746		(18,437	)		(627	)		—		(70	)		(1,305	)		(16,693	)		(21,689	)
As of December 31, 2016									Other Comprehensive Income
	Non-controlling			Equity		Net income			Available for sale investments		Exchange differences on translation			Hedge of net investment in foreign operations			Cash flow hedges		Defined benefits obligations			Deferred Tax			Total Other Comprehensive income			Comprehensive income
Subsidiaries	%			MCh$		MCh$			MCh$		MCh$			MCh$			MCh$		MCh$			MCh$			MCh$			MCh$
SMU CORP S.A.		49.00	%		437		—			—		—			—			—		—			—			—			—
Itaú Corredor de Seguros S.A (ex-Helm Corredor de Seguros S.A)		20.00	%		601		78			—		—			—			—		—			—			—			78
Itaú Corpbanca Colombia S.A (ex-Banco Corpbanca Colombia S.A.)		33.72	%		237,917		(527	)		3,876		(9,481	)		(1,459	)		—		(1,322	)		(133	)		(8,519	)		(9,046	)
Itaú Chile C. de Seguros Ltda.		0.100	%		13		10			—		—			—			—		—			—			—			10
Itaú Administradora General de Fondos S.A.		0.010	%		1		1			—		—			—			—		—			—			—			1
Itaú BBA Corredor de Bolsa Ltda.		0.020	%		—		—			—		—			—			—		—			—			—			—
Totals					238,969		(438	)		3,876		(9,481	)		(1,459	)		—		(1,322	)		(133	)		(8,519	)		(8,957	)

The following table shows the non-controlling interest movements for the year ended December 31, 2018, 2017 and 2016:

	As of December 31,
	2018			2017			2016
	MCh$			MCh$			MCh$
Balances as of January 1,		217,280			238,969			59
Changes due to initial application of IFRS 9		(3,157	)		—			—
Restated balances as of January 1,		214,123			238,969			59
Integration Itaú Corpbanca		—			—			247,867
Comprehensive income		3,959			(21,689	)		(8,957	)
Balances as of December 31,		218,082			217,280			238,969

  Itaú Corpbanca and Subsidiaries – Consolidated Financial Statements – December 31, 2018   F-119

Note 22 – Equity, continued

The main subsidiary with non-controlling interest of Itaú Corpbanca, is the following:

Entity Name	Country		Group participation			Non-controlling participation			Main activity
Itaú Corpbanca Colombia S.A. and subsidiaries		Colombia		66.28	%		33.72	%		Bank

Summarized financial information for the main subsidiary with non-controlling interest, is as follows:

	As of December 31,
	2018			2017			2016
Summary Statements of Financial Position	MCh$			MCh$			MCh$
Current assets		4,669,275			4,589,487			5,502,852
Current liabilities		(3,523,186	)		(3,939,253	)		(4,813,426	)
Net current assets (liabilities)		1,146,089			650,234			689,426
Non-current assets		1,664,700			1,690,890			1,780,581
Non-current liabilities		(2,160,781	)		(1,697,961	)		(1,764,461	)
Net non-current assets (liabilities)		(496,081	)		(7,071	)		(16,120	)
Total net assets (liabilities)		650,008			643,163			673,306
Accumulated non-controlling interest		217,673			216,883			237,917
	For the years ended December 31,
	2018			2017			2016
Summary Income Statements				MCh$			MCh$
Interest income and readjustments		553,937			579,176			482,806
Income of the period		(13,087	)		(14,830	)		(1,563	)
Non-controlling interests income		(4,500	)		(5,001	)		(527	)
	For the years ended December 31,
	2018			2017			2016
Summary Cash Flows Statements	MCh$			MCh$			MCh$
Net cash flows provided by (used in) operating activities		232,480			16,822			(35,057	)
Net cash flows provided by (used in) investing activities		(145,665	)		(158,402	)		93,018
Net cash flows provided by (used in) financing activities		(24,122	)		35,937			(4,400	)
Net increase (decrease) in cash flows		62,693			(105,643	)		53,561

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-120

Note 22 – Equity, continued

d) Consolidated comprehensive income for the years ended December 31, 2018, 2017 and 2016 is as follows:

	2018
Concepts	Equity holders of the Bank			Non-controlling interest			Totals
	MCh$			MCh$			MCh$
Income (loss) for the year		171,331			(4,477	)		166,854
Other comprehensive income (loss) before income taxes
Financial instruments at fair value through other comprehensive income		(295	)		(664	)		(959	)
Hedge of net investment in foreign operations		(35,338	)		(1,195	)		(36,533	)
Cash flow hedge		11,289			—			11,289
Exchange differences		38,366			10,244			48,610
Defined benefits obligations		(500	)		(254	)		(754	)
Subtotals		13,522			8,131			21,653
Income taxes
Financial instruments at fair value through other comprehensive income		(1,468	)		(704	)		(2,172	)
Hedge of net investment in foreign operations		9,541			1,024			10,565
Cash flow hedge		(1,669	)		—			(1,669	)
Defined benefits obligations		(29	)		(15	)		(44	)
Subtotals		6,375			305			6,680
Other comprehensive income for the year		19,897			8,436			28,333
Comprehensive income for the year		191,228			3,959			195,187
	2017
Concepts	Equity holders of the Bank			Non-controlling interest			Totals
	MCh$			MCh$			MCh$
Income (loss) for the year		67,821			(4,996	)		62,825
Other comprehensive income (loss) before income taxes
Available for sale investments		6,220			3,746			9,966
Net investment in foreign operations hedges		49,824			(627	)		49,197
Cash flow hedges		(127	)		—			(127	)
Exchange differences		(59,865	)		(18,437	)		(78,302	)
Defined benefits obligations		(138	)		(70	)		(208	)
Subtotals		(4,086	)		(15,388	)		(19,474	)
Income taxes
Available for sale investments		(2,173	)		(1,160	)		(3,333	)
Net investment in foreign operations hedges		(14,068	)		(143	)		(14,211	)
Cash flows hedges		44			—			44
Defined benefits obligations		(4	)		(2	)		(6	)
Subtotals		(16,201	)		(1,305	)		(17,506	)
Other comprehensive income (loss) for the year		(20,287	)		(16,693	)		(36,980	)
Comprehensive income (loss) for the year		47,534			(21,689	)		25,845

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-121

Note 22 – Equity, continued

	2016
Concepts	Equity holders of the Bank			Non-controlling interest			Totals
	MCh$			MCh$			MCh$
Income (loss) for the year		14,407			(438	)		13,969
Other comprehensive income (loss) before income taxes
Available for sale investments		11,542			3,876			15,418
Net investment in foreign operations hedges		14,917			(1,459	)		13,458
Cash flow hedges		(5,603	)		—			(5,603	)
Exchange differences		2,380			(9,481	)		(7,101	)
Defined benefits obligations		(2,598	)		(1,322	)		(3,920	)
Subtotals		20,638			(8,386	)		12,252
Income taxes
Available for sale investments		(2,990	)		(1,035	)		(4,025	)
Net investment in foreign operations hedges		(3,219	)		534			(2,685	)
Cash flows hedges		1,345			—			1,345
Defined benefits obligations		722			368			1,090
Subtotals		(4,142	)		(133	)		(4,275	)
Other comprehensive income (loss) for the year		16,496			(8,519	)		7,977
Comprehensive income (loss) for the year		30,903			(8,957	)		21,946

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-122

Note 23 - Interest Income and Interest Expense

This item comprises interest accrued in the year by all financial assets and liabilities, interest income and expenses, whose implicit or explicit performance is measured by applying the effective interest rate method, independently if these are measured at fair value, as well as the effects from accounting hedges, which are part of the interest income and expenses included in the Consolidated Statement of Income for the year.

a. The composition of interest income and inflation-indexing for the years ended December 31, 2018, 2017 and 2016 is as follows:

	For the years ended December 31,
	2018								2017								2016
	Interest			Inflation adjustments (1)		Totals			Interest			Inflation adjustments (1)		Totals			Interest			Inflation adjustments (1)		Totals
	MCh$			MCh$		MCh$			MCh$			MCh$		MCh$			MCh$			MCh$		MCh$
Investments under agreements to resell		4,988			—		4,988			6,643			2		6,645			25,550			—		25,550
Loans and receivables to banks		5,013			—		5,013			5,460			—		5,460			8,180			—		8,180
Commercial loans		816,193			115,468		931,661			872,416			68,729		941,145			772,704			100,381		873,085
Mortgage loans		196,598			107,364		303,962			188,094			59,149		247,243			155,101			79,655		234,756
Consumer loans		372,148			194		372,342			360,268			64		360,332			283,005			31		283,036
Financial investments		101,274			19,060		120,334			70,556			8,274		78,830			67,683			11,032		78,715
Other interest income		10,882			9,850		20,732			9,656			545		10,201			8,427			466		8,893
Gain (loss) from accounting hedges (*)		(19,715	)		—		(19,715	)		(3,527	)		—		(3,527	)		(3,012	)		—		(3,012	)
Totals		1,487,381			251,936		1,739,317			1,509,566			136,763		1,646,329			1,317,638			191,565		1,509,203

b. For the years ended December 31, 2018, 2017 and 2016, the detail of the amount of interest and inflation-indexing expense is as follows:

	For the years ended December 31,
	2018									2017									2016
	Interest			Inflation adjustments (1)			Totals			Interest			Inflation adjustments (1)			Totals			Interest			Inflation adjustments (1)			Totals
	MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$
Deposits and other demand liabilities		(49,536	)		(141	)		(49,677	)		(72,732	)		(139	)		(72,871	)		(78,147	)		(173	)		(78,320	)
Obligations under repurchase agreements		(29,660	)		(4	)		(29,664	)		(32,677	)		—			(32,677	)		(48,086	)		—			(48,086	)
Time deposits and other time liabilities		(370,206	)		(15,528	)		(385,734	)		(420,190	)		(13,047	)		(433,237	)		(419,661	)		(39,720	)		(459,381	)
Interbank borrowings		(69,054	)		(206	)		(69,260	)		(51,922	)		(2,463	)		(54,385	)		(45,801	)		—			(45,801	)
Debt instruments issued		(199,420	)		(122,832	)		(322,252	)		(210,104	)		(72,780	)		(282,884	)		(156,168	)		(79,126	)		(235,294	)
Other financial liabilities		(752	)		—			(752	)		(114	)		—			(114	)		(142	)		(197	)		(339	)
Other Interest expense		(397	)		(4,292	)		(4,689	)		(556	)		(1,962	)		(2,518	)		(905	)		(2,261	)		(3,166	)
Gain (loss) from hedge accounting (*)		10,374			—			10,374			15,339			—			15,339			359			—			359
Totals		(708,651	)		(143,003	)		(851,654	)		(772,956	)		(90,391	)		(863,347	)		(748,551	)		(121,477	)		(870,028	)

(1) The inflation indexing is the result of changes in the Unidades de Fomento (“UF”). The UF is an inflation-index Chilean monetary unit with a value in Chilean pesos that changes daily to reflect changes in the Official Consumer Price Index (“CPI”) of the Instituto Nacional de Estadísticas (the Chilean National Institute of Statistics) for the previous month. The effect of any changes in the nominal peso value of our UF-denominated interest earning assets and interest bearing liabilities is reflected in our results of operations as an increase (or decrease, in the event of deflation) in interest income and expense respectively.

(*) The mark to market adjustments are presented in this line for hedging derivatives used in hedging of assets except in the case of foreign currency hedges and cash flow hedges (cross-currency), their all-in mark to market adjustment is included in the foreign exchange gain (losses) (see Note 26 “Net foreign exchange income (losses)”).

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-123

Note 24 – Fee and Commission Income and Expense

This item comprises the amount of all commissions accrued and paid in the year, except for those that form an integral part of the effective interest rate of the financial instruments.

a. Fee and commission income

This item comprises the financial income for the year corresponding to remunerations generated by the services rendered by the Bank and its subsidiaries and corresponds to the following items:

	For the years ended December 31,
	2018		2017		2016
	MCh$		MCh$		MCh$
Fees and commissions from lines of credits and overdrafts		5,292		3,306		4,911
Fees and commissions from guarantees and letters of credit		15,317		14,776		13,562
Fees and commissions from card services		72,932		63,388		52,775
Fees and commissions from accounts management		11,512		12,024		10,171
Fees and commissions from collections and payments		20,359		25,359		24,813
Fees and commissions from brokerage and securities management		10,966		13,183		9,454
Fees and commissions from asset management		24,718		25,965		23,614
Compensation for insurance brokerage		36,693		26,096		21,477
Investment banking and advisory fees		19,403		8,162		8,951
Fees and commissions from student loans ceded		5,300		4,680		3,354
Commissions on loan transactions		651		2,560		2,572
Commissions for mortgage loans		1,486		1,112		1,023
Other fees from services rendered		10,982		12,088		12,768
Other commissions earned		2,345		3,721		4,356
Totals		237,956		216,420		193,801

b. Fee and commission expense:

This item includes expenses for commissions accrued during the year from operations, and corresponds to the following items:

	For the years ended December 31,
	2018			2017			2016
	MCh$			MCh$			MCh$
Compensation for cards transactions		(35,676	)		(23,439	)		(29,376	)
Fees and commissions for securities transactions		(2,963	)		(4,855	)		(3,328	)
Commissions paid for foreign trade transactions		(2,550	)		(2,449	)		(1,348	)
Commissions paid for customer loyalty program benefits		(2,607	)		(1,439	)		(1,309	)
Commissions paid for services to customers management		(3,455	)		(3,157	)		(3,232	)
Other commissions paid		(4,576	)		(3,510	)		(4,412	)
Totals		(51,827	)		(38,849	)		(43,005	)

Commissions earned on loans with mortgage finance bonds are recorded in the Consolidated Statement of Income under “Interest income.”

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-124

Note 24 – Fee and Commission Income and Expense, continued

c. Below are the income and expenses for commissions generated by segment and the revenue recognition calendar for ordinary activities, for the year ended December 31, 2018 according to IFRS 15.

	Segments									Revenue recognition calendar for ordinary activities
	Chile			Colombia			Total			Transferred over time		Transferred at a point in time			Accrual model
	MCh$			MCh$			MCh$			MCh$		MCh$			MCh$
Fees and commissions from lines of credits and overdrafts		5,180			112			5,292			5,292		—			—
Fees and commissions from guarantees and letters of credit		12,267			3,050			15,317			12,267		3,050			—
Fees and commissions from card services		47,238			25,694			72,932			—		72,932			—
Fees and commissions from accounts management		8,471			3,041			11,512			—		11,512			—
Fees and commissions from collections and payments		12,834			7,525			20,359			—		9,560			10,799
Fees and commissions from brokerage and securities management		6,212			4,754			10,966			—		10,966			—
Fees and commissions from asset management		15,417			9,301			24,718			—		24,718			—
Compensation for insurance brokerage		36,693			—			36,693			—		—			36,693
Investment banking and advisory fees		19,403			—			19,403			—		19,403			—
Fees and commissions from student loans ceded		5,300			—			5,300			—		5,300			—
Commissions on loan transactions		651			—			651			—		651			—
Commissions for mortgage loans		1,486			—			1,486			—		1,486			—
Other commissions earned		2,767			10,560			13,327			—		13,327			—
Totals		173,919			64,037			237,956			17,559		172,905			47,492
	Segments									Revenue recognition calendar for ordinary activities
	Chile			Colombia			Total			Transferred over time		Transferred at a point in time			Accrual model
	MCh$			MCh$			MCh$			MCh$		MCh$			MCh$
Compensation for cards transactions		(11,734	)		(23,942	)		(35,676	)		—		(35,676	)		—
Fees and commissions for securities transactions		(1,744	)		(1,219	)		(2,963	)		—		(2,963	)		—
Commissions paid for foreign trade transactions		(2,550	)		—			(2,550	)		—		(2,550	)		—
Commissions paid for customer loyalty program benefits		—			(2,607	)		(2,607	)		—		(2,607	)		—
Commissions paid for services to customers management		—			(3,455	)		(3,455	)		—		(3,455	)		—
Other commissions paid		(3,805	)		(771	)		(4,576	)		—		(4,576	)		—
Totals		(19,833	)		(31,994	)		(51,827	)		—		(51,827	)		—

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-125

Note 25 – Net Income (Expense) from Financial Operations

This item includes the amount of changes in the fair value of financial instruments, except those attributable to interest accrued by applying the effective interest rate method, as well as the results obtained in the purchase and sale thereof.

Net income (expense) from financial operations in the Consolidated Statements of Income for the year is as follows:

	For the years ended December 31,
	2018		2017			2016
	MCh$		MCh$			MCh$
Trading instruments (securities)		2,527		43,323			40,893
Financial derivative contracts (trading)		152,732		(63,992	)		44,499
Sale of loans and accounts receivable from customers (*)		1,602		15,121			18,863
Net gain on sale of financial instruments at fair value through other comprehensive income		13,765		—			—
Net gain on sale of available for sale investments		—		13,641			7,998
Others		2,129		175			699
Total		172,755		8,268			112,952

(*) See details Note 10, letter d.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-126

Note 26 – Net Foreign Exchange Gain (Loss)

This item includes the income earned from foreign currency trading, differences arising from converting monetary items in a foreign currency to the functional currency, and those generated by non-monetary assets in foreign currency at the time of their disposal. Net foreign exchange gains (losses) details are as follows:

	For the years ended December 31,
	2018			2017			2016
	MCh$			MCh$			MCh$
Net foreign exchange gain (loss)
Gain (loss) on net foreign currency exchange positions		(64,278	)		131,196			(30,191	)
Other foreign currency exchange gains (losses)		5,421			1,537			1,202
Subtotals		(58,857	)		132,733			(28,989	)
Net exchange rate adjustments gain (loss)
Adjustments for loans and accounts receivable from customers		93			(82	)		14
Adjustment for investment instruments		105			(824	)		(121	)
Adjustments to deposits and saving account		(322	)		—			10
Adjustment for other assets and liabilities		—			1,385			—
Net gain (loss) from hedge accounting		41,016			(87,047	)		(19,762	)
Subtotals		40,892			(86,568	)		(19,859	)
Totals		(17,965	)		46,165			(48,848	)

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-127

Note 27 – Provisions for Impairment of Financial Assets

a. The movement registered in income for the year related to allowances and impairment due to credit risk, for the year ended December 31, 2018 and 2017, is summarized as follows:

				Loans and accounts receivable at amortized cost
	Interbank loans			Commercial			Mortgage			Consumer			Financial instruments at FVTOCI			Financial instruments at amortized cost		Contingent loans			Totals
2018	MCh$			MCh$			MCh$			MCh$											MCh$
Loss for provisions established		(344	)		(634,886	)		(78,185	)		(562,620	)		(25	)		—		(14,511	)		(1,290,571	)(*)
Income for provisions released		131			474,192			78,873			380,294			411			50		28,354			962,305	(*)
Recovery of loans previously charged-off		—			19,921			2,588			25,959			—			—		—			48,468
Net charge to income		(213	)		(140,773	)		3,276			(156,367	)		386			50		13,843			(279,798	)

				Loans and accounts receivable from customers
	Interbank loans			Commercial loans			Mortgage loans			Consumer loans			Totals
2017	MCh$			MCh$			MCh$			MCh$			MCh$
Provisions established
Individually assessed		(226	)		(338,701	)		—			—			(338,927	)
Collectively assessed		—			(104,171	)		(63,699	)		(312,697	)		(480,567	)
(Loss) for provisions established		(226	)		(442,872	)		(63,699	)		(312,697	)		(819,494	)(*)
Provisions released
Individually assessed		209			302,504			—			—			302,713
Collectively assessed		—			33,538			31,310			104,953			169,801
Income for provisions released		209			336,042			31,310			104,953			472,514	(*)
Recovery of loans previously charged-off		—			13,236			1,908			16,419			31,563
Net charge to income		(17	)		(93,594	)		(30,481	)		(191,325	)		(315,417	)
				Loans and accounts receivable from customers
	Interbank loans			Commercial loans			Mortgage loans			Consumer loans			Totals
2016	MCh$			MCh$			MCh$			MCh$			MCh$
Provisions established
Individually assessed		(307	)		(387,737	)		—			—			(388,044	)
Collectively assessed		—			(49,218	)		(38,837	)		(198,242	)		(286,297	)
(Loss) for provisions established		(307	)		(436,955	)		(38,837	)		(198,242	)		(674,341	)(*)
Provisions released
Individually assessed		286			251,582			—			—			251,868
Collectively assessed		—			22,242			34,589			96,381			153,212
Income for provisions released		286			273,824			34,589			96,381			405,080	(*)
Recovery of loans previously charged-off		—			8,898			1,285			13,088			23,271
Net charge to income		(21	)		(154,233	)		(2,963	)		(88,773	)		(245,990	)

(*) The amounts disclosed in the Consolidated Statements of Cash Flows are detailed below:

	For the years ended December 31,
	2018			2017			2016
	MCh$			MCh$			MCh$
Charge to income for provisions established		1,290,571			819,494			674,341
Credit to income for provisions used		(962,305	)		(472,514	)		(405,080	)
		328,266			346,980			269,261

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-128

Note 27 – Provisions for Impairment of Financial Assets, continued

b. The detail by type of loans, analyzed collectively and individually, which were constituted and released by way of provision, is as follows:

			As of December 31, 2018
	Note		Provisions established			Provisions released		Totals
			MCh$			MCh$		MCh$
Commercial				(634,886	)		474,192		(160,694	)
Mortgage				(78,185	)		78,873		688
Consumer				(562,620	)		380,294		(182,326	)
Subtotals		10		(1,275,691	)		933,359		(342,332	)
Interbank loans, net		9		(344	)		131		(213	)
Totals				(1,276,035	)		933,490		(342,545	)

			As of December 31, 2017
	Note		Provisions established									Provisions released
			Individual			Group			Totals			Individual		Group		Totals
			MCh$			MCh$			MCh$			MCh$		MCh$		MCh$
Commercial loans				(338,701	)		(104,171	)		(442,872	)		302,504		33,538		336,042
Mortgage loans				—			(63,699	)		(63,699	)		—		31,310		31,310
Consumer loans				—			(312,697	)		(312,697	)		—		104,953		104,953
Subtotals		10		(338,701	)		(480,567	)		(819,268	)		302,504		169,801		472,305
Interbank loans, net		9		(226	)		—			(226	)		209		—		209
Totals				(338,927	)		(480,567	)		(819,494	)		302,713		169,801		472,514
			As of December 31, 2016
	Note		Provisions established									Provisions released
			Individual			Group			Totals			Individual		Group		Totals
			MCh$			MCh$			MCh$			MCh$		MCh$		MCh$
Commercial loans				(387,737	)		(49,218	)		(436,955	)		251,582		22,242		273,824
Mortgage loans				—			(38,837	)		(38,837	)		—		34,589		34,589
Consumer loans				—			(198,242	)		(198,242	)		—		96,381		96,381
Subtotals		10		(387,737	)		(286,297	)		(674,034	)		251,582		153,212		404,794
Interbank loans, net		9		(307	)		—			(307	)		286		—		286
Totals				(388,044	)		(286,297	)		(674,341	)		251,868		153,212		405,080

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-129

Note 28 – Personnel Salaries and Expenses

Personnel salaries expenses for the years ended December 31, 2018, 2017 and 2016 are as follows:

	For the years ended December 31,
	2018			2017			2016
	MCh$			MCh$			MCh$
Personnel compensation		(176,083	)		(174,029	)		(148,073	)
Bonuses or gratifications		(84,754	)		(68,946	)		(53,669	)
Compensation for years of service		(12,477	)		(18,803	)		(32,704	)
Health and life insurance		(804	)		(734	)		(1,050	)
Training expenses		(2,590	)		(3,487	)		(1,576	)
Other personnel expenses		(18,039	)		(15,324	)		(8,593	)
Totals		(294,747	)		(281,323	)		(245,665	)

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-130

Note 29 – Administrative Expenses

For the years ended as of December 31, 2018, 2017 and 2016, the composition of this item is as follows:

	For the years ended December 31,
	2018			2017			2016
	MCh$			MCh$			MCh$
Administrative expenses		(214,666	)		(217,130	)		(164,294	)
Maintenance and repair of fixed assets		(31,673	)		(34,754	)		(23,226	)
Office lease		(36,201	)		(36,482	)		(26,308	)
Equipment lease		(2,925	)		(2,890	)		(2,649	)
Insurance payments		(20,704	)		(22,624	)		(14,953	)
Office supplies		(1,885	)		(2,228	)		(2,004	)
IT and communications expenses		(43,667	)		(41,872	)		(25,860	)
Utilities and other services		(4,443	)		(5,022	)		(4,240	)
Security and transportation of securities services		(5,250	)		(4,691	)		(3,469	)
Representation and personnel travel expenses		(3,612	)		(3,347	)		(2,427	)
Legal and notarial expenses		(15,112	)		(9,546	)		(7,232	)
Technical report fees		(11,626	)		(11,274	)		(7,096	)
Professional services fees		(1,825	)		(2,358	)		(2,535	)
Fees for classification of titles		(134	)		(1,613	)		(888	)
Fines		(6,059	)		(75	)		(728	)
ATM maintenance and management services		(2,630	)		(5,837	)		(5,855	)
Temporary external services		(545	)		(812	)		(201	)
Postage and mailing expenses		(1,341	)		(1,397	)		(2,864	)
Internal events		(248	)		(666	)		(237	)
Commercial programs		(1,242	)		(1,253	)		(732	)
Credit card management services		(3,102	)		(4,363	)		(2,609	)
Other administrative expenses		(20,442	)		(24,026	)		(28,181	)
Subcontracted services		(22,303	)		(24,724	)		(23,609	)
Data processing		(13,044	)		(14,733	)		(14,369	)
Products sales		(275	)		(832	)		(435	)
Others		(8,984	)		(9,159	)		(8,805	)
Board of Directors compensation		(1,529	)		(1,394	)		(1,056	)
Marketing and advertising		(14,384	)		(16,268	)		(8,322	)
Real estate taxes, contributions and levies		(38,854	)		(46,106	)		(37,923	)
Real estate taxes		(393	)		(671	)		(443	)
Patents		(1,121	)		(1,430	)		(1,665	)
Other taxes (*)		(29,324	)		(36,031	)		(29,591	)
Contributions to SBIF		(8,016	)		(7,974	)		(6,224	)
Totals		(291,736	)		(305,622	)		(235,204	)

(*) These amounts primarily correspond to taxes other than income taxes that affect Itaú Corpbanca Colombia and its subsidiaries (Colombian segment). These are taxes on local financial transactions, ongoing performance of commercial activities or services, non-discountable value added tax and equity tax, among others.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-131

Note 30 – Depreciation, Amortization, and Impairment

a. Depreciation and amortization

The amounts corresponding to charges to results for depreciation and amortization for the years ended December 31, 2018, 2017 and 2016, are detailed below:

		For the years ended December 31,
		2018			2017			2016
	Notes	MCh$			MCh$			MCh$
Depreciation of property, plant and equipment	13		(20,659	)		(19,370	)		(13,834	)
Amortization of intangible assets	12		(66,158	)		(62,475	)		(49,858	)
Totals			(86,817	)		(81,845	)		(63,692	)

b. Impairment:

For the years ended December 31, 2018 and 2017, the composition of this item is as follows:

	For the years ended December 31,
	2018			2017			2016
	MCh$			MCh$			MCh$
Impairment of financial investments available-for-sale					—			—
Impairment of financial investments held-to-maturity					—			—
Subtotal financial assets		—			—			—
Impairment of property, plant and equipment (1)		(28	)		(27	)		(351	)
Impairment of goodwill and intangibles		—			—			—
Subtotal Non-financial assets		(28	)		(27	)		(351	)
Totals		(28	)		(27	)		(351	)

(1) Corresponds to impairment for due to technological obsolescence caused by the current regulations (Decree N°222 of October 30, 2013 of the Ministry of the Interior and Public Security) applied to ATMs, which is in accordance with stipulated by IAS 36 Impairment of assets.

The Bank has defined two CGUs: CGU Chile (Itaú Corpbanca and its Chileans subsidiaries and subsidiary allocated in New York) and CGU Colombia (Itaú Corpbanca Colombia and its subsidiaries and Itaú Corredores de Seguros S.A.). These CGUs were defined based on their main geographic areas. Their cash flow generation and performance are analyzed separately by Top management because their contributions to the consolidated entity may be identified independently. It is worth mentioning that these CGUs are consistent with the Bank’s operating segments (see Note 4).

Book Value of these CGUs is as follows:

CGU	As of December 31,
	2018		2017
	MCh$		MCh$
Chile		2,600,114		2,563,799
Colombia		843,943		864,958

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-132

Note 30 – Depreciation, Amortization, and Impairment, continued

1. Allocation of goodwill

The Goodwill generated in the reverse acquisition mentioned in Note 1, section “General information background of Itaú Corpbanca and subsidiaries” was allocated in the following manner to the two identified CGUs²:

Goodwill	As of December 31,
	2018		2017
	MCh$		MCh$
Chile		904,868		904,868
Colombia		230,524		221,795

2. Methodology used by the Bank

Consistent with the prior year, the recoverable amounts of CGU Chile and CGU Colombia have been determined using the dividend discount model. This methodology considers the cash flows that would be generated by dividends distributed to shareholders with at perpetuity, discounted to their cost of capital rate as of the valuation date. Therefore, the economic value of equity can be estimated using cash flow projections derived from financial budgets and other assumptions approved by management.

In testing goodwill for impairment, management considered different sources of information, including:

• Historical information existing for both Banks post-merger and, if relevant, pre-merger. Historical information for events assessed as one-time and non-recurring was excluded.

• Assumptions approved by management.

• Information from external sources such as analyst reports, regulators, central Banks and press releases.

• Observable market information such as rate curves, inflation and growth projections.

• The competitive strategy defined for both Banks.

The projected funding structure and its impact on the Bank’s capital requirements and internal policy

3. Key assumptions used in calculating the recoverable amount.

The key assumptions used in calculating recoverable amount, defined as those variables to which the calculation is more sensitive, are presented below:

			As of December 31,
			2018				2017
			Chile		Colombia		Chile		Colombia
Perpetuity rate	(	%)		5.20		6.50		5.20		6.50
Projected inflation rate	(	%)		3.00		3.00		2.80 – 3.00		3.00 – 3.40
Discount rate	(	%)		10.59		11.99		10.50		11.50
Loans growth	(	%)		9.65 – 11.10		8.60- 10.40		8.40 – 9.90		6.20 – 13.40
Solvency index limit	(	%)		12.50 – 14.70		11.50 – 4.00		10.00 – 12.00		9.00 – 10.80

²  Goodwill generated by the acquisition of a business abroad (Colombia case) is expressed in the functional currency of the aforementioned business (Colombian peso), converted at the closing exchange rate (exchange rate COP to CLP for the purpose of accounting registration. In Chile in accordance with IAS 21 “Effects of Changes in Exchange Rates of the Foreign Currency”. (See Note 13).

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-133

Note 30 – Depreciation, Amortization, and Impairment, continued

i. Period of Projection and Perpetuity

When performing the goodwill impairment in 2018, cash flow projections are prepared for a period of 5 years from 2019 to 2023. After this period, the present value of cash flows for the year 2023 are calculated, projected to perpetuity using GDP growth rates expected for the markets in which the aforementioned CGUs operate.

In 2017, management defined to project 6 years as it was consistent with the time needed to deploy the Corporate Integration plan, whose objective was to better capture the opportunities for creating value for the Bank. In this way, the strategy being implemented implied, in addition to the changes in the managerial staff and the operating models of both Banks, the change towards a new product mix, customer segmentation and medium and long-term objectives, consistent with the vision of becoming the third largest Bank in Chile.

This transformation involved certain costs and other economic efforts in order to harness synergies starting in 2018.

ii. Loans and deposits

Loans were projected considering an increase of around 10.43% per year in Chile and 9.42% in Colombia. Anticipated changes in the product mix were also modeled for both countries. The deposit portfolio was projected using target reciprocity.

iii. Income

Interest income and commissions were estimated based on the sensitivities of GDP growth and the effects of inflation with respect to the Banking industry (both in Chile and Colombia), which resulted in the projected growth rate based on the mix of products (consumer, housing and commercial placements) and in the market share objective proposed by the administration.

iv. Costs of funding

The cost projections are mainly determined based on demand deposits and term deposits balances, considering an annual average ratio of 3.2% for Chile and 4.3% for Colombia.

v. Discount rate

Estimated as the discount rate of the Cost of Capital (Ke) in local currency, which was used to discount the cash flows of each CGU. This calculation considers a premium for the risk of the country for each CGU.

vi. Perpetuity rate

The perpetuity growth rates are aligned with the growth of the economy in both jurisdictions. Consequently, these were built considering local inflation and GDP growth projections

vii. Dividend payment

The payment of dividends was made by maximizing the cash flows of the shareholder taking as a restriction that the solvency indicator (ratio of technical equity with risk-weighted assets) does not fall below the minimum limits required by the regulatory entities. In this way, a dividend for the CGU of Chile of 40% for the first 5 years and 50% in perpetuity was considered; and for the CGU Colombia of 50% and 55% respectively.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-134

Note 30 – Depreciation, Amortization, and Impairment, continued

4. Outcome of impairment testing

As a result of the impairment testing process described above, management concludes that the recoverable amount of the CGUs exceeds their carrying amount, as shown in the following table:

			As of December 31,
			2018				2017
			Chile		Colombia		Chile		Colombia
Recoverable Amount / Carrying Value	(	%)		113.00		102.90		118.30		102.00

Consequently, management has not identified an impairment impact that has to be recognized in the financial statements.

5. Uncertainty and sensitivity of calculation to changes in key assumptions

The estimates and judgments included in the calculations of recoverable amount are based on historical experience and other factors, including management’s expectations of future events considered reasonable based on current circumstances. However, the assumptions used are subject to a large degree of uncertainty and actual future results could differ from projections. For example:

• The Bank considers that the operational integration of the Banks in Chile will be completed in 2019.

• The model for estimating the recoverable amount of the Colombian CGU assumed a recovery of the business from 2019 onward.

• This, together with other measures, will result in growth of the various loan portfolios above industry averages.

The Bank has sensitized discount and growth rates at perpetuity separately for CGU Colombia so that the Recoverable Amount (AR) of CGU Colombia is equal to its Carrying Amount (CA):

			As of December 31,
			2018		2017
Discount rates	(	%)		12.21		11.60
Perpetuity growth rate	(	%)		6.29		6.40

Management has considered and analyzed possible reasonable changes in key assumptions and has not identified other situations in which the Carrying Amount exceeds the Recoverable Amount.

Additionally, the ranges of the discount and growth rates in perpetuity of the CGU Colombia have been sensitized, separately, in both cases of 60 basis points

			As of December 31,
			2018		2017
Discount rates	(	%)		11.99		11.50
Range	(	%)		11.39 – 12.59		10.90 – 12.10
Range (RA/CV)	(	%)		93.01 – 118.21		91.80 – 115.00
Perpetuity growth rate	(	%)		6.50		6.50
Range	(	%)		5.90 – 7.10		5.90 – 7.10
Range (RA/CV)	(	%)		94.72 – 116.05		91.50 – 115.40

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-135

Note 30 – Depreciation, Amortization, and Impairment, continued

6. Reconciliation of before and after taxes

The Bank has used the cost of own capital (Ke) rate as a discount rate in its calculation of the recoverable amount, a rate that is observable after taxes. The following table shows the effect of considering the flows and the discount rate before taxes.

			As of December 31,
			2018				2017
			Chile		Colombia		Chile		Colombia
Discount rates	(	%)		13.22		18.08		12.78		17.93
Recoverable amount/Carrying value	(	%)		126.50		111.90		150.50		118.06

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-136

Note 31 – Other operating income and expenses

a) Other operating income

The detail of other operating income is as follows:

	For the years ended December 31,
	2018		2017		2016
	MCh$		MCh$		MCh$
Income from assets received in lieu of payment
Gain on sales of assets received in lieu of payment		8,562		5,566		1,176
Other income		30		2,578		75
Subtotals		8,592		8,144		1,251
Other income
Compensations from insurance companies		53		—
Gain on sale of property, plant and equipment		5,519		14,119		37
Recovery of leased assets		1,349		522		514
Other operating income, subsidiaries		2,158		3,092		2,572
Gain on sale of leased assets		1,447		19		349
Other operating income		199		173		598
Marketing contribution, insurance companies		3,626		4,128		7,893
Other operating income, leases		724		446		—
Other income for recovery foreign expenses		620		420		—
Recoveries from expenses provisions		1,166		2,352		4,997
Other income		1,203		8,117		1,236
Subtotals		18,064		33,388		18,196
Totals		26,656		41,532		19,447

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-137

Note 31 – Other operating income and expenses, continued

b) Other operating expenses

During the years ended December 31, 2018, 2017 and 2016, the Bank presents other operating expenses according to the following:

	For the years ended December 31,
	2018			2017			2016
	MCh$			MCh$			MCh$
Provisions for assets received in lieu of payment		(16,132	)		(14,472	)		(9,463	)
Maintenance expenses for assets received in lieu of payment		(1,301	)		(714	)		(596	)
Subtotal		(17,433	)		(15,186	)		(10,059	)
Provisions for contingencies
Other provisions for contingencies		(1,998	)		(586	)		(8,952	)
Subtotals		(1,998	)		(586	)		(8,952	)
Other expenses.
Loss on sale of property, plant and equipment		(307	)		(1,099	)		(71	)
Credit card loyalty point benefits expenses		(14,306	)		(13,238	)		(26,303	)
Operating loss expenses		(10,589	)		(8,098	)		(2,661	)
Insurance expense (law 20,027)		(622	)		(1,205	)		(1,420	)
Provision expense for recovered leased assets		(4,170	)		(4,835	)		(11,327	)
Banking expenses		(2,450	)		(3,482	)		(2,184	)
Fines and penalties		(13,110	)		(2,025	)		(880	)
Loss on damaged assets		(2,311	)		(2,026	)		(962	)
Other expenses		(903	)		(10,550	)		(6,896	)
Subtotals		(48,768	)		(46,558	)		(52,704	)
Totals		(68,199	)		(62,330	)		(71,715	)

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-138

Note 32 – Related Party Transactions

In accordance with the provisions set forth in the Chilean General Banking Law and the instructions issued by the Chilean Superintendency of Banks and Financial Institutions, related parties are those individuals or corporations related to the ownership or management of the Institution directly or through third parties.

Article 89 of the Ley de Sociedades Anónimas (Chilean Companies Law), which also applies to Banks, establishes that any transaction with a related party must be carried out on an arm’s length basis.

In the case of sociedades anónimas abiertas (publicly traded companies) and their subsidiaries, transactions with related parties involve any negotiation, act, contract or transaction in which the company must intervene; the following are considered as parties related to them: those entities of the corporate Bank to which the company belongs; the corporations that, with respect to the company, have the status as parent, controlling entity, affiliate, subsidiary; the Directors, Managers, Administrators, Chief Executive Officer or Liquidators of the company, acting in their own names or on behalf of individuals other than the company, and their respective spouses or their relatives up to the second degree of consanguinity, as well as any entity controlled either directly or indirectly, through any of them; and any person who either acting individually or jointly with others with whom it has executed a joint operation agreement, may appoint at least one member of the management of the company or controls 10% or more of its capital stock, with the right to vote, in the case of a sociedad por acciones (stock corporation); those established by the bylaws of the company, or justifiably identified by the Directors’ Committee; and those in which it has acted as Director, Manager, Administrator, Chief Executive Officer or Liquidator of the company, during the last eighteen months. Article 147 of the Ley de Sociedades Anónimas (Chilean Companies Law) sets forth that a sociedad anónima abierta (publicly traded company) may only carry out transactions with related parties when they are intended to contribute to the corporate interest, are adjusted in the price, terms and conditions to those prevailing in the market at the time of their approval and comply with the requirements and the procedure indicated by it. Moreover, Article 84 of the Chilean General Banking Law establishes limits for the loans that may be granted to related parties and the prohibition to grant loans to the Directors, Managers or General Attorneys of the Bank.

a. Loans granted to related parties.

As of December 31, 2018 and 2017, the loans granted to related persons are detailed below:

	As of December 31, 2018									As of December 31, 2017
	Productive companies			Investment companies			Individuals			Productive companies			Investment companies			Individuals
	MCh$			MCh$			MCh$			MCh$			MCh$			MCh$
Loans and accounts receivable from customers
Commercial loans		170,873			64,073			3,960			113,202			79,715			3,730
Mortgage loans		—			—			21,154			—			—			19,273
Consumer loans		—			—			5,961			—			—			5,081
Gross loans and accounts receivable from customers		170,873			64,073			31,075			113,202			79,715			28,084
Allowance for loan losses		(2,550	)		(70	)		(63	)		(1,627	)		(5,252	)		(96	)
Loans and receivables to customers, net		168,323			64,003			31,012			111,575			74,463			27,988

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-139

Note 32 – Related Party Transactions, continued

b. Other transactions with related parties.

For the years ended December 31, 2018, 2017 and 2016, the Bank entered into the following transactions with related parties for amounts are detailed below:

		As of December 31, 2018
		Balances receivable		Effect on income (loss)
		(payable)		Income		Expense
Name or Corporate Name	Description	MCh$		MCh$		MCh$
Redbanc S.A.	ATM management		—		—		3,002
Transbank S.A.	Credit card management		—		—		15,469
Combanc S.A.	Data transmission services		—		—		350
Itaú Chile Cía. de Seguros de Vida S.A.	Life insurance		—		93		706
Corp Research S.A.	Advisory services		—		—		463
Itaú Chile Inv. Serv. y Administración S.A.	Leases		—		204		141
Instituto de Estudios Bancarios Guillermo Subercaseaux	Education services		—		—		121
VIP Asesorias y Servicios Integrales Ltda.	Advisory services		—		—		129
Everis Chile S.A.	Advisory services		—		—		906
CAI Gestion Inmobiliaria S.A.	Department stores		—		—		103
Promoservice S.A.	Promotional services		—		—		—
Comder Contraparte Central S.A	Banking services		—		—		902
Operadora de Tarjeta de Crédito Nexus S.A.	Credit card management		—		—		2,909
Pulso Editorial S.A	Publishing services		—		—		471
Inmobiliaria Edificio Corpgroup S.A.	Office lease and building fees		—		—		4,693
Hotel Corporation of Chile S.A.	Hotel, events		—		—		94
Corp Imagen y diseños S.A.	Marketing		—		—		99
Corp Group Holding Inversiones Limitada	Advisory services		—		—		408
SMU S.A., Rendic Hnos. S.A.	Lease of ATM space 6)		5,698		—		2,262
Inversiones Corp Group Interhold Ltda.	Administrative consulting		—		—		2,476
Bcycle Latam SPA	Administrative consulting		—		—		4,048
Bolsa de Comercio de Santiago	Other services		—		—		204
Adexus S.A.	Data transmission services		—		—		254
		As of December 31, 2017
		Balances receivable		Effect on income (loss)
Name or Corporate Name	Description	(payable)		Income		Expense
		MCh$		MCh$		MCh$
		MCh$		MCh$		MCh$
Redbanc S.A.	ATM management		—		—		3,355
Transbank S.A.	Credit card management		—		—		14,586
Combanc S.A.	Data transmission services		—		—		378
Itaú Chile Cía. de Seguros de Vida S.A.	Life insurance		—		7,819		948
Asesorias Cumelen S.A.	Advisory services		—		—		—
Corp Research S.A.	Management advisory services		—		—		453
Recuperadora de Créditos S.A.	Credit collection		—		—		—
Itaú Chile Inv. Serv. y Administración S.A.	Leases		—		—		650
Compañia de Seguros Confuturo S. A. (*)	Insurance		—		—		—
Instituto de Estudios Bancarios Guillermo Subercaseaux	Education services		—		—		143
Opina S.A.	Publishing services		—		—		—
VIP Asesorias y Servicios Integrales Ltda.	Advisory services		—		—		415
Everis Chile S.A.	Advisory services		—		—		607
CAI Gestion Inmobiliaria S.A.	Commercial home (Department stores)		—		—		115
Compañia de Seguros Corp Seguros S.A (*)	Insurance		—		—		—
Universidad Andres Bello	Education services		—		—		—
Promoservice S.A.	Promotion services		—		—		267
Comder Contraparte Central S.A	Banking services		—		—		1,067
Sinacofi S.A (*)	Data transmission services		—		—		—
Operadora de Tarjeta de Crédito Nexus S.A.	Credit Card processing		—		—		3,836
Pulso Editorial S.A	Publishing services		—		—		509
Inmobiliaria Edificio Corpgroup S.A.	Corporate office rent and building cost		—		—		4,725
Grupo de Radios Dial S.A.	Publicity		—		—		—
Hotel Corporation of Chile S.A.	Accommodation, events		—		—		265
Corp Imagen y diseños S.A.	Other services		—		—		196
Asesorias e Inversiones Rapelco Limitada S.A.	Other services		—		—		—
Corp Group Holding Inversiones Limitada	Advisory services		—		—		398
SMU S.A., Rendic Hnos. S.A.	Prepaid rent for space for ATMs		7,960		—		2,221
Inversiones Corp Group Interhold Ltda.	Management advisory services		—		—		3,097
Bcycle Latam SPA	Other services		—		—		552

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-140

Note 32 – Related Party Transactions, continued

		As of December 31, 2016
Name or Corporate Name	Description	Balances receivable (payable)		Effect on income (loss)
				Income		Expense
		MCh$		MCh$		MCh$
Redbanc S.A.	ATM management		—		—		3,754
Transbank S.A.	Credit card management		—		—		10,882
Combanc S.A.	Data transmission services		—		—		291
Itaú Chile Cía. de Seguros de Vida S.A.	Life insurance		—		5,653		2,782
Asesorias Cumelen S.A.	Advisory services		—		—		450
Corp Research S.A.	Management advisory services		—		—		443
Recuperadora de Créditos S.A.	Credit collection		—		—		540
Itaú Chile Inv. Serv. y Administración S.A.	Leases		—		—		422
Compañia de Seguros Confuturo S. A.	Insurance		—		—		1,418
Instituto de Estudios Bancarios Guillermo Subercaseaux	Education services		—		—		69
Opina S.A.	Publishing services		—		—		110
VIP Asesorias y Servicios Integrales Ltda.	Advisory services		—		—		185
Itaú Unibanco S.A.	Advisory services		—		—		—
CAI Gestion Inmobiliaria S.A.	Commercial home (Department stores)		—		—		90
Compañia de Seguros Corp Seguros S.A	Insurance		—		—		3,263
Universidad Andres Bello	Education services		—		—		32
Promoservice S.A.	Promotion services		—		—		1,431
Comder Contraparte Central S.A	Banking services		—		—		697
Sinacofi S.A	Data transmission services		—		—		918
Operadora de Tarjeta de Crédito Nexus S.A.	Credit Card processing		—		—		1,896
Pulso Editorial S.A	Publishing services		—		—		521
Inmobiliaria Edificio Corpgroup S.A.	Corporate office rent and building cost		—		—		5,010
Grupo de Radios Dial S.A.	Publicity		—		—		107
Hotel Corporation of Chile S.A.	Accommodation, events		—		—		64
Corp Imagen y diseños S.A.	Other services		—		—		82
Asesorias e Inversiones Rapelco Limitada S.A.	Other services		—		—		37
Corp Group Holding Inversiones Limitada	Advisory services		—		—		394
SMU S.A., Rendic Hnos. S.A.	Prepaid rent for space for ATMs		10,181		—		2,152
Inversiones Corp Group Interhold Ltda.	Management advisory services		—		—		2,172

These transactions were carried out at normal market prices prevailing at the day of the transactions.

c. Donations.

Name or corporate name	Description	For the years ended December 31,
		2018		2017		2016
		MCh$		MCh$		MCh$
Fundación Corpgroup Centro Cultural	Donations		1,225		1,302		1,373
Fundación Descúbreme	Donations		194		200		173
Fundación Itaú	Donations		157		167		152
Fundación de Inclusión Social Aprendamos	Donations		—		5		5

d. Other assets and liabilities with related parties.

	As of December 31,
	2018		2017
	MCh$		MCh$
ASSETS		26,854		23,962
Derivative financial instruments		25,708		21,687
Other assets		1,146		2,275
LIABILITIES		188,057		185,056
Derivative financial instruments		860		1,935
Current accounts and demand deposits		30,466		37,464
Time deposits and saving accounts		145,995		131,409
Other liabilities		10,736		14,248

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-141

Note 32 – Related Party Transactions, continued

e. Results of transactions with related parties

	For the years ended December 31,
	2018				2017				2016
Type of recognized income or expense	Income		Expenses		Income		Expenses		Income		Expenses
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$
Income and interest expenses and readjustments		3,748		2,970		10,146		4,902		11,370		5,913
Income and expenses for commissions and services		829		—		5,227		—		5,483		—
Profit and loss from trading		1,146		501		2,333		1,534		3,399		7,810
Operational support expenses		1,075		—		537		99		324		438
Other income and expenses		84		222		216		390		70		303
Totals		6,882		3,693		18,459		6,925		20,646		14,464

f. Payments to Board of Directors and key management personnel.

Compensation received by key personnel of Management correspond to the following categories:

	As of December 31,
	2018		2017		2016
	MCh$		MCh$		MCh$
Short-term employee benefits		31,892		27,759		35,762
Post-employment benefits		—		—		—
Other long-term benefits		—		—		—
Compensation for termination of contract		1,337		3,471		14,893
Totals		33,229		31,230		50,655

As of December 31, 2018, the total compensation received during 2018 by the managers and top executives of Itaú Corpbanca amounts to MCh$22,185 (MCh$21,505 million as of December 31, 2017).

g. Conformation of key personnel

Compensation received by directors and key management personnel is categorized as follows:

	Number of executives
	As of December 31,
Position	2018		2017
Directors		12		11
Chief Executive Officers-at the Subsidiaries		11		7
Corporative Manager		10		11
Area manager		145		94
Deputy Managers		163		155
Vice-president		14		2

h. Transactions with key personnel

The following transactions with key personnel have been performed during the years ended December 31, 2018 and 2017:

	As of December 31,
	2018		2017
	MCh$		MCh$
Credits cards		89		390
Consumer loans		339		793
Commercial loans		536		815
Mortgage loans		2,325		3,541

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-142

Note 33 – Fair Value of Financial Assets and Liabilities

This disclosure was prepared based on the guidelines “Fair Value of Financial Instruments” from the IFRS 13 “Fair Value Measurements.”

The following section details the main guidelines and definitions used by the Bank:

Fair value: The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e. an exit price). The transaction is carried out in the principal³ or most advantageous⁴ market and is not forced (i.e. it does not consider factors specific to the Bank that may influence a real transaction).

Market participants: Buyers and sellers in the principal (or most advantageous) market for the asset or liability that have all of the following characteristics:

• They are independent of each other, i.e. they are not related parties as defined in IAS 24 “Related Party Disclosures,” although the price in a related party transaction may be used as an input to a fair value measurement if the entity has evidence that the transaction was entered into at market terms.

• They are knowledgeable, having a reasonable understanding about the asset or liability and the transaction using all available information, including information that might be obtained through due diligence efforts that are usual and customary.

• They are able to enter into a transaction for the asset or liability.

• They are willing to enter into a transaction for the asset or liability (i.e. they are motivated, but not forced or otherwise compelled, to do so).

Fair value measurement: When measuring fair value, the Bank takes into account the same characteristics of the asset or liability that market participants would consider in pricing that asset or liability on the measurement date.

Aspects of the transaction: A fair value measurement assumes that the asset or liability is exchanged in an orderly transaction between market participants to sell the asset or transfer the liability at the measurement date under current market conditions. The measurement assumes that the transaction to sell the asset or transfer the liability takes place: (a) on the principal market for the asset or liability; or (b) in the absence of a principal market, on the most advantageous market for the asset or liability.

Market participants: The fair value measurement measures the fair value of the asset or liability using the assumptions that the market participants would use in pricing the asset or liability, assuming that the participants act in their best economic interest.

Prices: Fair value is the price that will be received for the sale of an asset or paid for the transfer of a liability in an orderly transaction on the main (or most advantageous) market as of the measurement date under current market conditions (i.e. exit price) regardless of whether that price is directly observable or estimated using another valuation technique.

Highest and best use of non-financial assets: The fair value measurement of these assets takes into account the market participant’s ability to generate economic benefits through the highest and best use of the asset or through the sale of the asset to another market participant that would maximize the value of the asset.

Bank’s own liabilities and equity instruments: The fair value measurement assumes that these items are transferred to a market participant on the date of measurement. The transfer of these items assumes that:

³  The market with the greatest volume and level of activity for the asset or liability.

⁴  The market that maximizes the amount that would be received to sell the asset or minimizes the amount that would be paid to transfer the liability, after taking into account transaction costs and transport costs.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-143

Note 33 – Fair Value of Financial Assets and Liabilities, continued

a. A liability would remain outstanding and the market participant transferee would be required to fulfill the obligation. The liability would not be settled with the counterparty or otherwise extinguished on the measurement date.

b. An entity’s own equity instrument would remain outstanding and the market participant transferee would take on the rights and responsibilities associated with the instrument. The instrument would not be cancelled or otherwise extinguished on the measurement date.

Default risk: The fair value of a liability reflects the effect of the default risk. This risk includes, but is not limited to, the entity’s own credit risk. This risk is assumed to be the same before and after the liability is transferred.

Initial recognition: When an asset is acquired or a liability assumed in an exchange transaction involving that asset or liability, the transaction price is the price paid to acquire the asset or received to assume the liability (the entry price). In contrast, the fair value of the asset or liability is the price received to sell the asset or paid to transfer the liability (the exit price). Entities do not necessarily sell assets at the prices paid to acquire them. Likewise, they do not necessarily transfer liabilities at the price received to assume them.

Valuation techniques: The Bank will use techniques that are appropriate for the circumstances and for which sufficient data is available to measure the fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs. The following approaches deserve mention:

a. Market approach. Uses prices and other relevant information generated by market transactions involving identical or comparable (similar) assets, liabilities, or a Bank of assets and liabilities (e.g. a business).

b. Income approach. Converts future amounts (cash flows or income and expenses) to a single current (discounted) amount, reflecting current market expectations about those future amounts. The fair value measurement is determined based on the value indicated by the current market expectations about those future amounts.

c. Cost approach. Reflects the amount that would be required currently to replace the service capacity of an asset (current replacement cost).

Present value techniques: Technique to adjust the discount rate and expected cash flows (expected present value). The present value technique used to measure the fair value will depend on the specific facts and circumstances of the asset or liability being measured and the availability of sufficient data.

Components of the present value measurement: Present value is the tool used to link future amounts (e.g. cash flows or values) to a present amount using a discount rate. A fair value measurement of an asset or a liability using a present value technique captures all the following elements from the perspective of market participants at the measurement date:

a. An estimate of future cash flows for the asset or liability being measured.

b. Expectations about possible variations in the amount and timing of the cash flows representing the uncertainty inherent in the cash flows.

c. The time value of money, represented by the rate on risk-free monetary assets that have maturity dates or durations that coincide with the period covered by the cash flows and pose neither uncertainty in timing nor risk of default to the holder (i.e. a risk-free interest rate).

d. The price for bearing the uncertainty inherent in the cash flows (i.e. a risk premium).

e. Other factors that market participants would take into account in the circumstances.

f. For a liability, the non-performance risk relating to that liability, including the entity’s (i.e. the debtor’s) own credit risk.

Fair value hierarchy: Gives the highest priority to quoted prices (unadjusted) in active markets for identical assets and liabilities (Level 1 inputs) and lowest priority to unobservable inputs (Level 3 inputs). Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-144

Note 33 – Fair Value of Financial Assets and Liabilities, continued

The following table summarizes the fair values of the Bank’s main financial assets and liabilities as of December 31, 2018, including those that are not recorded at fair value in the Consolidated Statement of Financial Position.

Determination of the fair value as of December 31, 2018 - under IFRS 9

	As of December 31,
	2018
	Book value		Estimated fair value
			Recurring		Non-recurring
	MCh$		MCh$		MCh$
ASSETS
Cash and deposits in banks		987,680		—		987,680
Cash items in process of collection		318,658		—		318,658
Financial instruments at fair value through profit or loss		96,943		96,943		—
Financial instruments at fair value through other comprehensive income		2,657,154		2,657,154		—
Loans and accounts receivable at amortized cost		20,714,370		—		20,827,852
Financial instruments at amortized cost		198,923		—		199,561
Investments under resale agreements		109,467		—		109,467
Financial derivative contracts		1,368,957		1,368,957
Interbank loans, net		341,244		—		341,244
Totals		26,793,396		4,123,054		22,784,462
LIABILITIES
Deposits and other demand liabilities		4,300,475		—		4,300,475
Cash in process of being cleared		247,165		—		247,165
Obligations under repurchase agreements		1,015,614		—		1,015,614
Time deposits and other time liabilities		10,121,111		—		10,135,722
Financial derivative contracts		1,112,806		1,112,806		—
Interbank borrowings		2,327,723		—		2,335,509
Debt instruments issued		6,010,124		—		6,311,527
Other financial liabilities		12,400		—		12,400
Totals		25,147,418		1,112,806		24,358,412

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-145

Note 33 – Fair Value of Financial Assets and Liabilities, continued

The following table summarizes the fair values of the Bank’s main financial assets and liabilities as of December 31, 2017, including those that are not recorded at fair value in the Consolidated Statement of Financial Position.

Determination of the fair value as of December 31, 2017 - under IAS 39

	As of December 31,
	2017
			Estimated fair value
	Book value		Recurring		Non-recurring
	MCh$		MCh$		MCh$
ASSETS
Cash and deposits in banks		964,030		—		964,030
Cash items in process of collection		157,017		—		157,017
Investments under resale agreements		28,524		—		28,524
Financial derivative contracts		1,248,775		1,248,775		—
Interbank loans, net		70,077		—		70,077
Trading investments		415,061		415,061		—
Loans and accounts receivable from customers, net		19,764,078		—		19,893,448
Available for sale instruments		2,663,478		2,663,478		—
Held to maturity investments		202,030		—		201,283
Totals		25,513,070		4,327,314		21,314,379
LIABILITIES
Deposits and other demand liabilities		4,141,667		—		4,141,667
Cash in process of being cleared		109,496		—		109,496
Obligations under repurchase agreements		420,920		—		420,920
Time deposits and other time liabilities		10,065,243		—		10,099,251
Financial derivative contracts		1,095,154		1,095,154		—
Interbank borrowings		2,196,130		—		2,216,507
Debt instruments issued		5,950,038		—		6,185,043
Other financial liabilities		17,066		—		17,066
Totals		23,995,714		1,095,154		23,189,950

In addition, the fair value estimates presented above do not attempt to estimate the value of the Bank’s profits generated by its business, nor future business activities, and, therefore, do not represent the value of the Bank as a going concern.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-146

Note 33 – Fair Value of Financial Assets and Liabilities, continued

The following section describes the methods used to estimate fair value:

Fair Value Measurements of assets and liabilities only for disclosure purposes (non-recurring) - under IFRS 9:

Non-recurring fair value measurement	As of December 31,
	2018
	MCh$
ASSETS
Cash and deposits in banks		987,680
Cash items in process of collection		318,658
Loans and accounts receivable at amortized cost		20,827,852
Investments under resale agreements		109,467
Interbank loans, net		341,244
Financial instruments at amortized cost		199,561
Totals		22,784,462
LIABILITIES
Deposits and other demand liabilities		4,300,475
Cash in process of being cleared		247,165
Obligations under repurchase agreements		1,015,614
Time deposits and other time liabilities		10,135,722
Interbank borrowings		2,335,509
Debt instruments issued		6,311,527
Other financial obligations		12,400
Totals		24,358,412

Fair Value Measurements of assets and liabilities only for disclosure purposes (non-recurring) - under IAS 39:

Non-recurring fair value measurement	As of December 31,
	2017
	MCh$
ASSETS
Cash and deposits in banks		964,030
Cash items in process of collection		157,017
Investments under resale agreements		28,524
Interbank loans, net		70,077
Loans and accounts receivable from customers, net		19,893,448
Held to maturity investments		201,283
Totals		21,314,379
LIABILITIES
Deposits and other demand liabilities		4,141,667
Cash in process of being cleared		109,496
Obligations under repurchase agreements		420,920
Time deposits and other time liabilities		10,099,251
Interbank borrowings		2,216,507
Debt instruments issued		6,185,043
Other financial obligations		17,066
Totals		23,189,950

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-147

Note 33 – Fair Value of Financial Assets and Liabilities, continued

Cash, short-term assets and short-term liabilities

The fair value of these items approximates their book value given their short-term nature. These items include:

• Cash and deposits in Banks

• Cash in the process of collection

• Financial instruments at fair value through profit or loss

• Trading investments

• Current accounts and demand deposits

• Other financial obligations

Loans

The fair value of loans is determined using a discounted cash flow analysis, using a risk-free interest rate adjusted for expected losses from debtors based on their credit quality. The credit risk adjustment is based on the Bank’s credit risk policies and methodologies: These items include:

• Interbank loans

• Loans and receivables from customers

Financial instruments held to maturity

The estimated fair value of these financial instruments is determined using quotes and transactions observed in the main market for identical instruments, or in their absence, for similar instruments. Fair value estimates of debt instruments or securities representative of debt take into account additional variables and inputs to the extent that they apply, including estimates of prepayment rates and the credit risk of issuers.

Financial instruments held to maturity

The estimated fair value of these financial instruments is determined using quotes and transactions observed in the main market for identical instruments, or in their absence, for similar instruments. Fair value estimates of debt instruments or securities representative of debt take into account additional variables and inputs to the extent that they apply, including estimates of prepayment rates and the credit risk of issuers.

Medium and long-term liabilities

The fair value of medium and long-term liabilities is determined using a discounted cash flow analysis, using an interest rate curve that reflects current market conditions at which the entity’s debt instruments are traded. Medium and long-term liabilities include:

• Time deposits and saving accounts

• Borrowings from financial institutions

• Debt issued

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-148

Note 33 – Fair Value of Financial Assets and Liabilities, continued

Fair Value measurement of financial assets and liabilities (recurring) - under IFRS 9:

Fair value measurement of recurring items	As of December 31,
	2018
	MCh$
ASSETS
Financial instruments at fair value through profit or loss		96,943
Chilean Central Bank and Government securities		36,608
Other securities issued in Chile		4,017
Foreign government and central bank instruments		23,276
Other instruments issued abroad		19,505
Investments in mutual funds		3,532
Other investments at FVTPL		10,005
Financial instruments at fair value through other comprehensive income		2,657,154
Chilean Central Bank and Government securities		1,352,084
Other securities issued in Chile		196,439
Foreign government and central bank instruments		769,693
Other instruments issued abroad		332,560
Other investments at FVOCI		6,378
Financial derivative contracts		1,368,957
Forwards		342,993
Swaps		1,021,701
Call options		4,217
Put options		46
Total		4,123,054
LIABILITIES
Financial derivative contracts		1,112,806
Forwards		322,241
Swaps		788,133
Call options		1,493
Put options		939
Total		1,112,806

Fair Value measurement of financial assets and liabilities (recurring) – under IAS 39:

Fair value measurement of recurring items	As of December 31,
	2017
	MCh$
ASSETS
Trading investments		415,061
Chilean Central Bank and Government securities		7,126
Other securities issued in Chile		5
Foreign government and central bank instruments		381,262
Other instruments issued abroad		8,147
Investments in mutual funds		18,521
Other investments		—
Available for sale instruments		2,663,478
Chilean Central Bank and Government securities		1,783,877
Other securities issued in Chile		147,762
Foreign government and central bank instruments		420,687
Other instruments issued abroad		300,740
Other investments		10,412
Financial derivative contracts		1,248,775
Forwards		316,901
Swaps		930,744
Call options		421
Put options		709
Total		4,327,314
LIABILITIES
Financial derivative contracts		1,095,154
Forwards		333,482
Swaps		759,216
Call options		86
Put options		2,370
Total		1,095,154

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-149

Note 33 – Fair Value of Financial Assets and Liabilities, continued

Financial Instruments

The estimated fair value of these financial instruments is determined using quotes and transactions observed in the main market for identical instruments, or in their absence, for similar instruments. Fair value estimates of debt instruments or securities representative of debt take into account additional variables and inputs to the extent that they apply, including estimates of prepayment rates and the credit risk of issuers. These financial instruments are classified as follows:

• Trading portfolio financial assets

• Financial investments available for sale

Financial Derivative Instruments

The estimated fair value of derivative instruments is calculated using prices quoted in the market for financial instruments with similar characteristics. Therefore, the methodology recognizes the credit risk of each counterparty.

The adjustments are known internationally as the counterparty value adjustment (“CVA”), which consists of an adjustment for debtor risk (credit value adjustment or CVA) and for creditor risk (debit value adjustment or “DVA”). The sum of these adjustments gives the effective counterparty risk that the derivative contract must have.

These adjustments are recorded periodically in the financial statements. As of December 2018, 2017 and 2016, the portfolio of derivative contracts in both Chile and Colombia is detailed as follows:

	As of December 31,
	2018					2017						2016
	CVA			DVA		CVA			DVA			CVA			DVA
	MCh$			MCh$		MCh$			MCh$			MCh$			MCh$
Derivatives held for hedging		—			—		(2	)		815			(36	)		244
Fair value hedge		—			—		(11	)		783			(12	)		274
Currency forwards		—			—		—			—			—			—
Currency swaps		—			—		(5	)		222			9			37
Interest rate swaps		—			—		(6	)		561			(21	)		237
Cash flow hedge		—			—		1			54			(18	)		(6	)
Currency forwards		—			—		(1	)		(13	)		(17	)		—
Currency swaps		—			—		—			27			(1	)		5
Interest rate swaps		—			—		2			40			—			(11	)
Hedge of net investments in a foreign operation		—			—		8			(22	)		(6	)		(24	)
Currency forwards		—			—		8			(22	)		(6	)		(24	)
Currency swaps		—			—		—			—			—			—
Interest rate swaps		—			—		—			—			—			—
Derivatives held for trading		(37,821	)		340		(53,396	)		554			(51,961	)		1,003
Currency forwards		(127	)		65		(258	)		(724	)		(1,161	)		(72	)
Currency swaps		(31,167	)		127		(42,829	)		367			(28,951	)		526
Interest rate swaps		(6,527	)		148		(10,244	)		911			(21,860	)		549
Call currency options		—			—		—			—			(10	)		—
Call currency options		—			—		(65	)		—			21			—
Total financial derivative contracts		(37,821	)		340		(53,398	)		1,369			(51,997	)		1,247

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-150

Note 33 – Fair Value of Financial Assets and Liabilities, continued

1.2 Fair value hierarchy

IFRS 13 establishes a fair value hierarchy that classifies assets and liabilities based on the characteristics of the data that the technique requires for its valuation:

Level 1:

Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Entity can access at the measurement date. The inputs needed to value the instruments in this category are available daily and used directly.

In the case of currency, shares and mutual funds, prices are observed directly in over-the-counter (OTC) markets and the stock exchange. These prices correspond to the values at which the exact same assets are traded. As a result, the portfolio valuation does not require assumptions or models of any type.

For instruments issued by the Chilean Central Bank and the Chilean Treasury, a price provider is used, which corresponds to a public quotation. The comparative prices are defined under the criterion of similarity in duration, type of currency and they are traded equivalently on a daily basis. The valuation of these instruments is identical to the Stock Exchange Comercio de Santiago, which is a standard and international methodology. This methodology uses the rate of internal return to discount the flows of the instrument.

Level 2:

The specific instrument does not have daily quotes. However, similar instruments can be observed (e.g. same issuer, different maturity; or different issuer, same maturity and risk rating). In general, they are diverse combinations of pseudo-arbitration. Although the inputs are not directly observable, observable inputs are available with the needed periodicity.

In this category, instruments are valued by discounting contractual cash flows based on a zero-coupon curve determined through the price of instruments with similar characteristics and a similar issuer risk. The income approach is used, which converts future amounts to present amounts.

For derivative instruments within this category, quotes from over-the-counter (OTC) transactions reported by the most important brokers in the Chilean market and the Bloomberg platform are used. The inputs observed include forward prices, interest rates and volatilities. Based on these inputs, market curves are modeled. They are a numerical representation of the opportunity costs of the instrument’s cash flows or the price volatility of an asset. Finally, cash flows are discounted.

The Black and Scholes model is used for options based on prices of brokers in the Over-The-Counter market.

For money market instruments, prices of transactions on the Santiago Stock Exchange are observed and used to model market curves.

For corporate or Bank bonds, given the lack of market depth, the Bank uses transactions (if any) in the Chilean market, on foreign markets, zero-coupon curves of risk-free instruments, adjustment curves, spread modeling, correlation with similar financial instruments, etc. and creates market curves for use in the final result. These market curves are provided by a pricing supplier and are widely accepted by the market, regulators and scholars.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-151

Note 33 – Fair Value of Financial Assets and Liabilities, continued

Level 3:

Inputs are unobservable inputs for the asset or liability.

This is used when prices, data or necessary inputs are not directly or indirectly observable for similar instruments for the asset or liability as of the valuation date. These fair value valuation models are subjective in nature. Therefore, they base their estimate of prices on a series of assumptions that are widely accepted by the market. The Bank has two products in this category.

Due to the lack of liquidity of the active Banking rate (TAB), the price is not observable and, therefore, models must be used to estimate the future cash flows of the contract. This spread is calculated on a historical basis using the Interest Rate Swap with the greatest market depth.

In addition, the Bank develops American forwards to meet its customers’ needs. They do not have a secondary market and, therefore, their value is estimated using an extension of the Hull-White model, used widely by the financial services industry.

None of these products generate significant impacts on the Bank’s results as a result of recalibration. The TAB swap does not have significant impacts on the valuation as the parameters are stable and the reversal to a historic average is empirically quick, which this model reflects correctly. On the other hand, the American forward behaves like a traditional forward when there is an important curve differential, which is the case between the Chilean peso-US dollar curve. Also, the model’s parameters are very stable.

The table below summarizes the impacts on the portfolio of a recalibration of the models based on a stress scenario, recalibrating parameters with the shock incorporated.

Impact calibration	As of December 31, 2018						As of December 31, 2017
	Forward Americano USD-CLP		Basis TAB CLP		Basis TAB CLF		Forward Americano USD-CLP		Basis TAB CLP		Basis TAB CLF
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$
Volatility exchange rate
USD-CLP		—		—		—		—		—		—
TAB 30		—		116		—		—		157		—
TAB 90		—		26		—		—		46		—
TAB 180		—		50		21		—		—		30
TAB 360		—		3		5		—		—		8
Totals		—		195		26		—		203		38

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-152

Note 33 – Fair Value of Financial Assets and Liabilities, continued

The following table summarizes the fair value hierarchy for the Bank’s recurring valuation of financial instruments:

Level	Instrument	Issuer	Price Source	Model
I	Currencies	Not Applicable	OTC, Bloomberg	Directly observable price.
	Shares	Various	Stock Exchange	Directly observable price.
	Mutual Funds	Asset Managers	CMF (formerly the SVS)	Directly observable price.
	Bonds	Chilean Central Bank and Chilean Treasury	Stock Exchange	Internal rate of return (“IRR”) based on prices.
II	Derivatives	Not Applicable	OTC (brokers), Bloomberg	Interest rate curves based on forward prices and coupon rates.
	Money market instruments	Chilean Central Bank and Chilean Treasury	Stock Exchange	Interest rate curves based on prices.
	Money market instruments	Banks	Stock Exchange	Interest rate curves based on prices.
	Bonds	Companies, Banks	Pricing provider	Interest rate curves based on correlations, spreads, interpolations, etc.
III	Derivatives, active Banking rate (TAB)	Not Applicable	OTC (brokers)	Interest rate curves based on modeling of TAB-Chamber spread.
	Derivatives, American forwards	Not Applicable	Bloomberg	Black and Scholes with inputs from European options.

The following table classifies assets and liabilities measured at fair value on a recurring basis, in accordance with the fair value hierarchy established in IFRS 13 as of December 31, 2018 – under IFRS 9:

	As of December 31, 2018
Measurement at fair value of instruments on a recurring basis using	Fair value		Market value of the asset for identified assets (Level 1)		Other observable significant inputs (Level 2)		Non-observable significant inputs (Level 3)
	MCh$		MCh$		MCh$		MCh$
ASSETS
Financial instruments at fair value through profit or loss		96,943		67,430		29,513		—
Chilean Central Bank and Government securities		36,608		36,608		—		—
Other securities issued locally		4,017		4,014		3		—
Foreign government and central bank instruments		23,276		23,276		—		—
Other securities issued abroad		19,505		—		19,505		—
Investments in mutual funds		3,532		3,532		—		—
Other investments at FVTPL		10,005		—		10,005		—
Financial instruments at fair value through other comprehensive income		2,657,154		2,458,410		198,744		—
Chilean Central Bank and Government securities		1,352,084		1,352,084		—		—
Other securities issued locally		196,439		5,979		190,460		—
Foreign government and central bank instruments		769,693		769,693		—		—
Other securities issued abroad		332,560		330,654		1,906		—
Other investments at FVOCI		6,378		—		6,378		—
Financial derivative contracts		1,368,957		—		1,341,801		27,156
Forwards		342,993		—		342,375		618
Swaps		1,021,701		—		995,163		26,538
Call options		4,217		—		4,217		—
Put options		46		—		46		—
Totals		4,123,054		2,525,840		1,570,058		27,156
LIABILITIES
Financial derivative contracts		1,112,806		—		1,112,237		569
Forwards		322,241		—		322,192		49
Swaps		788,133		—		787,613		520
Call options		1,493		—		1,493		—
Put options		939		—		939		—
Totals		1,112,806		—		1,112,237		569

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-153

Note 33 – Fair Value of Financial Assets and Liabilities, continued

The following table classifies assets and liabilities measured at fair value on a recurring basis, in accordance with the fair value hierarchy established in IFRS 13 as of December 31, 2017 – under IAS 39:

	As of December 31, 2017
Measurement at fair value of instruments on a recurring basis using	Fair value		Market value of the asset for identified assets (Level 1)		Other observable significant inputs (Level 2)		Non-observable significant inputs (Level 3)
	MCh$		MCh$		MCh$		MCh$
ASSETS
Trading investments		415,061		409,197		5,864		—
Chilean Central Bank and Government securities		7,126		7,126		—		—
Other securities issued locally		5		—		5		—
Foreign government and central bank instruments		381,262		378,636		2,626		—
Other securities issued abroad		8,147		4,914		3,233		—
Investments in mutual funds		18,521		18,521		—		—
Available for sale instruments		2,663,478		2,204,564		458,914		—
Chilean Central Bank and Government securities		1,783,877		1,783,877		—		—
Other securities issued locally		147,762		—		147,762		—
Foreign government and central bank instruments		420,687		420,687		—		—
Other securities issued abroad		300,740		—		300,740		—
Other investments		10,412		—		10,412
Financial derivative contracts		1,248,775		—		1,218,247		30,528
Forwards		316,901		—		316,848		53
Swaps		930,744		—		900,269		30,475
Call options		421		—		421		—
Put options		709		—		709		—
Totals		4,327,314		2,613,761		1,683,025		30,528
LIABILITIES
Financial derivative contracts		1,095,154		—		1,094,549		605
Forwards		333,482		—		333,482		—
Swaps		759,216		—		758,611		605
Call options		86		—		86		—
Put options		2,370		—		2,370		—
Totals		1,095,154		—		1,094,549		605

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-154

Note 33 – Fair Value of Financial Assets and Liabilities, continued

d. Transfers between level 1 and 2

As of December 31, 2018 no transfers were observed between Level 1 and Level 2, as shown below – under IFRS 9:

Measurement at fair value of instruments that are valued recurrently	As of December 31,
	2018
	Fair value		Level 1 to 2		Level 2 to 1
	MCh$		MCh$		MCh$
ASSETS
Financial instruments at fair value through profit or loss		96,943		—		—
Financial instruments at fair value through other comprehensive income		2,657,154		—		—
Financial derivative contracts		1,368,957		—		—
Totals		4,123,054		—		—
LIABILITIES
Financial derivative contracts		1,112,806		—		—
Totals		1,112,806		—		—

As of December 31, 2018 no transfers were observed between Level 1 and Level 2, as shown below – under IAS 39:

Measurement at fair value of instruments that are valued recurrently	As of December 31,
	2017
	Fair value		Level 1 to 2		Level 2 to 1
	MCh$		MCh$		MCh$
ASSETS
Trading investments		415,061		—		—
Available for sale instruments		2,663,478		—		—
Financial derivative contracts		1,248,775		—		—
Totals		4,327,314		—		—
LIABILITIES				—
Financial derivative contracts		1,095,154		—		—
Totals		1,095,154		—		—

e. Disclosures regarding level 3 assets and liabilities

During 2018 and 2017, no assets were transferred between levels 1 and 2.

a. Disclosures Regarding Level 3 Assets and Liabilities

Level 3 assets and liabilities are valued using techniques that require inputs that are not observable on the market, for which the income approach is used to convert future amounts to present amounts.

This category includes:

Financial derivative instruments indexed to the TAB rate. This rate is comprised of an interbank rate and a liquidity premium charged to financial institutions and is determined using a short-rate model with mean reversion.

American forward options.

As none of these products has a market, the Bank uses financial engineering valuation techniques that use unobservable variables.

These techniques use the following inputs: transaction prices from the main financial instrument markets and assumptions that are widely accepted by the financial services industry. Using this information, unobservable variables are constructed such as: adjustment curves, spreads, volatilities and other variables necessary for the valuation. Lastly, all of the models are subject to internal contrasts by independent areas and have been reviewed by internal auditors and regulators.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-155

Note 33 – Fair Value of Financial Assets and Liabilities, continued

None of these products generate significant impacts on the Bank’s results as a result of recalibration. The American forward is only offered for the US dollar-Chilean peso market and until now, given the important differential between these interest rates, the product behaves like a traditional forward. The TAB swap does not have significant impacts on the valuation as the modeled liquidity premiums have a quick mean reversion for the short part and low volatility for the long part, concentrating on the book’s sensitivity in the longest part of the curve. The following table reconciles assets and liabilities measured at fair value on a recurring basis as of December 31, 2018 and 2017.

	As of December 31, 2018
Level 3 reconciliation	Opening balance		Gain (loss) recognized in profit or loss			Gain (loss) recognized in equity		Purchases, sales and agreements			Transfers from level 1 or level 2		Ending balance
	MCh$		MCh$			MCh$		MCh$			MCh$		MCh$
ASSETS
Financial derivative contracts		30,528		5,863			—		(9,235	)		—		27,156
Forwards		53		716			—		(151	)		—		618
Swaps		30,475		5,147			—		(9,084	)		—		26,538
Call options		—		—			—		—			—		—
Put options		—		—			—		—			—		—
Totals		30,528		5,863			—		(9,235	)		—		27,156
LIABILITIES
Financial derivative contracts		605		1,223			—		(1,259	)		—		569
Forwards		—		831			—		(782	)		—		49
Swaps		605		392			—		(477	)		—		520
Call options		—		—			—					—		—
Put options		—		—			—					—		—
Totals		605		1,223			—		(1,259	)		—		569
	As of December 31, 2017
Level 3 reconciliation	Opening balance		Gain (loss) recognized in profit or loss			Gain (loss) recognized in equity		Purchases, sales and agreements			Transfers from level 1 or level 2		Ending balance
	MCh$		MCh$			MCh$		MCh$			MCh$		MCh$
ASSETS
Financial derivative contracts		41,124		4,849			—		(15,445	)		—		30,528
Forwards		—		209			—		(156	)		—		53
Swaps		41,124		4,640			—		(15,289	)		—		30,475
Call options		—		—			—		—			—		—
Put options		—		—			—		—			—		—
Totals		41,124		4,849			—		(15,445	)		—		30,528
LIABILITIES
Financial derivative contracts		1,340		(325	)		—		(410	)		—		605
Forwards		609		(465	)		—		(144	)		—		—
Swaps		731		140			—		(266	)		—		605
Call options		—		—			—					—		—
Put options		—		—			—					—		—
Totals		1,340		(325	)		—		(410	)		—		605

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-156

Note 33 – Fair Value of Financial Assets and Liabilities, continued

f. Hierarchy for remaining assets and liabilities

The following table classifies assets and liabilities measured at fair value on a non-recurring basis, in accordance with the fair value hierarchy as of December 31, 2018 and 2017.

	As of December 31, 2018
Measurement at fair value of items on a non-recurring basis	Estimated fair value		Market value of the asset for identified assets (Level 1)		Other observable significant inputs (Level 2)		Non-observable significant inputs (Level 3)
	MCh$		MCh$		MCh$		MCh$
ASSETS
Cash and deposits in banks		987,680		987,680		—		—
Cash items in process of collection		318,658		318,658		—		—
Loans and accounts receivable at amortized cost		20,827,852		—		—		20,827,852
Financial instruments at amortized cost		199,561		—		199,561		—
Investments under resale agreements		109,467		109,467		—		—
Interbank loans, net		341,244		341,244		—		—
Totals		22,784,462		1,757,049		199,561		20,827,852
LIABILITIES
Deposits and other demand liabilities		4,300,475		4,300,475		—		—
Cash in process of being cleared		247,165		247,165		—		—
Obligations under repurchase agreements		1,015,614		1,015,614		—		—
Time deposits and other time liabilities		10,135,722				10,135,722		—
Borrowings from financial institutions		2,335,509		2,335,509		—		—
Debt instruments issued		6,311,527				6,311,527		—
Other financial obligations		12,400		12,400		—		—
Totals		24,358,412		7,911,163		16,447,249		—
	As of December 31, 2017
Measurement at fair value of items on a non-recurring basis	Estimated fair value		Market value of the asset for identified assets (Level 1)		Other observable significant inputs (Level 2)		Non-observable significant inputs (Level 3)
	MCh$		MCh$		MCh$		MCh$
ASSETS
Cash and deposits in banks		964,030		964,030		—		—
Cash items in process of collection		157,017		157,017		—		—
Investments under resale agreements		28,524		28,524		—		—
Interbank loans, net		70,077		70,077		—		—
Loans and accounts receivable from customers, net		19,893,448		—		—		19,893,448
Held to maturity investments		201,283		—		201,283		—
Totals		21,314,379		1,219,648		201,283		19,893,448
LIABILITIES
Deposits and other demand liabilities		4,141,667		4,141,667		—		—
Cash in process of being cleared		109,496		109,496		—		—
Obligations under repurchase agreements		420,920		420,920		—		—
Time deposits and other time liabilities		10,099,251		—		10,099,251		—
Borrowings from financial institutions		2,216,507		2,216,507		—		—
Debt instruments issued		6,185,043		—		6,185,043		—
Other financial obligations		17,066		17,066		—		—
Totals		23,189,950		6,905,656		16,284,294		—

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-157

Note 34 – Risk management

The Bank and its subsidiaries, through their activity, are exposed to several types of risk mainly related to loans portfolio and financial instruments. Risk management policies are established in order to identify and analyze the risks faced by the Bank, set limits and adequate controls, monitor risks and comply with limits. The risk management policies and risk administration structures are reviewed periodically in order to reflect changes in the institution’s activities. The Bank, through its rules and procedures, intends to develop an appropriate control environment, in which all employees understand their roles and responsibilities.

The following is a description of the main business activities and policies of the Bank in terms of risk management.

Risk Management Structure:

Board of Directors

At the Bank and its Subsidiaries, the Board of Directors plays a leading role in corporate governance. It is responsible for establishing and monitoring the Bank’s risk management structure, for which it has a corporate governance system aligned with international best practices and Chilean regulations, mainly from the SBIF. One of the principal functions of the Board of Directors is to ensure that measures are in place to monitor, evaluate and guide senior management to ensure that their actions are in line with best practices and defined risk appetite levels. To accomplish this, a governance structure made up of various committees has been created. These committees lay out behavioral guidelines for the Bank’s associates and assist them in carrying out their functions related to controlling and managing the Bank’s risks.

Audit Committee

The Audit Committee’s objective is to monitor the Bank’s internal control systems and its compliance with regulations and other internal standards. It is also responsible for the oversight of the different aspects of maintenance, application and functioning of the Bank’s internal controls, monitoring compliance with standards and procedures regulating its practices, and having an understanding of the risks that can arise from the business conducted by the Bank.

The committee is linked to the Board of Directors through the participation of at least two board members named by the Board itself. These members must report to the Board situations and events analyzed by the Committee, thus holding the Bank’s board members responsible for complying with both self-control policies established and practiced by the entity as well as laws and regulations to which it is subject.

The Audit Committee must reinforce and support Internal Audit function including its independence from management and serve, at the same time, as a link between the internal audit department and the independent auditors as well as between these two Banks and the Board of Directors.

Directors’ Committee

The Directors’ Committee’s objective is to strengthen the self-regulation of the Bank and other entities under its control, making the Board’s work more efficient through increased oversight of management’s activities.

Likewise, responsible for making the agreements necessary to protect shareholders, especially minority shareholders, examining executive compensation systems and analyzing and issuing a report on the transactions referenced in title XVI of Law 18,046. A copy of this report is sent to the Board, which must read the report and approve or reject each respective transaction.

In its role as overseer of corporate activity, the committee must inform the market of any violations or major corporate events as well as transactions that the company carries out with related parties of the controlling shareholder or takeovers of any form.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-158

Note 34 – Risk management, continued

Corporate Governance Committee

For the purposes of this committee, which is aware of how difficult it is to bring together all aspects of good corporate governance under one definition, corporate governance shall be defined as the set of bodies and institutional practices that impact a company’s decision making process, contributing to sustainable value creation in a framework of transparency, proper management, risk control and corporate responsibility towards the market.

Therefore, appropriate corporate governance in a Bank must align organizational incentives and promote the rights of shareholders and other direct or indirect stakeholders.

The Corporate Governance Committee is a consultation body of the Board of Directors whose mission is to ensure the existence and development within the Bank of the best corporate governance practices for financial entities. To this end, it will evaluate the current practices and policies, propose and make recommendations to the Board of Directors on improvements, reforms and adjustments that it deems appropriate and work to ensure proper implementation and application of these corporate governance practices and policies defined by the Board of Directors.

Asset-Liability Committee (ALCO)

After the Board and its specialized committees, the Asset-Liability Committee (hereinafter also “ALCO”) is the next highest body involved in managing the institution’s financial policies.

The committee’s main purpose is to comply with the financial guidelines set by the Board of Directors. In this spirit, it must approve and monitor the financial strategies that guide the Bank with respect to the composition of its assets and liabilities, cash inflows and outflows and transactions with financial instruments.

It will consider the diverse alternatives available to make decisions that ensure the highest and most sustainable returns with financial risk levels that are compatible with the business, current regulations and internal standards.|

Anti-Money Laundering and Anti-Terrorism Finance Prevention Committee

This committee’s main purpose is to plan and coordinate activities to comply with policies and procedures to prevent asset laundering, terrorism financing and bribery, to maintain itself informed of the work carried out by the Compliance Officer, who has also been designated as the head of prevention in conformity with Law No. 20,393, as well as to adopt agreements to improve prevention and control measures proposed by the Compliance Officer.

Operational Risk Committee

This committee’s objective is to evaluate the status of critical processes that are directly related to the Bank’s Operational Risk and Internal Controls, in accordance with current Superintendency of Banks and Financial Institutions standards in order to improve any weaknesses that the Bank may present and ensure proper implementation of regulatory changes. It is also responsible for attaining critical processes under an internal control environment that enables the Bank to operate stably and consistently, thus procuring desired levels of reliability, integrity and availability for information resources.

Compliance Committee

The Compliance Committee’s main purpose is to define, promote and ensure that the conduct of all Itaú Corpbanca employees meets the highest possible standards of personal and professional excellence. Employee conduct should, at all times, be guided by the principles and values that embody our organization’s spirit, philosophy and good business practices. It is also responsible for ensuring that the Regulatory Compliance Model is properly applied in accordance with definitions set by this committee, and for maintaining itself informed of the work carried out by the Compliance Officer on such matters, as well as adopting agreements to improve control measures proposed by the Compliance Officer.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-159

Note 34 – Risk management, continued

Committee on Risk Methodologies

The objective of the Risk Methodologies Committee is to ensure the quality of all methodologies for estimating the Bank’s provisions for all business areas.

This Committee - which exercises its functions with respect to the Bank, its Divisions and Subsidiaries - deals with certain corporate aspects such as policies, manuals and procedures related to the methodologies of Bank provisions, as well as the statistical models of admission, behavior and provisions.

Its main members are: Corporate Risk Manager, Risk Control Manager, Retail Credit Manager, Financial Risk Manager, Responsible for Monitoring and Control of Retail and Responsible for Risk Models.

Portfolio Committee

The objective of the Portfolio Committee is to monitor the evolution of the Bank’s wholesale and retail portfolios in terms of their risk-return ratio, their adjustment to the defined risk appetite and the progress made in materializing short-term strategies or instructions. Also, long term that this committee has defined.

As a result, it considers in its analysis the competition, the movements of its most relevant actors and the main risks that affect the management of the portfolios, as well as the projects that have an impact on the matter.

Its main members are: General Manager, Corporate Risk Manager, Risk Control Manager, Wholesale Credit Manager, Wholesale Banking Manager, Retail Credit Manager, Retail Banking Manager, Financial Planning and Control Manager and Product Manager and Marketing

Internal Audit

The main function of Internal Audit is to support the Board of Directors and senior management to independently asses the maintenance, application and proper functioning of the Bank’s internal control system, which also entails supervising compliance with rules and procedures.

Code of Conduct and Market Information Manual

The objective is to continue progressing to become the best Bank and have first-rate human capital. All associates, directors and Subsidiaries must adhere to ethical standards based on principles and values designed to guide and maintain the highest possible standards.

In response to our clients’ trust and recognition, which are vital to our success, all associates and directors should strive to retain this trust, strictly complying with the General Code of Conduct.

Main Risks and Requirements Affecting the Bank and its Subsidiaries:

Credit risk

Credit risk is the risk that a customer or counterparty will default on its contractual obligations resulting in financial loss to the Bank. The Bank’s main income generating activity is lending to customers and therefore credit risk is a principal risk. Credit risk mainly arises from loans and advances to customers and other Banks (including related commitments to lend such as loan or credit card facilities), investments in debt securities and derivatives that are an asset position. The Bank considers all elements of credit risk exposure such as counterparty default risk, geographical risk and sector risk for risk management purposes.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-160

Note 34 – Risk management, continued

Credit risk management

The Bank’s credit committee is responsible for managing the Bank’s credit risk by:

• Ensuring that the Bank has appropriate credit risk practices, including an effective system of internal control, to consistently determine adequate allowances in accordance with the Bank’s stated policies and procedures, IFRS and relevant supervisory guidance.

• Identifying, assessing and measuring credit risk across the Bank, from an individual instrument to a portfolio level.

• Creating credit policies to protect the Bank against the identified risks including the requirements to obtain collateral from borrowers, to perform robust ongoing credit assessment of borrowers and to continually monitor exposures against internal risk limits.

• Limiting concentrations of exposure by type of asset, counterparties, industry, credit rating, geographic location etc.

• Establishing a robust control framework regarding the authorization structure for the approval and renewal of credit facilities.

• Developing and maintaining the Bank’s risk grading to categorize exposures according to the degree of risk of default. Risk grades are subject to regular reviews.

• Developing and maintaining the Bank’s processes for measuring ECL including monitoring of credit risk, incorporation of forward looking information and the method used to measure ECL.

• Ensuring that the Bank has policies and procedures in place to appropriately maintain and validate models used to assess and measure ECL.

• Establishing a sound credit risk accounting assessment and measurement process that provides it with a strong basis for common systems, tools and data to assess credit risk and to account for ECL. Providing advice, guidance and specialist skills to business units to promote best practice throughout the Bank in the management of credit risk.

The internal audit function performs regular audits making sure that the established controls and procedures are adequately designed and implemented.

Significant increase in credit risk

The Bank analyzes all data collected using statistical models and estimates the remaining lifetime PD of exposures and how these are expected to change over time. The factors taken into account in this process include macro-economic data such as GDP growth, unemployment, benchmark interest rates and house prices. The Bank generates a ‘base case’ scenario of the future direction of relevant economic variables as well as a representative range of other possible forecast scenarios. The Bank then uses these forecasts, which are probability-weighted, to adjust its estimates of PDs.

Under the Bank’s monitoring procedures a significant increase in credit risk is identified before the exposure has defaulted, and at the latest when the exposure becomes 30 days past due, unless the Bank has reasonable and supportable information that demonstrates otherwise.

The Bank uses different criteria to determine whether credit risk has increased significantly per portfolio of assets. The criteria used are both quantitative changes in PDs as well as qualitative. The table below summarizes per type of asset the range above which an increase in lifetime PD is determined to be significant, as well as some indicative qualitative indicators assessed.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-161

Note 34 – Risk management, continued

Criteria used for Chile

Type of portfolio	Debtor category	PD ranges per debtor category	% of absolute increase in lifetime PD	Stages	Days of arrears to the end of the month
	A1
	A2	0.04 – 0.25%	0.13%	Stage 1	Up to 29 days
	A3
	A4	2.00%	1.62%
	A5 (*)	4.75 – 10%	3.52%	Stage 2	From 30 to 89 days
	A6
	B1
	B2	15 -45%	23.05%
Corporate	B3
	B4
	C1
	C2
	C3	100%	100%	Stage 3	90 days or more
	C4
	C5
	C6

(*) Loans originated in A5 are considered Stage 1 at inception. Loans that were originated in a higher category and subsequently downgraded to A5 are considered Stage 2.

Type of portfolio	Stages	Days of arrears to the end of the month	Probability of default (PD) and qualitative considerations
	Stage 1	Up to 29 days	Difference between Referential Life Time PD and PD Life Time at origination < 20%
Group	Stage 2	From 30 to 89 days	Difference between Referential Life Time PD and PD Life Time at origination >= 20%
	Stage 3	90 days or more	Restructured loans with 60 days in arrears before restructuring

The quantitative criteria is used to identify where an exposure has increased in credit risk and it is applied based on whether an increase in the lifetime PD since the recognition date exceeds the threshold set in absolute and relative terms. The following formulas are used to determine such thresholds:

Relative comparison formula

Threshold = Lifetime PD (at reporting date) - 1

                      Lifetime PD (at origination)

Absolute comparison formula

Threshold = Lifetime PD (at reporting date) – Lifetime PD (at origination)

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-162

Note 34 – Risk management, continued

Criteria used for Colombia

	% of absolute increase in lifetime PD			% of relative increase in lifetime PD			Qualitative indicators assessed
Corporate portfolio
Without information		34.39	%		86.90	%
Small company		22.26	%		1314.07	%
Small company		33.91	%		1326.89	%
Medium company		22.53	%		64.23	%	• Debt restructuring
Medium company		25.67	%		1203.61	%	• Increase in credit risk of other financial instruments
Large company		10.28	%		99.15	%
Low default		0.46	%		0.48	%
Low default (Government and Financial)		0.00	%		324.00	%
Group portfolio
Leasing		33.23	%		82.04	%
Payroll deductible loan		2.79	%		77.14	%
Revolving line of credit		35.22	%		85.65	%
Overdraft limit		0.70	%		241.11	%
Credit card		29.44	%		175.32	%
Mortgage loan		2.55	%		151.19	%
Personal debt restructuring		44.04	%		101.64	%	• Increase in credit risk of other financial instruments
Other loans		26.53	%		174.02	%

Loan commitments are assessed along with the category of loan the Bank is committed to provide, i.e. commitments to provide mortgages are assessed using similar criteria to mortgage loans, while commitments to provide a corporate loan are assessed using similar criteria to corporate loans.

The Bank has monitoring procedures in place to make sure that the criteria used to identify significant increases in credit are effective, meaning that significant increase in credit risk is identified before the exposure is defaulted or when the asset becomes 30 days past due. The Bank performs periodic back-testing of its ratings to consider whether the drivers of credit risk that led to default were accurately reflected in the rating in a timely manner.

Incorporation of forward-looking information

The Bank uses forward-looking information that is available without undue cost or effort in its assessment of significant increase of credit risk as well as in its measurement of ECL. The Bank employs experts who use external and internal information to generate a ‘base case’ scenario of future forecast of relevant economic variables along with a representative range of other possible forecast scenarios. The external information used includes economic data and forecasts published by governmental bodies and monetary authorities.

The Bank applies probabilities to the forecast scenarios identified. The base case scenario is the single most-likely outcome and consists of information used by the Bank for strategic planning and budgeting. The Bank has identified and documented key drivers of credit risk and credit losses for each portfolio of financial instruments and, using a statistical analysis of historical data, has estimated relationships between macro-economic variables and credit risk and credit losses. The Bank has not made changes in the estimation techniques or significant assumptions made during the reporting period.

The table below summarizes the principal macroeconomic indicators included in the economic scenarios used as of December 31, 2018 until December 31, 2023 in the countries where the Bank and its subsidiaries operate and therefore are the countries that have a material impact on ECLs.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-163

Note 34 – Risk management, continued

Criteria for Chile

Indicators	Portfolio	2019												2020												2021
		Q1			Q2			Q3			Q4			Q1			Q2			Q3			Q4			Q1			Q2			Q3			Q4
Unemployment rate	Base scenario		7.16	%		7.42	%		7.13	%		6.86	%		7.15	%		7.43	%		7.16	%		6.91	%		7.21	%		7.49	%		7.21	%		6.96	%
	Range of upside scenarios		7.20	%		7.53	%		7.28	%		7.04	%		7.33	%		7.59	%		7.30	%		7.02	%		7.29	%		7.54	%		7.23	%		6.94	%
	Range of downside scenarios		7.12	%		7.32	%		6.98	%		6.69	%		6.98	%		7.26	%		7.02	%		6.80	%		7.13	%		7.43	%		7.20	%		6.98	%
Consumer’s price index (IPC)	Base scenario		108.52			109.33			110.24			110.93			112.05			112.66			113.48			114.23			115.41			116.01			116.86			117.63
	Range of upside scenarios		108.56			109.47			110.51			111.17			112.29			112.83			113.72			114.43			115.59			116.16			117.09			117.84
	Range of downside scenarios		108.48			109.19			109.96			110.68			111.81			112.48			113.23			114.02			115.23			115.87			116.62			117.43
Interbank interest rate	Base scenario		3.00	%		3.25	%		3.50	%		3.75	%		4.00	%		4.50	%		4.50	%		4.50	%		4.50	%		4.50	%		4.50	%		4.50	%
	Range of upside scenarios		3.75	%		4.50	%		5.00	%		5.25	%		5.50	%		6.25	%		6.00	%		5.50	%		5.00	%		4.50	%		4.50	%		4.50	%
	Range of downside scenarios		2.25	%		2.00	%		2.00	%		2.25	%		2.50	%		2.75	%		3.00	%		3.50	%		4.00	%		4.50	%		4.50	%		4.50	%
Copper	Base scenario		2.78			2.81			2.83			2.86			2.87			2.88			2.88			2.89			2.90			2.91			2.92			2.93
	Range of upside scenarios		2.58			2.40			2.22			2.10			2.68			2.88			2.88			2.89			2.90			2.91			2.92			2.93
	Range of downside scenarios		2.99			3.22			3.45			3.61			3.06			2.88			2.88			2.89			2.90			2.91			2.92			2.93

Criteria for Colombia

	As of December 31,
	2019		2020		2021
GDP growth
Base scenario		3.11		2.66		2.63
Range of upside scenarios		4.33		4.20		4.25
Range of downside scenarios		3.72		3.43		3.44
Unemployment rates
Base scenario		9.84		9.84		9.84
Range of upside scenarios		9.50		9.40		9.34
Range of downside scenarios		10.21		10.29		10.35
Benchmark interest rates
Base scenario		4.75		4.75		4.75
Range of upside scenarios		5.75		5.75		5.75
Range of downside scenarios		3.75		3.75		3.75
currency exchange rate
Base scenario		3,180		3,180		3,150
Range of upside scenarios		3,104		3,071		3,025
Range of downside scenarios		3,256		3,289		3,335
Consumer’s Price Index
Base scenario		3.40		3.00		3.00
Range of upside scenarios		3.95		3.91		4.27
Range of downside scenarios		2.74		1.86		1.38

Predicted relationships between the key indicators and default and loss rates on various portfolios of financial assets have been developed based on analyzing historical data over the past 3 years.

Sensitivity analysis

The most significant assumptions affecting the ECL allowance, as indicated in the tables above by country, are as follows:

Chile:

• Unemployment rate, given its impact on secured and unsecure borrowers’ ability to meet their contractual repayments.

• Consumer’s Price Index (IPC), given its impact on housing prices, mortgage collateral valuations, and consumers acquisition power

• Interbank interest rate, given its impact on companies’ likelihood of default

• Cooper, given its impact on the Chilean economy as a whole

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-164

Note 34 – Risk management, continued

Colombia:

- GDP growth, given the significant impact on companies’ performance and collateral valuations

- Unemployment rates, given its impact on secured and unsecure borrowers’ ability to meet their contractual repayments.

- Interest rate, given its impact on companies’ likelihood of default

- Exchange rates, given its impact on companies’ financial position and debt

- Consumer’s Price Index (IPC), given its impact on housing prices and consumers acquisition power

Set out below are the changes to ECL as of December 31, 2018 that would result from reasonably possible changes in these parameters from the actual assumptions used in the Bank’s economic variable assumptions as set forth in the tables above for Base scenarios, upside scenarios, and downside scenarios.

ECL coverage of loans and accounts receivable at amortized cost subject to significant measurement uncertainty as of December 31, 2018		Chile		Colombia
		MCh$		MCh$
Reported ECL			502,943		279,770
Loans and accounts receivable at amortized cost			16,783,609		4,698,881
Reported Coverage (Reported ECL/ loans and accounts receivable at amortized cost)	%		3.00		5.95
Consensus upside scenario (Upside scenario for ECL/ loans and accounts receivable at amortized cost)	%		2.94		6.03
Consensus central scenario (Base scenario for ECL/ loans and accounts receivable at amortized cost)	%		3.00		5.95
Consensus downside scenario (Downside scenario for ECL/ loans and accounts receivable at amortized cost)	%		3.04		5.84

ECL coverage rates reflect the underlying observed credit defaults, the sensitivity to economic environment, extent of collateral and the effective maturity of the book.

Measurement of ECL

The key inputs used for measuring ECL are:

- probability of default (PD);

- loss given default (LGD); and

- exposure at default (EAD).

As explained above these figures are generally derived from internally developed statistical models and other historical data and they are adjusted to reflect probability-weighted forward-looking information.

PD is an estimate of the likelihood of default over a given time horizon. It is estimated as at a point in time. The calculation is based on statistical rating models, and assessed using rating tools tailored to the various categories of counterparties and exposures. These statistical models are based on market data (where available), as well as internal data comprising both quantitative and qualitative factors. PDs are estimated considering the contractual maturities of exposures and estimated prepayment rates. The estimation is based on current conditions, adjusted to take into account estimates of future conditions that will impact PD.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-165

Note 34 – Risk management, continued

LGD is an estimate of the loss arising on default. It is based on the difference between the contractual cash flows due and those that the lender would expect to receive, taking into account cash flows from any collateral. The LGD models for secured assets consider forecasts of future collateral valuation taking into account sale discounts, time to realization of collateral, cross-collateralization and seniority of claim, cost of realization of collateral and cure rates (i.e. exit from non-performing status). LGD models for unsecured assets consider time of recovery, recovery rates and seniority of claims. The calculation is on a discounted cash flow basis, where the cash flows are discounted by the current interest rate.

EAD is an estimate of the exposure at a future default date, taking into account expected changes in the exposure after the reporting date, including repayments of principal and interest, and expected drawdowns on committed facilities. The Bank’s modelling approach for EAD reflects expected changes in the balance outstanding over the lifetime of the loan exposure that are permitted by the current contractual terms, such as amortization profiles, early repayment or overpayment, changes in utilization of undrawn commitments and credit mitigation actions taken before default. The Bank uses EAD models that reflect the characteristics of the portfolios.

The Bank measures ECL considering the risk of default over the maximum contractual period (including extension options) over which the entity is exposed to credit risk and not a longer period, even if contact extension or renewal is common business practice. However, for financial instruments such as credit cards, revolving credit facilities and overdraft facilities that include both a loan and an undrawn commitment component, the Bank’s contractual ability to demand repayment and cancel the undrawn commitment does not limit the Bank’s exposure to credit losses to the contractual notice period. For such financial instruments the Bank measures ECL over the period that it is exposed to credit risk and ECL would not be mitigated by credit risk management actions, even if that period extends beyond the maximum contractual period. These financial instruments do not have a fixed term or repayment structure and have a short contractual cancellation period. However, the Bank does not enforce in the normal day-to-day management the contractual right to cancel these financial instruments. This is because these financial instruments are managed on a collective basis and are canceled only when the Bank becomes aware of an increase in credit risk at the facility level. This longer period is estimated taking into account the credit risk management actions that the Bank expects to take to mitigate ECL, e.g. reduction in limits or cancellation of the loan commitment.

The measurement of ECL is based on probability weighted average credit loss. As a result, the measurement of the loss allowance should be the same regardless of whether it is measured on an individual basis or a collective basis (although measurement on a collective basis is more practical for large portfolios of items). In relation to the assessment of whether there has been a significant increase in credit risk it can be necessary to perform the assessment on a collective basis as noted below.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-166

Note 34 – Risk management, continued

Credit quality

A detail by credit quality, which includes loans and accounts receivable from customers and interbank loans, under IFRS 9 as of December 31, 2018 and under IAS 39 as of December 31, 2017, is summarized as follows:

	As of December 31, 2018
Corporate	Stage 1		Stage 2		Stage 3		Totals corporate		Percentage			Stage 1		Stage 2		Stage 3		Totals allowance		Percentage
	MCh$		MCh$		MCh$		MCh$		%			MCh$		MCh$		MCh$		MCh$		%
A1		115,422		—		—		115,422		0.53	%		899		—		—		899		0.12	%
A2		681,792		—		—		681,792		3.12	%		1,477		—		—		1,477		0.19	%
A3		3,033,770		—		—		3,033,770		13.90	%		5,901		—		—		5,901		0.77	%
A4		4,007,691		—		—		4,007,691		18.36	%		37,650		—		—		37,650		4.90	%
A5		2,727,643		—		—		2,727,643		12.50	%		96,956		—		—		96,956		12.61	%
A6		—		837,283		—		837,283		3.84	%		—		14,829		—		14,829		1.93	%
B1		—		377,954		—		377,954		1.73	%		—		10,116		—		10,116		1.32	%
B2		—		104,513		—		104,513		0.48	%		—		5,479		—		5,479		0.71	%
B3		—		84,197		—		84,197		0.39	%		—		8,830		—		8,830		1.15	%
B4		—		297,570		—		297,570		1.36	%		—		37,422		—		37,422		4.87	%
C1		—		—		137,216		137,216		0.63	%		—		—		2,344		2,344		0.30	%
C2		—		—		79,134		79,134		0.36	%		—		—		6,758		6,758		0.88	%
C3		—		—		34,263		34,263		0.16	%		—		—		7,317		7,317		0.95	%
C4		—		—		62,242		62,242		0.29	%		—		—		21,265		21,265		2.77	%
C5		—		—		63,181		63,181		0.29	%		—		—		47,576		47,576		6.19	%
C6		—		—		127,874		127,874		0.59	%		—		—		84,475		84,475		11.00	%
Subtotals corporate		10,566,318		1,701,517		503,910		12,771,745		58.53	%		142,883		76,676		169,735		389,294		50.66	%
	As of December 31, 2018
Group	Stage 1		Stage 2		Stage 3		Total group		Percentage			Stage 1		Stage 2		Stage 3		Totals allowance		Percentage
	MCh$		MCh$		MCh$		MCh$		%			MCh$		MCh$		MCh$		MCh$		%
Commercial loans		1,710,659		95,045		131,158		1,936,862		8.87	%		39,864		20,622		35,390		95,876		12.47	%
Mortgage loans		3,626,811		659,119		159,897		4,445,827		20.37	%		5,756		37,800		22,561		66,117		8.60	%
Consumer loans		2,135,693		444,058		90,012		2,669,763		12.23	%		70,765		84,842		61,689		217,296		28.27	%
Subtotals group		7,473,163		1,198,222		381,067		9,052,452		41.47	%		116,385		143,264		119,640		379,289		49.34	%
Totals portfolio		18,039,481		2,899,739		884,977		21,824,197		100	%		259,268		219,940		289,375		768,583		100	%

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-167

Note 34 – Risk management, continued

	As of December 31, 2017
Categories	Individual		% over total portfolio			Allowances		Cover range ratio
	MCh$		%			MCh$		%
A1		65,511		0.32	%		21		0.03	%
A2		248,736		1.22	%		273		0.11	%
A3		2,950,482		14.43	%		2,285		0.08	%
A4		3,861,377		18.88	%		22,819		0.59	%
A5		2,926,634		14.31	%		52,874		1.81	%
A6		683,049		3.33	%		16,509		2.42	%
Normal portfolio		10,735,789		52.49	%		94,781		0.88	%
B1		205,536		1.00	%		6,087		2.96	%
B2		120,640		0.59	%		2,315		1.92	%
Impaired		779,828		3.81	%		195,177		25.03	%
Non-compliant portfolio		1,106,004		5.40	%		203,579		18.41	%
Subtotals		11,841,793		57.89	%		298,360		2.52	%
	As of December 31, 2017
Categories	Group		% over total portfolio			Allowance		Cover range ratio
	MCh$		%			MCh$		%
Normal risk portfolio		1,751,232		8.56	%		57,057		3.26	%
Non-compliant portfolio		193,806		0.95	%		91,705		47.32	%
Commercial loans		1,945,038		9.51	%		148,762		7.65	%
Normal risk portfolio		3,975,744		19.44	%		22,730		0.57	%
Non-compliant portfolio		177,009		0.87	%		12,289		6.94	%
Mortgage loans		4,152,753		20.31	%		35,019		0.84	%
Normal risk portfolio		2,396,246		11.72	%		93,255		3.89	%
Non-compliant portfolio		117,060		0.57	%		43,339		37.02	%
Consumer loans		2,513,306		12.29	%		136,594		5.43	%
Subtotals		8,611,097		42.11	%		320,375		3.72	%
Totals		20,452,890		100	%		618,735		3.03	%

The table below provides an analysis of the gross carrying amount of loans and advances to customers by past due status under IFRS 9:

	As of December 31, 2018
	Current		Less than 30 days overdue		Between 30 and 89 days overdue		More than 90 days overdue		Totals		Total overdue
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$
Interbank loans		341,707		—		—		—		341,707		—
Loans and accounts receivable from customers
Commercial loans		13,683,048		251,596		117,386		314,870		14,366,900		683,852
Mortgage loans		4,181,849		108,783		64,088		91,107		4,445,827		263,978
Consumer loans		2,493,765		69,412		59,616		46,970		2,669,763		175,998
Totals		20,700,369		429,791		241,090		452,947		21,824,197		1,123,828

The table below provides an analysis of the gross carrying amount of loans and advances to customers by overdue status under IAS 39:

	As of December 31, 2017
	Current		Less than 30 days overdue		Between 30 and 89 days overdue		More than 90 days overdue		Totals		Total overdue
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$
Interbank loans		70,285		—		—		—		70,285		—
Loans and accounts receivable from customers
Commercial loans		13,526,944		211,535		143,063		319,377		14,200,919		673,975
Mortgage loans		3,893,786		115,688		61,890		93,786		4,165,150		271,364
Consumer loans		2,521,397		68,955		52,854		48,852		2,692,058		170,661
Totals		20,012,412		396,178		257,807		462,015		21,128,412		1,116,000

An analysis for the movement of the allowance for losses during the year by individual and group portfolio is included in Note 10, letter c.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-168

Note 34 – Risk management, continued

Maximum Exposure to Credit Risk

The following table shows the Bank’s maximum credit risk exposure by financial asset as of December 31, 2018, 2017, 2016 for different balance sheet items, including derivatives, without deducting real guarantees or other credit enhancements received:

			Maximum Exposure as of December 31, 2018
			Balance sheet asset						Off-balance sheet						Collateral				Net exposure
	Notes		Gross amounts		Allowances		Net amounts		Gross amounts		Allowances		Net amounts		Cash		Non-cash
			MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$
Financial instruments at fair value through other comprehensive income		11		2,657,154		—		2,657,154		—		—		—						2,657,154
Loans and accounts receivable at amortized cost		10		21,482,490		768,120		20,714,370		5,383,914		45,848		5,338,066		—		13,143,140		12,909,296
Commercial loans				14,366,900		484,707		13,882,193		5,383,914		45,848		5,338,066		—		5,527,419		13,692,840
Mortgage loans				4,445,827		66,117		4,379,710		—		—		—		—		7,257,682		(2,877,972	)
Consumer loans				2,669,763		217,296		2,452,467		—		—		—		—		358,039		2,094,428
Financial instruments at amortized cost		11		198,923		—		198,923		—		—		—		—		—		198,923
Investments under resale agreements		7		109,467		—		109,467		—		—		—		—		109,467		—
Financial derivative contracts		8		1,368,957		—		1,368,957		—		—		—		91,223		—		1,277,734
Interbank loans, net		9		341,707		463		341,244		—		—		—		—		—		341,244
Other assets		15		467,806		—		467,806		—		—		—		—		—		467,806
Totals				26,626,504		768,583		25,857,921		5,383,914		45,848		5,338,066		91,223		13,252,607		17,852,157

			Maximum Exposure
			as of December 31,
	Notes		2017
			MCh$
Investments under resale agreements		7		28,524
Financial derivative contracts		8		1,248,775
Interbank loans, net		9		70,077
Loans and accounts receivable from customers, net		10		19,764,078
Available for sale instruments		11		2,663,478
Held to maturity investments		11		202,030
Other assets		15		429,025
Totals				24,405,987

A summary for the allowances for loan losses according to IFRS 9 is as follows:

	As of December 31, 2018
	MCh$
Loans and accounts receivable at amortized cost		782,713
Interbank loans, net		463
Provisions for contingent loans risk		20,942
Total allowances		804,118

For more detail on maximum credit risk exposure and concentration by type of financial instrument, see the specific Notes.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-169

Note 34 – Risk management, continued

The following table displays the concentration of credit risk by industry for financial assets:

				As of December 31,
				2018							2017
	Note			Maximum gross exposure		Maximum net exposure (1)		%			Maximum gross exposure		Maximum net exposure (1)		%
				MCh$		MCh$					MCh$		MCh$
Manufacturing					1,097,211		994,246		7.64	%		1,040,491		960,774		7.24	%
Mining					677,777		675,973		4.72	%		644,061		419,582		3.16	%
Electricity, gas and water					957,373		769,643		6.66	%		936,483		466,008		3.51	%
Agriculture and livestock					346,369		341,018		2.41	%		415,930		289,826		2.18	%
Forestry and wood extraction					29,683		24,362		0.21	%		38,807		32,165		0.24	%
Fishing					3,475		2,621		0.02	%		13,912		8,688		0.07	%
Transport					700,401		602,973		4.88	%		668,477		450,949		3.40	%
Communications					86,077		84,135		0.60	%		94,439		28,201		0.21	%
Construction					1,746,626		1,729,426		12.16	%		1,638,120		1,357,343		10.23	%
Commerce					1,620,108		1,599,435		11.27	%		1,712,850		998,567		7.53	%
Services					3,872,060		3,869,613		26.95	%		3,780,733		2,578,863		19.43	%
Others					3,229,740		3,188,748		22.48	%		2,732,243		5,678,666		42.79	%
Subtotal commercial loans		10 a	)		14,366,900		13,882,193		100	%		13,716,546		13,269,632		100.00	%
Consumer loans		10 a	)		4,445,827		4,379,710					2,513,306		2,376,712
Mortgage loans		10 a	)		2,669,763		2,452,467					4,152,753		4,117,734
Totals					21,482,490		20,714,370					20,382,605		19,764,078

(1) Net of allowances

Guarantees

In order to mitigate credit risk, guarantees have been established in the Bank’s favor. The main guarantees provided by customers are detailed as follows:

For loans to individuals, the main guarantees are:	For loans to companies, the main guarantees are:
•  Machinery and/or equipment •  Buildings for specific purposes under construction •  Agricultural land •  Maritime ships and aircrafts •  Mining infrastructure •  Inventory •  Agricultural assets •  Industrial assets •  Biological assets •  Other warranties	•  Urban plots or land

Guarantees taken by the Bank to secure collections of rights reflected in its loan portfolios are mortgage-type guarantees (urban and rural property, farm land, ships and aircraft, mining claims and other assets) and pledges (inventory, farm assets, industrial assets, plantings and other pledged assets).

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-170

Note 34 – Risk management, continued

b.2 Financial Risk

Definition and Principles of Financial Risk Management

The Bank defines this risk as the possibility of an event having unexpected financial consequences on the institution. Although this definition involves a strong adversity component, it also involves an important opportunity component. Therefore, the purpose of financial risk management is not to eliminate this risk, but rather to limit its exposure to negative events in line with the risk appetite of the Bank’s shareholders and the regulations that govern the institution. The main financial risks to which the Bank is exposed are: Market Risk, Liquidity Risk and Counterparty Risk.

b.2.1)    Market Risk

Market Risk is the exposure to economic gains or losses caused by movements in prices and market variables. This risk stems from the activities of the Trading and Banking Books. In the first case, it comes from activities intended to obtain short-term gains and from the intensive use of fair value instruments. In the second case, with a more long-term vision, it stems from commercial activities with products valued at amortized cost.

The following section describes the main market risk factors to which the Bank and its subsidiaries are exposed:

b.2.1.1) Currency Risk

Currency risk is the exposure to adverse movements in the exchange rates of currencies other than their base currency (CLP in the case of operations in Chile and COP in the case of operations in Colombia) for all those positions inside and outside of balance. The main sources of exchange risk are:

• Positions in foreign currency (MX) within the attributions of the Trading Book.

• Currency mismatches between the assets and liabilities of the Banking Book.

• Currency flow mismatches.

• Structural positions, generated by consolidating our financial statements, assets and liabilities denominated in currencies other than the Chilean peso registered in our branches and subsidiaries abroad.

The foregoing means that movements in exchange rates can generate volatility in both the result and the Bank’s equity. This effect is known as “translation risk”.

b.2.1.2) Inflation and other indexes adjustments Risk

The inflation and other indexes adjustment risk is the exposure due to changes in units or indexes of readjustment (such as UF, UVR or others) defined in national or foreign currency, in which some of the instruments, contracts or other transactions registered in the balance with such characteristics.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-171

Note 34 – Risk management, continued

b.2.1.3) Interest Rate Risk

Interest Rate Risk is the exposure to movements in market interest rates. Changes in market interest rates can affect both the price of instruments recorded at fair value and the financial margin and other gains from the Banking Book such as fees. Fluctuations in interest rates also affect the Bank’s economic value.

Interest rate risk can be represented by sensitivities to parallel and/or non-parallel yield shifts with the effects reflected in the prices of instruments, the financial margin, equity and economic value.

The measurement of the structural interest rate risk is carried out through the representation by risk factor of the cash flows expressed in fair value, assigned on the dates of repricing and by currency. This methodology facilitates the detection of concentrations of interest risk in the different terms.

All the balance sheet and off balance sheet items are unbundled in their flows and placed at the repricing/maturity. In the case of those accounts that do not have a contractual maturity, an internal model of analysis and estimation of their durations and sensitivities is used.

The following are the Banking Book items (products valued at amortized cost and FVTOCI / instruments available for sale and derivatives valued at fair value) for the most relevant currencies in which the Bank trades at the end of the year ended December 31, 2018 and 2017:

	As of December 31, 2018
Positions	Up to 1 month			Between 1 and 3 months			More than 3 months and less 1 year			Between 1 and 3 years			More than 3 years			Totals
	MCh$			MCh$			MCh$			MCh$			MCh$			MCh$
ASSETS		7,361,827			2,732,465			5,510,072			4,787,052			8,314,688			28,706,104
CLP		3,519,009			1,000,478			1,753,132			1,800,011			1,181,157			9,253,787
CLF		466,115			447,398			1,329,598			1,845,604			6,182,033			10,270,748
USD		1,469,457			623,505			1,197,716			126,122			102,349			3,519,149
COP		1,907,246			661,084			1,229,626			1,015,315			849,149			5,662,420
LIABILITIES		(14,009,676	)		(2,685,555	)		(4,724,403	)		(2,206,000	)		(5,849,673	)		(29,475,307	)
CLP		(8,733,561	)		(1,463,211	)		(2,101,205	)		(560,099	)		(330,000	)		(13,188,076	)
CLF		(214,266	)		(181,744	)		(190,917	)		(1,072,879	)		(5,201,884	)		(6,861,690	)
USD		(1,319,813	)		(643,544	)		(1,750,434	)		(173,922	)		—			(3,887,713	)
COP		(3,742,036	)		(397,056	)		(681,847	)		(399,100	)		(317,789	)		(5,537,828	)
Derivatives		(729,147	)		444,096			251,673			(21,576	)		784,784			729,830
CLP		(209,799	)		1,521,695			394,300			209,804			65,913			1,981,913
CLF		(366,332	)		(1,221,035	)		(469,699	)		(330,428	)		762,022			(1,625,472	)
USD		(50,293	)		263,381			452,557			(38,395	)		(8,123	)		619,127
COP		(102,723	)		(119,945	)		(125,485	)		137,443			(35,028	)		(245,738	)

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-172

Note 34 – Risk management, continued

	As of December 31, 2017
Positions	Up to 1 month			Between 1 and 3 months			More than 3 months and less 1 year			Between 1 and 3 years			More than 3 years			Totals
	MCh$			MCh$			MCh$			MCh$			MCh$			MCh$
ASSETS		7,436,586			2,246,446			5,019,349			4,535,451			5,162,137			24,399,969
CLP		4,256,811			892,701			1,688,269			1,315,539			665,015			8,818,335
CLF		481,000			510,095			2,008,605			2,172,278			3,891,622			9,063,600
USD		702,899			263,710			547,828			33,258			11,851			1,559,546
COP		1,995,876			579,940			774,647			1,014,376			593,649			4,958,488
LIABILITIES		(11,817,755	)		(2,349,046	)		(4,811,419	)		(3,107,492	)		(4,272,956	)		(26,358,668	)
CLP		(6,418,945	)		(1,147,278	)		(3,162,828	)		(1,204,044	)		(221,116	)		(12,154,211	)
CLF		(352,331	)		(255,086	)		(423,122	)		(968,507	)		(3,748,085	)		(5,747,131	)
USD		(1,861,588	)		(318,197	)		(539,389	)		(450,818	)		—			(3,169,992	)
COP		(3,184,891	)		(628,485	)		(686,080	)		(484,123	)		(303,755	)		(5,287,334	)
Derivatives		256,630			(35,782	)		(808,002	)		186,303			80,255			(320,596	)
CLP		819,878			456,293			268,834			(324,113	)		(152,389	)		1,068,503
CLF		(1,209,472	)		(508,032	)		(817,140	)		(226,061	)		321,390			(2,439,315	)
USD		879,996			(47,020	)		70,834			361,999			6,409			1,272,218
COP		(233,772	)		62,977			(330,530	)		374,478			(95,155	)		(222,002	)

The expositions presented above correspond to the present values resulting from:

• Model contract flows according to their behaviors that affect market risk exposure. Example: prepayment, renewal, etc.

• Discount the flows of the items recorded to accrual at a rate that represents the opportunity cost of the liability/ asset.

• Discount the flows of items accounted to the market at the market rate.

b.2.1.4) Volatility Risk

In addition to the exposure related to the underlying asset, issuing options has other risks. These risks arise from the non-linear relationship between the gain generated by the option and the price and level of the underlying factors, as well as exposure to changes in the price volatility of the underlying asset.

b.2.1.5) Liquidity Risk

Liquidity Risk is the exposure of the Bank’s and its subsidiaries to events that affect their ability to meet, in a timely manner and at reasonable costs, cash payment obligations arising from maturities of time deposits that are not renewed, withdrawals from demand accounts, maturities or settlements of derivatives, liquidations of investments or any other payment obligation.

Financial institutions are exposed to funding liquidity risk that is intrinsic to the role of intermediary that they play in the economy. In general, in financial markets demand for medium or long-term financing is usually much greater than the supply of funds for those terms while short-term financing is in considerable supply. In this sense, the role of intermediary played by financial institutions, which assume the risk of satisfying the demand for medium and long-term financing by brokering short-term available funds, is essential for the economy to function properly.

Appropriately managing funding liquidity risk not only allows contractual obligations to be met in a timely manner, but also enables:

• The liquidation of positions, when it so decides, to occur without significant losses.

• The commercial and treasury activities of the Bank and its subsidiaries to be financed at competitive rates.

• The Bank to avoid fines or regulatory penalties for not complying with regulations.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-173

Note 34 – Risk management, continued

b.3 Financial Risk Management

Continuous and interconnected process that originates in the first instance with the identification of the risks to which the Institution is exposed, in order to then quantify the potential impact as a result of said exposure and to limit it to the level desired by the Bank. The above implies an active monitoring of the risks, studying their temporal evolution. The risk management process can be subdivided into the following stages:

b.3.1) Identification of Financial Risks

The Financial Risk Management has a high-level technical team that constantly monitors the activities of the Bank transfer and its subsidiaries in search of potential unquantified and controlled risks. In addition, the Bank Treasury as the first line of defense also plays a fundamental role in the detection of risks. Itaú Corpbanca provides a structure that facilitates this risk identification role by maintaining independence in its tasks and ensuring the active participation of management in the creation / modification of products. After a risk is identified, it is quantified to see the potential impact on the creation of value of the Institution.

b.3.2) Quantification and Control of Exposure to Financial Risk

Once the risk has been identified, the Financial Risk Management is in charge of mapping it into the appropriate metrics for its quantification. The way to measure the exposure is the knowledge of top management and the Board of Directors from which the appetite for risk desired for the Institution and the different openings thereof (business unit, manager, risk factor, area, etc.) always taking into account not to transgress the current norms. The process of establishing limits is the instrument used to establish the assets available to each activity. The determination of limits is conceived as a dynamic process that responds to the level of risk considered acceptable by top management.

The Financial Risk Management requests and proposes a framework of limits and warnings, quantitative and qualitative that affect the liquidity and market risk; this request must be authorized by the ALCO and the Board of Directors.

In addition, it carries out periodic measurements of the risk incurred, develops tools and valuation models, conducts periodic stress analysis, measures the degree of concentration with inter-Bank counterparts, draws up the policy and procedures manual, as well as the monitoring of authorized limits and alerts, which are reviewed at least annually.

The structure of limits requires carrying out a process that takes into account, among others, the following aspects:

• Identify and delimit efficiently and comprehensively the financial risks incurred, so that they are consistent with the management of the business and with the defined strategy.

• Quantify and communicate to the business areas the levels and the risk profile that Top management considers acceptable, in order to avoid incurring unwanted risks.

• Give flexibility to the business areas in the taking of financial risks in an efficient and timely manner according to changes in the market and in business strategies, always within the levels of risk that are considered acceptable by the entity.

• Allowing business generators to take prudent but sufficient risks to achieve the budgeted results.

• Delimit the range of products and underlying assets in which each Treasury unit can operate, taking into account characteristics such as the model, valuation systems and the liquidity of the instruments involved, among others.

The metrics, by type of risk, used to quantify the exposures or demonstrate a materialization of the same are detailed below:    

Metrics and limits of Market Risk

According to the complexity and relevance of the portfolios managed by Itaú Corpbanca, different instruments have been established to control market risks, according to the characteristics of the financial products of the Trading Book and Banking Book.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-174

Note 34 – Risk management, continued

The following are the normative and internal metrics used for the monitoring and control of market risk:

Normative Risk Measures for the Negotiation Book and Banking Book

The Bank measures regulatory exposure in line with the standardized methodology set forth by the Central Bank of Chile

(Chapter III-B-2.2 “Standards on the measurement and control of market risks of Banking companies” of the Compendium

of Financial Regulations) and complemented by the Superintendency of Banks and Financial Institutions (Chapter 12-21 “Norms on measurement and control of market risks”), which corresponds to a risk measure based on the standard methodology of the Basel Committee, which look for quantify exposure to market risks for the Negotiation Book and the Banking Book.

The normative measurement of the market risk of the Trading Book allows estimating the potential loss that the Bank could face from fluctuations standardized by the regulator. The regulatory limit corresponds to the sum of this risk (also called Market Risk Exposure or MRE) and 10% of the Weighted Assets for Credit Risk; Said sum may in no case be greater than once the effective Equity of the Bank.

The Bank, must permanently observe these limits and the data in turn to the Superintendency of Banks and Financial Institutions on the positions in the risk and compliance with said limits (regulatory report SBIF C41). It must also inform the Superintendency monthly about the positions in the consolidated risk with the subsidiaries and foreign branches (regulatory report SBIF C43).

The consumption of regulatory limit of market risk, specifically for the Trading Book as of December 31, 2018, 2017 and 2016, is presented below:

Limit consumption	As of December 31,
	2018			2017			2016
Market risk exposure (MRE)		71.80	%		71.30	%		60.40	%

The regulatory risk measurement for the Banking Book (SBIF C40 regulatory report) is used to estimate the Bank’s potential losses from standardized adverse movements in interest and exchange rates. It is important to specify that for regulatory reporting purposes, the Trading Book includes the interest rate risk of derivatives managed in the Banking Book.

The standardized regulatory report for the Banking Book (SBIF C40 regulatory report) is used to estimate the Bank’s potential economic losses from standardized adverse movements in interest rates defined by the SBIF. Currently, limits for short-term exposure (STE) to interest rate and indexation risk in the Banking Book must not exceed 35% of annual operating income (LTM moving period) and long-term limit consumption (LTE) must be less than 20% of the Bank’s regulatory capital.

The following table details regulatory limit consumption for market risk, specifically for the Banking Book as of December 31, 2018, 2017 and 2016:

Limit consumption	As of December 31,
	2018			2017			2017
Short-term exposure to interest rate risk		51.40	%		45.00	%		60.60	%
Long-term exposure to interest rate risk		50.30	%		43.20	%		13.18	%

As of December 31, 2018 and 2017 and for the years ended December 31, 2018, 2017 and 2016 the Bank has complied with all regulatory requirements and limits, as well as with all financial covenants, such as risk weighed capital adequacy ratio, single borrower exposure, aggregate large exposure, concentration risk, equity to assets ratio, coverage ratio of provisions, among others.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-175

Note 34 – Risk management, continued

Value at risk (VaR)

• Calculation of Historical Value at Risk (Non-parametric). This measurement provides the maximum potential economic loss at a certain confidence level and a given time horizon. Historical VaR, as opposed to Statistical or Parametric VaR, is based on the observed distribution of past returns, does not need to make assumptions of probability distributions (frequently normal distribution) and, therefore, does not need a mean (assumed 0), standard deviation and correlations across returns (parameters). The Bank’s uses a 99% confidence level and a time horizon of 1 day.

• Calculation of Volatility-Adjusted Historical Value at Risk (Non-parametric). This measurement is based on the above and the profit and loss vector is adjusted according to whether it is facing a period of greater or less volatility.

The Board and Top Management define limits on the Value at Risk (as of the end of the first half of 2016 it uses the volatility-adjusted Historical VaR method) that can be maintained, which is monitored on a daily basis. The measurement is also subjected to back testing to verify that the daily losses that effectively occurred do not exceed VaR more than once every 100 days. The result is monitored daily to confirm the validity of the assumptions, hypothesis and the adequacy of the parameters and risk factors used in the VaR calculation.

The Bank in turn calculates VaR for sub/portfolios and risk factors, which allows it to quickly detect pockets of risk. Since VaR does not consider stress scenarios, it is complemented by stress testing. Specifically, the Bank uses metrics that take into account prospective, historical and standardized scenarios.

Although the Value at Risk model is one of the models most frequently used by the local financial industry, like any model it has limitations that must be considered:

• It does not take into account the expected loss in the event that the portfolio return is above the confidence level defined in the VaR. In other words, in the Bank’s case it does not reflect what happens in the 1% of the tail. This is mitigated with the stress measures detailed below.

• It does not consider intraday results, but only reflects the potential loss given current positions.

• It does not take into account potential changes in the dynamics of movements in market variables (i.e. potential changes in the matrix of variance and covariance).

Sensitivity Measurements

The Bank uses stress testing as a sensitivity analysis tool in order to control financial risk. This measurement is performed separately for the Trading and Banking Books.

Sensitivity is estimated using the DV01 indicator, which is a measure of sensitivity of portfolio results if the zero coupon interest rate of the risk factor increases by 1 basis point (0.01%) for different maturities and in annualized terms. Although the use of DV01 to estimate potential impacts on the economic, book and equity value is easy to understand and implement, it excludes both correlations among risk factors and second-order effects.

In accordance with IFRS 7, the following table presents an estimate of the likely, but reasonable impact of fluctuations in interest rates, exchange rates and implicit volatilities (market factors) that would impact the Trading and Banking Book.

The fluctuations in market factors correspond to highly probable scenarios chosen from among a set of scenarios agreed upon based on the opinions of specialists in economics and financial risk and operators. In order to estimate sensitivity, sensitivity (DV01) and the reasonably likely scenarios must be multiplied by market factor.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-176

Note 34 – Risk management, continued

Interest rate scenarios - Chile (basis points – 0.01%)

The table below presents a sensitivity analysis for changes of 0.01% in interest rates by term and type of interest rate, and its corresponding impact on profit and loss (net interest margin) and equity (valuation accounts for financial instruments at FVTOCI).

Term	Scenarios for impacts on P&L														Scenarios for impacts on FVTOCI
	Chamber CLP			Government CLP		Chamber CLF		Government CLF		Curve USD			Curve MX		Chamber CLP			Government CLP		Chamber CLF			Government CLF		Curve USD		Curve MX
1 day		(35	)		52		139		140		(101	)		101		(35	)		52		(139	)		140		101		101
3 months		(35	)		52		139		140		(101	)		101		(35	)		52		(139	)		140		101		101
6 months		(35	)		52		139		140		(101	)		101		(35	)		52		(139	)		140		101		101
9 months		(35	)		57		111		116		(86	)		86		(35	)		57		(111	)		116		86		86
1 year		(35	)		62		81		89		(70	)		70		(35	)		62		(81	)		89		70		70
2 years		(46	)		52		86		56		(64	)		64		(46	)		52		(86	)		56		64		64
3 years		(47	)		48		83		60		(65	)		65		(47	)		48		(83	)		60		65		65
4 years		(48	)		43		79		64		(66	)		66		(48	)		43		(79	)		64		66		66
5 years		(48	)		39		75		68		(67	)		67		(48	)		39		(75	)		68		67		67
7 years		(45	)		43		67		68		(65	)		65		(45	)		43		(67	)		68		65		65
10 years		(39	)		50		55		68		(63	)		63		(39	)		50		(55	)		68		63		63
20 years		(39	)		50		42		48		(63	)		63		(39	)		50		(42	)		48		63		63

Interest rate scenarios - Colombia (basis points – 0.01%)

The table below presents a sensitivity analysis for changes of 0.01% in interest rates by term and type of interest rate, and its corresponding impact on profit and loss (net interest margin) and equity (valuation accounts for financial instruments at FVTOCI).

Tenor	Scenarios for impacts on P&L								Scenarios for impacts on FVTOCI
	Government COP			Swap IBR		Curve USD			Government COP			Swap IBR		Curve USD
1 day		(18	)		44		(1	)		(18	)		44		(1	)
3 months		(13	)		31		(2	)		(13	)		31		(2	)
6 months		(8	)		37		(6	)		(8	)		37		(6	)
9 months		(3	)		40		(9	)		(3	)		40		(9	)
1 year		2			43		(12	)		2			43		(12	)
2 years		22			48		(19	)		22			48		(19	)
3 years		42			46		(22	)		42			46		(22	)
4 years		53			55		(24	)		53			55		(24	)
5 years		54			63		(26	)		54			63		(26	)
7 years		56			58		(26	)		56			58		(26	)
10 years		58			50		(27	)		58			50		(27	)
20 years		49			23		(29	)		49			23		(29	)

Tenor	Scenarios for impacts on accrual book
	Government COP		Curve USD
1 day		44		28
1 month		31		29
3 months		31		32
6 months		37		40
9 months		40		35
1 year		43		31

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-177

Note 34 – Risk management, continued

Exchange rate scenarios Chile

The table below presents a sensitivity analysis for changes in the relevant exchanges rates, and its corresponding impact on profit and loss (net income from financial operations and net foreign exchange gain/loss) and equity (valuation accounts for financial instruments at FVTOCI).

Exchange rate	Change in scenario impacting P&L			Change in scenario impacting FVTOCI			Change in scenario impacting accrual book
	%			%			%
USD - CLP		(0.0718	)		(0.0718	)		(0.0718	)
USD - COP		(0.0717	)		(0.0717	)		(0.0717	)

Exchange rate scenarios Colombia

The table below presents a sensitivity analysis for changes in the relevant exchanges rates, and its corresponding impact on profit and loss (net income from financial operations and exchange differences) and equity (valuation accounts for financial instruments at FVTOCI).

Exchange rate	Change in scenario impacting P&L			Change in scenario impacting FVTOCI			Change in scenario impacting accrual book
	%			%			%
USD - COP		(0.0466	)		(0.0466	)		(0.0466	)

Impact on P&L derived from sensitivity analysis

The following table presents the impact of movements or reasonably likely scenarios explained above applied to positions in the Trading Book that affect P&L (net income from financial operations, net foreign exchange gain/losses, and net interest margin as applicable) as of December 31, 2018, 2017 and 2016:

Potential impact on P&L	As of December 31,
	2018			2017			2016
	MCh$			MCh$			MCh$
CLP rate risk		(5,019	)		(849	)		(2,812	)
Derivatives		(5,018	)		(847	)		(2,604	)
Debt instruments		(1	)		(2	)		(208	)
CLF rate risk		(5,942	)		(7,839	)		(8,069	)
Derivatives		(5,942	)		(7,839	)		(8,069	)
Debt instruments		—			—			—
COP rate risk		(29,182	)		(14,895	)		(11,622	)
Derivatives		(29,094	)		(9,909	)		(10,439	)
Debt instruments		(88	)		(4,986	)		(1,183	)
UVR rate risk		(375	)		—			(404	)
Derivatives		(364	)		—			—
Debt instruments		(11	)		—			(404	)
USD rate risk		(2,810	)		(2,001	)		(2,658	)
Other currencies rate risk		(42	)		(50	)		(9	)
Total rate risk		(43,370	)		(25,634	)		(25,574	)
Exchange rate risk		150			(755	)		(1,921	)
Options risk		156			66			(87	)
Total impact		(43,064	)		(26,323	)		(27,582	)

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-178

Note 34 – Risk management, continued

The following table presents the impact on the net interest margin of movements or reasonably likely scenarios on positions in the Accrual Book for the years ended December 31, 2018, 2017 and 2016:

Potential impact on Accrual Book	For the years ended December 31,
	2018			2017			2016
Interest rate shock sensitivity impact		(12,359	)		(9,432	)		(7,906	)

The impact on the Banking Book does not necessarily mean a gain/loss but it does mean smaller/larger net income from the generation of funds (net funding income, which is the net interest from the accrual portfolio) for the next 12 months.

Impact on Equity derived from sensitivity analysis

In line with the effects on P&L of positions accounted for at fair value and amortized cost, the changes in market factors because of reasonably possible movements in interest and exchange rates also generate impacts on equity accounts as a result of the potential change in market value of the portfolio of investments at FVTOCI/ available-for-sale instruments and the portfolios of cash flow and net foreign investment hedges, which are presented in the following table:

	For the years ended December 31,
	2018									2017									2016
	DV01 (+1 bp)			Impact of Change in Interest Rate						DV01 (+1 bp)			Impact of Change in Interest Rate						DV01 (+1 bp)			Impact of Change in Interest Rate
Potential Impact on FVTOCI	US$			MUS$			MCh$			US$			MUS$			MCh$			US$			MUS$			MCh$
CLP		(254,636	)		(11.73	)		(8,180	)		(386,979	)		(37.01	)		(22,745	)		(293,337	)		(14.00	)		(9,211	)
CLF		(177,471	)		(26.29	)		(18,328	)		(245,812	)		(47.62	)		(29,261	)		41,167			(15.00	)		(10,029	)
COP		(189,242	)		(5.74	)		(3,988	)		(225,321	)		(17.50	)		(10,766	)		(152,241	)		(8.00	)		(5,588	)
UVR		(29,763	)		(0.55	)		(380	)		—			—			—			—			—			—
USD		(33,769	)		(2.44	)		(1,701	)		(48,791	)		(2.77	)		(1,700	)		(77,927	)		(3.00	)		(2,094	)
Other		—			—			—			—			—			—			(159	)		—			(7	)
Total interest rate impact		(684,881	)		(46.75	)		(32,577	)		(906,903	)		(105	)		(64,472	)		(482,497	)		(40	)		(26,929	)

	Impact due to changes in prices
	As of December 31, 2018						As of December 31, 2017
Exchange rate	ThUS$			MCh$			ThUS$			MCh$
USD		(3.77	)		(2,624	)		(7.93	)		(4,875	)
COP		(3.72	)		(2,494	)		(9.15	)		(5,621	)
Total risk exchange rate		(7.49	)		(5,118	)		(17.08	)		(10,496	)
Total impact		(7.49	)		(5,118	)		(122.08	)		(74,968	)

Hedging

The Bank uses accounting hedges to manage efficiently the accounting asymmetries present in financial risk exposure.

The use of accounting hedges is subject to the limits defined by the Board of Directors, the definitions of the Assets and Liabilities Committee (ALCO) and the Hedging Policy.

The Treasury is responsible for designing and implementing the strategies and the Financial Risk Management is responsible for measuring and monitoring the effectiveness of the hedges, generating indicators of effectiveness that are constantly monitored. (For more detail on the accounting hedging strategies, review Note 8).

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-179

Note 34 – Risk management, continued

C) Operational Risk

The Bank and its subsidiaries define operational risk as the possibility of occurrence of losses resulting from failures, deficiencies or inadequacies in internal processes, people, and systems or external events, including in this definition the legal risk and excluding strategic risks and reputational. Operational risk is recognized as a manageable risk, for which it has defined a function in charge of this task within its corporate structure.

Operational risk management is executed, mainly, through the Operational Risk Management function. The Bank adopts a model of three lines of defense as the primary way to implement its operational risk management structure, internal controls and compliance, ensuring compliance with corporate guidelines.

The defense lines are composed by; the business and support areas (first line of defense) responsible for managing the risks related to their processes; Operational Risk, Internal Controls, and Compliance (second line of defense) area in charge of supporting the first line of defense in relation to the fulfillment of its direct responsibilities; and Internal Audit function (third line of defense) responsible for verifying, independently and periodically, the adequacy of the risk identification and management processes and procedures, in accordance with the guidelines established in the Internal Audit Policy and submitting the results of its recommendations for improvement to the Audit Committee.

The risk management program contemplates that all relevant risk issues must be reported to the higher levels and to the Operational Risk Committee.

Our methodology consists in the evaluation of the risks and controls of a business from a broad perspective and includes a plan to monitor the effectiveness of such controls and the identification of eventual weaknesses. The main objectives of the Bank and its subsidiaries in terms of operational risk management are the following:

• Identification, evaluation, information, management, and monitoring of the operational risk in connection with activities, products, and processes carried out or commercialized by the Bank and its subsidiaries;

• Build a strong culture of operational risk management and internal controls, with clearly defined and adequately segregated responsibilities between business and support functions, whether these are internally developed or outsourced to third parties;

• Generate effective internal reports in connection with issues related to operational risk management, with a clearly defined escalation protocol;

• Control the design and application of effective plans to deal with contingencies that ensure business continuity and losses control.

Regarding training and awareness, the risk culture continues to be reinforced through face-to-face training in the field of operational risk, internal control, prevention of external and internal fraud, and the implementation of the annual “more security” program for all collaborators and induction programs for new employees.

Finally, it is worth mentioning that Sarbanes-Oxley methodologies (SOX) continue to be applied for their main products and processes, the application of this methodology is annually certified by an external consultant.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-180

Note 34 – Risk management, continued

D) Shareholders’ equity requirements

The primary objectives of capital management are to ensure compliance with regulatory requirements and to maintain a solid risk rating and healthy capital ratios. During 2018 and 2017, the Bank has complied fully with all capital requirements.

In accordance with the General Banking Law, the Bank must maintain a minimum ratio of Regulatory Capital to Consolidated Risk-Weighted Assets of 8%, net of required provisions, and a minimum ratio of Core Capital to Total Consolidated Assets of 3%, net of required provisions. However, after the merger, the SBIF determined that the Bank’s Regulatory Capital could not be less than 10% of its Risk-Weighted Assets. For this purpose, the Bank has applied the dispose in the Chapter 12-1 “Heritage for legal and regulatory purposes” of RAN.

Assets are weighted using risk categories, which are assigned a risk percentage based on the capital needed to back up each asset. There are 5 risk categories (0%, 10%, 20%, 60% and 100%). For example, cash, due from Banks and financial instruments issued by the Chilean Central Bank have 0% risk, which means that, in accordance with current standards, no capital is required to back these assets. Bank have 100% risk, which means that a minimum capital equivalent to 8% of the value of these assets is needed. In the case of Itaú, it uses 10%.

All derivative instruments traded off-market are taken into account to determine risk assets using conversion factors over notional values, thus calculating the value of the credit risk exposure (or “credit equivalent”). For weighting purposes, “credit equivalent” also considers contingent loans not recorded in the Consolidated Statement of Financial Position.

According to local regulations, as of December 31, 2018 and 2017, the relation between assets and risk weighted assets is as follow:

	Consolidated assets				Risk-weighted assets
	As of December 31,				As of December 31,
	2018		2017		2018		2017
	MCh$		MCh$		MCh$		MCh$
Assets balance (net of allowances)
Cash and deposits in banks		987,680		964,030		—		—
Cash items in process of collection		318,658		157,017		56,963		30,679
Trading securities		86,938		415,061		27,658		64,799
Investments under resale agreements		109,467		28,524		106,916		7,277
Financial derivative contract (*)		1,315,165		1,461,326		1,040,274		1,094,481
Interbank loans		341,244		70,077		95,612		36,073
Loans and accounts receivable from customers		20,880,186		19,767,434		18,808,886		17,850,495
Available for sale investments		2,650,776		2,653,066		551,593		501,656
Held to maturity investments		198,910		202,030		198,910		202,030
Investments in companies		10,555		10,412		10,555		10,412
Intangible		1,613,807		1,605,234		435,572		435,991
Fixed assets		95,564		130,579		95,564		130,579
Current taxes		123,129		238,452		12,313		23,845
Deferred taxes		154,599		161,109		15,460		16,111
Other assets		561,435		444,692		505,495		427,567
Off-balance sheet assets
Contingent loans		2,333,398		2,199,660		1,400,038		1,319,796
Totals		31,781,511		30,508,703		23,361,809		22,151,791

(*) Items presented at their Equivalent Credit Risk value, in accordance with the provisions of Chapter 12-1 “Equity for Legal and Regulatory Effects” of the RAN, issued by the Superintendency of Banks and Financial Institutions.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-181

Note 34 – Risk management, continued

	Amount						Ratio
	As of December 31,						As of December 31,
	2018		2017				2018		2017
	MCh$		MCh$				%		%
Basic capital		3,324,531		3,189,876	(a	)		10.46		10.46	(c	)
Effective equity		3,415,845		3,249,572	(b	)		14.62		14.67	(d	)

(a) Basic Capital Corresponds to the net amount that must be shown in the Consolidated Financial Statements filed with the SBIF under the line item “Equity attributable to equity holders” as indicated in the Compendium of Accounting Standards.

(b) Based on the consolidated financial statements filed with SBIF, the effective net equity of a bank is the sum of (i) a bank’s basic capital, (ii) subordinated bonds issued by a bank valued at their placement price up to 50% of its net capital base; provided that the value of the bonds shall decrease 20% for each year that lapses during the period commencing six years prior to their maturity and (iii) voluntary loan loss allowances in an amount up to 1.25% of a bank’s risk-weighted assets (if a bank has goodwill, this value would be required to be deducted from the calculation of the effective net equity). The calculation of the effective net equity does not include the capital contributions made to subsidiaries of a bank and is made on a consolidated basis rather than on an unconsolidated basis.

(c) Consolidated basic capital ratio corresponding to basic capital divided by total assets for capital purposes (includes items outside the Consolidated Financial Statements).

(d) Consolidated solvency ratio corresponds to the ratio of effective equity to weighted assets.

The shareholders’ agreement established an “Optimal Regulatory Capital” with respect to Itaú Corpbanca Chile and Colombia, which must be, at any date, the highest between 120% of the minimum regulatory capital ratio established by the respective legislation and the average of the regulatory capital ratio of the 3 largest private Banks in the respective country, multiplied by the consolidated risk-weighted assets (APR) of the Chilean or Colombian Bank, as applicable, on the date that is one year from the last day of the fiscal year more recent, assuming that the assets weighted by their level of risk grow during that year at a rate equal to the Minimum Growth Rate. The Bank, in consolidated terms (owners of the Bank), maintains a total equity of MCh$3,324,531 (MCh$3,189,876 in December 2017) in the Consolidated Financial Statements filed with the SBIF, according to local regulations.

As of December 31, 2018 and 2017, the Bank is in compliance with the “Optimar Regulatory Capital” requirements, as well as with all financial covenants related to regulatory capital requirements.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-182

Note 35 – Maturity of assets and liabilities

The main assets Banked by maturity, including interest accrued as of December 31, 2018 and 2017, are detailed as follows:

	As of December 31, 2018
	Up to 1 month		Between 1 month to 3 months		Between 3 month to 1 year		Between 1 year to 3 years		Between 3 years to 6 years		Over 6 years		Totals
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$
Assets
Financial instruments at fair value through profit or loss		46,266		470		19,002		22,027		4,573		4,605		96,943
Financial instruments at fair value through other comprehensive income		151,521		103,048		582,899		1,314,188		330,485		175,013		2,657,154
Loans and accounts receivable from customers at amortized cost (**)		1,595,651		2,343,263		2,115,285		2,322,459		3,464,140		9,641,692		21,482,490
Commercial loans		1,391,707		1,876,174		2,023,542		1,734,720		2,238,373		5,102,384		14,366,900
Mortgages loans		2,544		1,021		3,876		18,192		103,965		4,316,229		4,445,827
Consumer loans		201,400		466,068		87,867		569,547		1,121,802		223,079		2,669,763
Financial instruments at amortized cost		27,012		18,238		153,673		—		—		—		198,923
Investments under resale agreements		109,467		—		—		—		—		—		109,467
Financial derivative contracts		120,361		102,992		178,826		263,595		279,427		423,756		1,368,957
Interbank loans (*)		65,398		16,685		17,437		242,187		—		—		341,707
Liabilities
Investments under resale agreements		1,015,614		—		—		—		—		—		1,015,614
Deposits and other demand liabilities		3,624,335		2,311,111		2,910,851		762,998		102,155		409,661		10,121,111
Financial derivative contracts		128,367		95,019		161,214		200,052		248,765		279,389		1,112,806
Interbank borrowings		231,419		446,436		1,151,959		337,465		100,455		59,989		2,327,723
Debt instruments issued		2,449		23,261		668,648		868,994		1,125,037		3,321,735		6,010,124

(*) Interbank loans are presented gross. The amount of allowances corresponds to MCh$463.

(**) Loans and accounts receivable from customers at amortized cost are presented gross. Allowances by loan type are detailed as follows: Commercial MCh$484,707, Mortgage MCh$66,117 and Consumer MCh$217,296.

	As of December 31, 2017
	Up to 1 month		Between 1 month to 3 months		Between 3 month to 1 year		Between 1 year to 3 years		Between 3 years to 6 years		Over 6 years		Totals
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$
Assets
Trading investments		18,941		298		170,098		189,735		9,365		26,624		415,061
Investments under agreements to resell		27,923		601		—		—		—		—		28,524
Derivative financial instruments		112,249		102,009		199,966		260,818		284,247		289,486		1,248,775
Interbank loans (*)		43,096		—		16,621		10,568		—		—		70,285
Loans and accounts receivable (**)		1,531,883		1,649,448		2,689,484		4,174,173		2,952,407		7,385,210		20,382,605
Commercial loans		1,226,214		1,494,950		2,513,004		2,410,168		1,917,111		4,155,099		13,716,546
Mortgages loans		35,428		66,596		98,292		649,867		446,737		2,855,833		4,152,753
Consumer loans		270,241		87,902		78,188		1,114,138		588,559		374,278		2,513,306
Available for sale instruments		86,201		155,376		408,093		790,503		805,892		417,413		2,663,478
Held to maturity investments		55,554		6,171		113,445		23,466		430		2,964		202,030
Liabilities
Investments under repurchase agreements		420,320		600		—		—		—		—		420,920
Deposits and other demand liabilities		2,957,278		1,858,394		3,936,827		793,684		118,388		372,262		10,036,833
Financial derivative contracts		144,639		90,445		172,606		250,792		241,810		194,862		1,095,154
Interbank borrowings		163,031		238,151		1,074,406		529,171		104,443		86,928		2,196,130
Debt instruments issued		3,064		46,514		625,287		1,209,242		812,979		3,252,952		5,950,038

(*) Interbank loans are presented gross. The amount of allowances corresponds to MCh$208

(**) Loans and accounts receivable are presented gross. Allowances by loan type are detailed as follows: Commercial MCh$446,914, Mortgage MCh$35,019 and Consumer MCh$136,594.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-183

Note 36 – Foreign currency position

In the Consolidated Statements of Financial Position as of December 31, 2018 and 2017, assets and liabilities are included in local and foreign currency, as well as adjustable by the variation of the exchange rate, for the amounts indicated below:

As of December 31, 2018	Note			CLP (*)			UF		USD			COP		EUR		Others currency		Readjustment			Totals
				MCh$			MCh$		MCh$			MCh$		MCh$		MCh$		MCh$			MCh$
Cash and deposits in banks		5a	)		223,099			—		449,437			299,458		15,686		—		—			987,680
Cash items in process of collection		5b	)		195,640			—		119,725			226		2,861		206		—			318,658
Financial instruments at fair value through profit or loss		6			54,162			—		—			42,781		—		—		—			96,943
Financial instruments at fair value through other comprehensive income		11			835,543			680,505		78,908			1,062,198		—		—		—			2,657,154
Loans and accounts receivable at amortized cost		10			5,571,537			7,785,104		3,208,848			4,120,535		19,391		13		8,942			20,714,370
Financial instruments at amortized cost		11			—			—		122,391			76,532		—		—		—			198,923
Investments under resale agreements		7			91,510			—		—			17,957		—		—		—			109,467
Financial derivative contracts		8			972,693			66,989		226,561			102,709		5		—		—			1,368,957
Interbank loans, net		9			239,963			—		70,823			30,458		—		—		—			341,244
Intangible assets		12			1,389,518			—		1,308			180,138		—		—		—			1,570,964
Property, plant, and equipment		13			77,639			—		846			17,079		—		—		—			95,564
Current taxes		14			68,094			—		2,887			52,148		—		—		—			123,129
Deferred taxes		14			130,883			—		20,311			27,492		—		—		—			178,686
Other assets		15			200,164			7,787		164,724			121,619		7,467		36		—			501,797
Other non-current assets held for sale		16			59,802			—		—			—		—		—					59,802
TOTAL ASSETS					10,110,247			8,540,385		4,466,769			6,151,330		45,410		255		8,942			29,323,338
Deposits and other demand liabilities		16			2,058,537			4,214		444,668			1,785,581		7,418		57		—			4,300,475
Cash in process of being cleared		5b	)		133,926			—		112,284			—		796		159		—			247,165
Obligations under repurchase agreements		7			363,789			—		6,834			644,991		—		—		—			1,015,614
Time deposits and other time liabilities		16			6,513,874			609,136		1,955,631			1,042,445		25		—		—			10,121,111
Financial derivative contracts		8			773,186			83,339		178,869			76,207		1,205		—		—			1,112,806
Interbank borrowings		17			—			5,863		2,279,817			39,859		2,170		14		—			2,327,723
Debt instruments issued		18			439,805			4,475,832		649,897			444,590		—		—		—			6,010,124
Other financial liabilities		18			12,390			10		—			—		—		—		—			12,400
Current taxes		14			528			—		—			663		—		—		—			1,191
Deferred taxes		14			—			—		454			17		—		—		—			471
Provisions		19			140,925			—		—			73,978		—		—		—			214,903
Other liabilities		20			239,175			133,106		69,900			49,508		2,509		—		27,597			521,795
Liabilities directly associated with non-current assets held for sale		20																				—
TOTAL LIABILITIES					10,676,135			5,311,500		5,698,354			4,157,839		14,123		230		27,597			25,885,778
Assets (liabilities) net					(565,888	)		3,228,885		(1,231,585	)		1,993,491		31,287		25		(18,655	)		3,437,560

(*) Includes transactions denominated in foreign currencies but that are settled in pesos.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-184

Note 36 – Foreign currency position, continued

As of December 31, 2017	Note			CLP (*)			UF		USD			COP		EUR		Others currency			Adjustable		Totals
				MCh$			MCh$		MCh$			MCh$		MCh$		MCh$			MCh$		MCh$
Cash and deposits in banks		5a	)		221,037			—		377,014			354,751		10,340		888			—		964,030
Cash items in process of collection		5b	)		124,414			—		22,202			1,067		9,286		48			—		157,017
Trading investments		6			25,652			—		—			389,409		—		—			—		415,061
Investments under resale agreements		7			2,074			—		218			26,232		—		—			—		28,524
Financial derivative contracts		8			967,831			70,174		119,997			90,773		—		—			—		1,248,775
Interbank loans, net		9			33,928			—		35,287			862		—		—			—		70,077
Loans and accounts receivable from customers, net		10			5,652,307			7,693,789		2,204,036			4,207,288		—		—			6,658		19,764,078
Available for sale instruments		11			914,656			999,540		14,053			725,569		—		—			9,660		2,663,478
Held to maturity investments		11			—			—		95,652			106,378		—		—			—		202,030
Intangible assets		12			1,370,857			—		1,422			190,375		—		—			—		1,562,654
Property, plant, and equipment		13			81,438			—		1,043			48,098		—		—			—		130,579
Current taxes		14			202,093			—		—			36,359		—		—			—		238,452
Deferred taxes		14			115,800			—		24,885			—		—		—			—		140,685
Other assets		15			239,308			12,843		95,807			80,308		677		82			—		429,025
Other non-current assets held for sale		15			18,308			—		—			—		—		—			—		18,308
TOTAL ASSETS					9,969,703			8,776,346		2,991,616			6,257,469		20,303		1,018			16,318		28,032,773
Deposits and other demand liabilities		16			1,952,975			7,803		432,253			1,742,508		6,076		52			—		4,141,667
Cash in process of being cleared		5b	)		56,399			—		53,097			—		—		—			—		109,496
Obligations under repurchase agreements		7			44,264			—		—			376,656		—		—			—		420,920
Time deposits and other time liabilities		16			6,034,571			814,336		1,013,235			2,196,671		6,429		—			1		10,065,243
Financial derivative contracts		8			869,263			84,530		82,231			59,130		—		—			—		1,095,154
Interbank borrowings		17			(1,257	)		21,958		1,516,717			650,987		2,269		5,456			—		2,196,130
Debt instruments issued		18			1,179,526			3,381,318		923,718			465,476		—		—			—		5,950,038
Other financial liabilities		18			16,255			—		—			811		—		—			—		17,066
Current taxes		14			624			—		—			—		—		—			—		624
Deferred taxes		14			52			—		—			26,302		—		—			—		26,354
Provisions		19			26,109			—		25,772			66,008		—		—			—		117,889
Other liabilities		20			145,599			166,866		86,648			63,675		—		—			647		463,435
Liabilities directly associated with non-current assets held for sale		20			—			—		—			—		—		—			—		—
TOTAL LIABILITIES					10,324,380			4,476,811		4,133,671			5,648,224		14,774		5,508			648		24,604,016
Assets (liabilities) net					(354,677	)		4,299,535		(1,142,055	)		609,245		5,529		(4,490	)		15,670		3,428,757

(*) Includes transactions denominated in foreign currencies but that are settled in pesos.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-185

Note 37 – Subsequent events

SBIF resolution

On January 7, 2019, the Bank was informed by Resolution No 101 of January 4, 2019, that the SBIF imposed a penalty fee of MCh$5,985 on the Bank, on the grounds that it had exceeded the limit of credits to the same debtors to which the Bank was obligated to comply with according to articles 84 No. 1, 85 letter a) of the General Law of Banks and Chapter 12-3 of the Updated Compilation of Standards of the SBIF. The same resolution accepted the defenses used by the Bank with respect to the other two charges that were formulated in the same sanctioning administrative proceeding.

On January 14, 2019, the Bank’s Board of Directors, together with its legal advisors, analyzed the aforementioned Resolution, its rationale and implications, as well as the possible courses of action against it, and considered all the aspects involved, both legal and not legal. The Board of Directors agreed, unanimously, to reiterate its full conviction that the Bank acted in accordance with the Law in all the loans operations that were subject to charges, including the one for which the penalty fee was issued; and decided not file a claim against the Resolution. This decision was adopted in the best interest of the Bank and its shareholders, since it was considered that initiating an appeal process would involve various costs to the Bank, even though there are solid grounds to challenge the fine. Instead, the Board of Directors agreed to favor the ordinary course of operations of the Bank, concentrating the attention and resources of Management in the development of its business, and to avoid continuing with this process and its negative implications regarding the distraction of the managerial staff, communicational impact, and loss of focus in the relationship between the Bank and the authority. In accordance with the provisions of the aforementioned Resolution, the fine has been paid in full as of the date of issuance of these Consolidated Financial Statements.

The foregoing constitutes a subsequent event that results in adjustment to the Consolidated Financial Statements as of December 31, 2018 in accordance with IAS 10 “Events after the reporting period”, for which the effects have been duly incorporated into the present Consolidated Financial Statements.

Dissolution by absorption of CorpLegal S.A.

On January 8, 2019, the Bank requested authorization from the SBIF to proceed with the dissolution of its subsidiary CorpLegal S.A., which will occur as a consequence of the acquisition that Itaú Corpbanca will make of the stock that Itaú Corredores de Bolsa Limitada holds in CorpLegal S.A., both of which are subsidiaries of the Bank, and so all of its shares are held by a single shareholder.

By letter dated February 25, 2019, the SBIF authorized the dissolution of the company.

After that, in March 2019, the Board approved the dissolution of CorpLegal.

As of the date of these Consolidated Financial Statements, the purchase has not yet taken place, therefore the entity has not yet been dissolved.

Modification of the General Banking Law

On January 12, 2019, Law 21,130, Modernizing Banking Legislation, was issued in the Official Gazette. This law introduces modifications, among other regulatory bodies, to the General Banking Law, N°21,000 that created the Commission for the Financial Market, the Organic Law of the State Bank of Chile and the Tax Code.

One of the main changes introduced by this law, is the integration of the SBIF with the Commission for the Financial Market (CMF), new capital requirements in accordance with the international standards established by Basel III, as well as new limits for credit operations.

The new Law adopts the highest international standards in terms of banking regulation and supervision, strengthening international competitiveness and contributing to financial stability of Chile.

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-186

Note 37 – Subsequent Events, continued

Lawsuit of Helm LLC against Itaú Corpbanca

In December 2016 Helm LLC (“Helm”) initiated an arbitration before the ICC International Court of Arbitration (the “ICC”) against Corp Group Holding Inversiones Ltda. (“Corp Group”) and Itaú Corpbanca (collectively, “Respondents”). Helm alleged that Respondents had breached (i) the Amended and Restated Shareholders Agreement of HB Acquisition S.A.S., dated as of July 31, 2013, which governs Itaú Corpbanca’s subsidiary Itaú Corpbanca Colombia, and (ii) the Transaction Agreement, dated January 29, 2014, as amended and restated, which governs the merger between Itaú Chile S.A. and Corpbanca, by which Itaú Corpbanca was formed, and the potential acquisition by Itaú Corpbanca of certain shares of Itaú Corpbanca Colombia from Corp Group. During the course of the proceedings, Helm demanded that Itaú Corpbanca and Corp Group effect the acquisition of its shares of Itaú Corpbanca Colombia at the price agreed with Corp Group in the Transaction Agreement, which (with interest at 9% per year running from January 29, 2014) would have totaled approximately $850 million.

On February 28, 2019, a three-member Tribunal of the ICC rejected Helm’s demand and ordered Helm to sell its shares of Itaú Corpbanca Colombia, which represent 19.44% of the equity of Itaú Corpbanca Colombia, to Respondents at approximately $299 million (which includes interest at LIBOR plus 2.7% per year running from April 1, 2016).

Itaú Corpbanca intends to purchase the shares from Helm. This price of $299 million implies a valuation multiple of 1.36 times book value of Itaú Corpbanca Colombia as of December 31, 2018, and is consistent with the valuations of Itaú Corpbanca Colombia in Itaú Corpbanca’s financial statements. The acquisition, when completed, will result in an estimated impact of 0.82% on Itaú Corpbanca’s Common Equity Tier 1 capital, on a fully loaded basis, under the Basel III standards (using exchange rates as of February 28, 2019).

In this context, on March 11, 2019 we have filed with regulators a request to be authorized to purchase those shares from Helm LLC corresponding to the 19.44% as indicated above and also from Kresge Stock Holding Company Inc (KSHC) for a 1.38% of the equity of Itaú Corpbanca Colombia, respectively, as part of the shareholders agreement in Colombia.

The Bank is currently in the process of seeking regulatory authorization to purchase those shares in Chile, Colombia and Brazil. The regulators’ approval in these three different jurisdictions is not perfunctory and accordingly, the acquisition of the non-controlling interest and corresponding obligation is to be reflected in the Consolidated Financial Statements once the approval process is completed. Consequently, as a result of these recent events, there are no effects to be recognized in these Consolidated Financial Statements.

Shareholders’ meeting

In the Annual Ordinary Shareholders’ Meeting held on March 19, 2019, Itaú Corpbanca’s shareholders agreed:

1. To renew in its entirety the bank’s board of directors. Consequently, the following persons were appointed, eleven as office-holders and two as alternates, respectively, as provided by Itaú Corpbanca’s by-laws:

Office-holders:	Andrés Bucher Cepeda
Jorge Andrés Saieh Guzmán	Gustavo Arriagada Morales
Ricardo Villela Marino	Pedro Samhan Escándar
Jorge Selume Zaror	Bernard Pasquier
Fernando Aguad Dagach	Fernando Concha Ureta
Caio Ibrahim David
Milton Maluhy Filho

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-187

Note 37 – Subsequent Events, continued

Alternates:
Diego Fresco Gutiérrez	Jessica López Saffie

It is noted herein that the office-holders, Messrs. Gustavo Arriagada Morales, Pedro Samhan Escándar, Bernard Pasquier and Fernando Concha Ureta were appointed as independent directors, as set forth in article 50 Bis. of Law No. 18,046.

2. To distribute a dividend equivalent to 30% of net income for 2018, which represents an aggregate amount equal to MCh$51,614 payable to the shareholders of the Bank entitled to receive dividends in a proportion of 0.100728627 per share.

Other subsequent events

Between January 1 and April 8, 2019, the date of issuance of these consolidated financial statements, there have been no other events after the reporting period that could affect the presentation and results of the financial statements.

/s/ Jonathan Covarrubias Hernández	/s/ Manuel Olivares Rossetti
Chief Accounting Officer	Chief Executive Officer

  Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018   F-188