Debt Instruments at Fair Value Through Other Comprehensive Income

12 Months Ended

Dec. 31, 2020

Disclosure of available-for-sale financial assets [text block] [Abstract]

DEBT INSTRUMENTS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

NOTE 10

DEBT INSTRUMENTS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

As of December 31, 2020 and 2019 detail of debt instruments is as follows:

	As of December 31,
	2020	2019
	MCh$	MCh$
Chilean central bank and government securities
Chilean central bank bonds	-	272,802
Chilean central bank notes	1,008,450	1,186,724
Other Chilean central bank and government securities (*)	5,344,910	1,908,031
Subtotal	6,353,360	3,367,557
of which sold under repurchase agreement	969,508	379,294
Other Chilean securities
Time deposits in Chilean financial institutions	492	398
Mortgage finance bonds of Chilean financial institutions	14,022	16,748
Other instruments issued in the country	2,217	2,410
Subtotal	16,731	19,556
of which sold under repurchase agreement	399	131
Foreign financial securities
Foreign Central Banks and Government securities	269,803	197,685
Other foreign financial securities	522,648	425,474
Subtotal	792,451	623,159
of which sold under repurchase agreement	-	-
Total	7,162,542	4,010,272

(*) Includes Treasury bonds in Chilean pesos and UF.

The Bank holds instruments, belonging to “Chilean central bank and government securities”, which guarantee derivatives transactions through Comder Contraparte Central S,A, in the local market as of December 31, 2020 and 2019 for an amount of Ch$158,600 and Ch$65,140, while “Foreign financial securities” guarantee derivatives transactions through London Clearing House (LCH) as of December 31, 2020 and 2019 Ch$67,685 and Ch$73,109. Additionally, the Bank maintains guarantees with Euroclear as of December 31, 2020 and 2019 Ch$258,183 and Ch$390,954 to comply with the initial margin required by European EMIR standard.

As of December 31, 2020 debt instruments at FVOCI included a cumulative net unrealized income of MCh$102,855, recorded as “valuation adjustment” in OCI, of which MCh$101,696 is attributable to shareholders equity and MCh$1,159 to non-controlling interest.

As of December 31, 2019 debt instruments at FVOCI included a cumulative net unrealized income of MCh$29,184, recorded as “valuation adjustment” in OCI, of which MCh$28,135 are attributable to shareholders equity and MCh$1,049 to non-controlling interest.

An analysis of changes in the fair value and the corresponding ECL as of December 31, 2020 is as follows:

	Stage1	Stage2	Stage3	TOTAL
	Collective	Collective	Collective
Gross carrying amount at January 1, 2020	4,010,272	-	-	4,010,272
New assets purchased	14,708,776	-	-	14,708,776
Transfers to stage 1	-	-	-	-
Transfers to stage 2	-	-	-	-
Transfers to stage 3	-	-	-	-
Assets derecognized or matured (excluding write-off)	(11,440,253)	-	-	(11,440,253)
Changes due to modifications not derecognized	100,401	-	-	100,401
Other adjustments	(216,654)	-	-	(216,654)
At December 31, 2020	7,162,542	-	-	7,162,542

	Stage1	Stage2	Stage3	TOTAL
	Collective	Collective	Collective
ECL at January 1, 2020	456	-	-	456
New assets purchased	1,965	-	-	1,965
Transfers to stage 1	-	-	-	-
Transfers to stage 2	-	-	-	-
Transfers to stage 3	-	-	-	-
Assets derecognized or matured (excluding write-off)	(1,501)	-	-	(1,501)
Changes due to modifications not derecognized	219	-	-	219
Write-off	-	-	-	-
Other adjustments	(1)	-	-	(1)
At December 31, 2020	1,138	-	-	1,138

An analysis of changes in the fair value and the corresponding ECL as of December 31, 2019 is as follows:

	Stage1	Stage2	Stage3	TOTAL
	Collective	Collective	Collective
Gross carrying amount at January 1, 2019	2,394,323	-	-	2,394,323
New assets purchased	7,573,665	-	-	7,573,665
Transfers to stage 1	-	-	-	-
Transfers to stage 2	-	-	-	-
Transfers to stage 3	-	-	-	-
Assets derecognized or matured (excluding write-off)	(5,694,456)			(5,694,456)
Changes due to modifications not derecognized	394,648	-	-	2,273,857
Write-off	-	-	-	-
Other adjustments	(657,908)	-	-	(657,908)
At December 31, 2019	4,010,272	-	-	4,010,272

	Stage1	Stage2	Stage3	TOTAL
	Collective	Collective	Collective
ECL at January 1, 2019	258	-	-	258
New assets purchased	816	-	-	816
Transfers to stage 1	-	-	-	-
Transfers to stage 2	-	-	-	-
Transfers to stage 3	-	-	-	-
Assets derecognized or matured (excluding write-off)	(614)	-	-	(614)
Changes due to modifications not derecognized	67	-	-	67
Write-off	-	-	-	-
Other adjustments	(71)	-	-	(71)
At December 31, 2019	456	-	-	456

Gross profits and losses realized on the sale of available for sale investments as of December 31, 2020, 2019 and 2018 is as follows:

	As of December 31,
	2020	2019	2018
	MCh$	MCh$	MCh$
Sale of available for sale investments generating realized profits	3,696,791	5,781,636	3,505,266
Realized profits	82,925	63,828	8,802
Sale of available for sale investments generating realized losses	379,046	607,349	709,371
Realized losses	2,246	156	6,004

The Bank evaluated those instruments with unrealized losses as of December 31, 2020 and 2019 and concluded they were not impaired. This review consisted of evaluating the economic reasons for any declines, the credit ratings of the securities’ issuers, and the Bank’s intention and ability to hold the securities until the unrealized loss is recovered. Based on this analysis, the Bank believes that there were no significant or prolonged declines nor changes in credit risk which would cause impairment in its investment portfolio, since most of the decline in fair value of these instruments was caused by market conditions which the Bank considers to be temporary. All of the instruments that have unrealized losses as of December 31, 2020 and 2019, were not in a continuing unrealized loss position for more than one year.

The following charts show debt instruments at fair value through other comprehensive income cumulative unrealized profit and loss, as of December 31, 2020:

	Less than 12 months				More than 12 months				Total
	Amortized cost	Fair value	Unrealized profit	Unrealized loss	Amortized cost	Fair value	Unrealized profit	Unrealized loss	Amortized cost	Fair value	Unrealized profit	Unrealized loss
	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$
Chilean central bank and government securities
Chilean central bank Bonds	-	-	-	-	-	-	-	-	-	-	-	-
Chilean central bank notes	1,008,450	1,008,450	-	-	-	-	-	-	1,008,450	1,008,450	-	-
Other Chilean central bank and government securities	5,288,189	5,344,910	96,180	(36,739)	-	-	-	-	5,288,189	5,344,910	96,180	(36,739)
Subtotal	6,296,639	6,353,360	96,180	(36,739)	-	-	-	-	6,296,639	6,353,360	96,180	(36,739)
Other Chilean securities
Time deposits in Chilean financial institutions	299	299	-	-	-	-	-	-	299	299	-	-
Mortgage finance bonds of Chilean financial institutions	13,293	14,022	729	-	-	-	-	-	13,293	14,022	729	-
Chilean financial institution bonds	-	-	-	-	-	-	-	-	-	-	-	-
Chilean corporate bonds	-	-	-	-	-	-	-	-	-	-	-	-
Other Chilean securities	305	2,410	2,105	-	-	-	-	-	305	2,410	2,105	-
Subtotal	13,897	16,731	2,834	-	-	-	-	-	13,897	16,731	2,834	-
Foreign financial securities
Foreign central banks and government securities	269,477	269,803	20,267	(19,941)	-	-	-	-	269,477	269,803	20,267	(19,941)
Other foreign financial securities	482,394	522,648	40,254	-	-	-	-	-	482,394	522,648	40,254	-
Subtotal	751,871	792,451	60,521	(19,941)	-	-	-	-	751,871	792,451	60,521	(19,941)
Total	7,062,407	7,162,542	159,535	(56,680)	-	-	-	-	7,062,407	7,162,542	159,535	(56,680)

The following charts show debt instruments at fair value through other comprehensive income cumulative unrealized profit and loss, as of December 31, 2019:

	Less than 12 months				More than 12 months				Total
	Amortized cost	Fair value	Unrealized profit	Unrealized loss	Amortized cost	Fair value	Unrealized profit	Unrealized loss	Amortized cost	Fair value	Unrealized profit	Unrealized loss
	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$	MCh$
Chilean central bank and government securities
Chilean central bank Bonds	270,979	272,802	3,600	(1,777)	-	-	-	-	270,979	272,802	3,600	(1,777)
Chilean central bank notes	1,186,487	1,186,724	237	-	-	-	-	-	1,186,487	1,186,724	237	-
Other Chilean central bank and government securities	1,895,367	1,908,031	38,002	(25,338)	-	-	-	-	1,895,367	1,908,031	38,002	(25,338)
Subtotal	3,352,833	3,367,557	41,839	(27,115)	-	-	-	-	3,352,833	3,367,557	41,839	(27,115)
Other Chilean securities
Time deposits in Chilean financial institutions	398	398	-	-	-	-	-	-	398	398	-	-
Mortgage finance bonds of Chilean financial institutions	15,962	16,748	786	-	-	-	-	-	15,962	16,748	786	-
Chilean financial institution bonds	-	-	-	-	-	-	-	-	-	-	-	-
Chilean corporate bonds	-	-	-	-	-	-	-	-	-	-	-	-
Other Chilean securities	407	2,410	2,003	-	-	-	-	-	407	2,410	2,003	-
Subtotal	16,767	19,556	2,789	-	-	-	-	-	16,767	19,556	2,789	-
Foreign financial securities
Foreign central banks and government securities	198,020	197,685	11,110	(11,445)	-	-	-	-	198,020	197,685	11,110	(11,445)
Other foreign financial securities	413,468	425,474	13,080	(1,074)	-	-	-	-	413,468	425,474	13,080	(1,074)
Subtotal	611,488	623,159	24,190	(12,519)	-	-	-	-	611,488	623,159	24,190	(12,519)
Total	3,981,088	4,010,272	68,818	(39,634)	-	-	-	-	3,981,088	4,010,272	68,818	(39,634)