ANNUAL REPORT FOR THE FISCAL YEAR ENDING DECEMBER 31, 2020

As filed with the Securities and Exchange Commission on April 23, 2021

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, 2020
	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, 2020

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	Trading Symbol	Name of each exchange on which registered
American Depositary Shares representing common shares	ITCB	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. ☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

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.

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SUMMARY OF RISK FACTORS

An investment in our securities and ADSs is subject to a number of risks, including Risks Associated with our Business, Risks Relating to Chile, Colombia and Other Countries in Which we Operate, Risks Relating to Expansion and Integration of Acquired Businesses and Risks Related to our Securities, the ADSs and our Common Shares. The following list summarizes some, but not all, of these risks. Please read the information in the section entitled “Risk Factors” for a more thorough description of these and other risks.

Risks Associated with our Business

● Composition of Loan Portfolio: 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, which may in turn have a material adverse effect on our results of operations.

● Growth of Loan Portfolio: 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 acquisitions. In addition, 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.

● Capital Adequacy Requirements: 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. 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, which could materially and adversely affect our business reputation, financial condition and results of operations.

● Rate Volatility: In the current global economic climate, there is a greater degree of uncertainty in the policy decisions and the setting of interest rates by the Central Bank of Chile and the Central Bank of Colombia. 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.

● Competition and Consolidation: The Chilean and Colombian markets for financial services are highly competitive and competition is likely to increase. 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. Increased competition and industry consolidation may adversely affect the results of our operations.

● Risk Management: We use various processes to identify, manage and control our risk exposure under all market conditions. However, these processes involve subjective and complex judgments and assumptions and we cannot guarantee that our risk management efforts will prevent us from experiencing material losses that could have a material adverse effect on our business, financial condition and results of operations.

● Concentration Risk: Concentration risk is associated with high financial losses triggered by significant exposure to a particular risk factor. We are subject to concentration risk and an excessive concentration in a particular risk factor could have a material adverse effect on our business, financial condition and results of operations.

● Reliance on Short Term Deposits: Time deposits and other term deposits are our primary sources of funding. 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.

● Banking Regulations: We are subject to constantly evolving regulation in the markets in which we operate. 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

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may also face increased compliance costs and limitations on our ability to pursue certain business opportunities, which may restrict our operations and thereby adversely affect our financial condition and results of operations.

● Government Debt Exposure: 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. 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 by this exposure.

● Benchmark Transition: In 2017, it was announced that banks will no longer be compelled to submit rates for the calculation of LIBOR after 2021. It is impossible to predict whether LIBOR will continue to exist and how it will be determined after this date, or what alternative reference rate may be adopted. A significant portion of our income, expenses and liabilities is directly tied to interest rates and we may not effectively manage risks associated with the replacement of benchmark indices, including LIBOR.

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

● Pension Fund Regulations: If the exposure of any pension fund to us exceeds the regulatory limits established by the Chilean government, 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.. Potential changes to the pension system in Chile may also impose an increase in our labor costs and therefore have a material adverse effect on our financial results.

● Government Influence: Chilean and Colombian authorities exercise influence on and intervene in the Chilean and Colombian economies from time to time and changes in monetary, fiscal and foreign exchange policies or in the Chilean and Colombian governments’ structures may adversely affect us, as our profitability depends on the levels of economic activity in these countries.

● Social and Political Environment: Ongoing social unrest in Chile and internal security issues in Colombia have had or could have in the future a negative effect on the economies in which we operate and in turn could negatively impact our business and/or financial performance. In particular, further deterioration of Colombia’s political relations with Venezuela 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.

● COVID-19: The ongoing COVID-19 pandemic and related government response measures, including measures related to both public health and financial stability, have and may continue to affect the economies of the countries in which we operate, our business operations or our financial condition and results of operations.

Risks Relating to Expansion and Integration of Acquired Businesses

● Integration Risk: Integration of acquired or merged businesses involves certain risks that may have a material adverse effect on us. For example, acquisitions and strategic partnerships may not perform as expected or may disrupt our operations and adversely affect our business financial condition and results of operations.

Risks Related to our Securities, the ADSs and our Common Shares

● Controlling Shareholder: Itaú Unibanco is the sole controlling shareholder of Itaú Corpbanca. Our controlling shareholder is able to exercise significant control over us which could result in conflicts of interest.

● Other Risks: Investors may find it difficult to enforce civil liabilities against us or our directors, officers and controlling persons, most of whom reside outside of the United States. In addition, investors may have fewer and less well defined shareholders’ rights than with shares of a company in the United States. Further, holders of ADSs are not entitled to attend shareholders’ meetings, and they may only vote through the depositary.

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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;

● adverse developments with respect to the financial stability and conditions of our shareholders, counterparties, joint venture partners and business partners;

● natural disasters and pandemics, including the ongoing SARS-CoV-2 (“COVID-19”) pandemic;

● 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;

● social unrest;

● our counterparties’ failure to meet contractual obligations;

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● 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;

● 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”), the acquisition of the assets and liabilities of Itaú BBA Colombia S.A., Corporación Financiera (“Itaú BBA Colombia”) by us (the “Itaú Colombia Acquisition”), and the acquisition of an additional 20.8% share ownership in Itaú Corpbanca Colombia by us;

● 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.

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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.

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ENFORCEMENT OF CIVIL LIABILITIES

We are a banking corporation organized under the laws of Chile. 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.

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TABLE OF CONTENTS

PART I	9
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS	9
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE	9
ITEM 3. KEY INFORMATION	9
ITEM 4. INFORMATION ON THE COMPANY	52
ITEM 4A. UNRESOLVED STAFF COMMENTS	155
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS	156
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	197
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	208
ITEM 8. FINANCIAL INFORMATION	211
ITEM 9. OFFER AND LISTING DETAILS	213
ITEM 10. ADDITIONAL INFORMATION	214
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT FINANCIAL RISK	250
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	274
PART II	277
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	277
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	277
ITEM 15. CONTROLS AND PROCEDURES	277
ITEM 16. RESERVED	278
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT	278
ITEM 16B. ETHICS	278
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES	279
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES	279
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS	280
ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT	280
ITEM 16G. CORPORATE GOVERNANCE	281
ITEM 16H. MINE SAFETY DISCLOSURE	282
PART III	283
ITEM 17. FINANCIAL STATEMENTS	283
ITEM 18. FINANCIAL STATEMENTS	283
ITEM 19. EXHIBITS	284

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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 Commission for the Financial Market (Comisión para el Mercado Financiero) also referred to as the “CMF”, and that are the basis for dividend distributions, have been prepared in accordance with Chilean accounting principles or Chilean Banking GAAP, issued by the CMF. CMF 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, 2019 and 2020, and for the years ended December 31, 2018, 2019 and 2020 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 year ended December 31, 2016 is not comparable to the data as of and for the years ended December 31, 2017, 2018, 2019, and 2020 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 16 as issued by the IASB in January 2016 with a date of transition of January 1, 2019, which resulted in changes to our accounting policies. As per the permitted transitional provisions of IFRS 16, we elected not to revise comparative figures; accordingly, some IFRS 16 disclosures presented in our consolidated financial statements and this Annual Report with respect to certain amounts and disclosures are not comparable. Please see Note 1 (t) for new accounting policies and Note 2 Accounting Changes to our consolidated financial statements included in this Annual Report for a description of the impact of the adoption of this standard.

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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, 2020, one UF equaled US$40.90, Ch$29,070.33 and COP$142,484.01 and as of March 31, 2021, one UF equaled US$40.82 , Ch$29,394.77 and COP$149,797.04. 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$710.73 and Ch$3,483.54, respectively, per US$1.00 or COP$1.00, as the case may be, as of December 31, 2020.

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 CMF, 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. As of December 31, 2018, 2019 and 2020 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 which sets forth new capital requirements for banks in Chile that are in line with Basel III standards), 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.

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$23,256.3 million or US$32.7 million as of December 31, 2020)) 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 UF600,000 (Ch$17,442.2 million or US$24.5 million as of December 31, 2020).

10

(2) On December 1, 2020, the CMF completed the issuance of the regulations necessary to implement in Chile the new capital requirements established by Law No. 21,130. As a result, the following will apply:

a. From December 1, 2020, a bank will be required to have an additional basic capital (Conservation Buffer) equal to 2.5% of its risk weighted assets, net of required allowances, above the minimum requirements. This additional requirement will go into effect progressively during a 4-year term at a ratio of 0.625% per year, starting on December 1, 2021. Note that the CMF has already issued and published the regulations that triggered the applicability of this additional basic capital requirement: (w) on September 25, 2020, the CMF published the regulation (Circular No. 2,272) setting forth the Conservation Buffer applicable to banks in Chile; (x) on November 30, 2020, the CMF published the regulation (Circular No. 2,280) setting forth the standard methodology for operational risk weighted assets, without allowing banks to use their own methodologies for operational risk weighted assets; (y) on December 1, 2020, the CMF published the regulation (Circular No. 2,281) setting forth the methodologies that banks must consider for credit risk weighted assets, including the use of both the standard and the internal methodologies; and (z) on December 1, 2020, the CMF published the regulation (Circular No. 2,282) setting forth the standard methodology for market risk weighted assets, without allowing banks to use their own methodologies for market risk weighted assets, without allowing banks to use their own methodologies for market risk weighted assets;

b. Beginning on December 1, 2020, the Central Bank of Chile may impose an additional basic capital requirement (Counter-Cyclical Buffer) 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 Central Bank of Chile on a general basis applicable to all banking institutions, as a contra-cyclical measure. Note that on September 25, 2020 the CMF published the regulation (Circular No. 2,272) setting forth the Counter-Cyclical Buffer that may be applicable to banks in Chile;

c. In the event that the CMF determines, through a grounded resolution and with the affirmative consent of the Counsel of the Central Bank of Chile, that a bank or group of banks has systemic importance, 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.

On November 2, 2020, the CMF published the regulation (Circular No. 2,276) setting forth the factors and methodologies to be considered to determine whether a bank or group of banks qualifies as of systemic importance; this regulation also provides the additional basic capital requirements to be imposed on a bank if it is considered of systemic importance. This regulation, which became effective on December 1, 2020, provides that the additional basic capital requirements will be applied progressively from December 1, 2022 to December 1, 2025, at a ratio of 25% per year until reaching 100% on December 1, 2025. Finally, the first resolution qualifying banks as systemically important was issued on March 31, 2021 and qualifies Itaú Corpbanca, among others, as a bank of systemic importance.

In general terms, the rating of a bank or group of banks under the same controller as of systemic importance is associated with the group’s materiality to the operation of the Chilean financial system. Materiality is determined based on a finding that the financial weakening or eventual insolvency of a bank or group of banks under the same controller could have material adverse consequences on the rest of the financial system or even on the country’s economy as a whole. To establish the degree of systemic importance of a bank or group of banks under the same controller, the CMF considers as a reference framework the evaluation methodology established by the Basel Committee on Banking Supervision (BCBS) in force since January 1, 2016, which contemplates the creation of an index based on different factors that determine the systemic impact of a bank if it were to financial weaken or become insolvent.

11

In accordance with the above, to establish the degree of systemic importance of a bank, the CMF established an index of systemic importance, determined by the weighted aggregate of the relative percentage of participation of each bank in the following factors, each of which is will be calculated from a set of sub-factors: size, local interconnection (sub-factors to be measured only within the local market, including assets within the Chilean financial system and liabilities within the Chilean financial system), local substitutability (sub-factors to be measured only within the local market including payment activities, deposits and loans), and complexity (sub-factors to be measured include OTC derivative contracts, inter-jurisdictional assets, inter-jurisdictional liabilities, assets at fair value and assets of third parties under the bank’s management).

Specifically, the systemic importance index is calculated as: (a) the weighted average of the bank’s scores in the four factors set forth in the preceding paragraph, using the following weighting: 30% for size and local interconnection and 20% for local substitutability and complexity, and (b) the bank’s score in each factor will be equal to the weighted average of its percentage participation in each of the sub-factors. This participation is multiplied by 10,000 to express it in basis points; 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, starting in the fourth quarter of 2020. Such additional equity requirements may consist in an additional basic capital, or one or more of the instruments listed in numbers (ii), (iii), (iv) and (v) 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, on September 11, 2020, the CMF issued the regulation (Circular No. 2,270) setting forth the general criteria and guidelines to determine the additional equity requirements as a result of this CMF supervision process. This regulation imposes on banks the obligation to prepare and deliver a Self-Assessment Report on the Effective Net Equity (Informe de Autoevaluación de Patrimonio Efectivo or the IAPE) to the CMF on a yearly basis, no later than April each year. This new regulation became effective as of September 11, 2020; however the IAPE must be delivered progressively pursuant to the following timeline: Starting April 2021, in a simplified format considering credit risk only; starting April 2022, in a simplified format considering credit, market and operational risks, and starting April 2023, in a full format considering all the material risks of the bank.

To determine the effective net equity of a bank (Patrimonio Efectivo), the Chilean Banking Act authorizes the CMF to set forth, through a general regulation, adjustments or exclusions of assets and liabilities, including risk mitigators, that impact its value. Pursuant to this authorization, on October 8, 2020, the CMF published the regulation (Circular No. 2,274) containing the elements of and discounts to the regulatory capital of Chilean banks. This regulation became effective on December 1, 2020 and the regulatory adjustments and exclusions will be applied progressively during a 5-year term, without discounts in 2021 and with progressive increases beginning with 15% on December 1, 2022, 30% from December 1, 2023, 65% from December 1, 2024 and reaching 100% on December 1, 2025.

Pursuant to the above-mentioned regulation, the effective net equity (Patrimonio Efectivo) or regulatory capital of a bank is the sum of the following factors: (a) tier 1 (T1) capital, plus (b) tier 2 (T2) capital. In turn, (y) tier 1 (T1) capital is the sum of (1) the the bank’s basic capital or common equity tier 1 (CET1) (i.e., paid-in capital and reserves) and (2) the additional tier 1 (AT1) capital (i.e., bonds issued without a maturity date and preferred stocks valued at their issue price, for an amount up to one third of the banks’ basic capital), and (z) tier 2 (T2) capital corresponds to (1) subordinated bonds issued by the bank valued at their issue price and 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) and (2) the bank’s voluntary allowances for loan losses up to (A) 1.25% of its credit risk weighted assets, if standard methodologies are applied, or (B) 0.625% in the event non-standard methodologies are applied.

12

The following table sets forth the Basel III Implementation Calendar Chilean banks:

	December 31,
	2020	2021	2022	2023	2024	2025
Conservation Buffer	0%	0.625%	1125%	1875%	2.5%
AT1	0%	0%	0.5%	1.0%	1.5%
SIB*	0%	0%	25%	50%	75%	100%
Capital discounts	0	0	15%	30%	65%	100%
Pillar III				First report
Pillar II	In effect	First IAPE
* Systemically Important Banks * The Bank has been designated as an SIB by the CMF.

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, 2018, 2019 and 2020 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, 2018, 2019 and 2020. 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 CMF 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 Financial Superintendency (Superintendencia Financiera de Colombia) as well as other publicly available information. The CMF 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 Financial Superintendency 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.

13

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.

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, 2020, the Bank’s U.S. dollar exchange rate was Ch$710.73 per US$1.00 and the Bank’s Colombian peso exchange rate was Ch$3,483.54 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.

14

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.”

	For the fiscal years ended December 31,
	2016	2017	2018	2019	2020	2020 (1)
	Ch$	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	1,509,203	1,646,329	1,739,317	1,773,640	1,549,674	2,180,398
Interest expense	(870,028)	(863,347)	(851,654)	(873,222)	(683,237)	(961,317)
Net interest income	639,175	782,982	887,663	900,418	866,437	1,219,081
Net service fee income	150,796	177,571	186,129	174,404	140,999	198,386
Trading and investment, foreign exchange gains and other operating income	83,551	95,965	181,446	216,232	102,001	143,516
Operating income before provision for loan losses	873,522	1,056,518	1,255,238	1,291,054	1,109,437	1,560,983
Provisions for loan losses	(245,990)	(315,417)	(279,798)	(382,678)	(466,230)	(655,988)
Total operating income, net of provision for loan losses, interest and fees	627,532	741,101	975,440	908,376	643,207	904,995
Total operating expenses	(616,627)	(731,147)	(741,527)	(736,533)	(1,581,778)	(2,225,568)
Total net operating income (loss) before income taxes	10,905	9,954	233,913	171,843	(938,571)	(1,320,573)
Income (loss) from investments in associates	—	—	—	532	(2,794)	(3,931)
Income (loss) before income taxes	10,905	9,954	233,913	172,375	(941,365)	(1,324,504)
Income taxes	3,568	52,871	(67,059)	(47,853)	115,210	162,101
Income (loss) from continuing operations	14,473	62,825	166,854	124,522	(826,155)	(1,162,403)
Income (loss) from discontinued operations	(504)	—	—	—	—	—
Net income for the year	13,969	62,825	166,854	124,522	(826,155)	(1,162,403)

	For the fiscal years ended December 31,
	2016	2017	2018	2019	2020	2020(1)
	Ch$	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	14,407	67,821	171,331	113,684	(808,784)	(1,155,252)
Non-controlling interest	(438)	(4,996)	(4,477)	10,838	(17,371)	(24,441)
Net income (loss) per common share(3)	0.035	0.132	0.334	0.248	(1,806)	(2.54)
Dividend per common share(4)	36,387	0.0012	0.04500	0.101	0.248	0.000
Gross dividends per ADS(4)	n.a.	1,8081,	67.26700	151.101	371.943	0.52
Shares of common stock outstanding	512,406,760,091	512,406,760,091	512,406,760,091	512,406,760,091	512,406,760,091

(1) Amounts stated in U.S. dollars as of December 31, 2020 and for the year ended December 31, 2020 have been translated from Chilean pesos at our exchange rate of Ch$710.73 per US$1.00 as of December 31, 2020.

(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 24(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.

15

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

	As of December 31,
	2016	2017	2018	2019	2020	2020(1)
	Ch$	Ch$	Ch$	Ch$	Ch$	US$
	(in millions of Ch$ and thousands of US$)
Cash and deposits in banks	1,487,137	964,030	987,680	1,009,681	3,089,072	4,346,337
Cash in the process of collection	145,769	157,017	318,658	231,305	173,192	243,682
Financial instruments at fair value through profit or loss	—	—	96,943	183,702	582,710	819,875
Financial instruments at fair value through other comprehensive income	—	—	2,657,154	3,598,890	3,970,899	5,587,071
Interbank loans at amortized cost	—	—	341,244	56,396	7,121	10,019
Loans and accounts receivable from customers at amortized cost	—	—	20,714,370	22,254,697	21,576,108	30,357,672
Financial instruments at amortized cost	—		198,923	115,658	111,542	156,940
Trading portfolio financial assets	632,557	415,061	—	—	—	—
Investments under resale agreements	170,242	28,524	109,467	75,975	105,580	148,551
Derivative financial instruments	1,102,769	1,248,775	1,368,957	3,154,957	3,982,803	5,603,820
Investment in associates	—	—	—	9,605	7,149	10,059
Loans and receivables from banks, net	150,568	70,077	—	—	—	—
Loans and receivables from customers, net	20,444,648	19,764,078	—	—	—	—
Financial investments available-for-sale	2,074,077	2,663,478	—	—
Held to maturity investments	226,433	202,030	—	—
Intangible assets	1,614,475	1,562,654	1,570,964	1,574,433	718,683	1,011,190
Property, plant equipment, net	121,043	130,579	95,564	95,080	80,615	113,426
Right of use asset under lease agreements	—	—	—	167,441	146,008	205,434
Current taxes	164,296	238,452	123,129	85,516	64,699	91,032
Deferred taxes	110,765	140,685	178,686	208,657	312,556	439,768
Other assets	427,394	429,025	501,797	770,861	542,633	763,487
Non-current assets held for sale	37,164	18,308	59,802	17,202	15,078	21,214
TOTAL ASSETS	28,909,337	28,032,773	29,323,338	33,610,056	35,486,448	49,929,577
Checking accounts and demand deposits	4,453,191	4,141,667	4,300,475	4,873,448	6,197,406	8,719,775
Transaction in the process of beign cleared	67,413	109,496	247,165	164,573	154,232	217,005
Obligations under repurchase agreements	373,879	420,920	1,015,614	559,457	638,851	898,866
Time deposits and time liabilities	11,581,710	10,065,243	10,121,111	11,620,187	11,433,064	16,086,368
Derivative financial instruments	907,334	1,095,154	1,112,806	2,938,034	3,673,591	5,168,757
Interbank borrowings	2,179,870	2,196,130	2,327,723	2,646,756	3,798,978	5,345,177
Debt instruments issued	5,460,253	5,950,038	6,010,124	6,408,356	6,204,856	8,730,258
Other financial obligations	25,563	17,066	12,400	12,966	13,123	18,464
Lease contracts liabilities	—	—	—	172,924	151,885	213,703
Current taxes	1,886	624	1,191	13	1,766	2,485
Deferred taxes	57,636	26,354	471	263	237	333
Provisions	100,048	117,889	214,903	177,827	135,090	190,072
Other liabilities	269,810	463,435	521,795	708,914	700,034	984,951
Liabilities directly associated with non-current assets held for sale	7,032	—	—	—	—	—
TOTAL LIABILITIES	25,485,625	24,604,016	25,885,778	30,283,718	33,103,113	46,576,214
Equity attributable to equity holders of the Bank	3,184,743	3,211,477	3,219,478	3,231,893	2,314,248	3,256,157
Non-controlling interest	238,969	217,280	218,082	94,445	69,087	97,206
TOTAL EQUITY	3,423,712	3,428,757	3,437,560	3,326,338	2,383,335	3,353,363
TOTAL LIABILITIES AND EQUITY	28,909,337	28,032,773	29,323,338	33,610,056	35,486,448	49,929,577

(1) Amounts stated in U.S. dollars as of December 31, 2020 and for the year ended December 31, 2020 have been translated from Chilean pesos at our exchange rate of Ch$710.73 per US$1.00 as of December 31, 2020.

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CONSOLIDATED RATIOS

	As of and for the Year Ended
	December 31,
	2016		2017		2018		2019		2020
Profitability and Performance
Net interest margin(1)	3.0	%	3.2	%	3.5	%	3.4	%	2.9	%
Return on average total assets(2)	0.1	%	0.2	%	0.6	%	0.4	%	(2.2)	%
Return on average equity(3)	0.5	%	1.8	%	4.8	%	3.5	%	(28.7)	%
Efficiency ratio (consolidated)(4)	68.0	%	67.3	%	67.7	%	56.9	%	121.3	%
Dividend payout ratio(5)	50.0	%	30.0	%	40.0	%	30.0	%	100.0	%
Capital
Average equity as a percentage of average total assets	11.3	%	11.9	%	11.9	%	11.3	%	7.7	%
Shareholders’ equity as a percentage of total liabilities	12.5	%	13.1	%	12.4	%	10.7	%	7.0	%
Asset Quality
Allowances for loan losses as a percentage of non-performing loans(6)(7)	158.6	%	133.9	%	169.6	%	134.6	%	206.8	%
Non-performing loans as a percentage of total loans(6)	1.7	%	2.3	%	2.1	%	2.8	%	57.0	%
Allowances for loan losses as a percentage of total loans (Risk Index)(7)	2.7	%	3.0	%	3.6	%	3.8	%	4.6	%
Past due loans as a percentage of total loans(8)	0.5	%	0.6	%	0.8	%	1.4	%	1.3	%
Other Data
Inflation rate	2.7	%	2.3	%	2.6	%	3.0	%	3.0	%
Revaluation (devaluation) rate (Ch$/US$) (foreign exchange rate)	(5.7)	%	(8.3)	%	13.1	%	7.8	%	(5.1)	%
Number of employees	9,659		9,492		9,179		8,987		8,364
Number of branches and offices	398		375		363		321		294

(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, 2019, and 2020 corresponds to loans at amortized cost. Our loan portfolio classified as stage 3, under IFRS 9, was Ch$1,325,218 million as of December 31, 2020, Ch$1,237,205 million in 2019 and Ch$884,977 million in 2018 with an ECL coverage of 40.0% as of December 31, 2020, 34.9% in 2019 and 39.7% in 2018.

(7) Allowance for loan losses as of December 31, 2018, 2019 and 2020 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.

17

Risks Associated with our Business

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

In 2020, our aggregate gross loan portfolio decreased by 2.2% due to negative factors in the business environment, particularly worse economic conditions due to COVID-19 pandemic in the countries where we operate. In 2020, our loan growth composition was different from previous years and from our expectations. However, consistent with our strategy, we increased the share of mortgage and consumer loans in our portfolio from 33.2% to 34.5% while ceding some ground in commercial loans, especially in our wholesale business, where we are focusing on improving returns. 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, 2020, commercial loans represented 65.5% of our total loan portfolio, a decrease when compared to the same period in 2019. As of December 31, 2020, mortgage loans represented 23.5% of our total loan portfolio compared to 21.1% as of December 31, 2019 and consumer loans represented 11.0% of our total loan portfolio compared to 12.1% as of December 31, 2019.

The consumer loans portfolio represents the single highest level of risk in our loan portfolio. As of December 31, 2020, the risk index (ratio of allowance for loans losses over total loans) of the consumer segment was 8.9% while other business units of our loan portfolio, such as mortgage loans and commercial loans, had lower risk indexes of 1.4% and 5.0% 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, 2020, our allowance for loan losses was Ch$1,041.9 billion (excluding allowances for loan losses on loans and receivable to banks) and the risk index (or allowances for loan losses to total loans) was 4.6%. 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

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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.

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, 2020, our non-performing loans were Ch$503,882 million, which resulted in a non-performing to total loans ratio of 2.2% as of December 31, 2020. Further, our loan portfolio classified as stage 3, under IFRS 9, was Ch$1,325,218 million with an expected credit loss (“ECL”) coverage of 40.0% as of December 31, 2020. 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; for instance, the ongoing COVID-19 pandemic may affect our ability to accurately assess the creditworthiness of borrowers. 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.

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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.

See “Item 3. Key Information—Presentation of Financial and Other Information—Specific Loan Information” in this Annual Report for additional information regarding events in which a higher effective net equity and/or a higher basic capital may be required and detail on certain regulations that were issued by the CMF during 2020, which may impose additional capital and reserve requirements.

Due to the Merger and considering that the market participation of the merged bank was higher than 15% and below 20%, the CMF 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 CMF and continued compliance with the CMF's capital requirements on us, our intention is to have the highest classification from the CMF. As of December 31, 2020, our regulatory capital to risk weighted assets ratio was 13.6% according to the rules issued by the CMF, under 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 solvency ratio (as defined below) be at least 9% of that institution’s total risk-weighted assets, and that its basic solvency ratio 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, 2020, the consolidated ratio for our Colombian operations (calculated according to the Colombian Financial Superintendency definitions for “Total Solvency” (Solvencia Total)) was 13.4%. 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 issued Decree No. 1477 of 2018 and Decree No. 1421 of 2019, which provide 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 have been implemented to adopt the recommendations set forth by Basel III. Financial institutions have been required to comply with Decree No. 1477 of 2018 since February 6, 2020 and with Decree No. 1421 of 2019 since January 1, 2021. However, with respect to the matters regarding the additional primary solvency ratio and the buffers included in Decree No. 1421 of 2019, a gradual four-year implementation schedule is being followed, starting on January 1, 2021. 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;

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● increases in goodwill and minority interest deductions from capital;

● mergers and acquisitions;

● 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 adequacy 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. For information on actions we are considering to address our capital adequacy ratios going forward, see “Item 5—Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Capital”.

Furthermore, if we fail to meet the capital adequacy requirements, we may be required to take corrective actions or be 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.

In 2015, the CMF 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, 2020, the liquidity coverage ratio (LCR) for our Chilean operations was 195%. 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, 2020, the LCR for our Colombian operations (calculated according to the Colombian Financial Superintendency) was 268.6% (127% 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 depend 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.

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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.

Further, the ongoing COVID-19 pandemic added a new source of uncertainty to global economic activity. Authorities around the world have taken measures aimed at containing the spread of the disease, and related restrictions will likely remain in place, continuing to depress activity, until the COVID-19 pandemic is controlled. The materialization of these risks has affected global growth and may continue to decrease the investors’ interest in assets in Chile, Colombia and other countries in which we do business, which has already impacted the market price of our securities and may continue to do so, possibly making it more difficult for us to access capital markets and, as a result, to finance our operations in the future.

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 2018, 2019 and 2020, our ratio of net interest income to total operating income before provision for loan losses was 70.7%, 69.8% and 78.1%, 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 2.9% and a low of 2.5% in 2018, a high of 3.0% and a low of 1.8% in 2019 and a high of 1.8% and a low of 0.5% in 2020. 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 4.8% and a low of 4.3% in 2018, was flat at 4.3% in 2019 and a high of 4.25% and a low of 1.75% in 2020. As of December 31, 2018, we had Ch$0 in financial investments at fair value through other comprehensive income and as of December 31, 2019 and 2020, we had Ch$3,599 million and Ch$3,971 million, respectively, 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.

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

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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.

We are subject to concentration risk.

Concentration risk is the risk associated with potentially high financial losses triggered by significant exposure to a particular component of risk, whether it be related to a particular counterparty, industry, geographic region, mitigating instruments, index or currency. Examples of such risks include significant exposure to a single counterparty, to counterparties operating in the same economic sector or geographical region, to businesses segments or credit products, or to 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

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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.

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

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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 32.7% of our liabilities as of December 31, 2020. 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, 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. As of December 31, 2019, the Chilean peso depreciated against the U.S. dollar by 7.8% and the Colombian peso depreciated against the U.S. dollar by 0.9%, each as compared to December 31, 2018. As of December 31, 2020, the Chilean peso appreciated against the U.S. dollar by 5.1% and the Colombian peso depreciated against the U.S. dollar by 6.3%, each as compared to December 31, 2019.

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, 2018, 2019 and 2020, the gap between foreign currency denominated assets and foreign currency denominated liabilities, excluding derivatives, was Ch$720,224 million, Ch$974,361million and Ch$1,725,528 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.

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.

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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.

Further, as a result of the ongoing COVID-19 pandemic, we have rapidly increased the number of employees working remotely. This may cause increases in the unavailability of our systems and infrastructure, interruption of telecommunication services, generalized system failures and heightened vulnerability to cyberattacks. Accordingly, our ability to conduct our business may be adversely impacted.

Chile’s continuous political, legal and economic uncertainty arising from social unrest could adversely impact our business.

In October 2019, a series of extreme disruptive protests over economic inequality in Chile were initially sparked by the announcement of a 4% subway fare increase in Santiago. Important political and social actors claim that the social unrest reflects the desire of a new social contract. Chile’s current constitution dates to August 11, 1980 and has been subject to several amendments. The most relevant amendment was published in the Chilean Official Gazette on September 22, 2005. On November 15, 2019, the majority of the local political parties agreed on a new constitutional process, which was initiated by a referendum held on October 25, 2020. As a result of this political agreement, Law No. 21,200 and Law No. 21,221 were enacted. See “Item 4—Information on the Company—B. Business Overview— Recent Regulatory Developments in Chile— Referendum to Amend the Chilean Constitution.” As a consequence of the social unrest and the political agreement to vote on a new constitution, there was increased volatility in the Chilean stock market and exchange rate fluctuations that resulted in a weakening of the Chilean peso against the U.S. dollar. Depreciation of the peso prompted the Central Bank to inject liquidity into the economy in U.S. dollars. The share prices and bond spreads of local banks, including ours, suffered significant declines in the market as social protests continued in the country. In addition, many banks and other financial institutions experienced physical damages at their branches and ATMs a result of violence and vandalism associated with the protests. Although most of our damages are insured, 72 of the Bank’s branches and some of our ATM machines suffered varying levels of damage during this period due to vandalism and pillaging, with five of such branches being destroyed.

While news of the referendum calmed markets and unrest levels have improved since then, if social unrest in Chile continues or worsens, particularly in light of the COVID-19 pandemic, it could have a negative impact on economic growth and the business environment in Chile overall, which could in turn have an adverse effect on our business and prospects.

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

As of December 31, 2020, on a consolidated basis we had 5,220 employees in Chile (not including 32 at our New York Branch), of which 64.4% were unionized, and 3,058 employees in Colombia, of which 43.0% 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 January 2020, in March 2020 and in September 2020 and expire in December 2022, March 2023 and August 2023, respectively. Itaú Corpbanca Colombia’s current labor agreement with 23 unions in Colombia was subscribed on September 1, 2019 and will expire on August 31, 2021. 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.

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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.

● 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.

There is currently a new labor reform being discussed in Congress, which, among other items, would shorten the work week from 45 hours to 40 hours, excluding lunch breaks. There is also discussion to increase minimum wage currently set at Ch$301,000/month (US$352.5/month). The weekly working hours agreed under the collective bargaining agreements we have with our employees are 45 hours (excluding lunch breaks) and our minimum wage is set above the legal minimum. Despite this, we cannot assure you at this time that the new labor reform will not have material impact on our expenses.

These and any additional legislative or regulatory actions in Chile, Colombia, Panama, the United States or other countries, and any required changes to our business operations resulting from such labor legislation and regulations, could result in reduced capital availability, significant loss of revenue, limit our ability to continue organic growth (including increased lending), pursue business opportunities in which we might otherwise consider engaging and provide certain products and services, affect the value of assets that we hold, require us to increase our prices and therefore reduce demand for our products, impose additional costs on us or otherwise adversely affect our businesses. Accordingly, we cannot provide assurance that any such new legislation or regulations would not have an adverse effect on our business, results of operations or financial condition in the future.

In a recent case (Decisión 00716, 2019), the State of Council of Colombia stated that temporary employees (known as those employees from staffing companies who render temporary services for user companies) can become unionized and benefit from collective bargaining agreements entered into between user companies to which employees render their services and industry unions. In the ruling, the State of Counsel also stated that the lack of a direct employment relationship between the temporary employees and their user companies should not be an obstacle to the unionization of temporary employees in industry unions. In addition, Article 471 of the Colombian Labor Code provides that when a

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collective bargaining agreement is part of the union whose unionized employees exceed one third of the total employees of a company, the benefits and rules of such collective bargaining agreement will be extended to all employees of such company, regardless of unionization status. The new ability of temporary employees to unionize as well as the effects of Article 471 of the Colombian Labor Code could impact our business given that it will increase costs.

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 loan and deposit servicing systems, back office and business process support, information technology production and support, internet connections and network access. Relying on these third parties and affiliated companies can be a source of operational and regulatory risk to us, including with respect to security breaches affecting such parties. We are also subject to risk with respect to security breaches affecting the vendors and other parties that interact with these service providers. As our interconnectivity with these third parties and affiliated companies increases, we increasingly face the risk of operational failure with respect to their systems. We may be required to take steps to protect the integrity of our operational systems, thereby increasing our operational costs and potentially decreasing customer satisfaction. In addition, any problems caused by these third parties or affiliated companies, including as a result of them not providing us their services for any reason, or performing their services poorly, could adversely affect our ability to deliver products and services to customers and otherwise conduct our business, which could lead to reputational damage and regulatory investigations and intervention. Replacing these third party vendors could also entail significant delays and expense, which 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.

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,

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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 CMF and by the Central Bank of Chile in Chile, and by the Central Bank of Colombia (Banco de la República), the Colombian Ministry of Finance and Public Credit (Ministerio de Hacienda y Crédito Público), the Colombian Financial Superintendency (Superintendencia Financiera de Colombia), 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 modified, among other matters, the corporate governance and operation of the Chilean regulator for securities, insurance, banking and established the CMF as a unique regulator with respect to these areas. 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 UF200. 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. 1735 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 and Public Credit 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.

In addition, Decree 1234 of 2020 sets out a mechanism of procedures, plans, conditions, and requirements to enable testing of innovative technological developments in the activities of the entities supervised by the Colombian Financial Superintendency. The innovative technological developments permitted under Decree 1234 must have one of the following purposes: increasing efficiency in the provision of services or offering of financial products; solving a problem for financial consumers; facilitating financial inclusion; improving regulatory compliance; and developing financial markets or improving their competitiveness. In January 2021, the Colombian Financial Superintendency reported that as of March 2021, nine alliances will be able to test operations in deposit products on behalf of cryptoactive platforms in the sandbox implemented by the Colombian regulator. This alliance will have a trial year during which participants can develop their activities.

In Colombia, the Ministry of Finance and Public Credit, the Colombian Central Bank, the Colombian Financial Superintendency and the entities that make up the regulatory financial network have adopted different measures aimed at protecting the stability of the financial system and the proper functioning of the markets, promoting access to liquidity and adequate management of the risks related to the COVID-19 pandemic, and especially protecting financial consumers in this context. One of these measures was Decree 817 of 2020, which took extraordinary measures to allow joint-stock companies (sociedad por acciones simplificada) to issue debt securities and trade them on stock exchanges for a two-year term. Also, in March 2020, the Colombian Financial Superintendency created the Debtor Support Program (“PAD”), which consists of a set of complementary measures for the support of debtors in the new economic reality, which focus on combining prudent guidelines and attention to the needs of financial consumers. The following were the key proposals by the Colombian Financial Superintendency in connection with the PAD: (i) credit institutions should apply targeted and structural measures to support debtors who are economically affected by the COVID-19 pandemic, in accordance with analyses to be carried out by financial entities taking into account the new economic reality of the debtor; (ii) creation of special measures for origination and rating by risk level for micro, small, medium and other companies that were or will be in reorganization processes; (iii) implementation of the PAD by financial institutions for debtors whose income or ability to pay were affected as a result of the COVID-19 pandemic, including the following

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measures: (1) reduction of interest payments; (2) restrictions on increases in interest rates and (3) new grace periods without the possibility of interest capitalization and without charging interest for other concepts that are deferred such as insurance fees. At the beginning of the COVID-19 pandemic, the PAD was intended to be in force until December 31, 2020, but in December 2020, the Colombian Financial Superintendency announced that the PAD would be extended until June 30, 2021.

Pursuant to the objective of the Colombian government in adopting the recommendations set forth by Basel III, the Colombian Ministry of Finance and Public Credit issued Decree No. 1477 of 2018 and Decree No. 1421 of 2019, which provide 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 and with Decree 1421 of 2019 no later than January 1, 2021, 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 January 1, 2021. However, due to the COVID-19 pandemic, the Basel Committee announced on March 27, 2020 a series of measures aimed at providing additional operational capacity to enable financial entities and their supervisors to respond proactively to the impact that the COVID-19 pandemic has had on the global financial system. Among the measures designed are the following: (i) delaying the final implementation date of certain new Basel III regulations; and (ii) allowing financial institutions to adopt a new market risk framework and make clearer disclosures about their solvency ratios and leverage ratios. Therefore, in March 2020, the Colombian Financial Superintendency issued an external circular (Circular 009, 2020) which (i) postponed sending resolution plans related to the implementation of international standards for different financial entities until April 2021 and (ii) suspended the requirement that entities carry out technical appraisals of suitable guarantees in the terms of the Circular Básica Contable y Financiera for 120 calendar days beginning March 17, 2020. The measures adopted by the Basel Committee allow financial entities to allocate resources that were aimed at strengthening their solvency to respond to the adverse impact that COVID-19 pandemic has had on global financial markets. The measures allow banks to have greater liquidity in order to promote financing to companies and households. Finally, through the measures implemented by the Basel Committee, supervisors will free up credit capacity by reducing the capital reserve that are required for banks in scenarios in which losses on loans must be covered. See “Item 4. Colombian Banking Regulation and Supervision – Capital Adequacy Requirements Amendment.”

We also have limited operations outside of Chile and Colombia, including Peru 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.

Pursuant to letter No. 16,191, the CMF 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

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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 former 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 former 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 former 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 former 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 former SBIF’s resolution and paid the Ch$5,985,328,978 fine imposed.

On August 22, 2019, the CMF Investigation Unit pressed administrative charges against Itaú Corpbanca in relation to the past tenure of Mr. Héctor Valdés as member of our board. Mr. Valdés left our board of directors in August 2016. The bill of charges comprises three different allegations. First, that Itaú Chile breached Section 84 No. 4 of the Chilean General Banking Act by lending UF45,000 (Ch$1,273.9 million or US$1.70 million as of December 31, 2019) to Inmobiliaria Zurich Tres S.A. (“Zurich Tres”). Section 84 No. 4 of the Chilean General Banking Act prohibits granting loans to directors, relatives, and entities in which directors hold an interest. At the time of the loan (June 2015), Mr. Valdés was a director of Itaú Chile and held a non-controlling, indirect stake (11.04%) in Zurich Tres. Second, that after the merger between Itaú Chile and Corpbanca, Itaú Corpbanca breached Section 84 No. 4 of the Chilean General Banking Act by failing to adjust Mr. Valdés’s financial situation before allowing his appointment as director in April 2016. According to the CMF’s investigation unit, the adjustment of Mr. Valdés’s financial situation would have required the full payment of Zurich Tres’s outstanding debt at the time (UF116,187 (Ch$3,289.2 million or US$4.4 million as of December 31, 2019)). And lastly, that Itaú Corpbanca breached Section 50 bis of the Chilean Corporations Act, by allowing the appointment of Mr. Valdés as an independent director when he must have been disqualified for such position. According to the CMF Investigation Unit, Mr. Valdés was not independent. The grounds for lack of independence were: (a) the indirect financial relationship with the bank through Zurich Tres, (b) the former tenure as director of Itaú Chile within the 18 months prior to his appointment as independent director of Itaú Corpbanca, and (c) the former tenure as an advisor of Corpbanca’s board within the 18 months prior to his appointment as independent director of Itaú Corpbanca.

On October 1, 2019, Itaú Corpbanca filed its statement of defense, claiming that Zurich Tres would have been covered by a regulatory provision (CMF’s RAN 12-12), which exempts, under certain conditions, loans granted to legal entities in which a director only holds an indirect stake. In addition, Itaú Corpbanca argued that the first and second charges would be time-barred. Finally, Itaú Corpbanca asserted that Mr. Valdés qualified as an independent director in April 2016, notwithstanding Zurich Tres’s financial commitments with the Bank and Mr. Valdés’s former tenure as director of Itaú Chile. Itaú Corpbanca denied that Mr. Valdés acted as an advisor of Corpbanca’s board within the 18 months prior to the appointment as independent director.

On December 9, 2019, the Chief of the CMF Investigation Unit recommended the CMF Council to: (i) declare the first charge as time-barred; (ii) impose a fine of UF173,000 (Ch$4,897.6 million or US$6.54 million as of December 31, 2019) in connection with the second charge; and (iii) declare Itaú Corpbanca liable for the third charge, without giving advice on a specific fine. Under regular conditions, the maximum statutory fine for such charge would be UF15,000 (Ch$424.6 million or US$0.57 million as of December 31, 2019).

On January 9, 2020 the CMF Council held a final hearing on the case. On March 25, 2020, the CMF Council dismissed all charges pressed against Itaú Corpbanca, ruling that (a) the loans granted to Zurich Tres were indeed

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covered by the regulatory exemption (CMF’s RAN 12-12) and thus did not infringe the General Banking Act and that (b) only a director (and not the corporation) could be liable for applying to an independent seat at a board without meeting the independence criteria set forth in Section 50 bis of the Corporations Act. There has been no further development in this case of Itau Corpbanca since March 2020. As of this date, the dismissal by the CMF counsel is final.

Over the last three years the Colombian Financial Superintendency opened several examination processes of the activities of financial institutions, which resulted in the imposition of over 56 sanctions and fines. Deficiencies in the implementation of Risk Management System for Money Laundering and Terrorism Financing (“SARLAFT”) parameters and the performance of unauthorized financial activities were the most common reasons for the opening of these examination processes during these years.

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.

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.

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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, 2020, 8.9% of our total assets comprised securities issued by the Chilean government and 0.6% 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 (S&P) and Moody’s upgraded our long and short term ratings to 'BBB+/A-2' and 'A3/Prime-2', respectively. However, on March 25, 2021 S&P lowered our ratings to 'BBB' following the sovereign action of March 24, 2021 when Chile was downgraded to 'A' reflecting the marked erosion of its public finances to a structurally weaker level amid countercyclical policies taken to cushion the harsh economic and social impact of the global pandemic and recession, and therefore diminishing the likelihood of extraordinary government support to banks. The outlook on our ratings is 'negative', incorporating the deterioration stemming from the COVID-19 pandemic and other internal events. On April 3, 2020, Moody’s affirmed the aforementioned ratings but revised our rating outlook to 'negative' from 'stable', reflecting the risk of prolonged adverse economic conditions due to COVID-19 and social unrest, which could translate into consistently heightened economic and credit risks for financial institutions operating in Chile.

Any further 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.

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.

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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 climate change. 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.

Climate change may have adverse effects on our business.

The risks associated with climate change are gaining increasing social, regulatory, economic and political relevance, both nationally and internationally. New regulations related to climate change may affect our operations and business strategy, leading us to incur financial costs resulting from: (i) the physical risk of climate change and (ii) the risk of transition to a low carbon economy.

The physical risks of climate change are related to the gradual increase in the average temperature of the planet and to the increase in the intensity and frequency of extreme weather events. Despite uncertainties with regard to the intensity and location of these events, their impact on the economy is expected to be more acute in the future. The

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potential impact on the economy includes, but is not limited to, significant changes in asset prices and industry profitability. Damage to borrowers' properties and operations may impair asset values and credit quality of customers, leading to more non-performing loans, write-offs and impairment charges in our portfolios. In addition, our facilities may also suffer physical damage due to weather events, leading to increased costs for us.

As the economy transitions to a low-carbon one, financial institutions may face significant and rapid developments in stakeholder expectations, policy, law and regulation which could impact the lending activities we undertake, as well as the risks associated with our lending portfolios, and the value of our financial assets. As concerns about climate change increase and societal preferences change, we may face greater scrutiny for the type of business we conduct, adverse media coverage and reputational damage, which may in turn impact customer demand for our products, returns on certain business activities and the value of certain assets and trading positions, leading to impairment charges. The impacts of climate change may also increase losses for sensitive sectors, as a result of the effects of both physical and transition risks, causing loss of profitability for companies exposed to these risks and impairing their ability to repay any loans. Possible carbon pricing can affect companies' costs and compromise their ability to generate cash flows. Any subsequent increase in defaults and rising unemployment could create recessionary pressures, which may lead to an increased deterioration in the creditworthiness of our clients, higher expected credit loss, and increased charge-offs and defaults among wholesale and retail customers. If we do not adequately embed risks associated with climate change into our risk framework to appropriately assess, manage and disclose the various financial and operational risks we face as a result of climate change, or fail to adapt our strategy and business model to the changing regulatory requirements and market expectations on a timely basis, it may have a material and adverse impact on our business growth rate, competitiveness, profitability, capital requirements, cost of funding, and financial condition.

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, 2021 had a 39.22% 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.”

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, various interbank offered rates which are deemed to be “benchmarks” (the “IBORs”, including LIBOR and EURIBOR) 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) as it forms part of domestic law of the United Kingdom by virtue of the European Union (Withdrawal) Act 2018.

In particular, the U.K. Financial Conduct Authority (“FCA”) announced that the FCA will no longer oblige banks to contribute to the calculation of LIBOR after the end of 2021. In addition, on March 5, 2021, the FCA confirmed that all LIBOR settings will either cease to be provided by any administrator or no longer be representative immediately after December 31, 2021, in the case of all sterling, euro, Swiss franc, Japanese yen, and the 1-week and 2-month US dollar settings, or immediately after June 30, 2023, in the case of the remaining US dollar settings. These announcements indicate that the continuation of LIBOR on the current basis (or at all) cannot and will not be guaranteed after 2021.

The cessation of LIBOR for various currencies at the end of 2021 (and in 2023 for certain tenors of USD LIBOR) will also result in replacement rates being used more widely, including in the instruments documenting certain of our financial obligations. For example, in the U.S., a group convened by the Federal Reserve Board and the Federal Reserve Bank of New York, called the Alternative Reference Rate Committee (“ARRC”) and comprised of a diverse set of private sector entities, has identified the Secured Overnight Financing Rate (or “SOFR”) as its preferred alternative rate for the USD LIBOR and the Federal Reserve Bank of New York has begun publishing SOFR daily. Many banks in the U.S. have begun entering into transactions where interest is determined based on SOFR or plan to do so during the course of 2021, as recommended by ARRC and certain regulators. Additionally, many financial contracts, including some which govern our financial obligations, include replacement alternatives for LIBOR upon the cessation of LIBOR. It is possible that some U.S. lenders will elect to use alternative rates other than SOFR. Central banks in several other jurisdictions have also announced plans for publishing alternative reference rates for other currencies.

In addition, on November 29, 2017, the Bank of England and the FCA announced that, as of January 2018, its working group on Sterling risk free rates has been mandated with implementing a broad-based transition to the Sterling Overnight Index Average (“SONIA”) over the next four years across sterling bond, loan and derivative markets so that SONIA is established as the primary sterling interest rate benchmark by the end of 2021.

On September 21, 2017, the European Central Bank announced that it would be part of a new working group tasked with the identification and adoption of a “risk free overnight rate” which can serve as a basis for an alternative to current benchmarks used in a variety of financial instruments and contracts in the euro area. On September 13, 2018, the working group on Euro risk-free rates recommended the new Euro short-term rate (“€STR”) as the new risk-free rate for the euro area. The €STR was published for the first time on October 2, 2019. Although EURIBOR has been reformed in order to comply with the terms of the Benchmark Regulation, it remains uncertain as to how long it will continue in its current form, or whether it will be further reformed or replaced with €STR or an alternative benchmark.

This and other reforms may cause IBORs 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 and hedging mismatches, 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 commercial risks arising from the potential impact of communication with customers and engagement during the transition period. Accordingly, the implementation of alternative benchmark rates may have a material adverse effect on our business, results of operations, financial condition and prospects.

The Bank is working on a “transition program” from existing benchmark indices focused on the following stages:

a) Front book (new operations)

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b) Discontinuation of new operations indexed in LIBOR

c) Curves and impacts on collateral

d) Back book, or LIBOR portfolio migration to risk-free rates.

As of December 31, 2020, the exposure of our financial assets and liabilities impacted by the LIBOR reform are presented below:

Financial Instruments based on Libor
	Exposure
	Assets	Liabilities
	MCh$	MCh$
Non-derivative financial instruments	1,632,335	1,107,483
Loans and accounts receivable from customers	1,632,335	—
Interbank borrowings	—	1,107,483
Financial derivative contracts (1) (2)	12,988,222	9,228,125
Totals	14,620,557	10,335,608

Our business strategy may not provide us the results we expect.

Our strategy and challenges are determined by management based on related assumptions, such as the future economic environment, and the regulatory, political and social scenarios in the regions in which we operate. These assumptions are subject to inaccuracies and risks that might not be identified or anticipated. Accordingly, the results and consequences arising from any possible inaccurate assumptions may compromise our capacity to fully or partially implement strategies, as well as to achieve the results and benefits expected therefrom, which might give rise to financial losses and reduce the value creation to our stockholders. For instance, as mentioned in “Item 4–Information on the Company–Strategy” below, we have developed and are implementing a transformation plan with five key pillars: client centricity, digital experience, simplification, talent development in an agile working model, and sustainable results. The implementation of our transformation plan will depend on, among other things: (1) our senior management’s focus in order to adequately mange our transformation and hiring additional personnel with specific training in the five key pillars, and (2) the incorporation of our pillars without disruption into our various business-specific operating procedures and systems, including our financial, accounting, information and other systems. To the extent we are not able to implement fully the items mentioned above, our transformation plan may not materialize as currently expected or could even be delayed indefinitely.

Additionally, factors beyond our control, such as, but not limited to, economic and market conditions, changes in laws and regulations, including regulations limiting fees or interest rates and fostering an increasingly competitive scenario, and other risk factors stated in this annual report may make it difficult or impossible to implement fully or partially our business model and also our achieving the results and benefits expected from our business plan.

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 CMF 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 CMF. Certain exceptions introduced by the CMF prevent banks from achieving full convergence, for example loan loss provisions, assets received in lieu of payment among others. Also, the CMF 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 CMF, institutions must follow IFRS. However, our consolidated

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financial statements as of and for the three years ended December 31, 2020 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.

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, 2020, the aggregate exposure of AFPs to us was US$5,448 million or 2.5% 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

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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.

Further, on February 24, 2020, Law No. 21,210 (the “New Tax Reform Bill”) was published in the Official Gazzette, which introduces additional amendments and modifications to the Chilean tax system.

Given that the Bank’s average annual amount of gross revenues would be higher than UF75,000, we are subject to the partially-integrated tax regime (corporate tax of 27%). 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 40%, 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, with the final tax burden being a maximum of 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.”

In addition, on December 29, 2016, the Colombian Government approved a tax reform under Law No. 1819 and subsequently, on December 18, 2018, Law No. 1943 came into force on January 1, 2019. See “Item 4—Information on the Company—B. Business Overview— Recent Regulatory Developments in Colombia — Tax Reform.” However, the Colombian Constitutional Court ruled that Law No. 1943 was partly unconstitutional. Law No. 1943 was thus replaced by Law No. 2010, which was enacted on December 27, 2019. Law 2010 was applicable for the 2020 fiscal year. On April 15, 2021, the Government presented to the Congress a new tax reform bill, but approval by Congress is expected to be challenging.

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. This new contribution requirement may impose an increase in our labor costs and in turn have a material adverse effect on our financial results.

For more information on recent changes to the pension system in Chile see “Item 4. Information on the Company—B. Business Overview—Chilean Banking Regulation and Supervision—Recent Regulatory Developments in Chile—Changes to the Pension System in Chile”.

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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. On March 26, 2020, S&P revised Colombia’s rating outlook to negative from stable on increased risks to external liquidity, debt, and growth; foreign currency ratings were affirmed at 'BBB-/A-3' as well as local currency sovereign credit ratings at 'BBB/A-2'. In April 2020, Fitch downgraded Colombia to 'BBB-' maintaining a negative outlook due to the likely weakening of key fiscal metrics in the wake of the economic downturn caused by a combination of shocks stemming from the sharp fall in the oil price and efforts to combat COVID-19. Additionally, in December 2020, Moody’s revised its outlook from stable to negative. As of March 31, 2021, Colombia’s long-term debt denominated in foreign currency is rated 'BBB-' with a negative outlook by S&P, 'Baa2' by Moody’s, with a negative outlook, and 'BBB-' with a negative outlook by Fitch. Further, Colombia recorded a wide current account deficit in 2020, contributing to an increase in external indebtedness, which may create additional downward pressure on its credit rating. We cannot assure you that Colombia’s credit rating or rating outlook will not be further downgraded in the future.

In July 2018, Moody’s downgraded Chile’s ratings to 'A1' and in August 2020 changed the outlook to stable from negative. In October 2020, Fitch downgraded Chile’s rating to 'A-' and the outlook changed from negative to stable. On March 24, 2021, S&P lowered Chile long-term foreign currency rating to 'A' from 'A+' on weaker fiscal flexibility; Chile’s outlook is stable, indicating S&P expectation of continuity in key economic policies over the coming two to three years while the country elects new political leadership and writes a new constitution. Nonetheless, 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.

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Prior to the ongoing COVID-19 pandemic, the Chilean fiscal outlook had deteriorated in response to increased social spending following the social unrest in October 2019. This was worsened by the fiscal response implemented by the Chilean government to mitigate the impacts of COVID-19 (see Item 5. Operating and Financial Review and Prospects—Operating Results—Recent Developments.), which will temporarily lead to larger deficits, debt issuances and use of rainy day funds. In this regard, if the Chilean government does not continue to pursue its fiscal consolidation plan, the Chilean peso would depreciate, causing an increase in inflation and interest rates and in turn a deceleration of economic growth, which could adversely affect our business, results of operations and financial condition.

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 adversely affecting the Chilean or Colombian economies and other emerging and developed markets such as those of our neighbor countries, including the negative impact of COVID-19 on these economies, and 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 over one third of exports, of which approximately 75% 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 the members of Mercosur influence our growth prospects, with 13%, 13% and 6% 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.

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.

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Colombia has experienced and continues to experience internal security issues that have had or could have a negative effect on the Colombian economy and in turn could negatively impact our business and/or financial performance.

Colombia has experienced internal security issues, primarily due to the activities of paramilitary and guerrilla groups, such as the National Liberation Army (Ejército de Liberación Nacional or “ELN”), urban militias, former members of the Revolutionary Armed Forces of Colombia (Fuerzas Armadas Revolucionarias de Colombia or “FARC”) and of drug cartels. These groups have exerted influence over the local population and funded their activities by protecting, and rendering services to drug traffickers. Any breakdown in peace, renewed or continuing drug-related crime and guerilla and paramilitary activities may have a negative impact on the Colombian economy in the future. Our business or financial condition could be adversely affected by rapidly changing economic or social conditions, including any peace negotiation with guerilla, paramilitary or other group, which may result in legislation that increases our tax burden, or that of other Colombian companies, which could, in turn, impact the overall economy.

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. Trade with Venezuela has constantly decreased; the share of total exports fell from over 10% in 2009  to less than 1% in 2020. 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 1.73 million Venezuelans had entered Colombian territory with the intention to stay as of December 31, 2020. 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. In a move to regulate and benefit from the migration, Colombia announced it will give temporary protective legal status (10 years) to Venezuelan migrants, potentially increasing the working-age population by 3%, and boost potential growth.

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. 1425 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.

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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.

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$224,000). 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.

Moreover, the Colombian Congress enacted Law 2009 of 2019, which provides that financial institutions, including banks, which are authorized to collect public savings and charge management fees for savings accounts, debit cards and credit cards, must grant their clients access to a minimum package of products and services at no additional cost. This new requirement could materially and adversely affect our results of operations and financial situation.

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.

Due to the adverse impact of the COVID-19 pandemic, the Colombian government issued several amendments to the Colombian insolvency regime aimed at mitigating the adverse effects of the COVID-19 pandemic on the economy. These amendments are expected to be in place until April 2022. Pursuant to these amendments (i) a company in Colombia can enter into an emergency negotiating proceeding or a business recovery proceeding created under Decree

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560 of 2020 as non-judicial insolvency proceedings and (ii) Colombian companies subject to a reorganization proceeding in Colombia are permitted to obtain additional financing in order to continue performing their business activities within the ordinary course of business without the insolvency court’s prior authorization. This transitory regulation seeks to protect the company as a unit of economic productivity and a source of employment and is aimed at those companies that have been affected by the government’s declaration of a state of emergency in response to the COVID-19 pandemic and may further limit our monetary collection efforts at such companies.

Insolvency proceedings may adversely affect our foreclosure rights in respect to security registered as personal property.

Pursuant to Article 50 of Law No. 1676 of 2013, secured creditors in Colombia with collateral registered as personal property (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.

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.

COVID-19 or any other pandemic disease and health events could affect the economies of the countries in which we operate, our business operations or our financial condition and results of operations.

Public health crises, or the public perception of the risks of public health crises, such as the ongoing COVID-19 pandemic, may negatively impact economic activity in Chile and in other countries in which we operate. Accordingly, our results of operations or financial condition may be adversely affected.

The outbreak of COVID-19 was first reported on December 31, 2019 in Wuhan, Hubei Province, China. From Wuhan, the disease spread rapidly to other parts of China, as well as other countries, including the countries in which we operate, growing into a global pandemic, as declared by the World Health Organization. Since the outbreak began, countries have responded by taking various measures including imposing mass quarantines, restricting travel, limiting public gatherings, closing businesses and schools and suspending certain economic activities. Although in various countries some of the activity restrictions listed above have been relaxed with progressive success, in many geographies, the number of individuals diagnosed with COVID-19 has significantly increased, causing a freezing or even reversal of the relaxation of activity restrictions. Moreover, although multiple COVID-19 vaccines have received regulatory approval and currently are being distributed to certain at-risk populations, it is too early to know how quickly these vaccines can be distributed to the broader population and how effective they will be in mitigating the adverse social and economic effects of the COVID-19 pandemic. Further, variant strains of the COVID-19 virus have appeared, further complicating efforts of the medical community and governmental authorities in response to the COVID-19 pandemic.

In addition, concerns related to COVID-19 have lowered equity market valuations, decreased liquidity in fixed income markets and created significant volatility and disruption in global financial markets, resulting in increased volatility of stock prices (including the price of our stock), a trend which may continue. Also, there are other broad and continuing concerns related to the potential effects of COVID-19 on international trade (including supply chain

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disruptions and export levels), travel, employee productivity, employee illness, increased unemployment levels, securities markets, and other economic activities that may have a destabilizing effect on financial markets and economic activity, including companies in the financial sector. Furthermore, any actions taken by governmental authorities and other third parties in response to the COVID pandemic may negatively impact our business, results of operations and financial condition. For example, a faster withdrawal of monetary stimulus in developed economies may affect emerging economies and thus affect our operations.

The first case of COVID-19 in Chile was detected on March 3, 2020. The Chilean national and subnational governments have since taken various measures in order to prepare for and safeguard the country from a mass contagion and to contain and control the spread of COVID-19. Measures include declaration of a state of emergency, partial or total lockdown for some regions, closure of public venues (including educational institutions) and mass events. Further government actions may be imposed as the COVID-19 pandemic continues to develop.

From a macroeconomic point of view, the overall impact of the COVID-19 pandemic in Chile is uncertain. The Chilean GDP shrunk 5.8% in 2020, compared to our estimate of a 1.2% increase prior to the onset of the COVID-19 pandemic. While the rollout of a swift inoculation program and elevated copper prices point to a notable recovery in 2021 (of 6.5%), resumption of widespread lockdown measures highlight the recovery uncertainty. Further economic stagnation, contraction and increased unemployment levels may affect our cost of funding, the recoverability and value of our assets and could result in higher past-due loans, given the deteriorated financial condition of our customers and, therefore, higher provisions for loans losses, resulting in lower net income.

The overall impact of the COVID pandemic in Colombia is also uncertain. While Colombia’s GDP increased by 1.1% year-over-year in the first quarter of 2020, as of December 31, 2020, it had decreased by 6.8% as compared to the prior year. While the Colombian government has taken various response measures, including the announcement of a fiscal package for 2020 totaling over COP 31 trillion (almost 3% of 2019 GDP), interest rate cuts by 250 basis points between March and December 2020, and introduction of a broad range of measures to increase liquidity, we cannot assure you that the period of economic stability that Colombia experienced prior to the COVID-19 pandemic will continue when the COVID-19 pandemic subsides, or that the growth the Colombian economy achieved over the past decade prior to the COVID-19 pandemic will continue in future periods.

The ongoing COVID-19 pandemic has also resulted in increased volatility in both the local and the international financial markets and economic indicators, such as exchange rates, interest rates and credit spreads. Any shocks or unexpected movements in these market factors could result in financial losses associated with our trading portfolio or financial assets, which could deteriorate our financial condition. Furthermore, market concerns could translate into liquidity constraints and reduced access to funding in both the local and the international markets, negatively affecting our business.

As the ongoing COVID-19 pandemic continues to impact economic activity globally, we, our employees, contractors, suppliers, customers and other business partners may continue to be prevented from conducting certain business activities for an indefinite period of time. In addition, preventive measures — either imposed by governments or voluntarily adopted by companies — may lead to our customers being unable to transact business and meet their obligations with us. Adverse changes in the economy may also have a negative effect on the ability of our borrowers to make timely repayments of their loans, which could have an adverse impact on our earnings. In order to prepare for the impacts of this environment, the Chilean financial authorities made various decisions in order to ensure liquidity within the Chilean financial system, such as consecutive reductions to the monetary policy affecting interest rates by the Central Bank. Any additional decisions towards accomplishing this end are also expected to affect our results of operations. Consequently, the COVID-19 pandemic may continue to have an adverse effect on our operations. Because there have been no comparable recent global pandemics that resulted in a similar global impact, we do not yet know the full extent of the COVID-19 pandemic’s effects on our business, operations, or the global economy as a whole. Any future development will be highly uncertain and cannot be predicted, including the scope and duration of the COVID-19 pandemic, the effectiveness of our remote working arrangements, third party providers’ ability to support our operations, and any further action taken by governmental authorities and other third parties in response to the COVID-19 pandemic. As the economic impact due to the COVID-19 pandemic continues we cannot provide any assurances as to how long it

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will be before the COVID-19 pandemic abates and economic activity can begin to resume to pre-COVID-19 pandemic levels.

For further information on measures adopted by the regulatory authorities in Chile to address the consequences of the ongoing COVID-19 pandemic on the Chilean financial system see “Item 5. Operating and Financial Review and Prospects—Operating Results—Recent Developments.”

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.

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

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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.”

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

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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.

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, 2021 Itaú Unibanco beneficially owned 39.22% 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.

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

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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.

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

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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.

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 advisors 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

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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 CMF 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 main websites are www.itau.cl and ir.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.

History

Itaú Corpbanca is the resulting entity from the merger of two leading banks in Chile: Corpbanca and Banco Itaú Chile. Corpbanca, the oldest private bank in Chile and the legal surviving entity, and Banco Itaú Chile, a fully owned-subsidiary of Itaú Unibanco, the largest private bank in Latin America and the sole controlling shareholder of Itaú Corpbanca since the merger on April 1, 2016.

The Bank’s history has been extensive and full of challenges. The Bank was 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. Over the next 150 years, the Bank went through a number of changes in control from private to government agency and back to private, and also through several mergers and acquisitions.

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 CMF. The bank remained under the control of the CMF 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

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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.

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 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. On January 29, 2014, Corpbanca and Itaú Chile agreed to merge (the “Transaction Agreement”, or “Merger”). 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. On April 1, 2016 the Merger was consummated and Banco Itaú Chile was merged with and into Corpbanca, renaming the Bank as “Itaú Corpbanca”.

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 brokerages’ (Corredoras de Bolsa) subsidiaries, our asset managers’ (Administradoras Generales de Fondos) subsidiaries, and our insurance broker’s subsidiaries, were also merged, to consolidate each of those business into one single company for each of them.

As of December 31, 2020, the Bank is the fifth largest private bank in Chile with approximately 9.8% market share in the local credit market.

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 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.

By consolidating operations in Chile and Colombia, the new bank became one of Chile’s largest private financial institutions, ranking fifth in the Chilean banking industry with a market share by loans of 9.8% in Chile as of December 31, 2020. 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. Indeed, we operate 182 branch offices in Chile, one branch in New York, 110 branches in Colombia and one office in Panama.

As of March 31, 2021, Itaú Unibanco and CorpGroup beneficially own 39.22% and 27.16% of our outstanding common shares, respectively. Itaú Unibanco and CorpGroup also entered into the Itaú CorpGroup Shareholders’ Agreement. Upon the consummation of the Merger, as previously mentioned, Itaú Unibanco became the sole 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.”

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

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 Financial Superintendency 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.

The amendment to the Transaction Agreement included, among other aspects, 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 (US$330 million in total) 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 purchase of this additional interest, if and when consummated considering the required regulatory approvals, would have an adverse impact on our consolidated capital and profitability levels, particularly as (i) the acquisition price, which was set in 2014 and includes accrued interest since 2015, implies a price to book value ratio for this interest that is higher than current price to book value ratios for listed Colombian banks (ii) we now have to comply with more stringent Basel III capital requirements, which could lead to a downgrade in our credit ratings and have a material adverse effect on us. For information on actions we are considering to address our capital adequacy ratios going forward, see “Item 5—Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Capital”.

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On February 28, 2019, as a result of an arbitration proceeding before the ICC International Court of Arbitration (the “ICC”) initiated by Helm LLC (“Helm”) against Corp Group Holding Inversiones Ltda. (“Corp Group”) and Itaú Corpbanca (collectively, “Respondents”), 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). On December 3, 2019, following receipt of regulatory approvals from the banking supervisors in Chile, Colombia and Brazil, Itaú Corpbanca completed the announced acquisition of shares of Itaú Corpbanca Colombia from Helm LLC and Kresge Stock Holding Company. In connection with the transactions, Itaú Corpbanca acquired shares representing approximately 20.82% of Itaú Corpbanca Colombia’s outstanding equity for aggregate consideration of approximately US$334 million. As a result of the transactions, Itaú Corpbanca owns approximately 87.10% of the equity of Itaú Corpbanca Colombia. Following the transactions, the Amended and Restated Shareholders Agreement of HB Acquisition S.A.S., dated as of July 31, 2013, which governs Itaú Corpbanca Colombia was terminated.

Capital Expenditures

The following table reflects our capital expenditures in the years ended December 31, 2018, 2019 and 2020:

	For the Year Ended December 31,
	2018	2019	2020
	(in millions of Ch$)
Land and buildings	6,207	1,505	159
Computer systems and equipment	74,449	61,723	65,713
Furniture and fixtures	—	—	—
Vehicle	—	—	—
Other	2,296	2,488	1,803
Total	82,952	65,716	67,675

Total capital expenditures in 2020 of Ch$67,675 million consisted mainly of Ch$65,713 million in expenses relating to computer software and IT projects. For further details relating to these results and related divestitures, see Notes 1(m) and 14 of our consolidated financial statements included herein.

B. BUSINESS OVERVIEW

COMPETITIVE STRENGTHS

Our business model is based on the combination of local bank strengths and local knowledge. In the last five years, we believe we have emerged as a leading banking platform for future expansion in the Andean Region as a result of the following strengths:

i.   Larger Scale. As a result of the Merger, we have greater scale and resources to grow and compete more effectively, particularly in Chile where we have become the fifth largest private bank as measured by loans, with a 9.8% market share. Total consolidated loans of Itaú Corpbanca represents 24% of Itaú Unibanco’s consolidated loan portfolio.

ii.    Leveraging Itaú Unibanco’s strong market position and expertise. Since Itaú Unibanco is the largest private financial institution in Brazil and a premier Latin American franchise, we believe 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. Itaú Corpbanca has been able to expand its offering of banking products through a successful managing model, segmentation and digitalization based on Itaú Unibanco’s strategy.

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iii.   Diversified business. 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. Further, 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.

STRATEGY

Our strategy aims at being a leading bank in terms of sustainable performance and customer satisfaction. Our culture supports us in attracting and retaining talent, directing our business path and promoting a competitive advantage. Our culture is translated into the seven attitudes, which we call “Our Way”, that keep us up-to-date with the context, demands and transformations of our business and organizational culture.

In order to better manage the impacts of COVID-19 in our operations, during the first half of 2020 we organized ourselves in three main pillars. The first pillar is related to our clients and what needed to be done to continue to be fully accessible remotely and to continue to provide the solutions requested by our clients, especially during this period. The second pillar is related to our people and how we could support and protect them as we simultaneously reinforce our organizational values and culture. The third pillar relates to our efforts to maintain our strong focus on risk operational management and technological conditions to keep us running strong, safe and solid.

As we begin to move away from the crisis caused by the COVID-19 pandemic, we are working towards our goal of building the bank of the future by accelerating our evolution building upon the strengths we developed over the last few months. For that reason, we built a transformation plan with five key pillars: client centricity, digital experience, simplification, talent development in an agile working model, and sustainable results.

Client Centricity

Client centricity is one of the key aspects of Our Way. We aim to optimize the experience of our clients and offer the solutions they need in a timely manner, combining convenience, value and freedom of choice to attract new customers.

On the convenience side, we offer a 100% digital portability experience as well as our digital channels with digital payments. We also facilitate portability to our bank by a process of data aggregation so that our customers do not have to manually enter their transfer and payment data to their new accounts with us.

On the value side, we have launched a mixed-rate mortgage product, called Bipotecario, which allows customers to take advantage of the current low interest rate environment. We have also opened our loyalty program, enabling customers to exchange Itaú points freely for travel tickets and products of their choice as well as cash back.

On the product offering side, we have opened investment architecture opportunitie to provide clients with freedom of choice, with the best investment options available in the market as well as independent advice. That is why we are partnering with top local and global asset managers. Our own asset management business is recognized as a leader in responsible investment, corporate governance and sustainability research.

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 Experience

Our digital banking strategy is one of the pillars we plan to use to boost our retail banking segment and to further improve our efficiency.

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Delivering a digital experience that allows us to offer an easy and convenient experience, adapted to the needs of our clients, is key as the strong trend towards digital channels and transactions continues. Due to the ongoing COVID-19 pandemic, we are encouraging our customers to use our digital channels, such as our apps and online banking, and our digital products, such as virtual cards, contactless payments (using near field communication technology) and digital invoicing. Therefore, we have been investing heavily in our digital channels. The share of transfers and payments made through our app more than doubled in 2020. Also, during 2020, we increased the frequency of all digital contact, sending information on investment alternatives, details on the market’s volatility and tips on how to avoid digital fraud related to the current situation to clients. At the end of March 2021, we announced a new alliance with Rappi that we believe will bring greater financial inclusion to Chile. This initiative is backed-up by the experience and support of both Itaú and Rappi and is expected to allow us to distribute products and services to Rappi's clients over the next 10 years. We see the alliance as an opportunity to diversify our strategies to attract new customers and to learn about the development of digital products and about the massive use of data to customize the customer experience with a leading company in marketplace strategy in various markets. In the third quarter, we launched a new app as well as a new and more convenient personal banking website. In addition, in the fourth quarter we launched a digital wallet that allows payments in smartphones and smart watches, making them easier and safer, as well as offering both Visa and MasterCard options for our clients. We were also the first bank to launch a digital token for companies, providing additional convenience and security for our corporate and SME clients.

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.

Simplification

Simplification is a key element of our strategy to drive customer satisfaction and 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. Through these initiatives, we will continue to strive to improve our efficiency ratio.

Robotic process automation and simplification of our organizational structure are part of our simplification initiatives. We have been working with robotic process automation since the end of 2018 and completed over 80 projects in 2020, which enabled us to save 0.5% of our cost base in 2020. We reduced our customer onboarding unit cost in almost 60%, which is key given the growth we have been experiencing in our customer base. We also simplified our organizational structure, with the most significant reduction in our headcount since the merger, with proportionally higher reductions in the top layers of the organization.

Talent Development

During 2020, our deep digital transformation allowed us to maintain operations in a year of crisis and continue working to deliver the best experience to customers while working remotely.

In a pioneering initiative in the Chilean banking market, we have announced a new flexible working model called Remote First. Under this model, for our employees, working from home will be the default option, rather than the exception. We believe this model will provide convenience and flexibility to our employees and expect it will be a competitive advantage in talent acquisition and retention as well as in efficiency in the years to come.

To manage this change, we set up multidisciplinary work teams that have focused on sizing the proportion of workers in each unit that will work in person, mixed or remotely, incorporating the opinions that we raise with collaborators. Teleworking is expected to continue during 2021 for approximately 50% of our collaborators, mainly those who have administrative positions and support areas.

This new way of working is one more step towards building the bank of the future, one that adapts to the demands of today's world. This process will involve adapting workspaces, technologies and work practices, always keeping the needs of customers at the center of our decisions.

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Sustainable Results

Sustainable results in responsible banking are at the core of what we do. We believe that having good governance, taking care of the environment, and being positively engaged with our employees, society in general, and the communities that we are a part of is essential. We believe that the union of the initiatives described above will allow us to deliver sustainable and recurring results for our shareholders and investors, because as Our Way says: we act and think like owners. In 2020, our management and corporate decisions were once again recognized by the market and we have continued to move forward by launching two new 100% ESG mutual funds in alliance with two world-class asset managers, Nordea and Robeco Assets.

These all are the steps towards consolidating our digital transformation and becoming a bank of the future that adapts to the needs of a constantly changing world.

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%, 2.08% and 1.08% share capital of Itaú Corpbanca from the Saieh Family, on October 26, 2016, September 15, 2017, on October 13, 2018 and on September 10, 2020, respectively. As a result of these acquisitions, the current shareholder structure is as follows:

PRINCIPAL BUSINESS ACTIVITIES

We are a commercial bank based in Chile that, in addition to our presence in every region in Chile, has operations in Colombia and Panama, a branch in New York and a representation office in Lima, Peru.

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, asset management, insurance brokerage and securities brokerage services through our subsidiaries, and banking services through our New York Branch.

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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). The following table sets forth a breakdown of our revenue by geographic market for the years ended December 31, 2018, 2019 and 2020 in accordance with IFRS 9:

	Net Interest Income by Geographic Market
	2018			2019			2020
	Chile	Colombia	Total	Chile	Colombia	Total	Chile	Colombia	Total
	(in millions of Ch$)
Interest income	1,208,481	530,836	1,739,317	1,279,986	493,654	1,773,640	1,116,943	432,731	1,549,674
Interest expense	(593,796)	(257,858)	(851,654)	(631,279)	(241,943)	(873,222)	(490,729)	(192,508)	(683,237)
Net interest income	614,685	272,978	887,663	648,707	251,711	900,418	626,214	240,223	866,437

The following table provides information on the composition of our loan portfolio at amortized cost net of allowances as of December 31, 2018 and 2019:

	As of December 31,(1)
	2018	2019	Variation(2)	Variation(2)
	(in millions of Ch$)			%
Commercial loans
Commercial loans	11,065,601	11,870,750	805,149	7.3	%
Foreign trade loans	920,479	1,034,681	114,202	12.4	%
Current account debtors	124,299	143,768	19,469	15.7	%
Factoring operations	210,558	217,410	6,852	3.3	%
Student loans	625,598	635,279	9,681	1.5	%
Leasing transactions	903,047	988,907	85,860	9.5	%
Other loans and receivables	32,611	24,550	(8,061)	(24.7)	%
Subtotals
	13,882,193	14,915,345	1,033,152	7.4	%
Mortgage loans
Letters of credit loans	37,892	29,891	(8,001)	(21.1)	%
Endorsable mutual mortgage loans	110,652	102,442	(8,210)	(7.4)	%
Other mutual mortgage loans	3,901,107	4,321,019	419,912	10.8	%
Leasing transactions	307,723	323,708	15,985	5.2	%
Other loans and receivables	22,336	20,480	(1,856)	(8.3)	%
Subtotal	4,379,710	4,797,540	417,830	9.5	%
Consumer loans
Consumer loans	1,766,313	1,811,312	44,999	2.5	%
Current account debtors	191,913	186,632	(5,281)	(2.8)	%
Credit card debtors	443,141	499,743	56,602	12.8	%
Consumer leasing transactions	5,727	2,886	(2,841)	(49.6)	%
Other loans and receivables	45,373	41,239	(4,134)	(9.1)	%
Subtotal	2,452,467	2,541,812	89,345	3.6	%
Total	20,714,370	22,254,697	1,540,327	7.4	%

(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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The following table provides information on the composition of our loan portfolio at amortized cost net of allowances as of December 31, 2019 and 2020:

	As of December 31,
	2019	2020	Variation	Variation
	(in millions of Ch$)			(%)
Commercial loans
Commercial loans	11,870,750	11,502,835	(367,915)	(3.1)	%
Foreign trade loans	1,034,681	825,445	(209,236)	(20.2)	%
Current account debtors	143,768	62,046	(81,722)	(56.8)	%
Factoring operations	217,410	151,487	(65,923)	(30.3)	%
Student loans	635,279	576,986	(58,293)	(9.2)	%
Leasing transactions	988,907	916,587	(72,320)	(7.3)	%
Other loans and receivables	24,550	25,796	1,246	5.1	%
Subtotals	14,915,345	14,061,182	(854,163)	(5.7)	%
Mortgage loans
Letters of credit loans	29,891	23,113	(6,778)	(22.7)	%
Endorsable mutual mortgage loans	102,442	89,409	(13,033)	(12.7)	%
Other mutual mortgage loans	4,321,019	4,761,064	440,045	10.2	%
Leasing transactions	323,708	295,856	(27,852)	(8.6)	%
Other loans and receivables	20,480	73,846	53,366	260.6	%
Subtotal	4,797,540	5,243,288	445,748	9.3	%
Consumer loans
Consumer loans	1,811,312	1,684,696	(126,616)	(7.0)	%
Current account debtors	186,632	112,945	(73,687)	(39.5)	%
Credit card debtors	499,743	442,854	(56,889)	(11.4)	%
Consumer leasing transactions	2,886	1,285	(1,601)	(55.5)	%
Other loans and receivables	41,239	29,858	(11,381)	(27.6)	%
Subtotal	2,541,812	2,271,638	(270,174)	(10.6)	%
Total	22,254,697	21,576,108	(678,589)	(3.0)	%

Business activities in Chile have been strategically aligned onto three areas 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 areas in Chile, along with 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 area specializes in institutional customers and customers with annual sales in excess of US$100 million.

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

Real Estate and Construction Companies. This area 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 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 areas:

Itaú Private Banking. Within our Private Banking Division, we provide private banking services to our high-income and high net worth customers. 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. The relationship model is based on providing each customer with the comprehensive, personalized and professional advising service for managing their net worth, major investments, banking and credit structuring needs in a way that best fits the investor and financing profile. 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. Our specialized team of business executives and investment bankers aims to maximize gains for our customers based on their investor profile.

Itaú Personal Bank. This area specializes in high-income individuals, with a monthly income between Ch$2.5 million and Ch$8.0 million. This is the first high-income individuals’ segment in Chile with differentiated branches at the ground floor to be access directly from the street, and additionally with differentiated mobile and web channels. The service model is based on relationships and constant advising on financial products, investment and/or protection. Itaú Personal Bank offers a specialized, differentiated value proposition based on customer relationships. Its three pillars are highly qualified executives, with a systematic work standard; smaller portfolios per executive in relation to the traditional model, in order to facilitate management; and certified investment consultants who specialize in providing exclusive, timely advising. The network includes 23 premium branches, 34 traditional branches with a space for the Personal Bank and two digital branches for this segment.

Itaú (Traditional Banking). Our Traditional Banking Division is mainly oriented toward individuals with medium-high income levels (focused on clients between Ch$600,000 and Ch$2.5 million monthly income). We offer our traditional and private banking clients products 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 mass-market model is focused on customer self-service through various channels: face-to-face at our branches, digitally through the website and App, and through direct e-mail contact with account executives and through calls to the Contact Center. Our

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goal is to face our customers’ changes and needs with them, offering agile, simple options that enable them interface with the Bank autonomously. This segment is served under 107 traditional branches and two digital branches.

Banco Condell (Consumer Finance). Our Consumer Finance Division operates under the trade name Banco Condell and specializes in financing for middle and low-income segments who have low banking access and monthly income between Ch$200,000 and Ch$600,000. A financial inclusiveness mechanism, Banco Condell's business model enables it to provide services to people with informal, non-accreditable income. Through Banco Condell we offer our customers insurance policies, certificates of deposit and consumer loans, products that represent the essence of our business. In an effort to drive down costs without compromising excellent customer service, in 2018 we start to integrated Banco Condell offices with Itaú branches, maintaining an experience of closeness and trust with this segment in an effort to provide agile financing solutions. The plan is to follow along these lines to bring our different segments to more places while maintaining our customers’ satisfaction. Also, we are aiming to make Banco Condell a point of access for future Itaú customers who demonstrate good credit and meet the requirements for a business area upgrade. As of December 2020, Banco Condell has 48 branches and its own brand identity.

Treasury

Our Treasury manages the Bank’s market risks (including interest rate and inflation risk) and liquidation risk, acting in accordance with internal policies as well as regulatory and corporate limits. Also, it is responsible for optimizing the funding structure and assigning transfer prices to the products it manages for the business channels and for managing relationships with counterparties from international financial institutions. Finally, this area is responsible for distributing financial products, like currency, derivative and money market operations, to all the Bank’s customer segments.

As of December 31, 2020, the outstanding loans from foreign banks to Itaú Corpbanca were US$1,160 million with approximately 12 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, 2020 were US$4,279 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 2020, according to the Colombian Financial Superintendency, Itaú Corpbanca Colombia was the ninth largest bank in Colombia in terms of total assets, the eighth largest bank in Colombia in terms of total loans and the ninth largest bank in Colombia, in terms of total deposits as reported under local regulatory and accounting principles.

As of December 31, 2020, Itaú Corpbanca Colombia had total assets of Ch$6,005,558 million (US$8,449.8 million), including total loans of Ch$4,649,475 million (US$6,541.8 million), and total equity of Ch$532,192 million (US$748.8 million). In comparative terms, Itaú Corpbanca Colombia has a market share of 3.9% of the total assets in Colombian Banking Industry and its total assets represent 16.9% of Itaú Corpbanca’s total assets.

As of December 31, 2020, Itaú Corpbanca Colombia had total net interest income of Ch$240,223 million (US$338.0 million) and losses of Ch$350,110 million (US$492.6 million). As of December 31, 2020, Itaú Corpbanca Colombia had 111 branches, 125 ATMs and 3,098 employees in Colombia and Panama.

New York Branch

Our New York Branch supports the commercial needs of Chilean and other Latin American companies that conduct business overseas. 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 internationally, 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.

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Our New York Branch has a Yankee Certificate of Deposits program that is placed directly to clients or through U.S. dealers. Also, the Branch funds its operation through interbank and financial institution deposits with a broad variety of customers. The New York Branch participates in bilateral and syndicated loans, together with other international institutions, to finance a variety of investment projects. As of December 31, 2020, the branch had US$2,646 million in assets and had a net income of US$181,033 for the year ended December 31, 2020.

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 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, 2020, assets of our subsidiaries represented 0.9% of total consolidated. For the year ended December 31, 2020, net income of our subsidiaries totaled Ch$32,158 million (US$45.2 million).

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The following table sets forth certain financial information with respect to our financial services subsidiaries as of December 31, 2018, 2019 and 2020, in millions of Chilean pesos. Amounts relating to inter-company transactions have not been removed for purposes of this table.

	As of and for the Year Ended December 31,
	2018			2019			2020
			Net			Net			Net
	Assets	Equity	Income	Assets	Equity	Income	Assets	Equity	Income
	(in millions of Ch$)
Itaú Corredores de Bolsa Ltda.(1)	200,158	40,998	546	293,808	41,760	1,484	196,374	43,414	1,927
Itaú Adm. General de Fondos S.A.(2)	15,195	12,922	6,790	16,008	13,649	7,516	12,540	11,528	5,395
Itaú Asesorías Financieras Ltda.(3)	11,798	6,803	8,321	9,051	8,494	6,683	10,530	9,298	805
Itaú Corredores de Seguros S.A.(4)	43,025	27,043	19,630	52,838	42,774	24,565	32,984	25,895	17,058
Itaú Chile Corredora de Seguros Limitada(4)	—	—	—	—	—	—	—	—	—
Corp Legal S.A.(5)	125	125	(229)	—	—	—	—	—	—
Recaudaciones y Cobranzas Ltda.(6)	3,842	1,316	105	3,462	2,824	1,508	4,384	1,984	1,199
Itaú Corredor de Seguros Colombia S.A.	3,468	2,047	73	3,982	2,387	623	3,650	2,017	(166)
Itaú Securities Services Colombia S.A. Sociedad Fiduciaria	13,119	12,906	189	14,943	14,484	718	14,198	13,694	506
Itaú Asset Management Colombia S.A. Sociedad Fiduciaria	17,941	16,137	2,495	24,308	20,941	3,714	24,410	21,810	2,755
Itaú Comisionista de Bolsa S.A.	17,748	9,174	1,685	12,919	11,243	1,449	15,112	12,736	2,679
Itaú Bank (Panamá) S.A.	416,786	71,548	2,449	446,771	89,266	8,620	393,558	91,108	6,015
Itaú Casa de Valores S.A.(7)	679	556	92	1,039	755	144	—	—	—

(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. On May 2, 2019 “Itaú Asesorías Financieras S.A.” changed its legal name to “Itaú Asesorías Financieras Ltda.”

(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 May 20, 2019, Corp Legal was dissolved.

(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) On January 27, 2020, Itaú Casa de Valores S.A. was sold.

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

Our subsidiary Itaú Corredores de Bolsa Ltda., 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 and fixed income.

Its integration into the bank's franchise model was a relevant challenge, since it involved a large part of the efforts of the year. This path will allow offering clients a unique investment platform, together with a diversified offer of investment alternatives.

For the year ended December 31, 2020 ICB’s net income was Ch$1,927 million and it had assets under custody of Ch$187 billion as of December 31, 2020. For the year ended December 31, 2020, ICB’s net income increase was driven by the fall in the interest rate curve benefiting the prices of the fixed income securities portfolio, since ICB’s investment policy is to invest its shareholders equity in fixed income securities only.

Itaú Administradora General de Fondos S.A.

Itaú Administradora General de Fondos S.A. ‒whose commercial name is “Itaú Asset Management”‒, 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.

Itaú Asset Management believes that its role in the management of third-party resources is not limited only to management, but also to deliver investment tools that adjust to the needs and investor profile of each client, and offer a wide scope of diverse products. For this reason, its objectives are focused on improving processes and products, and on a digital proposal for our clients, in a changing and dynamic market scenario.

During 2020, a series of new initiatives were developed, including the Open Investment Platform or the Invierte + account, focused precisely on the digital space. Regarding the institutional segment, the focus was on the Latin American Debt and Equity funds, where Itaú AGF has deep and dedicated analysis and coverage, and where interesting opportunities are expected to be captured. In the area of responsible investment, Itaú AGF's leadership position continued to be consolidated, at the local and regional level, in terms of the integration of ESG factors in investment decision-making. In fact, Itaú AGF was recognized for the second consecutive year by the Sustainable Leaders Agenda 2020 (ALAS20) as an ALAS20 Institution in Chile, after obtaining first place in the three categories in which they were nominated: Leading Institution in Responsible Investments, Leader in Research in Sustainability and Leader in Corporate Governance.

For the years ended December 31, 2018, 2019 and 2020, IAGF had net income of Ch$6,790 million, Ch$7,516 million and Ch$5,395 million, respectively. IAGF had total assets of Ch$15,195 million, Ch$16,008 million and Ch$12,540 million as of December 31, 2018, 2019 and 2020 respectively. As of December 31, 2020, IAGF managed 35 mutual funds, including equity funds, fixed income funds and ETFs and had total assets under management amounting to Ch$2,336 billion, an increase of Ch$375 billion as compared to December 31, 2019.

During 2020, IAGF experienced a decrease of 28.2% in net income, explained primarily by a customer shift in preferences towards: i) deposits rather than funds, which resulted in a decrease in volume; or ii) funds that are less risky which in turn have lower fees.

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.

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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 Ltda.

Itaú Asesorías Financieras Ltda., or IAF, provides a broad range of financial advisory services to a variety of corporations and government agencies. We offer our clients specialized and tailored solutions, among which are the structuring and implementation of corporate financing in the banking market, syndicated and bilateral loans, debt restructuring and project financing structuring under the Project Finance modality according to the Equator Principles.

Additionally, this subsidiary offers debt structuring services in the capital markets through the structuring, issuance and placement of bonds and commercial papers, as well as advice for mergers, acquisitions and capital increases, or advice and studies in general.

For the year ended December 31, 2020, IAF had net income of Ch$805 million. IAF had total assets of Ch$10,530 million as of December 31, 2020.

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.

The challenges of the last year led us to update ICS’s product grid, simplifying and modernizing such products, adjusting their coverage, establishing more competitive prices in relation to the market and seeking better protection for clients.

For the year ended December 31, 2020, ICS had net income of Ch$17,058 million. ICS had total assets of Ch$32,984 million as of December 31, 2020.

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.

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 to provide standard legal services to Itaú Corpbanca, its subsidiaries and its clients. On May 20, 2019, Corp Legal S.A. was dissolved.

Recaudaciones y Cobranzas Ltda.

This subsidiary is a banking support company engaged in legal and out-of-court collections services for any type of loans, titles or notes on its own behalf or on behalf of third parties.

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.

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

During 2020, this subsidiary was focused on supporting the bank and its clients offering the holiday payment or reestructuring products in the context of the COVID-19 pandemic. To promote installments payment in the lock-down periods, a dedicated portal was created to enable any client to pay remotely. These initiatives allowed to reduce delinquency ratios and, at the same time, benefitted recovery levels and decreased write-offs.

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.

Its operations have grown from a value of assets under custody of COP $6,520 million (Ch$1,455 million) as of December 31, 2017, to COP $9,472 million (Ch$2,011 million) as of December 31, 2018, to COP$12,014,496 million (Ch$2,744,110 million) as of December 31, 2019, and to COP$12,434,736 million (Ch$2,537 billion) as of December 31, 2020. The value of assets under local and global custody were COP$9,476,766 million (Ch$1,933.5 billion) and COP$2,960,968 million (Ch$604.1 billion), respectively, as of December 31, 2020. 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 Financial Superintendency.

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.

Itaú Casa de Valores S.A.

Itaú Casa de Valores (Panamá) S.A. was a Panamanian corporation (sociedad anónima) that acted as a brokerage firm. It has its main domicile in Panama City and was regulated by the Panamanian Superintendency of Securities Market. On January 27, 2020, Itaú Comisionista de Bolsa Colombia S.A., a subsidiary of Itaú Corpbanca Colombia S.A., completed the sale of 100% of its share ownership in Itaú Casa de Valores S.A.

Itaú Corredor de Seguros Colombia S.A.

Itaú Corredor de Seguros Colombia 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 Financial Superintendency regulates it.

On November 5, 2019, Itaú Corpbanca signed a share purchase agreement in which it committed to acquire 20% of the shares that Helm LLC holds in Itaú Corredor de Seguros Colombia S.A. The acquisition of the shares of Itaú

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Corredor de Seguros Colombia S.A. by Itaú Corpbanca is subject to the corresponding regulatory approvals, including the approval from the CMF.

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

As a universal bank, we provide a wide range of financial services and products to our clients, from commercial banking to asset management and investment banking. Those products are distributed through two main channels: traditional and digital.

The traditional channels are composed of brick & mortar branches, digital branches and ATMs. The digital channels are operated remotely, via the internet or mobile phones.

Our network of 294 branches (as of December 31, 2020) distributes all our products and services in Chile and Colombia, and our 533 ATMs (as of December 31, 2020) are a convenient and efficient way of serving clients, due to low operating costs, 24/7 availability and a very complete services offering.

During 2020, particularly as a result of the COVID-19 pandemic, we continue to experience an important increase in our digital channel usage. 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: we work continuously to improve the experience on our platforms, bearing in mind our security mechanisms, in order to protect customers from various attacks on our network, such as phishing.

Cybersecurity risk culture is relevant, especially for customers since they are the most vulnerable link in the fraud chain. That is why we focus efforts on ongoing education regarding the required precautions, protecting their passwords and avoiding falling victim to phishing or pharming schemes.

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. 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.

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, 2020, we operated 183 branch offices in Chile and New York, which includes one branch in New York, 107 branches operating as Itaú (23 exclusively for Itaú Personal Bank), 48 branches operating as Banco Condell, our consumer finance division, and four digital branches.

In 2019 we launched two digital branches, one for Personal Bank and the other focused on Itaú Sucursales, and in 2020 we launched two more (one of each segment). We believe that the COVID-19 pandemic only accelerated the

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development and acceptance of digital branches, confirming the value of remote service in times when physical care was limited. This reinforces our digital strategy by improving our customers’ experience through digitalized channels.

Our digital branches are mainly aimed at our clients with a digital profile, who value a fast, simple and tailor-made service. Currently, this model serves 10,000 clients from our Personal Bank and Itaú segments, has multiple service channels and operates during extended hours.

In addition, as of December 31, 2020, we owned and operated 408 ATMs in Chile, and our customers have access to 7,041 additional ATMs (including Banco del Estado de Chile and Banco Falabella’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 also 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.

The strong trend towards digital channels and transformation continues as the share of transfers and payments made through the app more than doubled in 2020. That is why we have been investing in our digital channel. In the third quarter, we launched a whole new app as well as a new and more convenient personal banking website. With a more attractive design and modern components, the new Itaú App provides easier access (with touch / face ID) and transfers. In addition, it has direct access to the functionalities most used by our clients. As a result, more than 200,000 clients are enrolled in our app, as of December 2020.

Further, we have experienced an increase in the Servitest ranking of four positions with the new app, and we have ranked first in new sites among companies in the same survey. Our new app ranks number two among our peers in both Android and Apple stores.

Also, in 2020 we launched a 100% digital security device that is found in the clients' cell phones and allows them to approve transactions in a simple, easy and secure way through unique and unrepeatable codes. It is called Itaú Pass. This allows our clients to carry out transactions through the application, only with their cell phone and / or by entering the corresponding code on the desktop. We are the first in the industry to have this type of technology not only for our personal clients, but also for the business segment. 60% of customers who carry out digital transactions use this device.

In addition, in the fourth quarter we launched a digital wallet that allows payments in smartphones and smart watches, making them easier and safer, as well as offering both Visa and MasterCard options for our clients.

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.

Itaú Corpbanca Colombia

Itaú Corpbanca Colombia’s distribution channels provide also 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, 2020, Itaú Corpbanca Colombia operated 111 branch offices in Colombia and Panama and 125 ATMs in Colombia, also providing its customers with access to 16,168 additional ATMs through Colombia’s other financial institutions as of December 31, 2020. Itaú Corpbanca Colombia utilizes 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, 2020, Itaú Corpbanca Colombia had 142 thousand customers with activated internet passwords who use the electronic banking service, 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.

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 17 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 2020, five private sector banks along with the state-owned bank together accounted for 88.1% of all outstanding loans by Chilean financial institutions as of December 31, 2020: Banco Santander-Chile (18.5%), Banco de Chile (16.6%), Banco de Crédito e Inversiones, or Bci (14.3%), Scotiabank Chile (13.7%), Itaú Corpbanca (9.8%), and Banco del Estado de Chile (14.4%). All market share statistics in this paragraph are presented as reported to the CMF 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. Acquisitions of non-banking credit card and consumer loans businesses between 2018 and 2019 such as Promotora CMR by Banco Falabella, Walmart Servicios Financieros by Bci and Santander Consumer by Banco Santander-Chile have increased competition in the credit card and consumer business. As compared to other Chilean banks, we believe our position in the Chilean banking industry 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 digital 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.

Further, 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

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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 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, Banco Condell, competes with consumer finance divisions of other banks such as 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 area 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.

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 on April 7, 2017.

Following a stable 2017, 2018 brought a change involving two players of the Colombian banking system, with Citibank Colombia´s decision to sell its retail business, including individuals and small enterprises, to Scotiabank Colpatria. Such operation was approved by the Colombian Financial Superintendency on June 18, 2018.

During 2019, Banco Serfinanza began operating as a new commercial bank in Colombia when the former financing company Serfinanza received authorization from the CFS to function as a bank. This approval was granted on February 4, 2019.

During January 2020, Lulo Bank S.A., entity owned by the local Gilinski family which is also behind Banco GNB Sudameris, was authorized by means of Resolution 0085 of 2020 by the Colombian Financial Superintendency to establish itself as a commercial bank in Colombia. This entity intends to be the first fully digital bank in Colombia and will be required to receive an operating license once the Colombian Financial Superintendency has verified its compliance with all the requirements to operate as a commercial bank. Additionally, during December 2020, J.P. Morgan received authorization from the Colombian Financial Superintendency by means of Resolution No. 1091 of 2020 to begin operating a new commercial bank in Colombia.

In terms of presence, 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

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America) by Banco de Bogotá, with Davivienda and Bancolombia also having made similar investments aiming to grow their businesses.

As of December, 2020, and according to the Colombian Financial Superintendency, the main actors in the local financial system were the Central Bank of Colombia, 26 commercial banks (17 domestic private banks, 8 foreign banks, and one domestic state-owned bank), five finance corporations and ten financing companies. In addition, trust companies, cooperatives, insurance companies, insurance brokerage firms, bonded warehouses, special state-owned institutions, and pension and severance pay funds also participate in the Colombian financial system.

Regulatory matters. On August 6, 2018, the Colombian Ministry of Finance and Public Credit issued Decree 1477 and on August 6, 2019 issued Decree 1421, regulating the standards of capital for credit institutions under Basel III, with initial implementation date on February 2020. 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. Additionally, on August 6, 2019 the Ministry of Finance issued Decree 1421, including capital charges for Operational Risk and postponing to January 2021 the beginning of the transition of capital requirements presented by Decree 1477. On September 6, 2019, the CFS published the instructions and methodology for the calculations of the capital ratio. The transition towards the new regulation began in January 2021 and will be completed by January 2024, period 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 2019 and 2020. 2020 was a year of moderate growth for the Colombian financial services sector. The inflation rate decreased throughout the year and ended at 1.61% as of December 31, 2020, outside of the Central Bank’s target range of 2% to 4%. The reference interest rate decreased throughout the year and ended at 1.75% as of December 31, 2020. As of December 2020, banks increased their gross loans by 4.2% as compared to a growth rate of 7.9% in 2019 and 6.0% in 2018. Similarly, deposits grew 14.9% as compared to December 31, 2019.

The Colombian banking system’s level of past-due loans above 30 days as a percentage of the system’s total loan portfolio stayed flat over the first half of 2020, at 3.99% in June 2020. In the second half of the year, the ratio increased to 5.47% as of December 2020, slightly above the 4.78% registered for December 2019. Coverage, measured as the ratio of allowances to past-due loans, ended December 2020 at 139%, compared to 127.4% at the end of 2019.

As of December 2020, the demand for business, small business and consumer loans slowed down as compared to December 2019. Business loans grew 4.7% after registering a 3.1% growth the previous year, small business loans grew 1.3%, after a growth of 3.0% in 2019, and consumer loans increased by 2.3% after an increase rate of 16.6% the previous year. On the other hand, the gross amount of mortgage loans increased 7.0%, compared to 9.8% in 2019.

During 2020, lending decreased in the Colombian banks system’s structure. Net loans decreased from 66.6% of total assets at the end of 2019 to 63.1% as of December 2020. Investment portfolio and derivatives, as a percentage of total assets, increased from 18.9% at the end of 2019 to 21.7% at the end of 2020.

As of December 31, 2020, the Colombian financial sector recorded COP$768,723,769 million in total assets, representing a 8.2% increase as compared to December 31, 2019. The Colombian financial system’s total composition of assets shows banks hold a market share of 94.9%, followed by financial corporations at 2.9%, financing companies at 1.6% and financial cooperatives at 0.5%.

As of December 31, 2020, the capital adequacy ratio (Tier 1 + Tier 2) for credit institutions was 17.2% (including banks, finance corporations, financing companies and cooperative entities), increasing 177 basis points when compared to December 2019, well above the minimum legal requirement of 9%.

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Loans

As of December 31, 2019 and 2020, our gross consolidated loan portfolio was Ch$23,154,056 million and Ch$22,589,071, respectively, as reported to the CMF 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 9.8% of the market for loans in the Chilean financial system (comprising all commercial banks) as of December 31, 2020. In 2020, our loan portfolio decreased 2.4% driven primarily by the decrease in the Colombian portfolio, which was impacted by a 9% devaluation of the COP/CLP exchange rate. Excluding the effect of this exchange variation, at the end of 2020, the most affected segments were commercial and consumer loans in Chile. On the other hand, mortgage loans performed well in both countries, being more resilient during the economic downturn produced by the COVID-19 pandemic.

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, 2018, 2019 and 2020, based on information as reported to the CMF calculated under local regulatory and accounting principles:

	Bank Loans(1)
	As of December 31,
	2018	2019	2020
	(in millions of Ch$)
Banco Santander-Chile	30,266,929	32,716,883	34,390,240
Banco de Chile	27,914,322	30,019,470	30,936,968
Banco de Crédito e Inversiones (Bci)	30,099,862	33,880,778	35,508,713
Itaú Corpbanca(2)	21,548,899	23,199,360	22,635,560
Banco Bilbao Vizcaya Argentaria, BBVA(3)	—	—	—
Scotiabank Chile(3)	22,823,339	25,347,159	25,376,523
Others	44,375,257	49,736,187	50,432,778
Total	177,028,608	194,899,837	199,280,782

Source: CMF monthly consolidated financial information

(1) Excludes interbank loans.

(2) The amounts under IFRS for 2018, 2019 and 2020 are Ch$21,482,490 million, Ch$23,134,814 million, and Ch$22,619,167 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$13,923,511 million as of December 31, 2020, 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 9.3% for deposits and other obligations as of such date ranks us in fifth place among private sector banks in Chile.

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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, 2018, 2019 and 2020, based on information as reported to the CMF calculated under local regulatory and accounting principles:

	Bank Deposits and Other Obligations(1)
	As of December 31,
	2018	2019	2020
	(in millions of Ch$)
Banco Santander-Chile	21,809,236	23,490,249	25,142,684
Banco de Chile	20,240,662	22,182,751	24,066,770
Banco de Crédito e Inversiones (BCI)	24,551,315	27,553,455	30,566,185
Itaú Corpbanca	14,421,586	16,493,635	17,630,470
Banco Bilbao Vizcaya Argentaria Chile (BBVA)(2)	—	—	—
Scotiabank Chile(2)	14,927,861	15,989,560	15,645,249
Others	42,974,991	46,511,133	50,867,265
Total	138,925,651	152,220,783	163,918,623

Source: CMF monthly consolidated financial information

(1) Our aggregate deposits as calculated under IFRS for the years ended December 31, 2018, 2019 and 2020 were Ch$14,421,586 million, Ch$16,493,635 million and Ch$17,630,470 million, respectively.

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

Shareholders’ Equity

We were the fourth largest among private sector banks in Chile with Ch$2,315,411 million in shareholders’ equity (excluding net income and provision for mandatory dividends) as of December 31, 2020, as reported to the CMF 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, 2018, 2019 and 2020, based on information as reported to the CMF calculated under local regulatory and accounting principles:

	Shareholders’ Equity(1)(2)
	As of December 31,
	2018	2019	2020
	(in millions of Ch$)
Banco Santander-Chile	3,239,546	3,390,823	3,567,916
Banco de Chile	3,304,152	3,528,222	3,726,267
Banco de Crédito e Inversiones (BCI)	3,457,509	3,791,478	3,893,620
Itaú Corpbanca(3)	3,324,531	3,346,102	2,315,411
Banco Bilbao Vizcaya Argentaria Chile (BBVA)(4)	—	—	—
Scotiabank Chile(4)	2,013,539	2,038,149	2,398,357
Others	3,185,318	2,203,398	5,807,823
Total	18,524,595	18,298,172	21,709,394

Source: CMF 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 CMF.

(3) The amounts under IFRS, excluding net income (loss) and provision for mandatory dividends, for the years ended December 31, 2018, 2019 and 2020 were Ch$3,099,761 million, Ch$3,156,329 million and Ch$3,123,032 million, respectively.

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

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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 CMF 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 CMF 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.

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.

CMF

On June 1, 2019, the Superintendency of Banks and Financial Institutions (Superintendencia de Bancos e Instituciones Financieras or SBIF) as former banking regulator, was replaced by the Commission for the Financial Market (Comisión para el Mercado Financiero or CMF). The CMF is an independent Chilean governmental agency 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 banks and the entities part of the securities and insurance market. With respect to banks, the main responsibilities of the CMF 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 CMF may impose sanctions, including fines payable by the

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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 CMF 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 CMF 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 CMF. 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 CMF for review.

The CMF 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 CMF may only refuse to grant its approval based on specific grounds set forth in the Chilean General Banking Act and its regulations.

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 CMF 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$3.5 million or US$4,908.20 as of December 31, 2020) 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 CMF and the Central Bank of Chile, Chilean banks must maintain a technical reserve (Reserva

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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 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 CMF 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.

During 2015, the Central Bank of Chile published a final version of new liquidity standards for local banks, based on Basel III guidelines. The CMF is the institution empowered to put these guidelines into practice and monitor them on an ongoing basis. Accordingly, the CMF 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 CMF 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$23,256.3 million or US$32.7 million as of December 31, 2020).

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 CMF, 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. See “Item 3. Key Information—Presentation of Financial and Other Information—Specific Loan Information” in this Annual Report for additional information regarding events in which a higher effective net equity and/or a higher basic capital may be required and detail on certain regulations that were issued by the CMF during 2020, which may impose additional capital and reserve requirements.

Basic capital or common equity tier 1 (CET1) is defined as a bank’s paid-in capital and reserves.

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Regulatory capital or “effective net equity” is defined as the aggregate of: (a) tier 1 (T1) capital, plus (b) tier 2 (T2) capital. In turn, (y) tier 1 (T1) capital is the sum of (1) the the bank’s basic capital or common equity tier 1 (CET1) (i.e., paid-in capital and reserves) and (2) the additional tier 1 (AT1) capital (i.e., bonds issued without a maturity date and preferred stocks valued at their issue price, for an amount up to one third of the banks’ basic capital), and (z) tier 2 (T2) capital corresponds to (1) subordinated bonds issued by the bank valued at their issue price and 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) and (2) the bank’s voluntary allowances for loan losses up to (A) 1.25% of its credit risk weighted assets, if standard methodologies are applied, or (B) 0.625% in the event non-standard methodologies are applied.

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 21-1 of the Regulations of the CMF), the bank would have to comply with such legal requirements within a period of 60 days. Further, if the bank fails to comply with such legal requirements, it would be subject to the sanctions 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) UF15,000 (approximately US$613,531 as of December 31, 2020), 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) the 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

● 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

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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 CMF. 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 CMF detailed information regarding their loan portfolio on a monthly basis. The CMF 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 CMF. However, a bank may request the authorization of the CMF 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.

A bank fits within level A if (y) its effective net equity over its risk weighted assets, including the additional basic capital requirement (Conservation Buffer), is equal to or higher than 10.5% or the higher applicable ratio in the event any of the additional basic capital requirements are applicable (i.e., Counter-Cyclical Buffer, systemic importance

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additional requirement or Pilar 2 requirement) and (z) its basic capital over its risk weighted assets is equal to or higher than 7.0% or the higher applicable ratio in the event any of the additional basic capital requirements are applicable (i.e., Counter-Cyclical Buffer, systemic importance additional requirement or Pilar 2 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.

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. Pursuant to Chapter 1-13 of the regulations of the CMF (Recopilación Actualizada de Normas), as amended through Circular No. 2,261 dated July 6, 2020, the CMF set forth the terms and conditions necessary to implement the aforementioned management rating, which consider, among others, compliance by the bank with the regulations governing critical information infrastructure in cyber security, as set forth in Chapter 20-1 of the regulations of the CMF (Recopilación Actualizada de Normas).

On March 31, 2021, the CMF designated Itaú Corpbanca, among others, as a bank of systemic importance, in its first resolution on the qualification of systemically important banks.

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.

Suspension of interest income and inflation-indexation adjustments recognition. Financial institutions must suspend recognition of income on an accrual basis in their statements of income for certain loans included in the impaired portfolio. IFRS 9 did not allow the suspension of accrual of interest on financial assets for which an impairment loss has been determined. As of January 1, 2018, the Bank adopted IFRS 9. Under IFRS 9, 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). Off-balance interests are recorded as interest income only if the Bank receives the related payments.

Allowances for Loan losses. The main difference between Chilean Banking GAAP and IFRS 9 regarding loan loss allowances is that loan loss allowances under Chilean Banking GAAP are calculated using expected loss models based on specific guidelines set by the CMF, which in turn are based on an 12-month period expected losses approach while IFRS 9, if a financial assets has experienced a significant increase in credit risk or is impaired, requires a lifetime expected losses approach. According to both Chilean Banking 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 Banking GAAP given by the CMF. The CMF 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 impairment requirements. Impairment losses will increase and become more volatile for financial instruments in the scope of IFRS 9 impairment model. Based

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on the assessment made, the total impact of the adoption of IFRS 9 on the opening balance of our equity on January 1, 2018 was Ch$129,025 million (net of tax).

Loans and accounts receivable charge-offs. Under Chilean Banking GAAP, charge-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 charge-off term established by the CMF in the Compendium of Accounting Standards. 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.

Investments in other companies. Under Chilean Banking GAAP, investments in other companies in which the Bank does not exercise significant influence were reclassified and presented as FVTOCI  financial investment in accordance with IAS 39 and in some circumstances are accounted for at cost. 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).

Assets received in lieu of payment - Other non-current assets held for sale. Under Chilean Banking GAAP it is required that the initial value of assets received in lieu of payment be the value agreed upon with a debtor as a result of the loan settlement or the value awarded in an auction, as applicable. These assets are required to be written off one year after their acquisition, if the assets have not been previously disposed of. IFRS requires that assets received in lieu of payment be initially accounted for at fair value. Subsequently, asset valuation depends on the classification provided by the entity for that type of asset. No deadline is established for charging-off an asset. Assets in lieu of payment were reclassified and recognized in accordance with IFRS 5.

Country risk and contingent loans provisions. Under Chilean Banking GAAP, the Bank establishes provisions for country risk and provisions related to the undrawn available credit lines and contingent loans in accordance with local regulations. Since January 1, 2018, in accordance with IFRS 9, expected credit losses for contingent loans are recorded in our consolidated financial statements.

Improvements in leased properties. As instructed by the CMF, improvements in leased properties should be disclosed together with right-of-use assets under the same line item in the Consolidated Statement of Financial Position. While there is no difference with IFRS in terms of measurement, there is a significant difference in terms of disclosures. These assets have been properly reclassified in the consolidated financial statements.

Deferred taxes. The Bank records, when appropriate, deferred tax assets and liabilities for the estimated future tax effects attributable to the differences between the carrying amount of assets and liabilities and their tax bases. Due to the adjustments made to the consolidated financial statements, we adjust deferred taxes accordingly.

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 CMF.

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 CMF, (10) real estate leasing, and (11) social security advice. These subsidiaries are regulated by the CMF except with respect to social security, in which case the entities are

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regulated 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 CMF, 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 CMF of the occurrence of any such circumstance, and (ii) submit to the CMF 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 CMF 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 CMF 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 CMF. The remediation plan submitted by the bank must be approved by the CMF and shall set forth a maximum six-month term from the date of its approval by the CMF for its satisfaction, unless otherwise expressly authorized by the CMF.

Additionally, the bank must provide the CMF 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 CMF, 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 CMF rejects for a second time the conditions to summon the shareholders meeting, the CMF 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 CMF, 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 CMF, 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 CMF’s orders or has incurred in any material fact that threatens its financial stability, or if the CMF 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 CMF rejects for the second time the conditions to summon the shareholders meeting that shall approve the capital increase, the CMF 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 CMF 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 CMF must revoke such bank’s authorization of existence and mandate its liquidation, subject to approval by the Central Bank of Chile. The CMF’s resolution must state the reason for ordering the liquidation and must 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

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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:

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

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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 (as amended by Law No. 21,130) modifies, among other matters, the corporate governance and operation of the Chilean regulator for (i) securities and insurance, a role that was historically performed by the Chilean Superintendency of Securities and Insurance and (ii) banks, a role that was historically performed by the SBIF. This law came into effect in March 2017, except with respect to the replacement of the SBIF by the CMF in which case the law came into effect on June 1, 2019. The main features of this new law (as amended by Law No. 21,130) 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.

● 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 and the Chilean Superintendency of Banks and Financial Institutions, 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

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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 CMF 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.

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 CMF 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 CMF 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

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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 Financial Superintendency, 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.

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 Financial Superintendency 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.

In addition, the Colombian Financial Superintendency issued External Circular 27 of 2020, which includes several new provisions. Entities under surveillance must have effective FATF policies and procedures and must comply with the obligations on international lists binding for Colombia, foreign PEPs, and PEPs of international organizations. Therefore, such entities must have have the ability to consult such lists immediately prior to engaging a client, final beneficiary, supplier, shareholder or employee, as well as permanently during the contractual or legal relationship.

In any case, the scope of the customer knowledge procedures applicable to the employees, suppliers and administrators (in terms of article 22 of Law 222 of 1995) of the supervised entity, must include, as a minimum, compliance with the subnumeral 4.2.2.1.4 of the chapter, provided that such measure allows the supervised entity to carry out an adequate and effective management of FATF risk according to its FATF risk analysis.

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 Superintendency 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.

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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. See “Item 4—Information on the Company—B. Business Overview—Chilean Banking Regulation and Supervision—CMF.”

Commission for the Financial Market

On February 23, 2017, Law No. 21,000, which establishes the CMF, was published. This new law modified, 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. In conjunction with Law No. 21,130, which modified the Chilean General Banking Act for purposes of adopting Basel III, the aforementioned act also provided for the replacement of the SBIF by the CMF This law came into effect in March 2017. See “Item 4. Information on the Company—Changes in the Governance of Our Regulators.”

Referendum to Amend the Chilean Constitution

Pursuant to Law No. 21,200 (effective December 24, 2019) and Law 21,221 (effective March 26, 2020), the Chilean Constitution was amended to entitle the President of the Republic of Chile (the “Republic”) to call for a referendum with the purpose of asking the citizens: (i) whether they would like a new Constitution and (ii) whether this potential new Constitution should be drafted by either a “Combined Constitutional Convention” (Convención Mixta Constitucional), comprised of 86 congressmen currently in office and chosen by the National Congress, and 86 popularly elected members—or a “Civic Constitutional Convention” (Convención Constitucional), exclusively composed of 155 popularly elected members. The referendum took place on October 25, 2020, and a wide majority of the Chilean voters chose to approve the drafting of a new constitution and voted in favor of having such document drafted by a Civic Constitutional Convention.

In accordance with these results, the President of the Republic called for elections of the 155 participants of the Civic Constitutional Convention which would have taken place on April 11, but due to the COVID-19 those were postponed until May 15 and May 16, 2021. This election will be made jointly with the election of regional governors, mayors, and municipal authorities..

However, due to the recent surge in COVID-19 cases in Chile, there has been a series of protocols and measures taken to ensure the safety of the elections. On March 17, 2021, Law No. 21,317 was published in the official gazette, amending the constitution by dividing the upcoming elections in two days, April 10 and April 11, 2021. Furthermore, on March 30, 2021, the government submitted to the Chilean Congress a bill of law that that has been recently approved and enacted Law No. 21,324 amending by suspending the upcoming elections of April, until May 15 and May 16, 2021.

The Civic Constitutional Convention shall draft and approve a proposal of new Constitution within nine months after its establishment, which may be extended only once for three additional months. The approval of the new constitutional provisions will require two thirds of the votes of the members of the Civic Constitutional Convention (i.e., 104 votes). The proposal of a new Constitution shall respect: (i) the State’s organization as a republic; (ii) the Republic’s democratic regime; (iii) all final judgments issued in the Republic; and (iv) the international treaties ratified by the Republic.

After the approval by the Civic Constitutional Convention of a new Constitution, the President of the Republic shall call for a third referendum asking the citizens whether they approve or reject said proposal. Finally, if this proposal is approved by the citizens, the eventual new Constitution will become effective after its publication in the Official Gazette; provided, however, that it may contain transitory provisions regarding certain matters.

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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.

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 and Future Changes in Chilean Tax Regulations

On February 24, 2020, Law No. 21,210 (the “Tax Reform”) was published in the Official Gazette, which introduces additional amendments and modifications to the Chilean tax system.

Pursuant to the Tax Reform and given that the Bank’s average annual amount of gross revenues would be higher than UF75,000, the Bank is 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 40%, against which only 65% of the corporate tax will be allowed to be used as a credit against the withholding tax or the Complementary Global Tax. In any case, the final tax burden cannot exceed a rate of 44.45%. Nevertheless, a foreign holder shall be entitled to full corporate tax credit, if such holder is established in, domiciled in, or resident of a country with which Chile has a double taxation treaty in force or, until December 31, 2026, with which Chile has signed a double taxation treaty, although not in force, given that the foreign holder credits his tax residency under the Chilean IRS’s regulations on the matter. These regulations are currently contained in Exempt Resolution No. 151, issued on December 9, 2020, which provides the requirements that must be met by foreign investors and their tax certificates in order to be eligible for this benefit.

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).

Lastly, pursuant to the current social and political agenda, it is expected that the Chilean government, based on a report prepared in January 2021 by a commission of experts, will introduce a new tax reform bill aimed at limiting tax exemptions and/or preferential tax treatments contained in the Chilean tax legislation, such as the exemption on capital gains arising from the sale of shares that are publicly traded and have a large presence on the stock exchange.

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Amendment to the Consumer Protection Act

On September 13, 2018, Law No. 21,081 was published in the Official Gazette. This law, which entered 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).

Amendment to the Invoices Act

Law No. 19,893 (the “Invoices Act”) regulates invoices and their payment dates. The Invoices Act was amended by Law No. 21,131 (effective May 16, 2019) and by Law No. 21,217 (effective June 3, 2020). Pursuant to these amendments, all purchasers or recipients of good and services are obliged to pay the provision for such goods and services within a 30-day term following the receipt of the corresponding invoice issued by the relevant seller or supplier.

Exceptionally, the Invoices Act allows the parties of a sale and purchase agreement or equivalent (other than agreements between small and large-sized companies, as defined by Chilean law) to extend the abovementioned payment period as long as: (i) such extension (the “Extension”) is mutually agreed by the parties in writing; (ii) the Extension is registered before the Ministry of Economy within five business days from its execution; and (iii) the aforementioned extension does not imply the imposition of an abusive condition by the purchaser or recipient of the goods or services. Any Extension that does not comply with any of the prior requirements shall be deemed void and unwritten. Likewise, any condition or provision that intends to unduly delay the payment of the corresponding goods or services shall be deemed void and unwritten.

Amendment to Payment Methods for Overdrawing in Banking Current Accounts

On June 18, 2019, Law No. 21,167 was published. This law came into effect on January 1, 2020 and amended the Chilean Bank Checking and Checking Accounts Act, providing for the automatic application to the payment of the associated credit facility the deposits made into a banking current account, unless the account holder instructs otherwise and to the extent that there are no outstanding debts for non-stipulated credits. The account holder is entitled to change its instruction at any time, which will become effective on the immediately following calendar month.

Amendments to Chilean Personal Data Protection Act

On February 28, 2020, Law No. 21,214 was published. This law went into effect on August 26, 2020 and amends the Chilean Personal Data Protection Act that governs the treatment and management of personal data of identified or identifiable individuals by public agencies and private entities in data banks and registries. This new law prohibits the manager of the data bank to publish or disclose the information related to student loans contracted to finance personal or third parties’ education.

New Labor Laws

On April 1, 2020, Law No. 21,220 went into effect. This law modifies the Chilean Labor Code with respect to remote work and teleworking, such as the working day, minimum breaks and control and supervision by the employer. The main aspects regulated by the law are: (i) the obligation to agree and establish the modality of telework in an employment contract or annex, which must be registered with the Labor Office (Dirección del Trabajo), (ii) the employer’s duty to supply the employees with all work tools, and (iii) the employees’ right to a minimum total disconnection time of 12 continuous hours between each work day.

On April 6, 2020, Law No. 21,227 went into effect. This law allows an employment contract to be suspended for those employees who cannot provide their services remotely (i.e., teleworking). Employees may collect unemployment insurance for the duration of the suspension of the employment relationship. The main aspects regulated by the law are the following: (i) it provides for the suspension of the employment relationship by the sole mandate of the law in cases

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where, due to an act of the government, the employee is absolutely prevented from rendering their services, (ii) it allows the suspension of an employment contract through an agreement between the employer and the employee in cases not falling under (i) above and in which COVID-19 has seriously affected the employer, (iii) it allows employers to agree with employees on a reduction of the working day of up to 50% and of the remuneration in the same proportion, (iv) it provides for a right of the employees to receive unemployment insurance benefits of up to 70% of their remuneration, and (v) it prohibits the dismissal of employees by reason of force majeure under the Chilean Labor Code.

Law Limiting the 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, on May 29, 2020, Law No. 21,234 went into effect. This law amended certain aspects of Law No. 20,009, establishing 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 within 30 business days from the notice mentioned above. Upon such claim, the issuer of the Payment Method shall (i) within five business days, cancel the charges or reimburse the funds in an amount of up to UF35 (Ch$1.0 million or US$1,431.6 million as of December 31, 2020); and/or (ii) with respect to amounts in excess of UF35 (Ch$1.0 million or US$1,431.6 million as of December 31, 2020) and within seven additional business days, cancel the charges, reimburse the funds or initiate judicial legal actions against the user, if the issuer has evidence that the user has acted with gross negligence or willful misconduct. If the issuer of a Payment Methods desires to contest the claim of a user, the issuer shall bear the burden of proof.

Law Regulating Financial Portability

On September 8, 2020, Law No. 21,236 went into effect. This law (which also amended the Consumer Protection Act) provides for a full set of provisions regulating financial portability with the main purpose of allowing individuals and small and medium size companies to contract for financial products or services with a new provider, allowing the termination of the financial products or services contracted with the initial provider. For these purposes, a provider corresponds to every insurance company, manager of mortgage loans, family allowance compensation fund (caja de compensación de asignación familiar), association of savings and credits (cooperativa de ahorro y crédito), any massive lending institution pursuant to the Chilean Money Loan Transactions Act and any other entity subject to the surveillance of the CMF.

Law Regulating Responsibilities of Market Agents

On April 13, 2021, Law No. 21,314, a part of the anti-abuse agenda, was published. This law regulates the responsibility and transparency requirements for market agents.

This law introduces various modifications to several legal provisions, but mainly to the Chilean Securities Market Act and the Chilean Corporations Act. The main modifications introduced by this law can be summarized as follows: (i) imposition of new information and transparency rules on stock markets, (ii) establishment of the prohibition against directors, managers, administrators and executives of a securities issuer (e.g. a public limited companies) directly or indirectly executing transactions over the securities issued by the issuer, (iii) imposing on the stock markets or securities exchanges the obligation to establish a real-time interconnection system among them in order to provide better service for investors, (iv) establishment of the prohibition against price manipulation, (v) establishment of new regulations for the relationships among related parties and delegation of power to the CMF to request information about the transactions made with these related parties and regulated companies, (vi) establishment of new regulations and responsibilities for

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social security advisors, and (vii) creation of the role of financial and social security advisors or entities that perform a financial and social security advisory function.

Bill Amending the Chilean Banking Act

A bill submitted on October 3, 2019, which remains at an early stage of discussion at the Chilean Congress, proposes to amend the Chilean Banking Act in respect of the termination of banking services agreements as follows: (i) imposing on banks the duty to deliver to their clients all the available information to assist them in the termination of such contracts; (ii) setting forth that the termination of such contracts must be completed within seven business days from the date of the client’s request of termination; (iii) prohibiting the collection of expenses and commissions related to the termination of such contracts; and (iv) imposing on banks the obligation to deliver to their clients upon the termination of the contract and payment of all outstanding obligations, all the security documents executed and those containing personal and commercial information about the client.

Bills Amending the Consumer Protection Act

Several bills have been submitted to the Chilean Congress containing amendments to the Consumer Protection Act in the following matters:

● A bill submitted on March 1, 2021 and under discussion by the Chilean Congress proposes amendments to the Chilean Money Loan Transactions Act and the Criminal Code in order to prohibit compound interest imposed by companies (including banks) on individuals. This bill of law: (i) amends the Criminal Code by considering the collection of compound interest as usury, and (ii) modifies the Chilean Money Loan Transactions Act by prohibiting compound interest in respect of interest and default interest in money loan transactions. This bill is currently in a very early stage of discussion.

● A bill submitted on December 11, 2019 and under discussion by the Chilean Congress amends the Chilean Consumer Protection Act and the Chilean Money Loan Transactions Act prohibiting: (i) compound interests in respect of interests and default interests in money loan transactions, even if none of the parties qualifies as a consumer; (ii) compound interests in any contract in which a consumer is a party; and (iii) the inclusion of early maturity provisions in a consumer contract. It should be noted that an earlier bill submitted on November 11, 2019 also proposes to amend the Chilean Money Loan Transactions Act prohibiting compound interests in money loan transactions below UF4,000 (Ch$116.3 million or US$163.608 million as of December 31, 2020).

● A bill submitted on September 10, 2019 is currently under discussion in the Chilean Congress to amend the Consumer Protection Act in, among others, the following matters: (i) expanding the definition of consumer by eliminating the existing requirement that the consumer contract corresponds to an onerous act or agreement (acto jurídico oneroso); (ii) setting forth that the interpretation of the law and adhesion agreements (contratos de adhesión) must take into account the consumer’s protective purpose of the law and the imbalance of the contracting parties; and (iii) setting forth the commissions, prices and expenses that can and cannot be charged to the consumers in any financial product and credit services adhesion agreements (contratos de adhesión).

● A bill submitted on August 5, 2019 is currently under discussion to amend the Chilean Consumer Protection Act to provide that the operational expenses arising from the renegotiation of mortgage loans will be borne by the loan provider.

● A bill submitted on January 24, 2019 amends to Chilean Consumer Protection Act in the following manner: (i) provides as rights of the consumer of financial products or services those set forth in the Chilean Money Loan Transactions Act (which includes, among others, the prohibition to set forth in certain loan transactions, an interest rate higher than the conventional maximum interest rate (tasa máxima convencional)); (ii) authorizes consumers to prepay their loans notwithstanding the outstanding principal amount (it should be noted that another bill of law submitted on September 10, 2019 proposes to amend the Chilean Money Loan Transactions Act setting forth the debtor’s right to prepay its loans even against the lender’s approval, to the extent that the pre-payment includes the principal amount and the interests accrued thereon calculated as of the payment date);

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(iii) eliminates the providers’ right to expressly prohibit consumers to exercise their withdrawal right in consumer contracts; (iv) imposes on providers the duty to inform consumers the means through which they can exercise their rights and how to terminate their contracts; and (v) prohibits the providers under adhesion agreements (contratos de adhesión) to provide conditions on consumers to exercise their rights or terminate a contract which are more burdensome than those required for their execution. Currently, this bill is in its third state of discussion in the Chamber of Representatives with extreme urgency.

Bill Amending the Chilean Money Loan Transactions Act in respect of the Conventional Maximum Interest Rate

A bill submitted to the Chilean Congress on December 9, 2019 proposes to amend the Chilean Money Loan Transactions Act by reducing the conventional maximum interest rate (tasa máxima convencional) applicable to certain loan transactions, including those in Chilean pesos with a principal amount of up to UF200 (Ch$5.8 million or US$8,180.4 million as of December 31, 2020).

Though this particular bill has not been discussed since its submission to the Chilean Congress, a bill with a similar content was submitted to the Chilean Congress on July 1, 2020, proposing a transitory limitation of the conventional maximum interest rate until December 31, 2020. However, this bill has also not been discussed since its submission.

Bill Amending the Chilean Insolvency Act

A bill submitted to the Chilean Congress on August 14, 2019 proposes to amend the Chilean Insolvency Act setting forth special requirements in order for individuals over 60 years of age to be subject to a renegotiation procedure (aimed to assist debtor and creditors in reaching an agreement for renegotiation the former’s debt). This bill is currently in its second stage of discussion at the Economy Commission of the Chamber of Representatives.

Economic Crimes and Anti-Abuse Agenda (Agenda Anti-Abusos)

A bill submitted on October 23, 2019 proposes to amend several Chilean laws, including the Chilean Banking Law, the Chilean Securities Act and Law No. 21,000 which created the CMF, by increasing the penalties applicable to several economic crimes, including, banking bankruptcy crimes, insider trading and securities law crimes. In addition, during the first quarter of 2020, the Government of Chile has pushed an anti-abuse agenda (agenda anti-abusos) through several bills of law (currently at an early stage) that in substance create the category of economic crimes, which would include those crimes contemplated in the Chilean Securities Market Act (including insider trading), collusion, crimes set forth in the Chilean General Banking Act (including, banking bankruptcy crimes (delitos concursales bancarios), breach of the rules on bank secrecy) and incompatible negotiation (negociación incompatible), corruption between private parties (corrupción entre particulares), and money laundering. The new category of economic crimes would also be subject to special rules to determine the applicable penalties and includes economic crimes among those that create criminal liability for legal entities.

Bill Regulating Expenses Associated with Execution and Liquidation of Money Loan Transactions

On May 19, 2020, a bill was submitted to the Chilean Congress proposing a series of amendments and modifications to several acts regarding expenses associated with the execution and liquidation of money loan transactions. These amendments can be summarized as follows: (i) amends the Consumer Protection Act in terms of prohibiting the transfer to the consumer of extrajudicial debt collection costs. Such costs would have to first be proved before the civil courts like other damages; (ii) modifies the Consumer Protection Act by expressly regulating the operational costs in the procurement of financial products; and (iii) amends the Chilean Money Loan Transactions Act in terms of limiting the maximum amounts of prepayment commissions and default interest for loan transactions below UF5,000. This bill is currently in early stages of discussion.

Draft on Regulation Amending the Report of Social Responsibility and Sustainable Development

On December 2, 2019, the CMF published for comments a draft regulation on new information requirements regarding social responsibility and sustainable development (ESG), that would be applicable for all security issuers

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registered in Chile. As a continuation of this process, on March 22, 2021, the CMF submitted a new version of such draft regulation reflecting the comments received as well as the advances on the subject matter were observed at the international level during 2019 and 2020. This regulation seeks to broaden the scope of information that security issuers are obliged to disclose on their annual reports (memorias anuales) by amending General Rule No. 386, which in turn amends General Rule No. 30. This draft regulation provides for the obligation to deliver information on: (i) economic impact; (ii) environmental sustainability benchmarks; and (iii) social sustainability benchmarks. The draft regulation contemplates a restructuring of the current annual report, incorporating ESG issues in a comprehensive manner throughout such report. The new annual report proposal is structured based on an approach that starts with the governance of the entity, its strategy, risk management system, and is complemented by the disclosure of specific indicators and goals. The rationale for the changes is that the new annual report would make it possible to disclose the way in which the entity structures its corporate governance, defines the strategy to achieve its objectives, and determines, identifies and manages material risks.

Changes to the Pension System in Chile

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.

Further, on November 26, 2019, the Ministry of Finance and the Chilean Senate reached an agreement to increase the basic pension for pensioners aged 80 years or older by 50% starting on December 1, 2019. The agreement resulted in Law No. 21,190, which provides for a 50% increase in the pension for pensioners aged 80 years and older and a 30% increase in basic pensions for pensioners between 75 to 79 years of age by December 1, 2019, which will be equalized to the basic pension for pensioners aged 80 years and older by January 1, 2021. Basic pensions for pensioners under 75 years of age increased by 25% on December 1, 2019, will increase 40% in the aggregate from January 1, 2021, and will be equalized to the basic pensions for pensioners between 75 to 79 years of age by January 1, 2022.

Law No. 21,190 is financed by the treasury of the Chilean government.

Amendments to Allow Withdrawal of 10% of the Pension Funds Administered by Pension Funds Managers

On April 20, 2020, the first bill proposing an amendment to the Chilean constitution to allow individuals to exceptionally request a one-time withdrawal of 10% of their pension funds administered by the Chilean pension fund management companies (Administradoras de Fondos de Pensiones, or AFP) due to the adverse economic and social effects of the COVID-19 pandemic was submitted to the Chilean Congress. This first bill was enacted into Law No. 21,248 on July 30, 2020, which introduced a transitory provision in the Chilean constitution in order to allow this one-time withdrawal that could be requested by the individual until 365 days after the publication of the law.

Considering that the adverse effects of the COVID-19 pandemic persisted during 2020, on August 27, 2020, several congressmen presented a second bill of law to amend the Chilean constitution and allow individuals to withdraw another 10% of their pension funds. However, since this bill was initiated by congressmen and has other constitutional and validity issues, the Constitutional Tribunal declared the unconstitutionality of the bill.

Nevertheless, on November 11, 2020, the President of the Republic submitted to the Chilean Congress a third bill proposing to allow a second withdrawal by individuals of 10% of their pension funds. This bill was enacted into Law No. 21,295 on December 10, 2020, with similar conditions to the ones described under Law No. 21,248 except that it was not enacted as an amendment to the Chilean constitution.

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Finally, since December 15, 2020, there have been five new bills submitted by congressmen that propose to allow a third withdrawal of 10% of the pension funds. These bills are currently in an advanced stage of discussion and have been recently merged for joint discussion. These bills are distinguishable from each other in terms of setting different limits to the minimum and maximum amount that people would be able to withdraw, the scope of beneficiaries of this amendment, and the specific means of amending the Chilean constitution in light of the resolution of Constitutional Tribunal mentioned above.

Government Actions to Address COVID-19

On March 19, 2020, the President of Chile declared constitutional state of emergency under catastrophic circumstances. According to articles 41 and 43 of the Chilean Constitution, under a constitutional state of emergency the President of Chile is entitled to: (i) restrict the freedom of movement and the right of assembly, (ii) establish limitations to property rights, (iii) requisition of goods, and (iv) adopt extraordinary administrative measures that are necessary for the prompt recovery of normal conditions in the affected zones. This state of emergency has been extended until June 30, 2021 by means of Decree No. 72 of March 13, 2021.

In order to address the financial implications of the COVID-19 outbreak, Chilean financial authorities, including both the Central Bank and the CMF, have taken, and continue to take an array of measures at the beginning of the COVID-19 pandemic. The following is a summary of the measures that regulatory authorities have taken in Chile to address the consequences of the COVID-19 pandemic on the Chilean economy:

● A first package of measures was presented by the Chilean government on March 17, 2020, including the following: (i) an employment protection initiative that allows employees to retain their employment contracts and employee labor rights, while receiving a partial wage financed through the unemployment insurance fund; (ii) a capital injection of US$0.5 billion to Banco del Estado de Chile that would raise its credit capacity (to provide financing to individuals and SMEs) by close to US$4.4 billion; (iii) a special bonus for workers without a formal employment relationship that would benefit nearly three million people; (iv) a municipal solidarity fund focused on alleviating reduced SME revenue during the emergency; (v) the elimination of the stamp tax for six months, applicable to all new credit operations; (vi) and the fast-tracking of payments to government suppliers to within 30 days after delivery of product or service;

● The Central Bank of Chile’s easing of the policy rate by 125 basis points to 0.5%, the launching of a first-round financing facility (FCIC) to banks for close to 10% of the Chilean GDP, and a bank bond purchasing program of US$8 billion (just over 3% of the Chilean GDP). The Central Bank has also announced a third phase of its bank financing facility (FCIC). The third phase contemplates an amount of US$10 billion (around 4% of GDP) over a six-month period. The second FCIC phase expired in February 2021 and was underutilized for an amount comparable to the new tranche (with just over US$5 billion of the US$16 billion program used). The Central Bank of Chile questioned whether the limited use of the second phase by the financial system was reflective of structural damage inflicted by the crisis, or if adjustments could be made to increase uptake. The rate paid by banks on this credit facility will be the policy rate at the time (0.5%);

● A second package was announced by the Chilean government on April 8, 2020, considering two key areas: protecting economic activity and protecting income, especially for workers without a formal employment relationship. This package includes the Chilean government guarantee of 48-month credit lines to SMEs. The total guarantees provided by the Chilean government could reach US$3 billion (just over 1% of the Chilean GDP) and will grant preferential interest rates on new loans by addressing credit risk concerns. Collateral offered by the Chilean government decreases with a firm’s annual sales, with new credit channeled through the banking sector available until September. Banks will need to reschedule other credit lines held by the respective recipients at such banks for the duration of the COVID-19 credit line period. Firms receiving this working capital injection are not able to use it to pay other credit lines, but rather to pay for ongoing operations (e.g., salaries, providers, rent, etc.). Preliminary estimates are close to US$24 billion in new credit, which would imply up to a 20% increase in outstanding commercial loans (or 10% of the Chilean GDP);

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● An initiative to provide income for those workers without a formal employment relationship who do not hold unemployment insurance, supported by a US$2 billion fund (just under 1% of the Chilean GDP);

● A new fiscal package for US$5 billion, with new additional resources committed closer to an additional US$3 billion. As a result, Chile’s debt is set to accelerate even further. In addition to the measures adopted to address the pre-existing social demands (2% of the Chilean GDP, including increased pensions, minimum wages as well as infrastructure repair), the combined coronavirus stimulus packages adds further pressure to the fiscal accounts, raising the likelihood of a credit rating downgrade. Last month, Fitch changed its outlook to negative on its 'A' rating. While the government of Chile retains a very strong balance sheet and holds significant financial buffers (SWFs), the planned expenditure path means debt stabilizing in coming years is unlikely. The fiscal impulse from the coronavirus measures (phase I and II) is expected to be equivalent to approximately US$5.5-7 billion or approximately 2%-3% of the Chilean GDP, taking the fiscal deficit to 7.4% of GDP in 2020;

● The issuance, since March 18, 2020, by the CMF of several regulations requesting its supervised entities to provide any material information on the financial and operational effects that may have been caused by the outbreak of COVID-19 in Chile and to timely implement their contingency plans, postponing the obligation of supervised entities to submit their financial statements in March, extending in an additional 18-month period the one-year term during which banks must sell goods received as payment of debts between March 1, 2019 and September 30, 2020, amending the treatment of the guarantees constituted by banks in the context of bilaterally cleared derivative transactions and announcing measures guaranteeing greater flexibility of the financial system (e.g., postpone the implementation of Basel III requirements for one year and maintaining the current general regulatory framework for banks capital requirements until December 2021, authorize banks to extend up to six months the maturity of loans granted to consumers and small and medium-sized enterprises, and to use mortgage guarantees’ surpluses to secure such loans and facilitate banks in certain circumstances and until July 31, 2020 to reschedule loans without implementing additional provisions); and

● The enactment of Law No. 21,225, which sets forth several measures part of an extraordinary economic plan to combat the economic consequences of COVID-19, including the stamp tax reduction to 0% rate between April 1, 2020 and September 30, 2020.

● Legislative adjustments have provided the Central Bank of Chile the ability to purchase Chilean Treasury bonds in the secondary market, under exceptional and transitory circumstances. The IMF approved the Central Bank’s 2-year precautionary flexible credit line for US$23.9 billion.

● Following increased restrictions implemented to counter the second COVID-19 wave, which from March 25, 2021 saw close to 70% of the population (almost 14 million people) placed under the strictest lockdown measure, the government announced additional support measures worth US$6.2 billion (2% of GDP). The plan focuses on: 1. improving the income of households affected by lockdowns (enhancing and extending the Family Emergency Income benefit by two months until June 2021); 2. boosting support to the middle class (creating a middle class income supplement; establishing a soft, interest-free loan program; creating a transfer program for transport workers; and delaying property tax payments for certain real estate); 3. improving employment protection programs (extending unemployment insurance benefits; extending and enhancing employment subsidies, with focus on women, youth, and disabled workers); 4. enhancing support to SMEs (pardoning interests and fines on outstanding local taxes, postponing alcohol and operational license payments, as well as loan payments with state-owned Banco Estado, among other measures); and 5. boosting health expenditures by US$300 million, aimed at improving testing, contact-tracing, and vaccine purchases. The additional expenditure, which builds on the US$12 billion COVID-19 fund agreed last year (around half is yet to be spent), would be funded with higher copper revenue and use of the Economic and Social Stabilization Fund (FEES), which was worth US$9 billion at the close of 2020 (US$12.2 billion in 2019).

● Legislation led to the partial withdrawal of pension funds, with over US$35 billion (nearly 15% of GDP) being released through two episodes of 10% extractions. A third withdrawal proposal is being discussed. The subsequent liquidity injection has resulted in a consumption-led economic recovery in Chile.

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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 and Public Credit, the Colombian Financial Superintendency, the SIC, the Normative Projection and Financial Regulation Studies Unit (Unidad de Proyección Normativa y Estudios de Regulación Financiera – URF), the Deposit Insurance Fund (Fondo de Garantías de Instituciones Financieras - FOGAFIN) 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 and Public Credit is to regulate all aspects of finance and insurance activities. As part of its duties, the Colombian Ministry of Finance and Public Credit issues decrees relating to financial matters that may affect banking operations in Colombia. In particular, the Colombian Ministry of Finance and Public Credit is responsible for regulations relating to capital adequacy, risk limitations, authorized operations, disclosure of information and accounting of financial institutions.

Colombian Financial Superintendency

The Colombian Financial Superintendency 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 Financial Superintendency 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 Financial Superintendency can also conduct on-site inspections of Colombian financial institutions.

The Colombian Financial Superintendency 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 Financial Superintendency 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.

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The sanctions of SRO can coexist with the sanctions of the Colombian Financial Superintendency. Itaú Corpbanca Colombia and Itaú Asset Management Colombia are members of the SRO and are subject to its regulations.

Normative Projection and Financial Regulation Studies Unit (Unidad de Proyección Normativa y Estudios de Regulación Financiera – URF)

The URF, within the policy framework established by the Colombian Ministry of Finance and Public Credit and without prejudice to the Board of Directors of the Colombian Central Bank, is responsible for the preparation of regulations for the exercise of the power of regulation in exchange matters and monetary, credit, regulation and intervention in financial, stock market, insurance activities and any other activities related to the management, use and investment of the resources captured from the public, for their subsequent issuance by the Colombian government.

Deposit Insurance Fund - FOGAFIN (Fondo de Garantías de Instituciones Financieras)

FOGAFIN is in charge of protecting the savings of citizens deposited in banks, financial corporations, financing companies, and companies specialized in SEDPEs that, by obligation, are registered in FOGAFIN. FOGAFIN is part of the Safety Network of the Colombian Financial System, made up of the Colombian Ministry of Finance and Public Credit, the Colombian Central Bank and the Colombian Financial Superintendency.

To protect the public’s savings and thereby ensure the stability of the financial sector, FOGAFIN applies, if necessary, different support operations to its registered entities to reduce or minimize the adverse effects of crisis situations in the financial system; administers and pays out deposit insurance; and monitors financial entities in possession and in liquidation of such funds.

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 Financial Superintendency 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;

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

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● 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 Financial Superintendency implements a closer supervision on banking activities of the entity based on the supervision policy implemented by the Colombian Financial Superintendency. 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$93,829 million (Ch$20,066 million) for 2018, COP$96,813 million for 2019, COP$100,492 million (Ch$20,503 million) for 2020 and COP$102,110 million (Ch$20,037 million) for 2021. Failure to meet such requirement can result in the relevant financial institution take over (Toma de Posesión) by the Colombian Financial Superintendency. 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).

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

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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$14,353.2 as of December 31, 2020) 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 8% 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 3.5% 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 Financial Superintendency’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 of one year or longer; 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 Financial Superintendency 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 (2018-2020)

On December 28, 2018, the Colombian Government approved a tax reform under Law No. 1943. This tax reform was replaced by Law No. 2010 on December 27, 2019; however, most provisions in Law No. 1943 remain in Law No. 2010. The most relevant features of this reform are the following:

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

					2022 and
	2020		2021		following years
General tax rate	32	%	31	%	30	%
Surcharge(*)	—		—		—
Total	32	%	31	%	30	%

● Financial entities are subject to a corporate income tax rate of 36% in 2020, 34% in 2021 and 33% in 2022, provided that net taxable income amounts to approximately U.S $1.1 million in the corresponding taxable year.However, the Colombian government has announced that the corporate income tax rate for financial entities will maintain at 31% in the new tax reform bill presented to the Colombian Congress in April 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.

● 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 was set at 10% in 2020 and onwards.

● The dividends distributed between Colombian companies were 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 or under a controlled situation (situación de control) 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) applied and 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.

● The percentage of liquid equity to calculate “assumed income” (renta presuntiva) decreased from 3.5% to 0.5% in 2020 and 0% as of 2021.

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

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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.

Moreover, the Colombian Congress enacted Law 2009 of 2019, which provides that financial institutions, including banks, which are authorized to collect public savings and charge management fees for savings accounts, debit cards and credit cards, must grant their clients access to a minimum package of products and services at no additional cost.

Abusive Contract Clauses and Practices

On May 26, 2016, the Colombian Financial Superintendency 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 Financial Superintendency, 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 Financial Superintendency 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 Financial Superintendency 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 Financial Superintendency 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 Financial Superintendency 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.

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Accessibility for People with Disabilities

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

Securities Custodian

On January 26, 2017, the Colombian Ministry of Finance and Public Credit 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.

Moreover, on July 26, 2019, the Colombian Ministry of Finance and Public Credit issued Decree No. 1351, which, among other matters, extends the faculties of the securities custodians so that they can act on behalf of its clients as a securities transfer agent for the management, negotiation and settlement of the operations of temporary transfer of securities (TTVs). The custodian may register transactions in the registration system and will be in charge of the guarantees and the final execution of the transaction. This Decree also allows banks to invest in securities issued by stock exchange funds whose basket is constituted solely of public debt securities issued by the Colombian government.

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

On December 7, 2017, the Colombian Ministry of Finance and Public Credit 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.

In February 2020, the Colombian Ministry of Finance and Public Credit issued Decree 222 of 2020 that modifies Decree 2555 which regulates, among other instruments, low-amount deposits, low-amount credits, correspondents and microcredit. This decree was created to channel resources during the COVID-19 pandemic. One of the features is, among others, that people will be able to open low-amount demand deposits in SEDPEs and cooperatives with specific characteristics of the amount through a simplified procedure.

On April 11, 2020, the Colombian Financial Superintendency issued External Circular No. 15 to impart instructions related to the treatment of resources injected by the Colombian government through SEDPEs within the framework of the Solidarity Income Program. This regulatory instrument was later amended by the External Circular No. 32, to add new instructions related to abusive practices and the automatic debit.

Publication of the Current Banking Interest Rate

Beginning on September 1, 2017, the Colombian Financial Superintendency 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 Financial Superintendency 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 Financial Superintendency 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

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Financial Superintendency 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 Financial Superintendency that is already subject to an equivalent regime of prudential regulation and consolidated supervision.

As a result, the Colombian Ministry of Finance and Public Credit enacted (i) Decree 246 of 2018 to provide criteria to exclude certain entities from the financial conglomerates, (ii) Decree 774 of 2018 to determine appropriate levels of capital for financial conglomerates, and (iii) Decree 1486 of 2018 to establish criteria for determining linked entities, exposure limits, risk concentration and conflicts of interest of financial conglomerates.

In addition, the Colombian Financial Superintendency issued (i) External Circular No. 012 of 2019, regarding appropriate levels of capital for financial conglomerates and (ii) External Circular No. 013 of 2019 giving instructions related to the Risk Management Framework for Financial Conglomerates (Marco de Gestión de Riesgos para los Conglomerados Financieros).

Finally, the CFS issued External Circular No. 030 of 2020, which sets forth rules applicable to related parties, exposure limits and concentration of risks of financial conglomerates. External Circular No.041 of 2020 further modifies existing rules to control aggregate exposure limits and risk concentration between entities of a financial conglomerate and their related parties.

Modification of the Initial Conditions of Credits

On September 29, 2017 the Colombian Financial Superintendency 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 Financial Superintendency 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.

Furthermore, on February 19, 2019, the Colombian Ministry of Finance and Public Credit issued Decree No. 232, amending Decree No. 2555, which provides rules about the election of the members of the board of directors, their duties and the conditions that companies must meet to retire from the mutual fund.

Properties and Investments of Financial Institutions

On November 30, 2017, the Colombian Financial 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.

On December 19, 2019, the Colombian Financial Superintendency modified Chapter XVIII of its Basic Financial Circular to adjust the requirements for the management and measurement of risks associated to transactions in derivative operations and structured products. The financial institutions were required to implement these modifications by December 31, 2020.

In addition, in March and April of 2020, the Colombian Financial Superintendency issued instructions related to the strengthening of operational risk management and the adoption of measures to mitigate negative effects in response to the adverse financial and economic impact of the COVID-19 pandemic.

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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 Financial Superintendency 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 and Public Credit issued Decree No. 521, amending Decree No. 2555, which incorporates a chapter regulating the purchase of assets and assumption of liabilities from credit institutions (Establecimientos de Crédito) under a forced liquidation process.

Access to the Financial System for Former Members of FARC

On April 2, 2018 the Colombian Financial Superintendency 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 and Public Credit issued Decree No. 720, amending Decree No. 2555, regarding the characteristics of the electronic savings accounts.

Capital Adequacy levels for Financial Conglomerates

On May 8, 2018 the Colombian Ministry of Finance and Public Credit 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 Central Bank of Colombia 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 and Public Credit 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 Financial Superintendency 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.

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Cybersecurity and Technology

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

In addition, in 2019, the Colombian Financial Superintendency issued the following regulations: (i) External Circular No. 005, regarding the minimum requirements for the use of cloud services by its supervised entities; (ii) External Circular No. 006, which provides instructions related to safety and quality of operations using QR codes; and (iii) External Circular No. 029, which sets forth the minimum security and quality requirements for carrying out operations, access and information for financial consumers and the use of biometric factors.

In addition, the Colombian Financial Superintendency issued External Circular 033 of 2020 which (i) regulates the minimum requirements for the management of information security and cybersecurity and (ii) defines the single taxonomy for the reporting of cybersecurity incidents by adopting the Traffic Light Protocol (TLP) for the report of cyber incidents to the Colombian regulator.

Capital Adequacy Requirements Amendment

On August 6, 2018 the Colombian Ministry of Finance and Public Credit 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): 1.5% of RWA covered with ordinary primary capital;

● Buffer for entities of systemic importance (Colchón para las Entidades con Importancia Sistémica): 1.0% of RWA covered with ordinary primary capital; and

● Combined Buffer (Colchón Combinado).

In addition, on August 6, 2019, the Colombian Ministry of Finance and Public Credit issued Decree No. 1421, amending Decree No. 2555, regarding capital adequacy requirements by operational risk for credit institutions. This Decree, among other matters, provides a formula for calculating the operational exposure value, using a business indicator (indicador de negocio) multiplied by the coefficient of operational risk (coeficiente de riesgo operacional) and by the internal loss (indicador de pérdida interna).

Financial institutions were required to comply with Decrees No. 1477 and No. 1421 no later than January 1, 2021, except on the matters regarding the additional primary solvency ratio and the buffers, which will have a gradual implementation in a four-year term, from January 2021 until January 2024.

Investments in Companies of Innovation and Financial Technology

On December 27, 2018, the Colombian Ministry of Finance and Public Credit 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.

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Draft Bill Presented to the Colombian Congress for the Modernization of Payment Systems and Capital Markets Development

On March 23, 2021, the Colombian Ministry of Finance and Public Credit presented a bill to the Colombian Congress. The bill was based on the Colombian public policy for a greater development of the financial system between 2020 and 2025 and also in accordance with the recommendations of the 2019 Capital Market Mission. The bill is divided into four major chapters: (i) promote payment systems and financial inclusion; (ii) develop the capital markets; (iii) modernize some subsectors of the financial system and (iv) strengthen the institutional framework of the financial authorities, according to the Ministry of Finance and Public Credit. Thus, it is proposed that there be a single regulator with greater capacities to promote universal, efficient and secure access to payment systems. The Ministry of Finance and Public Credit, with the support of the Financial Regulation Unit (URF), will have a broad authority for this purpose. Likewise, the supervision of payment actors is assigned to the Colombian Financial Superintendency to ensure a homogeneous standard. In addition, it is proposed to update the subsidy dispersal scheme in accordance with the experience acquired during the COVID-19 pandemic, in order to improve the targeting of public policy and make the actions of the Colombian Government more efficient.

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, 2018, 2019 and 2020 has been expressed in Chilean pesos as of December 31, 2020. 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

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).

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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;

● 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

108

● 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, 2018, 2019 and 2020.

	Year Ended December 31,
	2018						2019						2020
			Average		Average				Average		Average				Average		Average
	Average	Interest	Nominal		Real		Average	Interest	Nominal		Real		Average	Interest	Nominal		Real
	Balance	Earned	Rate		Rate		Balance	Earned	Rate		Rate		Balance	Earned	Rate		Rate
	(in millions of Ch$ except for percentages)
INTEREST EARNING ASSETS
Deposits in Central Bank
Ch$	127,534	1,778	1.4	%	(1.2)		93,607	—	—		(2.5)	%	1,326,438	2,708	0.2	%	(2.7)	%
UF	—	—	—		—		—	—	—		(3)	%	—	—	—		—
Foreign currency	8,528	—	—		10.2	%	16,902	—	—		10.2	%	25,104	861	3.4	%	8.2	%
Total	136,062	1,778	1.3	%	(0.5)	%	110,509	—	—	%	(0.6)	%	1,351,542	3,569	0.3	%	(2.5)	%
Financial investments
Ch$	821,238	29,658	3.6	%	1.0	%	1,234,023	36,786	3.0	%	0.4	%	2,082,428	24,088	1.2	%	(1.8)	%
UF	704,707	26,354	3.7	%	1.1	%	537,620	17,979	3.3	%	0.7	%	735,578	22,051	3.0	%	—	%
Foreign currency	1,460,155	64,321	4.4	%	15.0	%	1,057,750	39,888	3.8	%	14.4	%	964,450	32,899	3.4	%	8.2	%
Total	2,986,100	120,333	4.0	%	7.9	%	2,829,393	94,653	3.3	%	5.7	%	3,782,456	79,038	2.1	%	1.1	%
Total loans
Ch$	5,977,972	572,181	9.6	%	6.8	%	6,070,912	553,481	9.1	%	6.4	%	6,456,845	475,776	7.4	%	4.2	%
UF	7,778,882	453,513	5.8	%	3.1	%	8,339,123	476,859	5.7	%	3.0	%	8,911,447	449,809	5.0	%	2.0	%
Foreign currency	7,226,952	582,271	8.1	%	19.1	%	7,829,584	628,795	8.0	%	19.0	%	8,093,776	530,497	6.6	%	11.5	%
Total	20,983,806	1,607,965	7.7	%	9.7	%	22,239,619	1,659,135	7.5	%	9.6	%	23,462,068	1,456,082	6.2	%	5.9	%
Interbank loans
Ch$	116,340	3,372	2.9	%	0.3	%	99,005	2,564	2.6	%	(0.0)	%	84,917	736	0.9	%	(2.1)	%
UF	—	—	—		—		—	—	—	%	—		—	—	—	%	—	%
Foreign currency	87,332	1,642	1.9	%	12.3	%	93,205	1,797	1.9	%	12.3	%	55,626	805	1.4	%	6.2	%
Total	203,672	5,014	2.5	%	5.4	%	192,210	4,361	2.3	%	6.0	%	140,543	1,541	1.1	%	1.2	%
Investment under resale agreements
Ch$	103,654	2,782	2.7	%	0.1	%	64,142	1,451	2.3	%	(0.3)	%	85,353	1,959	2.3	%	(0.7)	%
UF	—	—	—		—		—	—	—	%	—		—	—	—		—
Foreign currency	42,789	2,206	5.2	%	15.9	%	68,774	3,543	5.2	%	15.9	%	63,936	1,608	2.5	%	7.3	%
Total	146,443	4,988	5.2	%	4.7	%	132,916	4,994	3.8	%	8.1	%	149,289	3,567	2.4	%	2.7	%
Other interest earning assets
Ch$	113	—	—		10.2	%	122,904	455	0.4	%	(2.2)	%	229,507	383	0.2	%	(2.8)	%
UF	—	—	—		—		—	—	—	%	—		—	—	—		—
Foreign currency	579,539	(761)	(0.1)	%	10.1	%	845,938	10,042	0.9	%	11.2	%	1,077,850	5,494	0.5	%	5.2	%
Total	579,652	(761)	(0.1)	%	10.1	%	968,842	10,497	1.1	%	9.5	%	1,307,357	5,877	0.4	%	3.8	%
Total interest earning assets
Ch$	7,146,851	609,771	8.5	%	5.8	%	7,684,592	594,737	7.7	%	5.0	%	10,265,488	505,650	4.9	%	1.9	%
UF	8,483,589	479,867	5.7	%	3.0	%	8,876,743	494,838	5.6	%	2.9	%	9,647,025	471,860	4.9	%	1.8	%
Foreign currency	9,405,295	649,679	6.9	%	17.8	%	9,912,152	684,065	6.9	%	17.8	%	10,280,742	572,164	5.6	%	10.5	%
Total	25,035,735	1,739,317	6.9	%	9.4	%	26,473,487	1,773,640	6.7	%	9.1	%	30,193,255	1,549,674	5.1	%	4.8	%

109

	Year Ended December 31,
	2018				2019				2020
			Average	Average			Average	Average			Average	Average
	Average	Interest	Nominal	Real	Average	Interest	Nominal	Real	Average	Interest	Nominal	Real
	Balance	Earned	Rate	Rate	Balance	Earned	Rate	Rate	Balance	Earned	Rate	Rate
	(in millions of Ch$)
NON-INTEREST EARNING ASSETS
Cash
Ch$	474,207	—	—	—	467,947	—	—	—	434,581	—	—	—
UF	—	—	—	—	—	—	—	—	—	—	—	—
Foreign currency	445,823	—	—	—	382,741	—	—	—	306,202	—	—	—
Total	920,030	—	—	—	850,688	—	—	—	740,783	—	—	—
Allowance for loan losses
Ch$	482,567	—	—	—	(428,709)	—	—	—	(551,386)	—	—	—
UF	—	—	—	—	(2,003)	—	—	—	(2,262)	—	—	—
Foreign currency	271,780	—	—	—	(274,929)	—	—	—	(281,992)	—	—	—
Total	754,347	—	—	—	(705,641)	—	—	—	(835,640)	—	—	—
Property, plant and equipment
Ch$	73,524	—	—	—	40,238	—	—	—	35,482	—	—	—
UF	—	—	—	—	—	—	—	—	—	—	—	—
Foreign currency	37,100	—	—	—	16,340	—	—	—	21,137	—	—	—
Total	110,624	—	—	—	56,578	—	—	—	56,619	—	—	—
Derivatives
Ch$	892,914	—	—	—	1,473,720	—	—	—	2,738,668	—	—	—
UF	71,759	—	—	—	219,004	—	—	—	361,193	—	—	—
Foreign currency	311,364	—	—	—	472,664	—	—	—	1,211,278	—	—	—
Total	1,276,037	—	—	—	2,165,388	—	—	—	4,311,139	—	—	—
Other assets
Ch$	2,098,272	—	—	—	2,029,886	—	—	—	1,713,607	—	—	—
UF	13,324	—	—	—	161,027	—	—	—	64,946	—	—	—
Foreign currency	521,334	—	—	—	728,780	—	—	—	1,097,310	—	—	—
Total	2,632,930	—	—	—	2,919,693	—	—	—	2,875,863	—	—	—
Total non-interest earning assets
Ch$	3,056,349	—	—	—	3,583,082	—	—	—	4,370,952	—	—	—
UF	85,083	—	—	—	378,028	—	—	—	423,877	—	—	—
Foreign currency	1,043,840	—	—	—	1,325,597	—	—	—	2,353,935	—	—	—
Total	4,185,272	—	—	—	5,286,707	—	—	—	7,148,764	—	—	—
Total assets
Ch$	10,203,200	609,771	—	—	11,267,674	594,737	—	—	14,636,440	505,650	—	—
UF	8,568,672	479,867	—	—	9,254,771	494,838	—	—	10,070,902	471,860	—	—
Foreign currency	10,449,134	649,679	—	—	11,237,749	684,065	—	—	12,634,677	572,164	—	—
Total	29,221,006	1,739,317	—	—	31,760,194	1,773,640	—	—	37,342,019	1,549,674	—	—

110

	Year Ended December 31,
	2018						2019						2020
			Average		Average				Average		Average				Average		Average
	Average	Interest	Nominal		Real		Average	Interest	Nominal		Real		Average	Interest	Nominal		Real
	Balance	Paid	Rate		Rate		Balance	Paid	Rate		Rate		Balance	Paid	Rate		Rate
	(in millions of Ch$ except for percentages)
LIABILITIES AND EQUITY
INTEREST BEARING LIABILITIES
Time Deposits
Ch$	6,171,595	184,021	3.0	%	0.4	%	6,982,682	207,951	3.0	%	0.4	%	8,417,414	140,558	1.7	%	(0.9)	%
UF	639,980	40,755	6.4	%	3.7	%	430,140	24,087	5.6	%	2.9	%	403,581	23,615	5.9	%	3.2	%
Foreign currency	3,285,676	160,958	4.9	%	15.6	%	3,199,175	145,052	4.5	%	9.8	%	3,374,784	103,309	3.1	%	8.3	%
Total	10,097,251	385,734	3.8	%	5.5	%	10,611,997	377,090	3.6	%	3.3	%	12,195,779	267,482	2.2	%	1.8	%
Central Bank borrowings
Ch$	—	—	—		—		—	—	—		—		1,539,759	7,162	0.5	%	(2.1)	%
UF	—	—	—		—		—	—	—		—		—	—	—		—
Foreign currency	—	—	—		—		—	—	—		—		—	—	—		—
Total	—	—	—		—		—	—	—		—		1,539,759	7,162	0.5	%	(2.1)	%
Repurchase agreements
Ch$	281,691	7,546	2.7	%	0.1	%	373,437	9,226	2.5	%	(0.1)	%	409,857	3,204	0.8	%	(1.8)	%
UF	—	4	—		—		—	—	—		—		—	—	—		—
Foreign currency	524,532	22,114	4.2	%	14.8	%	342,753	17,123	5.0	%	10.3	%	188,347	5,418	2.9	%	8.1	%
Total	806,223	29,664	3.7	%	9.7	%	716,190	26,349	3.7	%	4.9	%	598,204	8,622	1.4	%	1.3	%
Mortgage finance bonds
Ch$	—	—	—		—		—	—	—		—		—	—	—		—
UF	58,939	2,963	5.0	%	2.4	%	45,598	1,993	4.4	%	1.3	%	34,536	1,262	3.7	%	0.6	%
Foreign currency	—	—	—		—		—	—	—		—		—	—	—		—
Total	58,939	2,963	5.0	%	2.4	%	45,598	1,993	4.4	%	1.3	%	34,536	1,262	3.7	%	0.6	%
Bonds
Ch$	567,496	61,589	10.9	%	8.0	%	631,821	66,052	10.5	%	7.2	%	839,586	60,282	7.2	%	4.1	%
UF	4,232,986	209,261	4.9	%	2.3	%	4,760,456	222,959	4.7	%	1.6	%	4,761,392	188,066	3.9	%	0.9	%
Foreign currency	989,060	48,439	4.9	%	15.6	%	965,401	51,469	5.3	%	10.2	%	757,911	42,379	5.6	%	10.5	%
Total	5,789,542	319,289	5.5	%	5.1	%	6,357,678	340,480	5.4	%	3.5	%	6,358,889	290,727	4.6	%	2.5	%
Other interest bearing liabilities
Ch$	1,623,176	7,596	0.5	%	(2.1)	%	1,784,255	(4,414)	(0.2)	%	(3.2)	%	2,236,779	8,195	0.4	%	(2.6)	%
UF	15,607	4,833	31.0	%	27.6	%	3,622	6,216	171.6	%	163.7	%	121,987	330	0.3	%	(2.7)	%
Foreign currency	3,130,676	101,575	3.2	%	13.8	%	3,319,744	125,508	3.8	%	8.6	%	3,600,564	99,457	2.8	%	7.5	%
Total	4,769,459	114,004	2.4	%	8.4	%	5,107,621	127,310	2.5	%	4.6	%	5,959,330	107,982	1.8	%	3.5	%
Total interest bearing liabilities
Ch$	8,643,958	260,752	3.0	%	0.4	%	9,772,195	278,815	2.9	%	(0.1)	%	13,443,396	219,401	1.6	%	(1.3)	%
UF	4,947,511	257,816	5.2	%	2.5	%	5,239,816	255,255	4.9	%	1.8	%	5,321,495	213,273	4.0	%	1.0	%
Foreign currency	7,929,943	333,086	4.2	%	14.8	%	7,827,072	339,152	4.3	%	9.2	%	7,921,605	250,563	3.2	%	7.9	%
Total	21,521,412	851,654	4.0	%	6.2	%	22,839,083	873,222	3.8	%	3.5	%	26,686,496	683,237	2.6	%	1.9	%

111

	Year Ended December 31,
	2018				2019				2020
			Average	Average			Average	Average			Average	Average
	Average	Interest	Nominal	Real	Average	Interest	Nominal	Real	Average	Interest	Nominal	Real
	Balance	Paid	Rate	Rate	Balance	Paid	Rate	Rate	Balance	Paid	Rate	Rate
	(in millions of Ch$)
NON-INTEREST EARNING LIABILITIES
Non-interest-bearing demand deposits
Ch$	657,388	—	—	—	663,099	—	—	—	680,483	—	—	—
UF	6,053	—	—	—	3,441	—	—	—	5,294	—	—	—
Foreign currency	1,670,808	—	—	—	1,655,539	—	—	—	1,831,418	—	—	—
Total	2,334,249	—	—	—	2,322,079	—	—	—	2,517,195	—	—	—
Derivatives
Ch$	755,182	—	—	—	1,342,427	—	—	—	2,582,756	—	—	—
UF	91,479	—	—	—	270,407	—	—	—	449,618	—	—	—
Foreign currency	241,447	—	—	—	463,213	—	—	—	1,288,305	—	—	—
Total	1,088,108	—	—	—	2,076,047	—	—	—	4,320,679	—	—	—
Other non-interest-bearing
Ch$	381,290	—	—	—	405,178	—	—	—	368,659	—	—	—
UF	145,879	—	—	—	282,031	—	—	—	234,737	—	—	—
Foreign currency	259,246	—	—	—	249,556	—	—	—	338,847	—	—	—
Total	786,415	—	—	—	936,765	—	—	—	942,243	—	—	—
Equity
Ch$	3,340,551	—	—	—	3,421,657	—	—	—	2,636,110	—	—	—
UF	117,620	—	—	—	113,112	—	—	—	126,645	—	—	—
Foreign currency	32,650	—	—	—	51,451	—	—	—	112,651	—	—	—
Total	3,490,821	—	—	—	3,586,220	—	—	—	2,875,406	—	—	—
Total non-interest-bearing liabilities and shareholders’ equity
Ch$	5,134,412	—	—	—	5,832,361	—	—	—	6,268,008	—	—	—
UF	361,030	—	—	—	668,991	—	—	—	816,294	—	—	—
Foreign currency	2,204,151	—	—	—	2,419,759	—	—	—	3,571,221	—	—	—
Total	7,699,593	—	—	—	8,921,111	—	—	—	10,655,523	—	—	—
Total liabilities and equity(1)
Ch$	13,778,370	260,752	—	—	15,604,556	278,815	—	—	19,711,404	219,401	—	—
UF	5,308,542	257,816	—	—	5,908,807	255,255	—	—	6,137,789	213,273	—	—
Foreign currency	10,134,094	333,086	—	—	10,246,831	339,152	—	—	11,492,826	250,563	—	—
Total	29,221,006	851,654	—	—	31,760,194	873,222	—	—	37,342,019	683,237	—	—

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

112

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,
	2018		2019		2020
	(in millions of Ch$
	except for percentages)
Total average interest earning assets
Ch$	7,146,851		7,684,592		10,265,488
UF	8,483,589		8,876,743		9,647,025
Foreign currency	9,405,295		9,912,152		10,280,742
Total	25,035,735		26,473,487		30,193,255
Net interest earned(1)
Ch$	349,019		315,922		286,249
UF	222,051		242,101		258,587
Foreign currency	316,593		342,395		321,601
Total	887,663		900,418		866,437
Net interest margin, nominal basis(2)
Ch$	4.9	%	4.1	%	2.8	%
UF	2.6	%	2.7	%	2.7	%
Foreign currency	3.4	%	3.5	%	3.1	%
Total	3.5	%	3.4	%	2.9	%

(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 2018 to 2019 and 2019 to 2020.

113

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.

	Increase (Decrease)
	from 2018 to 2019 due to changes in
			Net Change
			from 2018
	Volume	Rate	to 2019
	(in millions of Ch$)
ASSETS
INTEREST EARNING ASSETS
Deposits in Central Bank
Ch$	(473)	(1,305)	(1,778)
UF	—	—	—
Foreign currency	—	—	—
Total	(473)	(1,305)	(1,778)
Financial Investments
Ch$	14,907	(7,779)	7,128
UF	(6,249)	(2,126)	(8,375)
Foreign currency	(17,726)	(6,707)	(24,433)
Total	(9,068)	(16,612)	(25,680)
Total Loans
Ch$	8,896	(27,596)	(18,700)
UF	32,662	(9,316)	23,346
Foreign currency	48,554	(2,030)	46,524
Total	90,112	(38,942)	51,170
Interbank Loans
Ch$	(502)	(306)	(808)
UF	—	—	—
Foreign currency	110	45	155
Total	(392)	(261)	(653)
Investment under resale agreements
Ch$	(1,060)	(271)	(1,331)
UF	—	—	—
Foreign currency	1,340	(3)	1,337
Total	280	(274)	6
Other interest earning assets
Ch$	—	455	455
UF	—	—	—
Foreign currency	(350)	11,153	10,803
Total	(350)	11,608	11,258
Total interest earning assets
Ch$	21,768	(36,802)	(15,034)
UF	26,413	(11,442)	14,971
Foreign currency	31,928	2,458	34,386
Total	80,109	(45,786)	34,323

114

	Increase (Decrease)
	from 2018 to 2019 due to changes in
			Net change
			from 2018
	Volume	Rate	to 2019
	(in millions of Ch$)
LIABILITIES AND SHAREHOLDERS’ EQUITY INTEREST BEARING LIABILITIES
Time deposits
Ch$	24,185	(255)	23,930
UF	(13,363)	(3,305)	(16,668)
Foreign currency	(4,238)	(11,668)	(15,906)
Total	6,584	(15,228)	(8,644)
Central Bank borrowings
Ch$	—	—	—
UF	—	—	—
Foreign currency	—	—	—
Total	—	—	—
Repurchase agreements
Ch$	2,458	(778)	1,680
UF	—	—	—
Foreign currency	(7,665)	2,670	(4,995)
Total	(5,207)	1,892	(3,315)
Mortgage finance bonds
Ch$	—	—	—
UF	(671)	(299)	(970)
Foreign currency	—	—	—
Total	(671)	(299)	(970)
Bonds
Ch$	6,981	(2,518)	4,463
UF	26,076	(12,378)	13,698
Foreign currency	(1,159)	4,189	3,030
Total	31,898	(10,707)	21,191
Other interest bearing liabilities
Ch$	754	(12,764)	(12,010)
UF	(3,711)	5,094	1,383
Foreign currency	6,134	17,799	23,933
Total	3,177	10,129	13,306
Total interest bearing liabilities
Ch$	34,378	(16,315)	18,063
UF	8,331	(10,888)	(2,557)
Foreign currency	(6,928)	12,990	6,062
Total	35,781	(14,213)	21,568

115

	Increase (Decrease)
	from 2019 to 2020 due to changes in
			Net Change
			from 2019
	Volume	Rate	to 2020
	(in millions of Ch$)
ASSETS
INTEREST EARNING ASSETS
Deposits in Central Bank
Ch$	—	2,708	2,708
UF	—	—	—
Foreign currency	—	861	861
Total	—	3,569	3,569
Financial Investments
Ch$	25,291	(37,989)	(12,698)
UF	6,620	(2,548)	4,072
Foreign currency	(3,518)	(3,471)	(6,989)
Total	28,393	(44,008)	(15,615)
Total Loans
Ch$	35,185	(112,890)	(77,705)
UF	32,727	(59,777)	(27,050)
Foreign currency	21,217	(119,515)	(98,298)
Total	89,129	(292,182)	(203,053)
Interbank Loans
Ch$	(365)	(1,463)	(1,828)
UF	—	—	—
Foreign currency	(725)	(267)	(992)
Total	(1,090)	(1,730)	(2,820)
Investment under resale agreements
Ch$	480	28	508
UF	—	—	—
Foreign currency	(249)	(1,686)	(1,935)
Total	231	(1,658)	(1,427)
Other interest earning assets
Ch$	395	(467)	(72)
UF	—	—	—
Foreign currency	2,753	(7,301)	(4,548)
Total	3,148	(7,768)	(4,620)
Total interest earning assets
Ch$	60,986	(150,073)	(89,087)
UF	39,347	(62,325)	(22,978)
Foreign currency	19,478	(131,379)	(111,901)
Total	119,811	(343,777)	(223,966)

116

	Increase (Decrease)
	from 2019 to 2020 due to changes in
			Net Change
			from 2019
	Volume	Rate	to 2020
	(in millions of Ch$)
LIABILITIES AND SHAREHOLDERS’ EQUITY
INTEREST BEARING LIABILITIES
Time deposits
Ch$	42,728	(110,121)	(67,393)
UF	(1,487)	1,015	(472)
Foreign currency	7,962	(49,705)	(41,743)
Total	49,203	(158,811)	(109,608)
Central Bank borrowings
Ch$	—	7,162	7,162
UF	—	—	—
Foreign currency	—	—	—
Total	—	7,162	7,162
Repurchase agreements
Ch$	900	(6,922)	(6,022)
UF	—	—	—
Foreign currency	(7,714)	(3,991)	(11,705)
Total	(6,814)	(10,913)	(17,727)
Mortgage finance bonds
Ch$	—	—	—
UF	(484)	(247)	(731)
Foreign currency	—	—	—
Total	(484)	(247)	(731)
Bonds
Ch$	21,720	(27,490)	(5,770)
UF	44	(34,937)	(34,893)
Foreign currency	(11,062)	1,972	(9,090)
Total	10,702	(60,455)	(49,753)
Other interest bearing liabilities
Ch$	(1,119)	13,728	12,609
UF	203,135	(209,021)	(5,886)
Foreign currency	10,617	(36,668)	(26,051)
Total	212,633	(231,961)	(19,328)
Total interest bearing liabilities
Ch$	64,229	(123,643)	(59,414)
UF	201,208	(243,190)	(41,982)
Foreign currency	(197)	(88,392)	(88,589)
Total	265,240	(455,225)	(189,985)

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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,
	2018		2019		2020
	(in millions of Ch$, except for percentages)
Net income (loss)	166,854		124,522		(826,155)
Net income (loss) attributable to equity holders of the Bank	171,331		113,684		(808,784)
Average total assets	29,221,006		31,760,194		37,342,019
Average equity	3,490,821		3,586,220		2,875,406
Net income (loss) as a percentage of:
Average total assets	0.57	%	0.39	%	(2.24)	%
Average equity	4.78	%	3.47	%	(29.18)	%
Average equity as a percentage of:
Average total assets	11.95	%	11.29	%	7.69	%
Annual cash dividend	22,979		51,614		127,065
Dividend payout ratio, based on net income attributable to shareholders under local GAAP	40.00	%	30.00	%	100.00	%

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.

Financial investments as of December 31, 2018, 2019 and 2020 are as follows:

	As of December 31,
	2018	2019	2020
	(in millions of Ch$)
Financial Instruments at Fair Value Through Profit or Loss
Chilean Central Bank and Government securities:
Chilean Central Bank securities	21,736	52,019	21,369
Other Chilean Central Bank and Government securities	14,872	28,879	86,673
Other national institution securities:
Bonds	3	905	271
Notes	—	—	—
Other securities	4,014	22,218	—
Foreign institution securities:
Bonds	23,276	67,088	432,178
Notes	—	—	—
Other securities	19,505	4,390	4,861
Mutual funds investments
Funds managed by related organizations	3,532	5,870	35,017
Funds managed by third parties	10,005	33	—
Other investments
Other financial instruments at FVTPL	—	2,300	2,341
Total	96,943	183,702	582,710

118

	As of December 31,
	2018	2019	2020
	(in millions of Ch$)
Financial Instruments at Fair Value Through Other Comprehensive Income
Chilean Central Bank and Government securities
Chilean Central Bank and Government securities	411,431	477,900	1,170,841
Chilean Treasury bonds	913,041	1,609,397	1,783,765
Other Government securities	27,612	86,981	101,573
Other financial instruments
Promissory notes related to deposits in local banks	185,501	412,962	14,856
Chilean mortgage finance bonds	50	41	30
Chilean financial institutions bonds	—	118,583	277,163
Other local investments	5,979	—	—
Financial instruments issued abroad
Foreign government and central banks instruments	769,693	165,927	217,185
Other foreign investments	332,560	716,423	394,691
Impairment provision	—	—	—
Unquoted securities in active markets
Chilean corporate bonds	4,909	—	—
Other investments	6,378	10,676	10,795
Impairment provision	—	—	—
Total	2,657,154	3,598,890	3,970,899

	As of December 31,
	2018	2019	2020
	(in millions of Ch$)
Financial Instruments at Amortized Cost
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	—	—	—
Other foreign investments	198,923	115,658	111,542
Impairment provision	—	—	—
Unquoted securities in active markets
Chilean corporate bonds	—	—	—
Other investments	—	—	—
Impairment provision	—	—	—
Total	198,923	115,658	111,542

We do not hold securities of any issuer other than the Central Bank of Chile, the Chilean Treasury, and the Colombian Ministry of Finance and Public Credit, 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.

119

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, 2020:

			After		After
			one		five
		Weighted	year	Weighted	years	Weighted		Weighted
	In one	average	through	average	through	average	After	average
	year or	Nominal	five	Nominal	ten	Nominal	ten	Nominal
	less	Rate	years	Rate	years	Rate	years	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	21,369	8.29%	—	—	—	—	—	—	21,369
Chilean Central Bank notes	—	0.00%	—	—	—	—	—	—	—
Others Government securities	86,318	33.48%	—	—	355	3.33%	—	—	86,673
Other national institution securities:
Bonds	267	0.10%	—	—	—	—	4	100%	271
Notes	—	0.00%	—	—	—	—	—	—	—
Other securities	—	0.00%	—	—	—	—	—	—	—
Other local investments	—	0.00%	—	—	—	—	—	—	—
Foreign institution securities:
Bonds	110,422	42.83%	314,215	100%	7,541	70.69%	—	—	432,178
Notes	—	0.00%	—	—	—	—	—	—	—
Other securities	2,089	0.81%	—	—	2,772	25.98%	—	—	4,861
Mutual fund investments:
Funds managed by related organizations	35,017	13.58%	—	—	—	25.98%	—	—	35,017
Funds managed by third parties	—	0.00%	—	—	—	—	—	—	—
Other investments:						—			—
Other trading investments	2,341	13.58%	—	—	—	—	—	—	2,341
Total	257,823	32.21%	314,215	100%	10,668	56.83%	4	100%	582,710

120

		Weighted	After	Weighted	After five	Weighted		Weighted
	In one	average	one year	average	years	average		average
	year or	Nominal	through	Nominal	through	Nominal	After ten	Nominal
	less	Rate	five years	Rate	ten years	Rate	years	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	1,169,788	68.62%	1,053	—	—	—	—	—	1,170,841
Chilean Treasury bonds	251,280	14.74%	1,302,784	65.78%	203,009	81.82%	26,692	100%	1,783,765
Others Government securities	26,872	1.58%	31,479	1.59%	43,222	17.42%	—	—	101,573
Other financial instruments:
Promissory notes related to deposits in local banks	14,856	0.87%	—	—	—	—	—	—	14,856
Chilean mortgage finance bonds	—	—	30	—	—	—	—	—	30
Chilean financial institution bonds	90,969	5.34%	186,194	9.40%	—	—	—	—	277,163
Other local investments	—	—	—	—	—	—	—	—	—
Financial instruments issued abroad:
Foreign Government and central bank instruments	25,685	1.51%	191,500	9.67%	—	—	—	—	217,185
Other foreign investments	125,297	7.35%	267,523	13.51%	1,871	0.75%	—	—	394,691
Impairment provision	—	—	—	—	—	—	—	—	—
Unquoted securities in active markets
Chilean corporate bonds	—	—	—	—	—	—	—	—	—
Other foreign investments	—	—	—	—	—	—	—	—	—
Impairment provision	—	—	—	—	—	—	—	—	—
Other investment	10,795	—	—	—	—	—	—	—	10,795
Total	1,715,542	49.83%	1,980,563	46.94%	248,102	69.99%	26,692	100%	3,970,899

121

			After
			one		After
		Weighted	year	Weighted	five	Weighted		Weighted
		average	through	average	years	average		average
	Within	Nominal	five	Nominal	through	Nominal	After ten	Nominal
	one year	Rate	years	Rate	ten years	Rate	years	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	—	—	—	—	—	—	—	—	—
Financial instruments issued abroad:
Foreign government and central bank instruments	—	—	—	—	—	—	—	—	—
Other foreign investments	111,542	1.0%	—	—	—	—	—	—	111,542
Impairment provision	—	—	—	—	—	—	—	—	—
Unquoted securities in active markets
Chilean corporate bonds	—	—	—	—	—	—	—	—	—
Other foreign investments	—	—	—	—	—	—	—	—	—
Other investment	—	—	—	—	—	—	—	—	—
Impairment provision	—	—	—	—	—	—	—	—	—
Total	111,542	1.0%	—	—	—	—	—	—	111,542

122

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, 2019 and 2020, our loan portfolio refers to loans and accounts receivable from customers at amortized cost.

	As of December 31,
	2018	2019	2020
Commercial loans:
Commercial loans	11,457,388	12,288,810	12,172,207
Foreign trade loans	928,443	1,109,169	847,086
Checking account debtors	131,100	154,276	70,126
Factoring operations	210,567	221,104	155,540
Student loans	676,689	654,721	594,688
Leasing transactions	928,160	1,005,209	940,989
Other loans and receivables	34,553	27,255	28,163
Subtotals	14,366,900	15,460,544	14,808,799
Mortgage loans:
Letters of credit loans	38,364	30,269	23,345
Endorsable mutual mortgage loans	118,668	103,850	90,456
Other mutual mortgage loans	3,953,245	4,384,547	4,820,863
Leasing transactions	312,118	336,587	307,574
Other loans and receivables	23,432	20,788	74,515
Subtotals	4,445,827	4,876,041	5,316,753
Consumer loans:
Consumer loans	1,921,785	2,005,038	1,866,015
Checking account debtors	209,492	206,738	124,009
Credit card debtors	481,567	537,741	467,624
Consumer leasing transactions	6,203	3,113	1,467
Other loans and receivables	50,716	45,599	33,314
Subtotals	2,669,763	2,798,229	2,492,429
Loans	21,482,490	23,134,814	22,617,981
Loans and receivables from Banks	341,707	56,635	7,131
Total	21,824,197	23,191,449	22,625,112

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.

123

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

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.

124

The balances of the renegotiated mortgage loans as of December 31 2018, 2019 and 2020 were as follows:

	As of December 31,
	2018	2019	2020
	(in millions of Ch$)
Opening balance(1)	10,933	11,112	12,080
Integration Itaú Corpbanca	—	—	—
Renegotiated(2)	2,779	3,437	4,021
Recovery(3)	(2,567)	(2,450)	(3,010)
Write-offs(4)	(33)	(19)	(198)
Final balance	11,112	12,080	12,893

(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.

125

The balances of the renegotiated consumer loans as of December 31, 2018, 2019 and 2020 were as follows:

	As of December 31,
	2018	2019	2020
	(in millions of Ch$)
Opening balance(1)	150,707	186,320	236,689
Integration Itaú Corpbanca	—	—	—
Renegotiated(2)	48,318	90,687	133,404
Recovery(3)	(14,937)	(47,159)	(42,103)
Write-offs(4)	2,232	6,841	5,090
Final balance	186,320	236,689	333,080

(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.

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, the normative criteria is defined by the CMF, i.e. the delinquency of such loans must be for at least four consecutive months with less than 90 days past due, but in the case of IFRS 9, we use an internal criteria, where a renegotiated loan must be in stage three for at least four months after being impaired in order to be cured.

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.

126

The wholesale remedial management unit (Normalización Mayorista) managed a deteriorated exposure (internal classification of B3 or worse) of over Ch$415,039 million in 2020.

	As of December 31,
	2018	2019	2020
	(in millions of Ch$)
Opening balance(1)	492,535	443,042	459,259
Integration Itaú Corpbanca	—	—	—
Additions to normalization portfolio(2)	57,184	137,814	129,626
Recovery(3)	(61,078)	(60,149)	(86,067)
Write-offs(4)	(45,599)	(61,448)	(45,576)
Final balance(5)	443,042	459,259	457,242

(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).

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.

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.

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Risk Index of Our Loan Portfolio

The risk index is calculated as ratio of the allowance for loan losses over total loans. 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, 2018, 2019, and 2020 was 3.4%, 3.5% and 5.0% 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.

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.

Mortgage loans. The risk index of our residential mortgage loans as of December 31, 2018, 2019 and 2020 was 1.5%, 1.6% and 1.4%, respectively.

Consumer loans. The risk index of our consumer loans as of December 31, 2018, 2019 and 2020 was 8.1%, 9.2% and 8.9%, 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.

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Our Risk Index (calculated using general ledger balances and applying IFRS 9) as of December 31, 2018 and 2019 was:

RISK INDEX

					% Change
	As of December 31,				from
	2018		2019		2019/2018
	(in millions of Ch$
	except for percentages)
Total loans	21,482,490		23,134,814		7.7	%
Commercial loans	14,366,900		15,460,544		7.6	%
Mortgage loans	4,445,827		4,876,041		9.7	%
Consumer loans	2,669,763		2,798,229		4.8	%
Allowances for loan losses(1)	768,120		880,117		14.6	%
Commercial loans	484,707		545,199		12.5	%
Mortgage loans	66,117		78,501		18.7	%
Consumer loans	217,296		256,417		18.0	%
Allowances for loan losses as a percentage of total loans(1)	3.6	%	3.8	%	5.6	%
Commercial loans	3.4	%	3.5	%	2.9	%
Mortgage loans	1.5	%	1.6	%	6.7	%
Consumer loans	8.1	%	9.2	%	13.6	%

(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.

During 2019, our loan portfolio and, consequently, our allowances for loan losses, were negatively impacted by (i) specific cases in the wholesale segment (one in Chile and one in Colombia); (ii) a higher provisioning level for wholesale and retail clients related to social unrest events in Chile; and (iii) a negative impact on our loan loss provisions associated with loans in foreign currency due to the greater depreciation of the Chilean and Colombian pesos against the U.S. dollar. This decrease was partially offset by a financial hedge that is accounted for in our net income from financial operations.

Our loan portfolio increased 7.7% in 2019, primarily due to both a sound performance in commercial loans and a positive growth trend in our mortgages and consumer loan portfolios (9.7% and 4.8%, respectively). Our mortgage loans, which is the business unit with the lowest level of risk, increased from Ch$4,445,827 million in 2018 to Ch$4,876,041 million in 2019 and our consumer loans, the business unit with the highest level of risk, increased from Ch$2,669,763 million in 2018 to Ch$2,798,229 million in 2019. As of December 31, 2019, commercial loans, mortgage loans and consumer loans represented 66.8%, 21.1% and 12.1% of our total loan portfolio, respectively.

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Our Risk Index (calculated using general ledger balances and applying IFRS 9) as of December 31, 2019 and 2020 was:

RISK INDEX

					% Change
	As of December 31,				from
	2019		2020		2020/2019
	(in millions of Ch$
	except for percentages)
Total loans	23,134,814		22,617,981		(2.2)	%
Commercial loans	15,460,544		14,808,799		(4.2)	%
Mortgage loans	4,876,041		5,316,753		9.0	%
Consumer loans	2,798,229		2,492,429		(10.9)	%
Allowances for loan losses	880,117		1,041,873		18.4	%
Commercial loans	545,199		747,617		37.1	%
Mortgage loans	78,501		73,465		(6.4)	%
Consumer loans	256,417		220,791		(13.9)	%
Allowances for loan losses as a percentage of total loans	3.8	%	4.6	%	21.1	%
Commercial loans	3.5	%	5.0	%	42.9	%
Mortgage loans	1.6	%	1.4	%	(12.5)	%
Consumer loans	9.2	%	8.9	%	(3.3)	%

During 2020, our loan portfolio and, consequently, our allowances for loan losses, were negatively impacted by the adverse economic impact of the COVID-19 pandemic.

Our loan portfolio decreased 2.2% in 2020, primarily due to the decrease in our Colombian portfolio, which in turn was mainly the result of a 9% devaluation of the COP / CLP exchange rate. Excluding the effect of the exchange variation, at the end of 2020, the most impacted businesses were commercial and consumer lines in Chile. Our mortgage loans, which is the business unit with the lowest level of risk, performed well in both countries, increasing from Ch$4,876,041 million in 2019 to Ch$5,316,753 million in 2020 and our consumer loans, the business unit with the highest level of risk, decreased from Ch$2,798,229 million in 2019 to Ch$2,492,429 million in 2020. As of December 31, 2020, commercial loans, mortgage loans and consumer loans represented 65.5%, 23.5% and 11.0% of our total loan portfolio, respectively.

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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, 2020:

		Due after
		1 year		Balance as of
	Due in 1	through	Due after	December 31,
	year	5 years	5 years	2020
	(in millions of Ch$ as of December 31, 2020)
Commercial loans	3,710,592	3,935,586	4,526,029	12,172,207
Foreign trade loans	440,214	236,233	170,639	847,086
Checking account debtors	70,126	—	—	70,126
Factoring operations	155,488	52	—	155,540
Student loans	267	8,738	585,683	594,688
Leasing transactions	49,214	390,428	501,347	940,989
Other loans and receivables	26,877	1,286	—	28,163
Subtotals	4,452,778	4,572,323	5,783,698	14,808,799
Letters of credit loans	113	9,035	14,197	23,345
Endorsable mutual mortgage loans	222	5,697	84,537	90,456
Other mutual mortgage loans	3,555	122,807	4,694,501	4,820,863
Leasing transactions	1,160	12,603	293,811	307,574
Other loans and receivables	10	796	73,709	74,515
Subtotals	5,060	150,938	5,160,755	5,316,753
Consumer loans	92,341	1,362,951	410,723	1,866,015
Checking account debtors	124,009	—	—	124,009
Credit card debtors	429,379	38,236	9	467,624
Consumer leasing transactions	360	1,107	—	1,467
Other loans and receivables	33,126	—	188	33,314
Subtotals	679,215	1,402,294	410,920	2,492,429
Subtotal loans				22,617,981
Loans and receivables to banks				7,131
Total loans				22,625,112

The following table presents the interest rate analysis of our outstanding loans due after one year as of December 31, 2020.

	As of December 31, 2020
Variable interest rate
Ch$	1,768,960
UF	2,360,061
Ch$ indexed to US$	—
Foreign currency	2,842,070
Subtotal	6,971,091
Fixed interest rate
Ch$	2,599,176
UF	5,757,819
Ch$ indexed to US$	5,989
Foreign currency	2,146,853
Subtotal	10,509,837
Total	17,480,928

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The following table sets forth an analysis of our foreign loans by type and time remaining to maturity as of December 31, 2020:

	Due in 1
	year	Due after 1 year	Due after 5
2020	or less	through 5 years	year	Total
	(in millions of Ch$ as of December 31, 2020)
Commercial loans	5,336	40,450	—	45,786
Foreign loans (*)	1,302,164	1,797,162	1,989,282	5,088,608
Total	1,307,500	1,837,612	1,989,282	5,134,394

^(*)    Includes commercial, mortgage and consumer loans.

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, 2019 and 2020 refer to loans and accounts receivable from customers at amortized cost:

Loans by Economic Activity

										Distribution
	Domestic Loans as of			Foreign Loans as of			Total Loans as of			percentage as of
	December 31,			December 31,			December 31,			December 31,
	2018	2019	2020	2018	2019	2020	2018	2019	2020	2018		2019		2020
Loans by Economic Activity
Manufacturing	982,497	988,739	973,913	114,714	111,000	87,253	1,097,211	1,099,739	1,061,166	5.11	%	4.75	%	4.69%	%
Mining and Petroleum	424,883	292,263	336,354	252,894	259,352	198,635	677,777	551,615	534,989	3.16	%	2.38	%	2.37%	%
Electricity, Gas and Water	600,667	685,749	694,970	356,706	439,792	404,875	957,373	1,125,541	1,099,845	4.46	%	4.87	%	4.86%	%
Agriculture and Livestock	207,271	309,648	328,563	139,098	174,295	166,191	346,369	483,943	494,754	1.61	%	2.09	%	2.19%	%
Forestry and wood extraction	24,511	48,192	51,348	5,172	5,136	4,674	29,683	53,328	56,022	0.14	%	0.23	%	0.25%	%
Fishing	1,945	42,397	31,461	1,530	4,505	4,273	3,475	46,902	35,734	0.02	%	0.20	%	0.16%	%
Transport and storage	509,354	478,737	498,450	191,047	80,534	88,563	700,401	559,271	587,013	3.26	%	2.42	%	2.60%	%
Communications	23,886	25,209	52,911	62,191	9,717	3,254	86,077	34,926	56,165	0.40	%	0.15	%	0.25%	%
Construction	1,436,096	1,757,874	1,536,686	310,530	348,955	300,997	1,746,626	2,106,829	1,837,683	8.13	%	9.11	%	8.12%	%
Commerce	861,291	1,439,969	1,618,660	758,817	689,210	592,492	1,620,108	2,129,179	2,211,152	7.54	%	9.20	%	9.78%	%
Services	2,735,023	2,864,307	2,761,121	1,137,037	1,080,264	839,930	3,872,060	3,944,571	3,601,051	18.02	%	17.05	%	15.92%	%
Others	2,436,337	2,275,275	2,207,936	793,403	1,049,425	1,025,289	3,229,740	3,324,700	3,233,225	15.03	%	14.37	%	14.30%	%
Subtotal Commercial Loans	10,243,761	11,208,359	11,092,373	4,123,139	4,252,185	3,716,426	14,366,900	15,460,544	14,808,799	66.88	%	66.82	%	0.65	%
Mortgage Loans(1)	3,852,962	4,211,094	4,684,980	592,865	664,947	631,773	4,445,827	4,876,041	5,316,753	20.70	%	21.08	%	23.51%	%
Consumer Loans(1)	1,750,986	1,923,745	1,706,234	918,777	874,484	786,195	2,669,763	2,798,229	2,492,429	12.43	%	12.10	%	11.02%	%
Total	15,847,709	17,343,198	17,483,587	5,634,781	5,791,616	5,134,394	21,482,490	23,134,814	22,617,981	100	%	100	%	1.00	%

(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, 2018, 2019 and 2020. This table does not include foreign trade-related loans to Chilean borrowers.

	As of December 31,
	2018	2019	2020
	(in millions of Ch$)
Argentina	30,939	34,048	31,099
Bahamas	—	—	—
Brazil	—	—	12,840
British Virgin Islands	—	—	—
Colombia	5,087,740	5,196,014	4,649,475
Costa Rica	—	—	—
France	1,046	1,129	—
Luxembourg	—	—	—
Mexico	43,327	36,336	31,471
Netherlands	—	—	—
Panama	2,983	1,607	8,060
Peru	262,023	242,795	238,899
Switzerland	—	—	—
United States	206,722	279,687	161,666
Uruguay	—	—	884
Total	5,634,780	5,791,616	5,134,394

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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, 2018, 2019 and 2020.

	As of December 31,
	2018	2019	2020
	(in millions of Ch$)
Australia	147	130	(17)
Belgium	25	239	65
Canada	315	376	272
China	9	31	372
Colombia	158,787	203,867	227,560
Denmark	—	(159)	—
England	60	711	—
Germany	8,715	30,032	24,141
Italy	—	—	—
Japan	634	4,646	2,054
London	—	—	—
Mexico	1	239	1,098
New Zealand	—	40	8
Norway	1	9	1
Panama	242	74	40
Peru	24	233	28,003
South Korea	22	—	—
Spain	27	443	2,273
Sweden	3	14	158
Switzerland	770	152	210
United Kingdom	2,988	19,582	10,960
United States	484,595	377,233	1,443,236
Venezuela	—	—	—
Total	657,365	637,892	1,740,434

Credit Risk Governance

Credit risk management is the responsibility of the Corporate Risk Management Division, 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 Division 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 New York and 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.

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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.

In the case of Wholesale Banking customers, the 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. Credit limits are determined not on the basis of individual clients, but on the direct and indirect credit risk of entire financial groups.

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.

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.

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.

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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:

● 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 to 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

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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.

Charge-off Policy, Recovery and Planning.

The charge-off policy, recovery and planning process consists of:

● Charge-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).

● Loan Loss Allowance. 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. Forward-looking information and all considerations required by applicable regulations and standards are taken into account.

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)

As of 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.

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

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We have defined default on an individual or collective basis as follows:

● Individual:when exposure is more than 89 days past due, it is in judicial collection or it has been identified as impaired by an internal risk committee.

● Collective: when exposure is more than 89 days past due or has been restructured with more than 60 days past due.

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

At the end of each reporting period, we evaluate 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.

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. Significant increases in credit risk on other financial instruments of the same borrower.

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.

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During this last year, considering the impact of the COVID-19 pandemic, the IASB required special attention be paid to assessment of the impairment reflected in the ECL calculation and the SICR triggers, taking in account not only the current conditions and forecast of the economic conditions, but also the government support measures.

In this context, we have decided to use the SICR as the main approach to reflect our current situation, as result of our COVID-19 assessment, detailed as follow:

● Individual: In the case of the individual portfolio, we used the CMF classification as a trigger of the SICR, therefore, in the COVID-19 pandemic economic context there was an effort to take the changing industries and economic sectors affected by the COVID-19 pandemic into account in the CMF classification and consequently to the SICR.

● Collective: On the other hand, for the collective portfolio, we have decided to use another approach related to clients with payment postponements and government support measures, trying to assess if they have evidence of SICR in this period of no-payment behavior. Moreover, we have used a list of different variables of internal and external behavior to try to find evidence of SICR for these clients with reasonable and supportable information.

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.

139

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.

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:

● Exchange Rate (USD/CLP)

● Unemployment rates

● Central Bank interest rates

● Economic Perception Index (IPEC)

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.

140

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 21 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 1 of our consolidated financial statements in respect of accounting policies and ECL criteria, with further details contained in Note 36 of our consolidated financial statements in respect of risk management considerations and specific criteria by country). 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.

141

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 methodology described above:

	As of December 31, 2018
		Allowances
	Total Loans	for loan losses	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	%

	As of December 31, 2019
		Allowances
	Total Loans	for loan losses	Risk Index (%)
	(in millions of Ch$ except for percentages)
Commercial	1,204,478	312,626	26.0	%
Leasing commercial	69,668	16,302	23.4	%
Factoring commercial	12,854	3,694	28.7	%
Student loans	654,721	19,442	3.0	%
Consumer	2,795,116	256,190	9.2	%
Leasing consumer	3,113	227	7.3	%
Mortgage	4,539,454	65,622	1.5	%
Leasing mortgage	336,587	12,879	3.8	%

	As of December 31, 2020
		Allowances
	Total Loans	for loan losses	Risk Index (%)
	(in millions of Ch$ except for percentages)
Commercial	1,389,678	380,016	27.3	%
Leasing commercial	60,736	24,402	40.2	%
Factoring commercial	10,561	4,053	38.4	%
Student loans	594,688	17,702	3.0	%
Consumer	2,490,962	220,609	8.9	%
Leasing consumer	1,467	182	12.4	%
Mortgage	5,009,179	61,747	1.2	%
Leasing mortgage	307,574	11,718	3.8	%

142

Consumer Loans — Models Based on Group Analysis

	As of December 31, 2018
		Allowances for loan
	Total Loans	losses	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	—	—	—

	As of December 31, 2019
		Allowances for loan
	Total Loans	losses	Risk Index (%)
	(in millions of Ch$ except for percentages)
Credit cards	537,741	35,046	6.5	%
Lines of credit	248,678	24,240	9.8	%
Other revolving	3,394	552	16.3	%
Installment consumer loans	1,465,987	94,779	6.5	%
Card loans	7,648	489	6.4	%
Salary discount loans	330,257	22,140	6.7	%
Renegotiation	201,406	78,944	39.2	%
Others	5	—	—

	As of December 31, 2020
		Allowances for loan
	Total Loans	losses	Risk Index (%)
	(in millions of Ch$ except for percentages)
Credit cards	466,804	63,428	13.59	%
Lines of credit	154,458	13,391	8.67	%
Other revolving	2,680	269	10.04	%
Installment consumer loans	1,311,198	68,891	5.25	%
Card loans	3,522	1,048	29.76	%
Salary discount loans	319,404	16,394	5.13	%
Renegotiation	232,896	57,188	24.56	%
Others	—	—	—

143

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:

2018

	Corporate Portfolio																				Group Portfolio
	Normal Portfolio										Impaired Portfolio										Normal		Impaired
As of December 31, 2018	A1		A2		A3		A4		A5		A6		B1		B2		Impaired		Total		Portfolio		Portfolio		Total		General Total
	(in millions of Ch$)
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	%	—	%			—		—		—		—		0.14	%	—		—				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
Checking 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	%

144

2019

	Corporate Portfolio																				Group Portfolio
	Normal Portfolio																				Normal		Impaired				General
	A1		A2		A3		A4		A5		A6		B1		B2		Impaired		Subtotal		Portfolio		Portfolio		Total		Total
As of December 31, 2019	(in millions of Ch$)
Loans and receivables from banks	—		4,570		37,725		14,340		—		—		—		—		—		56,635		—		—		—		56,635
Allowances for loan losses	—		4		58		177		—		—		—		—		—		239		—		—		—		239
As percentage of total loans	—	%	0.09	%	0.15	%	1.23	%	—		—		—		—		—		0.42	%	—		—		—		0.42	%
Loans and receivable from customers
Commercial loans:
Commercial loans	11,339		565,824		2,873,658		3,907,004		2,303,624		497,734		176,544		82,783		754,310		11,172,820		988,305		127,685		1,115,990		12,288,810
Foreign trade loans	90,944		63,956		282,215		328,146		250,042		32,251		13,738		267		26,113		1,087,672		20,979		518		21,497		1,109,169
Checking account debtors	—		288		31,161		24,726		31,864		6,628		3,569		371		5,532		104,139		42,011		8,126		50,137		154,276
Factoring operations	9,205		22,995		69,177		67,888		35,573		2,707		463		—		242		208,250		12,547		307		12,854		221,104
Student loans	—		—		—		—		—		—		—		—		—		—		576,029		78,692		654,721		654,721
Leasing transactions	—		3,935		112,762		305,023		353,768		78,534		21,911		8,166		51,442		935,541		64,199		5,469		69,668		1,005,209
Other loans and receivables	2		42		1,292		2,638		3,978		938		269		25		947		10,131		14,666		2,458		17,124		27,255
Subtotal Commercial loans	111,490		657,040		3,370,265		4,635,425		2,978,849		618,792		216,494		91,612		838,586		13,518,553		1,718,736		223,255		1,941,991		15,460,544
Allowances for loan losses	47		420		5,509		40,421		62,860		15,793		7,420		7,483		315,876		455,830		30,277		59,093		89,369		545,199
As percentage of total loans	0.04	%	0.06	%	0.16	%	0.87	%	2.11	%	2.55	%	3.43	%	8.17	%	37.67	%	3.37	%	1.76	%	26.47	%	4.60	%	3.53	%
Consumer loans	—		—		—		—		—		—		—		—		—		—		2,623,064		175,165		2,798,229		2,798,229
Allowances for loan losses	—		—		—		—		—		—		—		—		—		—		119,353		137,064		256,417		256,417
As percentage of total loans	—		—		—		—		—		—		—		—		—		—		4.55	%	78.25	%	9.16	%	9.16	%
Mortgage loans	—		—		—		—		—		—		—		—		—		—		4,644,274		231,767		4,876,041		4,876,041
Allowances for loan losses	—		—		—		—		—		—		—		—		—		—		34,693		43,808		78,501		78,501
As percentage of total loans	—		—		—		—		—		—		—		—		—		—		0.75	%	18.90	%	1.61	%	1.61	%
Total loans and receivable to customers	111,490		657,040		3,370,265		4,635,425		2,978,849		618,792		216,494		91,612		838,586		13,518,553		8,986,074		630,187		9,616,261		23,134,814
Allowances for loan losses	47		420		5,509		40,421		62,860		15,793		7,420		7,483		315,876		455,830		184,323		239,964		424,287		880,117
As percentage of total loans	0.04	%	0.06	%	0.16	%	0.87	%	2.11	%	2.55	%	3.43	%	8.17	%	37.67	%	3.37	%	2.05	%	38.08	%	4.41	%	3.80	%

145

2020

	Corporate Portfolio																				Group Portfolio
	Normal Portfolio																				Normal		Impaired				General
	A1		A2		A3		A4		A5		A6		B1		B2		Impaired		Subtotal		Portfolio		Portfolio		Total		Total
As of December 31, 2020	millions of Ch$
Loans and receivables from banks	—		—		7,131		—		—		—		—		—		—		7,131		—		—		—		7,131
Allowances for loan losses	—		—		10		—		—		—		—		—		—		10		—		—		—		10
As percentage of total loans	—	%	—	%	0.14	%	—	%	—		—		—		—		—		0.14	%	—		—		—		0.14	%
Loans and receivable from customers
Commercial loans:
Commercial loans	75,982		450,537		1,943,514		3,634,056		2,378,316		737,887		360,664		135,586		1,127,771		10,844,313		1,196,835		131,059		1,327,894		12,172,207
Foreign trade loans	86,639		58,437		122,366		248,956		230,882		63,693		14,570		—		2,386		827,929		14,842		4,315		19,157		847,086
Checking account debtors	—		—		1,412		11,007		13,414		7,533		2,757		807		4,297		41,227		22,485		6,414		28,899		70,126
Factoring operations	1,360		4,566		39,089		49,114		37,481		10,873		2,111		—		385		144,979		10,561		—		10,561		155,540
Student loans	—		—		—		—		—		—		—		—		—		—		521,846		72,842		594,688		594,688
Leasing transactions	—		1,355		75,481		279,461		280,605		99,300		51,653		24,978		67,420		880,253		56,112		4,624		60,736		940,989
Other loans and receivables	—		52		223		923		11,824		757		177		83		396		14,435		12,038		1,690		13,728		28,163
Subtotal Commercial loans	163,981		514,947		2,182,085		4,223,517		2,952,522		920,043		431,932		161,454		1,202,655		12,753,136		1,834,719		220,944		2,055,663		14,808,799
Allowances for loan losses	66		254		3,625		35,619		61,686		38,539		10,755		13,264		497,694		661,502		29,127		56,988		86,115		747,617
As percentage of total loans	0.04	%	0.05	%	0.17	%	0.84	%	2.09	%	4.19	%	2.49	%	8.22	%	41.36	%	5.19	%	1.59	%	25.79	%	4.19	%	5.05	%
Consumer loans	—		—		—		—		—		—		—		—		—		—		2,327,924		164,505		2,492,429		2,492,429
Allowances for loan losses	—		—		—		—		—		—		—		—		—		—		101,880		118,911		220,791		220,791
As percentage of total loans	—		—		—		—		—		—		—		—		—		—		4.38	%	72.28	%	8.86	%	8.86	%
Mortgage loans	—		—		—		—		—		—		—		—		—		—		5,083,078		233,675		5,316,753		5,316,753
Allowances for loan losses	—		—		—		—		—		—		—		—		—		—		29,842		43,623		73,465		73,465
As percentage of total loans	—		—		—		—		—		—		—		—		—		—		0.59	%	18.67	%	1.38	%	1.38	%
Total loans and receivable to customers	163,981		514,947		2,182,085		4,223,517		2,952,522		920,043		431,932		161,454		1,202,655		12,753,136		9,245,721		619,124		9,864,845		22,617,981
Allowances for loan losses	66		254		3,625		35,619		61,686		38,539		10,755		13,264		497,694		661,502		160,849		219,522		380,371		1,041,873
As percentage of total loans	0.04	%	0.05	%	0.17	%	0.84	%	2.09	%	4.19	%	2.49	%	8.22	%	41.38	%	5.19	%	1.74	%	35.46	%	3.86	%	4.61	%

146

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,
	2018	2019	2020
	(in millions of Ch$, except for percentages)
Current	20,358,662	21,867,833	21,403,564
Overdue 1-29 days	429,791	384,973	362,384
Overdue 30-89 days	241,090	228,343	348,151
Overdue 90-180 days	148,234	298,718	140,702
Overdue 181-240 days	28,977	64,964	42,154
Overdue 241-360 days	52,176	89,723	100,295
Overdue more than 360 days	223,560	200,260	220,731
Total loans (excludes interbank loans)	21,482,490	23,134,814	22,617,981

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,
	2018		2019		2020
	(in millions of Ch$ except for percentages)
Total loans (1)	21,482,490		23,134,814		22,617,981
Impaired loans (2)	1,299,226		1,468,775		1,821,779
Allowance for loan losses (3)	768,120		880,117		1,041,873
Impaired loans as a percentage of total loans	6.0	%	6.3	%	8.1	%
Non-performing loans (4)	452,947		653,664		503,882
Non-performing loans as a percentage of total loans (4)	2.1	%	2.8	%	2.2	%
Past due loans (5)	271,791		312,510		291,781
Past due loans as a percentage of total loans	1.3	%	1.4	%	1.3	%
Allowance for loans losses as a percentage of:
Total loans	3.6	%	3.8	%	4.6	%
Total impaired loans	59.1	%	60.6	%	57.2	%
Total Non-performing loans	169.6	%	136.1	%	206.8	%
Total amounts past due	282.6	%	284.7	%	357.1	%
Reported ECL	768,120		880,117		1,041,873
Reported Coverage (Reported ECL/ loans and accounts receivable at amortized cost)	3.6	%	3.8	%	4.6	%

(1) Total loans as of December 31, 2018, 2019 and 2020 corresponds to loans and accounts receivable from customers at amortized cost according to IFRS 9.

(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, 2019 and 2020, impaired loans include loans classified in stage 3 according to IFRS 9.

(3) Allowance for loan losses as of December 31, 2018, 2019 and 2020 corresponds to allowances for loans and accounts receivable from customers at amortized cost according to IFRS 9.

(4) Non-performing loans include the principal and interest on any loan with one installment more than 90 days overdue. Total loans in 2018, 2019 and 2020 corresponds to loans at amortized cost. Our loan portfolio classified as stage 3 under IFRS 9 was Ch$1,325,218 million as of December 31, 2020, Ch$1,237,205 million in 2019 and Ch$884,977 million in 2018 with an ECL coverage of 40.0%, 34.9% in 2019 and 39.7% in 2018.

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(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:

	Between	Between	Between	More than
As of December 31, 2018	90-180 days	181-240 days	241-360 days	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

	Between	Between	Between	More than
As of December 31, 2019	90-180 days	181-240 days	241-360 days	360 days	Total
	(in millions of Ch$)
Commercial Loans	211,906	52,152	71,557	154,959	490,574
Mortgages Loans	46,997	9,236	12,771	33,645	102,649
Consumer Loans	60,441	—	—	—	60,441
Total loans (excludes interbank loans)	319,344	61,388	84,328	188,604	653,664

	Between	Between	Between	More than
As of December 31, 2020	90-180 days	181-240 days	241-360 days	360 days	Total
	(in millions of Ch$)
Commercial Loans	82,582	37,147	90,953	170,931	381,613
Mortgages Loans	13,148	4,888	9,341	49,798	77,175
Consumer Loans	28,256	122	—	16,716	45,094
Total loans (excludes interbank loans)	123,986	42,157	100,294	237,445	503,882

Analysis of Allowances for Loan Losses

The following sets forth the movements in our allowances for loan losses during the years ended December 31, 2018, 2019 and 2020, 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).”

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The following table sets forth information on allowances for loan losses:

	Individually assessed				Group assessed
	Stage 1	Stage 2	Stage 3		Stage 1	Stage 2	Stage 3
	12-Month	Lifetime	Lifetime		12-Month	Lifetime	Lifetime
	ECL	ECL	ECL	Subtotals	ECL	ECL	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

Individually assessed			Group assessed
Stage 1	Stage 2	Stage 3	Stage 1	Stage 2	Stage 3
12-Month	Lifetime