~~Table of Contents~~

PART I

~~PART I~~

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

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

The selected consolidated financial information included herein as of December 31, ~~2016~~2017 and ~~2017~~2018 and for the years ended December 31, ~~2015,~~ 2016, 2017 and ~~2017,~~2018 is derived from, and presented on the same basis as, our consolidated financial statements prepared under IFRS and should be read together with such consolidated financial statements.

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

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

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

We have adopted IFRS 9 as issued by the IASB in July 2014 with a date of transition of January 1, 2018, which resulted in changes to our accounting policies. As per the permitted transitional provisions of IFRS as9, we elected not to revise comparative figures; accordingly, some IFRS 9 disclosures presented in our consolidated financial statements and this Annual Report with respect to certain financial assets are not comparable since their classification and measurement may differ between IFRS 9 and the prior standard of ~~December 31, 2016~~IAS 39. Please see Note 1 (k) and ~~2017~~(u) and Note 2 “Accounting Changes” to our consolidated financial statements included in this Annual Report for a description of the ~~years ended December 31, 2015, 2016 and 2017. See pages F-1 and F-2 of this report for further details on PwC’s opinions.~~new accounting policies.

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$” or “CLP” are to Chilean pesos, references to “UF” are toUnidades de Fomento and references to “Colombian pesos” or “COP$” 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, ~~2017, one UF equaled US$43.61, Ch$26,798.14 and COP$130,213.11 and as of April 2,~~ 2018, one UF equaled US$~~44.54,~~39.68, Ch$~~26,966.89~~27,565.79 and COP$~~124,578.69.~~128,896.15 and as of March 31, 2019, one UF equaled US$40.51, Ch$27,565.76 and COP$128,816.98. See “Item 5. Operating and Financial Review and Prospects.”

This Annual Report contains translations of certain Chilean peso amounts into U.S. dollars and Colombian pesos at specified rates solely for the convenience of the reader. These translations should not be construed as representations that such Chilean peso amounts actually represent such U.S. dollar or Colombian pesos amounts, were converted from U.S. dollars or Colombian pesos amounts at the rate indicated in preparing our consolidated financial statements or could be converted into U.S. dollars or Colombian pesos amounts at the rate indicated or any particular rate at all. Unless otherwise indicated, such U.S. dollar and Colombian pesos amounts have been translated from Chilean pesos based on our own exchange rate of Ch$~~614.48~~694.73 and ~~COP$2,985.78,~~Ch$0.2139, respectively, per US$1.00 or COP$1.00, as the case may be, as of December 31, ~~2017.~~2018.

Specific Loan Information

Unless otherwise specified, all references in this Annual Report to total loans are to loans and financial leases before deduction for allowances for loan losses, and they do not include loans to banks or unfunded loan commitments. In addition, all market share data and financial indicators for the Chilean banking system when compared to Itaú Corpbanca’s financial information, presented in this Annual Report or incorporated by reference into this Annual Report are based on information published periodically by the SBIF, which is published under Chilean Banking GAAP and prepared on a consolidated basis.Non-performing loans include the principal and accrued interest on any loan with at least one installment more than 90 days overdue. Impaired loans include those loans on which there is objective evidence that customers will not meet some of their contractual payment obligations. At the end of each reporting period the Bank evaluates the impairment of the loan portfolio. For December 31, 2018 this has been assessed in accordance with IFRS 9 and for prior periods in accordance with IAS 39. Past due loans include all installments and lines of credit more than 90 days overdue, provided that the aggregate principal amount of such loans is not included. Under IFRS, a loan is evaluated on each financial statement reporting date to determine whether objective evidence of impairment exists. A loan will be impaired if and only if, objective evidence of impairment exists as a result of one or more events that occurred after the initial recognition of the loan, and such event or events have an impact on the estimated future cash flows of such loan that can be reliably estimated. It may not be possible to identify a single event that was the individual cause of the impairment. An impairment loss relating to a loan is calculated as the difference between the carrying amount of the loan and the present value of estimated future cash flows discounted at the effective interest rate. Individually significant loans are individually tested for impairment. The remaining financial loans are evaluated collectively in groups with similar credit risk characteristics. The reversal of an impairment loss occurs only if it can be objectively related to an event occurring after the initial impairment loss was recorded. In the case of loans recorded at amortized cost, the reversal is recorded in income. See “Item 4. Information on the Company—Business Overview—Selected Statistical Information—Classification of Banks and Loan Portfolios; Allowances for Loan Losses.”

~~According to~~Unless an exception applies, under Decree with Force of Law No. 3 of 1997, as amended (including, without limitation, by Law No. 21,130), also called theLey General de Bancosor the Chilean General Banking Act, (1) a bank must have an effective net equity (~~patrimonio efectivo~~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 ~~paid in~~(2) thepaid-in capital and reserves, or basic capital (capital básico), shall not be lower than (y) 4.5% of ~~at least~~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 minimumpaid-in capital and reserves, or basic capital (capital básico) (i.e., UF800,000 (Ch$22,052.6 million or US$31.7 million as of December 31, 2018)) has not been paid, the respective bank shall have an additional basic capital equal to 2% of its risk weighted assets, net of required allowances, above the general minimum basic capital of 4.5%plus any additional basic capital that may be applicable pursuant to number (2) below. The additional 2% requirement will be reduced to 1% once the bank’s paid basic capital reaches UF 600,000 (Ch$16,539.5 million or US$23.8 million as of December 31, 2018).

(2)

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

Within 18 months from the date in which such replacement occurs, the CMF shall issue a regulation (with the affirmative consent of the Council of the Chilean Central Bank) setting forth (i) the standardized methodology for risk weighting the assets of a bank, and (ii) in the event of banks authorized to use their own methodologies, the requirements to use and implement them. Once such regulation becomes effective, a bank will be required to have an additional basic capital equal to 2.5% of its risk weighted assets, net of required allowances, above the minimum requirements. This additional requirement will come into effect progressively during a4-year term at a ratio of 0.625% per year, starting on the date in which the CMF issues the aforementioned regulation;

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

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

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

For these purposes, the effective net equity of a bank is the sum of ~~(1)~~(i) the bank’s basic capital, ~~(2)~~(ii) bonds issued without a maturity date and preferred stock issued once the CMF issues a regulation authorizing their issuance. These instruments shall be valued at their issue price, for an amount up to one third of its basic capital, (iii) subordinated bonds issued by the bank valued at their issue price for an amount of up to 50% of its basic capital (provided that the value of the bonds shall decrease by 20% for each year that elapses during the period commencing six years prior to their maturity), ~~(3)~~(iv) its voluntary allowances for loan losses, for an amount of up to 1.25% of its risk weighted assets to the extent voluntary allowances exceed those that banks are required to maintain by law or regulation. Note that the CMF shall issue a regulation ~~(4)~~setting forth (i) the standardized methodology for risk weighting the assets of a bank, and (ii) in the event of banks authorized to use their own methodologies, the requirements to use and implement them. Once such regulations are issued, voluntary allowances shall be considered up to the following amounts (y) up to 1.25% of its credit risk weighted assets, if standard methodologies are applied, or (z) 0.625% in the eventnon-standard methodologies are applied, (v) minority interests of up to 20% of the basic capital (provided that if such minority interests exceed 20%, only 20% will be taken into account), minus ~~(5)~~(vi) goodwill or premiums, paid balances and investments in companies that are not consolidated and ~~(6)~~(vii) certain deductions to be made in accordance with provisions of chapter12-1 of the regulations of the SBIF (Recopilación Actualizada de Normas), or the Regulations of the SBIF.

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, ~~2015,~~ 2016, 2017 and ~~2017~~2018 have been rounded for ease of presentation. Percentage figures included in this Annual Report have in all cases not been calculated on the basis of such rounded figures but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this Annual Report may vary slightly from those obtained by performing the same calculations using the figures in our consolidated financial statements as of and for the years ended December 31, ~~2015,~~ 2016, 2017 and ~~2017.~~2018. Certain other amounts that appear in this Annual Report may similarly not sum due to rounding.

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

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

EXCHANGE RATE INFORMATION

Exchange Rates

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

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

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, ~~2017,~~2018, the Bank’s U.S. dollar exchange rate ~~used by us~~ was Ch$~~614.48~~694.73 per US$1.00 and the Bank’s Colombian peso exchange rate ~~used by us~~ was Ch$~~2,985.78~~0.2139 per COP$1.00.

~~The following table sets forth the annual low, high, average and period-end Observed Exchange Rate for U.S. dollars for the periods set forth below, as reported by the Central Bank of Chile.~~

Daily Observed Exchange Rate (Ch$ per US$)(1)

Low (2)

High (2)

Average (3)

Period-End (4)

Year Ended December 31,

2013

466.50

533.95

495.00

523.76

2014

524.61

621.41

570.01

607.38

2015

597.10

715.66

654.25

707.34

2016

645.22

730.31

676.83

667.29

2017

615.22

679.05

649.33

615.22

Quarterly period

2016 1st Quarter

671.97

730.31

702.07

675.10

2016 2nd Quarter

657.90

696.96

677.69

661.49

2016 3rd Quarter

645.22

680.28

661.65

659.08

2016 4th Quarter

649.40

679.24

665.80

667.29

2017 1st Quarter

638.35

673.36

655.58

662.66

2017 2nd Quarter

647.47

679.05

664.68

663.21

2017 3rd Quarter

615.58

666.61

643.23

636.85

2017 4th Quarter

615.22

655.74

633.36

615.22

2018 1st Quarter

588.28

614.75

602.08

605.26

Month ended

September 2017

615.58

638.28

625.54

636.85

October 2017

619.68

640.52

629.55

636.49

November 2017

629.21

642.41

633.77

642.41

December 2017

615.22

655.74

636.92

615.22

January 2018

599.33

614.75

605.53

604.42

February 2018

588.28

603.25

596.84

589.15

March 2018

593.61

609.58

603.45

605.26

April 2018(5)

603.39

603.39

603.39

603.39

~~(1)~~ ~~Nominal figures.~~

~~(2)~~ ~~Exchange rates are the actual low and high, on a day-by-day basis for each period.~~

~~(3)~~ ~~The average of the exchange rates on the last day of each month during the period.~~

~~(4)~~ Each annual period ends on December 31, and the respective period-end exchange rate is published by the Central Bank of Chile on the first business day following December 31. Each monthly period ends on the last calendar day of such month and the respective period-end exchange rate is published by the Central Bank of Chile on the first business day following the last calendar day of such month.

~~(5)~~ ~~The information for April 2018 is as of April 2, 2018.~~

~~The following table sets forth the annual low, high, average and period-end exchange rate for U.S. dollars for the periods set forth below under our policy to calculate our own exchange rate:~~

Bank’s Exchange Rate Ch$ per US$1

Low (2)

High (2)

Average (3)

Period-End

Year Ended December 31,

2013

466.48

533.95

495.31

526.41

2014

605.46

621.56

612.85

605.46

2015

593.49

714.82

654.55

710.32

2016

643.04

731.70

677.15

669.81

2017

614.48

678.23

649.12

614.48

Quarterly period

2016 1st Quarter

667.08

731.70

701.17

667.08

2016 2nd Quarter

658.95

695.94

677.29

659.55

2016 3rd Quarter

643.04

692.91

662.75

658.20

2016 4th Quarter

648.87

680.20

666.36

669.81

2017 1st Quarter

637.03

673.91

655.53

662.26

2017 2nd Quarter

645.88

678.23

664.68

663.97

2017 3rd Quarter

615.78

667.07

642.65

639.14

2017 4th Quarter

614.48

655.24

633.14

614.48

2018 1st Quarter

587.93

610.47

601.93

604.18

Month ended

September 2017

615.78

639.14

626.07

639.14

October 2017

619.19

639.49

629.68

636.19

November 2017

627.64

647.50

634.61

647.50

December 2017

614.48

655.24

635.16

614.48

January 2018

598.10

610.47

605.12

601.18

February 2018

587.93

603.30

596.22

594.62

March 2018

595.74

610.19

604.03

604.18

April 2018(4)

605.52

605.52

605.52

605.52

~~(1)~~ ~~Nominal figures.~~

~~(2)~~ ~~Exchange rates are the actual low and high, on a day-by-day basis for each period.~~

~~(3)~~ ~~The average of the exchange rates on the last day of each month during the period.~~

~~(4)~~ ~~The information for April 2018 is as of April 2, 2018.~~

Exchange Controls Considerations

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

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

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

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

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

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

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

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

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

A. SELECTED FINANCIAL DATA

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

   For the fiscal years ended December 31,
   2015    2016    2017    2018    2018⁽¹⁾
   Ch$    Ch$    Ch$    Ch$    US$
   (in millions of Ch$ and thousands of US$, except for
number of shares and per share data)⁽²⁾
Interest income
   501,982    1,509,203    1,646,329    1,739,317    2,503,587
Interest expense
   (278,692 )    (870,028 )    (863,347 )    (851,654 )    (1,225,878 )










Net interest income
   223,290    639,175    782,982    887,663    1,277,709
Net service fee income
   71,088    150,796    177,571    186,129    267,916
Trading and investment, foreign exchange gains and other operating income
   50,040    83,551    95,965    181,446    261,175
Operating income before provision for loan losses
   344,418    873,522    1,056,518    1,255,238    1,806,800
Provisions for loan losses
   (42,929 )    (245,990 )    (315,417 )    (279,798 )    (402,744 )










Total operating income, net of provision for loan losses, interest and fees
   301,489    627,532    741,101    975,440    1,404,056
Total operating expenses
   (178,460 )    (616,627 )    (731,147 )    (741,527 )    (1,067,360 )
Total net operating income before income taxes
   123,029    10,905    9,954    233,913    336,696
Income attributable to investment in other companies
   —      —      —      —      —
Income before income taxes
   123,029    10,905    9,954    233,913    336,696
Income taxes
   (17,263 )    3,568    52,871    (67,059 )    (96,525 )
Income from continuing operations
   105,766    14,473    62,825    166,854    240,171
Income from discontinued operations
   —      (504 )    —      —      —










Net income for the year
   105,766    13,969    62,825    166,854    240,171

For the fiscal years ended December 31,

2015

2016

2017

2017(1)

Ch$

Ch$

Ch$

US$

(in millions of Ch$ and thousands of US$, except for
number of shares and per share data)(2)

Interest income

501,982

1,509,203

1,646,329

2,679,223

Interest expense

(278,692
)
(870,028
)
(863,347
)
(1,405,004
)

Net interest income

223,290

639,175

782,982

1,274,219

Net service fee income

71,088

150,796

177,571

288,978

Trading and investment, foreign exchange gains and other operating income

50,040

83,551

95,965

156,173

Operating income before provision for loan losses

344,418

873,522

1,056,518

1,719,369

Provisions for loan losses

(42,929
)
(245,990
)
(315,417
)
(513,307
)

Total operating income, net of provision for loan losses, interest and fees

301,489

627,532

741,101

1,206,062

Total operating expenses

(178,460
)
(616,627
)
(731,147
)
(1,189,863
)

Total net operating income before income taxes

123,029

10,905

9,954

16,199

Income attributable to investment in other companies

—

—

—

—

Income before income taxes

123,029

10,905

9,954

16,199

Income taxes

(17,263
)
3,568

52,871

86,042

Income from continuing operations

105,766

14,473

62,825

102,241

Income from discontinued operations

—

(504
)
—

—

Net income for the year

105,766

13,969

62,825

102,241

For the fiscal years ended December 31,

2015

2016

2017

2017(1)

Ch$

Ch$

Ch$

US$

(in millions of Ch$ and thousands of US$, except for
number of shares and per share data)(2)

Equity holders of the bank

105,757

14,407

67,821

110,371

Non-controlling interest

9

(438
)
(4,996
)
(8,130
)

Net income per common share (3)

0.919

0.035

0.132

0.00022

Dividend per common share (4)

18,448

36,387

0.00121

0.000002

Gross dividends per ADS (4)

n.a.

n.a.

1.80814

0.00294

Shares of common stock outstanding

115,039,690,651

512,406,760,091

512,406,760,091


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

~~(1)~~ Amounts stated in U.S. dollars as of December 31, 2017 and for the year ended December 31, 2017 have been translated from Chilean pesos at our exchange rate of Ch$614.48 per US$1.00 as of December 31, 2017.
⁽¹⁾
Amounts stated in U.S. dollars as of December 31, 2018 and for the year ended December 31, 2018 have been translated from Chilean pesos at our exchange rate of Ch$694.73 per US$1.00 as of December 31, 2018.
⁽²⁾
Amounts stated in millions of Chilean pesos and thousands of U.S. dollars except for net income per share, dividends per common share and dividend per ADS expressed in Chilean pesos and in U.S. dollars.
⁽³⁾
Net income per common share has been calculated on the basis of net income attributable to the equity holders of the Bank divided by the weighted average number of shares outstanding for the period. For further information on basic earnings and diluted earnings please see Notes 1(ee) and 22(d) to our consolidated financial statements.
⁽⁴⁾
Represents dividends or net dividends paid to common shareholders or to ADS holders in respect of net income earned in the prior fiscal year.

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

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

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

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION


	As of December 31,				As of December 31,
	2015	2016	2017	2017(1)	2015		2016		2017		2018		2018⁽¹⁾
	Ch$	Ch$	Ch$	US$	Ch$		Ch$		Ch$		Ch$		US$
	(in millions of Ch$ and thousands of US$)				(in millions of Ch$ and thousands of US$)
Cash and deposits in banks	477,809	1,487,137	964,030	1,568,855		477,809		1,487,137		964,030		987,680		1,421,675
Cash in the process of collection	62,095	145,769	157,017	255,528		62,095		145,769		157,017		318,658		458,679
Financial instruments at fair value through profit or loss						—		—		—		96,943		139,541
Financial instruments at fair value through other comprehensive income						—		—		—		2,657,154		3,824,729
Interbank loans at amortized cost						—		—		—		341,244		491,189
Loans and accounts receivable from customers at amortized cost						—		—		—		20,714,370		29,816,432
Financial instruments at amortized cost						—		—				198,923		286,331
Trading portfolio financial assets	17,765	632,557	415,061	675,467		17,765		632,557		415,061		—		—
Investments under agreements to resell	10,293	170,242	28,524	46,420		10,293		170,242		28,524		109,467		157,568
Derivative financial instruments	227,984	1,102,769	1,248,775	2,032,247		227,984		1,102,769		1,248,775		1,368,957		1,970,488
Loans and receivables from banks, net	99,398	150,568	70,077	114,043		99,398		150,568		70,077		—		—
Loans and receivables from customers, net	6,705,492	20,444,648	19,764,078	32,163,908		6,705,492		20,444,648		19,764,078		—		—
Financial investments available-for-sale	514,985	2,074,077	2,663,478	4,334,523		514,985		2,074,077		2,663,478		—		—
Held to maturity investments	—	226,433	202,030	328,782		—		226,433		202,030		—		—
Intangible assets	51,809	1,614,475	1,562,654	2,543,051		51,809		1,614,475		1,562,654		1,570,964		2,261,258
Property, plant equipment, net	33,970	121,043	130,579	212,503		33,970		121,043		130,579		95,564		137,556
Current income taxes	8,275	164,296	238,452	388,055		8,275		164,296		238,452		123,129		177,233
Deferred income taxes	13,930	110,765	140,685	228,950		13,930		110,765		140,685		178,686		257,202
Other assets	135,742	427,394	429,025	698,192		135,742		427,394		429,025		501,797		722,291
Non-current assets held for sale	1,785	37,164	18,308	29,794		1,785		37,164		18,308		59,802		86,079

TOTAL ASSETS	8,361,332	28,909,337	28,032,773	45,620,318		8,361,332		28,909,337		28,032,773		29,323,338		42,208,251

Checking accounts and demand deposits	981,349	4,453,191	4,141,667	6,740,117		981,349		4,453,191		4,141,667		4,300,475		6,190,139
Transaction in the course of payment	26,377	67,413	109,496	178,193		26,377		67,413		109,496		247,165		355,771
Obligations under repurchase agreements	43,727	373,879	420,920	685,002		43,727		373,879		420,920		1,015,614		1,461,883
Time deposits and saving accounts	3,952,573	11,581,710	10,065,243	16,380,099		3,952,573		11,581,710		10,065,243		10,121,111		14,568,409
Derivative financial instruments	253,183	907,334	1,095,154	1,782,245		253,183		907,334		1,095,154		1,112,806		1,601,782
Borrowings from financial institutions	658,600	2,179,870	2,196,130	3,573,965		658,600		2,179,870		2,196,130		2,327,723		3,350,543
Debt issued	1,504,335	5,460,253	5,950,038	9,683,046		1,504,335		5,460,253		5,950,038		6,010,124		8,651,021
Other financial obligations	20,733	25,563	17,066	27,773		20,733		25,563		17,066		12,400		17,849
Current income tax provision	543	1,886	624	1,015		543		1,886		624		1,191		1,714
Deferred income taxes	67	57,636	26,354	42,888		67		57,636		26,354		471		678
Provisions	75,924	100,048	117,889	191,852		75,924		100,048		117,889		214,903		309,333
Other liabilities	52,480	269,810	463,435	754,191		52,480		269,810		463,435		521,795		751,076
Liabilities directly associated with non-current assets held for sale	—	7,032	—	—		—		7,032		—		—		—

TOTAL LIABILITIES	7,569,891	25,485,625	24,604,016	40,040,385		7,569,891		25,485,625		24,604,016		25,885,778		37,260,198

Equity attributable to equity holders of the bank	791,382	3,184,743	3,211,477	5,226,333
Equity attributable to equity holders of the Bank						791,382		3,184,743		3,211,477		3,219,478		4,634,143
Non-controlling interest	59	238,969	217,280	353,600		59		238,969		217,280		218,082		313,909

TOTAL EQUITY	791,441	3,423,712	3,428,757	5,579,933		791,441		3,423,712		3,428,757		3,437,560		4,948,052

TOTAL LIABILITIES AND EQUITY	8,361,332	28,909,337	28,032,773	45,620,318		8,361,332		28,909,337		28,032,773		29,323,338		42,208,251

~~CONSOLIDATED RATIOS~~

As of and for the Year Ended December 31,

2015

2016

2017

Profitability and Performance

Net interest margin(1)

3.0%

3.0%

3.2%

Return on average total assets (2)

1.3%

0.1%

0.2%

Return on average equity (3)

13.9%

0.5%

1.8%

Efficiency ratio (consolidated) (4)

49.6%

68.0%

67.3%

Dividend payout ratio (5)

50.0%

30.0%

40.0%

Capital

Average equity as a percentage of average total assets

9.4%

11.3%

11.9%

Shareholders’ equity as a percentage of total liabilities

10.5%

12.5%

13.1%

Asset Quality

Allowances for loan losses as a percentage of non-performing loans (6)

104.9%

158.6%

133.9%

Non-performing loans as a percentage of total loans (6)

1.3%

1.7%

2.3%

Allowances for loan losses as a percentage of total loans (Risk Index)

1.4%

2.7%

3.0%

Past due loans as a percentage of total loans (7)

0.8%

0.5%

0.6%

Other Data

Inflation rate

4.4%

2.7%

2.3%

Revaluation (devaluation) rate (Ch$/US$) (foreign exchange rate)

17.3%

(5.7)%

(8.3)%

Number of employees

2,549

9,659

9,492

Number of branches and offices

97

398

375

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

CONSOLIDATED RATIOS


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

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

⁽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 frommake-to-market and trading exchange differences (net) and other operating income (net).

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

⁽⁶⁾

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

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

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

~~(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.~~

~~(7)~~ ~~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 anon-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.

Risks Associated with our Business

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

In ~~2017~~2018, our aggregate gross loan portfolio ~~decreased~~increased by ~~3.0%~~5.4% due to ~~weak~~several positive factors in the business environment, particularly better economic ~~activity~~conditions in ~~both Chile and Colombia, in addition~~the countries where we operate. Our loan portfolio performed well throughout 2018, particularly with respect to consumer loans, which have shown a ~~devaluation~~consistent improved performance since the second quarter of ~~7.8% of the Colombian peso against the Chilean peso.~~2017. This trend is a key indicator that we are making progress towards balancing our loan portfolio. Our business strategy is to grow profitably while increasing ~~the size of~~ our loan ~~portfolio.~~

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, ~~2017,~~2018, commercial loans represented ~~67.3%~~66.9% of our total loan portfolio compared to ~~69.7%~~67.3% as of December 31, ~~2016.~~2017. As of December 31, ~~2017,~~2018, mortgage loans represented ~~20.4%~~20.7% of our total loan portfolio compared to ~~18.5%~~20.4% as of December 31, ~~2016~~2017 and consumer loans represented ~~12.3%~~12.4% of our total loan portfolio compared to ~~11.8%~~12.3% as of December 31, ~~2016.~~

2017.

Although the consumer loans portfolio represents the single highest level of risk in our loan portfolio, the most material loan losses experienced during 2016 and 2017 came from our largest wholesale clients. As of December 31, ~~2017,~~2018, the risk index (ratio of allowance for loans losses over total loans) of the consumer segment was ~~5.4%~~8.1% while other business units of our loan portfolio, such as mortgage loans and commercial loans, had lower risk indexes of ~~0.8%~~1.5% and ~~3.3%,~~3.4% respectively.

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

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

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

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

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

As of December 31, ~~2017,~~2018, our allowance for loan losses was Ch$~~618,527~~768,120 million (excluding allowances for loan losses on loans and receivable to banks) and the risk index (or allowances for loan losses to total loans) was ~~3.0%~~3.6%. The amount of allowance for

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

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, ~~2017,~~2018, ournon-performing loans were Ch$~~462,015~~452,947 million, which resulted in anon-performing to total loans ratio of ~~2.3%~~2.1% as of December 31, ~~2017.~~2018. Further, our loan portfolio classified as stage 3, under IFRS 9, was Ch$884,977 million with an ECL coverage of 3.6% as of December 31, 2018. We seek to continue to improve our credit risk management policies and procedures. However, we cannot assure you that our credit risk management policies, procedures and systems are free from any deficiency. Failure of credit risk management policies may result in an increase in the level ofnon-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 andsmall-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.

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 ~~at least~~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)

(2)

Once the CMF replaces the SBIF, the following should occur:

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

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

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

Due to the Merger and considering that the market participation of the merged bank was higher than 15% and below 20%, the SBIF considered the ~~bank~~Bank to behave a ~~systemically important bank~~material market share and therefore imposed a larger regulatory minimum capital of 10% on the ~~bank~~Bank instead of the previous 8%. For the purposes of maintaining a high solvency classification from the SBIF and continued compliance with the SBIF’s capital requirements on us, our intention is to have the highest classification from the SBIF. As of December 31, ~~2017,~~2018, our regulatory capital to risk weighted assets ratio was ~~14.7%~~14.65% according to the rules issued by the SBIF, which implement the Basel I capital requirements standards in Chile.

In line with the pending adoption of Basel III regulations in Chile, the SBIF has proposed an increase to the minimum effective BIS capital adequacy ratio from the current 8% to 10.5%, not including the cyclical buffer requirements and those for the designated Systemically Important Financial Institutions (“SIFI”). However, given that this regulation is not yet applicable, it is not possible to determine a precise new capital position. In this way, the bank contemplates periodic reviews in order to volatility in the projections.

Considering the above, Itaú Corpbanca expects to target a capital ratio based on the greater of 1.2 times the minimum regulatory capital requirement or the average regulatory capital ratio of the three largest private banks in Chile and Colombia. As of December 31, 2017, according to public information published by the SBIF, the average regulatory capital ratio of the three largest private banks in Chile was 13.9%. 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. ~~The~~Current regulations establish four categories of assets, which are each assigned different risk weights, and require that a credit institution’s Technical Capital (as defined below) be at least 9% of that institution’s total risk-weighted assets, and that its ordinary basic capital be at least 4.5% of that institution’s total risk-weighted assets. Technical Capital for the purposes of the Colombian regulations consists of the sum of tier one capital (ordinary basic capital), additional tier one capital (additional basic capital) and tier two capital (additional capital). As of December 31, ~~2017,~~2018, the consolidated ratio for our Colombian operations (calculated according to the Colombian Superintendency of Finance definitions for “Total Solvency” (“(Solvencia Total”)) was ~~12.7%~~14.61%. See “Item 4—4. Information on the Company—B. Business Overview— Capital Adequacy Requirements” for more information on capital adequacy requirements in Colombia.

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

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

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

·the failure to increase our capital correspondingly;

·losses resulting from a deterioration in our asset quality;

·declines in the value of our ~~available-for-sale investment portfolio;~~financial instruments at fair value through other comprehensive income;

·goodwill and minority interest;

·changes in accounting rules;

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

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

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

In 2015, the SBIF and the Central Bank published new liquidity standards and ratios to be implemented and calculated by all banks. The first stage of these new liquidity requirements, which is currently being implemented, is intended to improve the information—in quantity and quality—about the actual situation of banks without imposing specific limits, except liquidity mismatches for30-day and90-day periods, for which thresholds with respect to banks’ capital, are already in place. As of December 31, ~~2017,~~2018, the liquidity coverage ratio (LCR) for our Chilean operations was ~~161.4%~~130%. Since we have no certainty regarding the limits to be imposed by the regulator to the banking industry and Itaú Corpbanca in particular, we cannot assure you that new liquidity requirements will not have a material impact on our financial condition or results of operations in the future. See “Item 4—Information on the Company—B. Business Overview— Reserve Requirements” for more information on liquidity requirements in Chile.

Liquidity adequacy requirements for Colombian financial institutions (as set forth in Resolución Externa No. 5 de 2008, as amended, issued by the board of directors of the Central Bank of Colombia) include 11% on demand and savings deposits, with the exception of time certificates of deposit under 18 months, in which case the percentage is 4.5% or 0% when they exceed that term. As of December 31, ~~2017,~~2018, the LCR for our Colombian operations (calculated according to the Colombian Superintendency of Finance) was ~~444% (121.4%~~253.82% (108% under our internal models based on Basel III standards). Although we have historically complied with our required liquidity ratios, there can be no assurance that we will continue to do so in the future. See “Item 4—Information on the Company—B. Business Overview— Reserve Requirements” for more information on liquidity requirements in Colombia.

We are dependent on key personnel.

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

We are subject to market risk.

We are ~~directly and indirectly~~ affected by changes in local and global economic conditions as both domestic and international idiosyncratic factors and market ~~conditions. 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. ~~Changes~~Moreover, as we operate in financially integrated economies, changes in market conditions that may affect our financial condition and results of operations include fluctuations in interest and currency exchange rates, securities prices, and changes in the implied volatility of interest rates and foreign exchange rates, among others.

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

Our results of operations depend to a great extent on our net interest income. In ~~2015,~~ 2016, 2017 and ~~2017,~~2018, our ratio of net interest income to total operating income before provision for loan losses was ~~64.8%~~73.2%, ~~73.2%~~74.1% and ~~74.1%~~70.7%, respectively. Changes in market interest rates in Chile or Colombia could affect the interest rates earned on our interest-earning assets differently from the interest rates paid on our interest-bearing liabilities leading to a reduction in our net interest income. Interest rates are highly sensitive to many factors beyond our control, including the monetary policies of the Central Bank of Chile and the Central Bank of Colombia, changes in regulation of the financial sector in Chile and Colombia, domestic and international economic and political conditions and other factors. Yields on the Chilean government’s90-day benchmark rate reached a high of 3.1% and a low of 2.8% in 2015, a high of 3.6% and a low of 3.5% in 2016, ~~and~~ a high of 3.2% and a low of 2.5% in ~~2017.~~2017 and a high of 2.9% and a low of 2.5% in 2018. On the other hand, the Colombian government does not issue short-term bonds of 30, 60 or 90 days as the Chilean government does. Instead, every month the board of directors of the Central Bank of Colombia determines the benchmark rate in order to achieve a specific goal of inflation. Yields on the Colombian benchmark rate reached a high of ~~5.8% and a low of 4.5% for 2015, a high of~~ 7.8% and a low of 5.8% for 2016, ~~and~~ a high of 7.5% and a low of 4.8% for ~~2017.~~2017 and a high of 4.8% and a low of 4.3% in 2018. As of December 31, ~~2015,~~ 2016 and 2017, we had Ch$~~515 million, Ch$~~2,074 million, ~~and~~ Ch$2,663 million, respectively, in financial investments ~~available-for-sale.~~available-for-sale and as of December 31, 2018, we had Ch$2,657 million in financial instruments at fair value through other comprehensive income. In the current global economic climate, there is a greater degree of uncertainty and unpredictability in the policy decisions and the setting of interest rates by the Central Bank of Chile and the Central Bank of Colombia and, as a result, any volatility in interest rates could adversely affect us, including our future financial performance and the market value of our securities. In addition, inflation rate volatility could adversely affect our net interest income due to fluctuations in the gap between assets and liabilities that are indexed to the UF.

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 andnon-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 ofnon-Chilean banks are allowed to promote the credit products and services of their headquarters, which has increased, and may further increase, competition in our industry and, thus, have an adverse effect on our results of operation and financial condition.

In Colombia, we also operate in a highly competitive environment and increased competitive conditions are to be expected in the jurisdictions where we operate. Intensified merger activity in the financial services industry produces larger, better capitalized and more geographically diverse firms that are capable of offering a wider array of financial products and services at more competitive prices. Our ability to maintain our competitive position in Colombia depends mainly on our ability to fulfill new customers’ needs through the development of new products and services and offer adequate services and strengthen our customer bases through cross-selling. Our Colombian operations will be adversely affected if we are not able to maintain efficient service strategies, or overcome certain delays or difficulties in the transition of the integration of the operational services and activities of Itaú Corpbanca Colombia and Helm Bank. 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 potential high financial losses triggered by significant exposure to a particular component of risk, whether it be related to a particular counterparty, industry or geographic concentration. Examples of such risks include significant exposure to a single counterparty, counterparties operating in the same economic sector or geographic region, or financial instruments that depend on the same index or currency.

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

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

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

Changes in accounting standards could impact reported earnings.

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

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

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

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

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

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

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

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

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

Time deposits and other term deposits are our primary sources of funding, which represented ~~40.9%~~39.1% of our liabilities as of December 31, ~~2017.~~2018. If a substantial number of our depositors withdraw their demand deposits or do not roll over their time deposits upon maturity, our liquidity position, results of operations and financial condition may be materially and adversely affected. We cannot assure you that in the event of a sudden or unexpected shortage of funds, any money markets in which we operate will be able to maintain levels of funding without incurring higher funding costs or the liquidation of certain assets. If this were to happen, our business, results of operations and financial condition may be materially and adversely affected.

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

Economic policies and any future changes in the value of the Chilean peso or the Colombian peso against the U.S. dollar could affect the dollar value of our securities, since the equity value of Itaú Corpbanca is hedged against our base currency Chilean peso. The Chilean peso and the Colombian peso have been subject to significant fluctuations in their value against the U.S. dollar in the past and could be subject to similar fluctuations in the future. As of December 31, ~~2015, the Chilean peso depreciated against the U.S. dollar by 17.3% and the Colombian peso depreciated against the U.S. dollar by 31.64%, each as compared to December 31, 2014. As of December 31,~~ 2016, the Chilean peso appreciated against the U.S. dollar by 5.7% and the Colombian peso appreciated against the U.S. dollar by ~~4.72%~~4.2%, each as compared to December 31, 2015. As of December 31, 2017, the Chilean peso appreciated against the U.S. dollar by 8.3% and the Colombian peso appreciated against the U.S. dollar by ~~0.56%~~0.5%, each as compared to December 31, 2016.

As of December 31, 2018, the Chilean peso depreciated against the U.S. dollar by 13.1% and the Colombian peso depreciated against the U.S. dollar by 8.8%, each as compared to December 31, 2017.

Our results of operations may be affected by fluctuations in exchange rates between and among the Chilean peso, the Colombian peso and the U.S. dollar despite our internal policy and Chilean and Colombian regulations relating to the general avoidance of material exchange rate gaps. As of December 31, ~~2015,~~ 2016, 2017 and ~~2017,~~2018, the gap between foreign currency denominated assets and foreign currency denominated liabilities, excluding derivatives, was Ch$~~222,673~~(606,535) million, Ch$~~(606,535)~~(571,951) million and Ch$~~(571,951)~~720,224 million, respectively.

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

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

Our business is highly dependent on the ability of our information technology systems to accurately process a large number of transactions across numerous and diverse markets and products in a timely manner. The proper functioning of our financial control, risk management, accounting, customer service and other data processing systems is critical to our business and our ability to compete effectively. We have backup data for our key data processing systems that could be used in the event of a catastrophe or a failure of

our primary systems, and have established alternative communication networks where available. However, we cannot assure you that our business activities would not be materially disrupted if there were a partial or complete failure of any of these primary information technology systems or communication networks. Such failures could be caused by, among other things, software bugs, computer virus attacks, cyber-attacks or conversion errors due to system upgrading. In addition, a cyber-attack, including any security breach caused by unauthorized access to information or systems, intentional malfunctions or loss or corruption of data, software, hardware or other computer equipment, could have a material adverse effect on our business, results of operations and financial condition.

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

~~Our business in Colombia is dependent on certain technology service agreements with affiliates of Banco Santander, S.A.~~

Upon our acquisition of Banco Santander Colombia in 2012, Banco Santander, S.A. agreed to cause certain of its affiliates to provide us certain technology services. Our business in Colombia is still dependent on such service and support of such affiliates of Banco Santander, S.A. We have recently extended the technology service agreements entered into with such affiliates (including Produban Servicios Informáticos Generales S.L. and Ingeniería de Software Bancario S.L.) until at least May 31, 2018. If the affiliates of Banco Santander, S.A. are unable to service and support our business in Colombia or if we are unable to integrate our information technology systems into our business in Colombia after the expiration of the technology service agreements, then such failure could materially and adversely affect our business, financial condition and results of operations.

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

As of December 31, ~~2017,~~2018, on a consolidated basis we had ~~5,848~~5,685 employees in Chile (including 3132 at our New York Branch), of which ~~62.3%~~61.3% were unionized, and ~~3,644~~3,494 employees in Colombia, of which ~~27.9%~~30.3% were unionized. We are parties to collective bargaining agreements with unions representing our employees in Chile and Colombia. Itaú Corpbanca’s current labor agreements with five unions in Chile were subscribed onin 2017 and expire on May 31, 2020, November 23, 2020 and December 4, 2020. Itaú Corpbanca Colombia’s current labor agreement with 23 unions in Colombia was subscribed on September 1, 2017 and expires on August 31, 2019. We generally apply the relevant terms of our collective bargaining agreement to unionized andnon-unionized employees in each of the markets in which we operate. We have traditionally enjoyed good relations with our employees and their unions. However, we may not be able to renew our collective bargaining agreements on satisfactory terms or at all. This could result in strikes or work stoppages, which could result in substantial losses. The terms of existing or renewed agreements could also significantly increase our costs or negatively affect us. Also, a strengthening of cross-industry labor movements may result in increased employee or labor costs that could materially and adversely affect our business, financial condition or results of operations.

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

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

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

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

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

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

•

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

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

We are subject to counterparty risk.

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

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

We rely on third parties for important products and services.

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

We may experience operational problems, errors or misconduct.

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

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

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

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

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

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

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

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

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

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

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

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 personsnon-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 bynon-Chilean banks with representative offices in Chile, (c) strengthened consumers’ rights in connection with financial products and services; and (d) lowered the maximum legal interest rate that can be imposed in general loans valued at over UF 200. These amendments have affected the Chilean banking industry in several ways including by increasing competition, increasing the risks associated with the growth of loan portfolios, providing additional scrutiny regarding prices and contracts for financial products and have caused a loss of flexibility in the determination of price and product distribution strategies in the retail banking unit.

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

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

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

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

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

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

We cannot assure you that we will be able to meet all of the applicable regulatory requirements and guidelines, or that we will not be subject to other sanctions, fines, restrictions on our business or other penalties in the future as a result ofnon-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 SBIF fined the Bank for an alleged infringement to the individual lending limits provided by Article 84 No. 1, in relation to Article 85 of the Chilean General Banking Act. The total amount was Ch$21,765 million. In an extraordinary meeting on January 4, 2016, the Bank’s board of directors agreed: to communicate the letter as a material event, expressing disagreement with the alleged infringement and to instruct management to exercise each and every legal action in order to obtain the annulment of the fines.

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

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

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

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

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

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

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

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

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

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

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

Following the consummation of the Merger, Standard & Poor’s and Moody’s upgraded our long and short term ratings toBBB+/A-2 andA3/Prime-2, respectively. On August 22, 2018, Standard and Poor’s confirmed the aforementioned ratings and revised our rating outlook from “Negative” to “Stable,” as concerns related to Chile’s economic imbalances have diminished.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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.

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.~~

~~We may experience operational problems, errors or misconduct.~~

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

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

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

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

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

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

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

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

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

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

~~Failure to protect personal information 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 these cybersecurity risks but these 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 could constitute a breach of privacy or other laws, subject us to legal actions and administrative sanctions as well as damages, adversely affect our ability to offer and grow our online services, result in the loss of customer relationships, negatively impact our reputation, and have an adverse effect on our business, results of operations and financial condition.

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.~~

~~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, 2017, 6.4% of our total assets comprised of securities issued by the Chilean government and 3.9% 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.

Following the consummation of the Merger, Standard & Poor’s and Moody’s upgraded our long and short term ratings to BBB+/A-2 and A3/Prime-2, respectively. On August 4, 2017, Standard and Poor’s confirmed the aforementioned ratings and removed the ‘CreditWatch Negative’ assigned on July 14, 2017 following the sovereign downgrade. The Outlook is ‘Negative’ reflecting S&P’s view that there is at least a one-in-three chance that they could downgrade us and other eight Chilean financial institutions if growth in lending and property prices picks up in Chile, leading to pressures on economic imbalances given the country’s already weakened external position. The latter led to a downgrade of Chile sovereign rating on July 13, 2017.

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

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.~~

~~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.~~

~~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 April 2, 2018 had a 36.06% 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.~~

On December 20, 2016, Helm LLC initiated an arbitration proceeding (the “Arbitration”) against respondents Itaú Corpbanca and Corp Group Holding Inversiones Ltda. (“Corp Group”), and nominal respondent Itaú Corpbanca Colombia (collectively with Corp Group and Itaú Corpbanca, “Respondents”), by filing a Request for Arbitration in the ICC’s International Court of Arbitration in New York. Helm LLC alleged that Corp Group and Itaú Corpbanca had breached the Amended and Restated Shareholders Agreement of HB Acquisition S.A.S., dated July 31, 2013, between shareholders of Itaú Corpbanca Colombia (the “SHA”). As relief, Helm LLC is seeking, among other things, damages of $598 million, reflecting what it claims is the value to which it is entitled in return for its shares in Itaú Corpbanca Colombia, plus interest. On February 14, 2017, Respondents filed their answers to Helm LLC’s Request for Arbitration, denying Helm LLC’s claims, and Corp Group and Itaú Corpbanca filed a counterclaim against Helm LLC for breaching the SHA. As relief under their counterclaim, Corp Group and Itaú Corpbanca are seeking, among other things, for Helm LLC’s rights under the SHA to be terminated. On April 19, 2017, Helm LLC filed a reply to Corp Group and Itaú Corpbanca’s counterclaim. The Arbitration has continued pursuant to the applicable procedures and an evidentiary hearing is expected to take place in July 2018. Itaú Corpbanca believes Helm LLC’s claim is without merit and intends to enforce its rights under the SHA and applicable law.

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

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

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

As a regulated financial institution, we are required to submit to the SBIF unaudited consolidated and unconsolidated balance sheets and income statements on a monthly basis. As of January 2008, the statements have to be prepared in accordance with the Compendium of Accounting Standards (~~Compendio de Normas Contables y Manual del Sistema de Información~~), or the “Compendium,” and the rules of the SBIF. Although Chilean banks are required to apply IFRS as of January 1, 2009, certain exceptions introduced by the SBIF prevent banks from achieving full convergence, for example loan loss provisions, assets received in lieu of payment among others. Also, the SBIF is vested with the authority to issue specific orders to banks, including on accounting matters. In situations not addressed by the guidance issued by the SBIF, institutions must follow the generally accepted accounting principles issued by the Association of Chilean Accountants, which coincide with IFRS. However, our consolidated financial statements as of and for the three years ended December 31, 2017 have been prepared in accordance with IFRS in order to comply with SEC requirements.

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

~~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 allsub-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 ofsub-fund, to shares, deposits, derivatives and debt securities of a single banking institution (or guaranteed by such bank); and (iii) per fund (considering allsub-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, ~~2017,~~2018, the aggregate exposure of AFPs to us was US$~~5,996~~5,928 million or ~~2.8%~~3.1% of their total assets. If the exposure of any AFP to us exceeds the regulatory limits, we would need to seek alternative sources of funding, which could be more expensive and, as a consequence, may have a material adverse effect on our business, financial condition and results of operations.

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

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

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

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

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

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 andnon-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 ~~August 10, 2017, former~~November 6, 2018, President ~~Michelle Bachelet~~Sebastián Piñera submitted ~~a bill of law (No. 117-65)~~BillNo. 12212-13 with the purpose of introducing changes to the existing Chilean pension funds ~~system. Under~~system, specifically related to solidary pensions, the ~~current private~~individual capitalization pension system ~~employees make contributions to fund their individual pension accounts. Under former President Bachelet’s proposal,~~and new schemes of pensions for the ~~first time,~~middle class and women.

Under this proposal, companies would have to contribute to the ~~system. The proposal contemplates, among other measures, a gradual increase over the next six years from the current 10%~~system with 4% contribution ~~funded by employees~~ to ~~a 15% contribution in which the additional 5% will~~ be exclusively funded by employers. ~~As proposed, part~~This amendment would have a gradual implementation during a period of ~~this additional contribution~~five years. Additionally, the employer would gobe 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 ~~common~~serious physical or mental disability.

Further, the bill states that the solidarity fund ~~(the “solidarity fund” or~~ (~~pilar solidario~~Pilar Solidario)~~, rather than employees’ personal savings accounts, in order~~ will increase approximately 40% given that the Chilean government is expected to ~~increase~~contribute 1.12% of the ~~pensions for certain lower-income individuals. There are several economic and political discussions over~~GDP to the ~~content of~~fund.

Should this bill ~~of law. However,~~come into effect, it ~~is possible to anticipate that some additional contribution from the employers to the Chilean social security system will be approved, which~~ may cause a relevant increase in our labor costs and, therefore, have a material adverse effect on our financial and operational results.

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

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

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

Any adverse revisions to Chile’s or Colombia’s credit ratings for domestic and international debt by international rating agencies may adversely affect our ratings, and, as a result, our cost of funding, including interest rates paid on our deposits and

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

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

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

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

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

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

Substantially all of our loans are to borrowers doing business in Chile or Colombia. Accordingly, the recoverability of these loans in particular, our ability to increase the amount of loans outstanding and our results of operations and financial condition in general, are dependent to a significant extent on the level of economic activity in Chile and Colombia. The Chilean and Colombian economies have been influenced, to varying degrees, by economic conditions in other emerging market countries. Future developments in or affecting the Chilean or Colombian economies, including consequences of economic difficulties in emerging and developed markets, including some of our neighbor countries, or a deceleration in the economic growth of Asian or other developed nations to which Chile and Colombia export a majority of their respective goods, could materially and adversely affect our business, financial condition or results of operations.

In this regard, with close to one third of exports, of which approximately 75.9% is copper, sent to China, developments in the Chinese economy have relevant implications in the investment, growth and exchange valuation in Chile. Additionally, changes in the economic and political outlook in the United States, Europe and Latin America influence our growth prospects, with 16.8%, 11.6% and 15.2 of exports sent to these regions, respectively.

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

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

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

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

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

We have limited experience conducting credit card and consumer finance businesses in countries outside Chile. Accordingly, we may not be successful in managing credit card and consumer finance operations outside of our traditional domestic market in

Chile. We may face delays in payments by customers and higher delinquency rates in any market we enter into, which could necessitate higher provisions for loan losses and, consequently, have an adverse effect on our financial performance.

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

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

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

~~Despite~~Notwithstanding the peace agreement ~~between~~with the ~~Colombian government and~~ FARC, ~~which have reduced guerrilla and criminal activity, particularly in the form of terrorism~~terrorist attacks, homicides, kidnappings and extortion ~~such activities~~ persist in ~~Colombia, and~~Colombia. Recent terrorist attacks by the ELN resulted in the Colombian government announcing the termination of any peace negotiations with such group. The possible escalation of such activities and the effects associated with them have had and may have in the future a negative impact on the Colombian economy and on our operations in Colombia, including on our customers, employees, results of operations, ~~and~~ financial condition, and physical assets.

~~The final peace agreement was reached in September 2016~~ Since the ELN, paramilitary groups and ~~the government submitted it to a referendum that was~~drug cartels were not ~~approved. However, the Colombian Congress subsequently approved~~part of the peace ~~agreement, and in December 2016 the agreement implementation process began. The final agreement~~negotiations, it is expected to provide FARC with several benefits including: (i) changes in legislation concerning access to credit and financial services; (ii) tax benefits; and (iii) more favorable labor regulations. Such agreements and other legislative changes arising therefrom may have a negative impact on the Colombian economy and on our operations in Colombia.

that their activities will continue.

In addition, the peace agreement reached with the FARC may be modified or implemented deficiently by ~~future governments, including~~ the ~~new~~current Colombian government. Although the Colombian Congress has enacted certain regulations to implement the peace agreement with the FARC, such as the law governing the Peace Special Justice System (Juridiscción Especial para la Paz), certain congressmen have expressed their intention to make amendments to the peace agreement and its related regulations. Likewise, the Colombian president ~~that will take office in 2018.~~has recently objected to portions of the law regulating the Peace Special Justice System (Juridiscción Especial para la Paz). If there are deviations from the peace agreement or the peace agreement is implemented deficiently, there can be no assurance that criminal actions will not escalate in Colombia.

~~ELN, paramilitary groups and drug cartels’ were not part of the peace negotiations. It is expected that their activities will continue.~~

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

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

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

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

Additionally, further deterioration in relations with Venezuela and Ecuador may result in the closing of borders, the imposition of trade barriers or a breakdown of diplomatic ties, any of which could have a negative impact on Colombia’s trade balance, economy and general security situation, which may adversely affect our results of operations and financial ~~condition. In 2015, the~~condition Since 2013, trade with Venezuela has constantly decrease; exports have decreased by 87.8%. The Venezuelan government has abruptly closed the Colombian-Venezuelan border which resulted in a substantial decrease in trade between Colombia and Venezuela, representing in that year less than 0.7% of total Colombian exports. In recent years, diplomatic tensions between the two governments have increased. We cannot assure you that there will notVenezuelan 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 inwith 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.

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

Constitutional collective actions (~~acciones populares~~)(Acciones Populares), class actions (~~acciones~~(Acciones de ~~grupo~~)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— ~~Promulgation of Bill of Law Amending~~Recent Regulatory Developments in Chile—Amendment to the Consumer Protection Act.” In the past few years, Chilean financial institutions have experienced limited numbers of collective and class actions mostly relating to abusive clauses in standard contracts.

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

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

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

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$~~240,000)~~230,000). In ~~mortgage loans, irrespective of their principal amount or in~~ other loans in which the outstanding amount is greater than 880 SMMLV, prepayment penalties or fees may be charged but only when expressly contemplated under the governing loan agreement. With respect to mortgage long-term loans granted in connection with the acquisition of homes, banks are prohibited from charging prepayment penalties. Further limits or regulations regarding banking fees, and uncertainties with respect thereto could have a negative effect on Itaú Corpbanca Colombia and our results of operations and financial condition.

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

~~On January 9, 2014, a new insolvency act was published in Chile in the Official Gazette (~~~~Ley No. 20,720 de Reorganización y Liquidación de Empresas y Personas~~, or the Chilean Insolvency Act) and came into effect on October 10, 2014. Under the Chilean Insolvency Act, monetary collection and enforcement of rights by a creditor may face limitations such as those arising from the Insolvency Protection (as defined below) recognized by the act. For more information on these limitations please see “Item 4—Information on the Company—B. Business Overview—Recent Regulatory Developments in Chile.”

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 fornon-merchant individuals. This insolvency protection entails that, once anon-merchant individual has ceased paying his or her debts, such individual can initiate a voluntary insolvency proceeding before a notary public or mediator to reach an agreement with its creditors. The terms of any agreement reached with a group (two or more) of creditors that represent more than 50% of the total amount of the claims will be mandatorily applicable to all relevant creditors. There are other protections such as an automatic stay for 80 days, which could be extended by 30 additional days. These legal limitations make it difficult to recover on defaulted loans, and as a result, may cause Itaú Corpbanca Colombia to enhance its credit requirements which would result in decreased lending to individuals by making it more expensive. In addition, increased difficulties in enforcing debt and other monetary obligations due to this insolvency law could have an adverse effect on Itaú Corpbanca Colombia and our results of operations and financial condition.

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

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

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

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

Risks Relating to Expansion and Integration of Acquired Businesses

We may not be able to manage our growth successfully.

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

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

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

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

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

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

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

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

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

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

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

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

On April 1, 2016, Corpbanca and Banco Itaú Chile completed a business combination, which was consummated through the Merger. The Merger brought together two large financial institutions that had previously operated as independent companies. Significant management attention and resources have been and will continue to be required to integrate certain aspects of the business

practices and operations of Corpbanca and Banco Itaú Chile. The success of the Merger will depend, in part, on the ability of Itaú Corpbanca to realize anticipated revenue synergies, cost savings and growth opportunities resulting from the combination of the businesses of former Corpbanca and former Banco Itaú Chile. We expect to generate synergies resulting from optimization of organizational structures, scalable IT systems, savings related to the branch network and reductions in administrative expenses. There is a risk, however, that Itaú Corpbanca may not be able to combine the businesses of Corpbanca and Banco Itaú Chile in a manner that permits Itaú Corpbanca to realize these revenue synergies, cost savings and growth opportunities in the time, manner or amounts it expects or at all. Potential difficulties Itaú Corpbanca may encounter as part of the ~~merger~~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 –~~ Prospects—A. Operating ~~Results -~~ 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 implement these steps as anticipated or at all. If Itaú Corpbanca fails to achieve the planned restructuring within the time frame that is currently contemplated or to the extent that is currently planned, or if for any other reason the expected revenue synergies, cost savings and growth opportunities fail to materialize, the Merger may not produce the benefits that Itaú Corpbanca currently anticipates.

~~Itaú Corpbanca has incurred significant costs and expenses in connection with the Merger and will continue to incur additional costs and expenses.~~

Itaú Corpbanca has incurred and will continue to incur substantial expenses in connection with the integration process derived from the Merger. In 2014 and 2015, after the Merger was announced but prior to its consummation, expenses were related to transaction costs associated to the closing of the Merger, such as investment banks, legal advisors, auditors, filing fees, printing expenses and other related charges. After the Merger, expenses have been related to restructuring costs associated to one-time integration expenses. There are also many processes, policies, procedures, operations, technologies and systems that must be integrated in connection with the Merger. Any delay in the integration of the business operations of former Corpbanca and former Banco Itaú Chile or factors beyond Itaú Corpbanca’s control could affect the total amount or the timing of the integration and implementation expenses.

If additional unanticipated significant costs are incurred in connection with the Merger, these costs and expenses could, particularly in the near term, exceed the savings that Itaú Corpbanca expects to achieve from the elimination of duplicative expenses and the realization of economies of scale, other efficiencies and cost savings. Although Itaú Corpbanca expects to achieve savings and economies of scale sufficient to offset these integration and implementation costs over time, this net benefit may not be achieved in the near term or at all.

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

The size of Itaú Corpbanca’s combined business following the completion of the Merger is significantly larger and more complex than the previous businesses of former Corpbanca or former Banco Itaú Chile individually. Itaú Corpbanca’s future success will depend, in part, on its ability to manage this expanded business, posing substantial challenges for management. There can be no

assurances that Itaú Corpbanca will be successful or that it will fully realize the expected operating efficiencies, cost savings, revenue synergies and other benefits currently anticipated from the Merger.

~~We may have problems successfully completing the implementation of a new information technology core banking system in Colombia.~~

A key element of our expansion strategy consists in the acquisition of existing businesses and their integration into our business model and administration and management processes. During 2017, we continued the technology integration process of the bank in Colombia, which includes the implementation of a unique integrated information technology core banking system in Colombia. The original project, which we had been implementing since February 2013, was discontinued after the Merger. New management decided to maintain the existing proprietary platform that Helm Bank had and to integrate all existing IT information instead of implementing a fully new information technology core banking system as originally planned. If we are unable to successfully complete the integration into one platform, the integration process in Colombia could be adversely affected, which could adversely affect our financial condition, results of operations and liquidity. The integration into one single information technology core banking system in Itaú Corpbanca Colombia is underway, on 2017 the branch network migration began, and it is expected to finish in the first half of 2018.

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 ~~April 2, 2018,~~March 31, 2019 Itaú Unibanco beneficially owned ~~36.06%~~38.14% of our voting common shares. In addition, (i) Itaú Unibanco and (ii) Inversiones Gasa Limitada, CorpGroup Holding Inversiones Limitada, CorpGroup Banking S.A., Compañía Inmobiliaria y de Inversiones Saga SpA and CorpGroup Interhold SpA (together, “CorpGroup”) have signed a shareholders’ agreement to determine certain aspects related to corporate governance, dividend policy, transfer of shares, liquidity and other matters (the “Itaú CorpGroup Shareholders’ Agreement”). Itaú Unibanco and CorpGroup are in position to elect 11 of the 13 members of our board of directors. The Itaú CorpGroup Shareholders’ Agreement provides that the directors appointed by Itaú Unibanco and CorpGroup will vote, to the extent permitted by the law, in a block and in accordance with the recommendation of Itaú Unibanco, subject to certain exceptions. Accordingly, Itaú Unibanco is able to control the actions taken by the board of directors of Itaú Corpbanca on most matters, which could result in conflicts of interest.

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

We are required to furnish current reports onForm 6-K, but the information that we must disclose in those reports is governed primarily by Chilean law disclosure requirements and may differ fromForm 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~~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 ActRule 10A-3(b)(1) independence requirements. We currently use these exemptions and intend to continue using these exemptions. Accordingly, you will not have the same protections afforded to investors

in companies that are subject to all NYSE corporate governance requirements. See “Item 16G. Corporate Governance” for a comparison of the corporate governance standards of the New York Stock Exchange and Chilean practice.

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

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

Risks Relating to Our ADSs and Common Shares

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

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

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~~Article 14 of theLey 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.

TheLey 18,046 sobre Sociedades Anónimas and theReglamento 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 ourEstatutos Sociales, orBy-laws, and the laws of Chile. Under such laws, our shareholders may have fewer or less well-defined rights than they might have as shareholders of a corporation incorporated in a U.S. jurisdiction. For example, under legislation applicable to Chilean banks, our shareholders would not be entitled to appraisal rights in the event of a merger or other business combination undertaken by us.

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

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

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.~~

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 andnon-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 anon-compliant institution may be subject to withholding even if the holder otherwise would not be subject to withholding. U.S. holders are urged to consult their tax advisers regarding the application of these rules to their ownership of the ADSs or our common shares. See “Item 10. Additional Information—E. Taxation—U.S. federal income tax considerations” for additional information related to these rules and their application to holders of ADSs or our common shares.

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

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

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

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

ITEM ~~4. INFORMATION~~4.INFORMATION ON THE COMPANY

A. HISTORY AND DEVELOPMENT OF THE COMPANY

We are a publicly traded company (sociedad ~~anó~~anónima) organized under the laws of Chile and licensed by the SBIF to operate as a commercial bank. Our legal name is Itaú Corpbanca, and our commercial name is Banco Itaú and/or Itaú. Our principal executive offices are located at Rosario Norte 660, Las Condes, Santiago, Chile. Our telephone number is56-2-2660-8000 and our website is www.itau.cl. Our agent in the United States is Itaú Corpbanca New York Branch, Attention: Joaquín Rojas Walbaum, located at 885 Third Avenue, 33rd33rd 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. ~~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.~~

History

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

In 1971, Banco de Concepción was transferred to a government agency,Corporación de Fomento de la Producción(the Chilean Corporation for the Development of Production, or CORFO). Also in 1971, Banco de Concepción acquired Banco Francés e Italiano in Chile, which provided for the expansion of Banco de Concepción into Santiago. In 1972 and 1975, the ~~bank~~Bank acquired Banco de Chillán and Banco de Valdivia, respectively. In November 1975, CORFO sold its shares of the ~~bank~~Bank to private business persons, who took control of the ~~bank~~Bank in 1976. In 1980, the name of the ~~bank~~Bank was changed to Banco Concepción. In 1983, control of Banco Concepción was assumed by the SBIF. The bank remained under the control of the SBIF through 1986, when it was acquired bySociedad Nacional de Minería (the Chilean National Mining Society, or SONAMI). Under SONAMI’s control, Banco Concepción focused on providing financing to small- andmedium-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~~Bank’s Consumer Division, Banco Condell, focused on themiddle-low income segment of the population in Chile.

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

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

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

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

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

As of December 31, ~~2017,~~2018, the ~~bank~~Bank is the ~~fourth~~fifth largest private bank in Chile with approximately ~~10.8%~~10.2% 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, since its beginning in 1871 in the city of Concepción, has had a clear goal: offering clients a service of excellence being faithful to what inspired its founders. On the other hand, Itaú Unibanco, with more than 90 years of history in Brazil, contributed all its experience as the largest private bank in Latin America and one of the largest banks in the world measured in market capitalization with a leading presence in the Brazilian market.

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

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

LOGO

The Merger

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

On April 1, 2016 the Merger was consummated and Banco Itaú Chile was merged with and into Corpbanca. As of ~~April 2, 2018,~~March 31, 2019, Itaú Unibanco and CorpGroup beneficially own ~~36.06%~~38.14% and ~~30.65%~~28.57% of our outstanding common shares, respectively. Itaú Unibanco and CorpGroup also entered into the Itaú CorpGroup Shareholders’ Agreement. Upon the consummation of the Merger, Itaú Unibanco became the controlling shareholder of the merged bank. For a description of the Itaú CorpGroup Shareholders’ Agreement and the Transaction Agreement, see “Item 10. Additional Information—C. Material Contracts.”

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

By consolidating operations in Chile and Colombia, the new bank became one of Chile’s largest private financial institutions, ranking ~~fourth~~fifth in the industry with a market share by loans of ~~10.8%~~10.2% in Chile at the end of ~~2017.~~2018. The Merger and combination of the strengths of both banks has translated into an expansion in the offer of products and services for our clients, with a large branch platform in Chile ~~(201)~~(we operate 201 branch offices in Chile and one branch in New York) and Colombia ~~(174)~~(161, including one office in Panama).

~~Client Migration~~

Platform Integration

~~In order to migrate our clients from Corpbanca’s platform systems to Banco Itaú Chile’s, we set forth a gradual process defined as “migration waves,” which started after we consummated~~After the Merger. For this purpose, we scheduled several waves to migrate Corpbanca’s customers. The migration waves also included the change of image of certain Corpbanca branches. This process was completed during the fourth quarter of 2017.

~~In parallel to the migration waves,~~Merger, we started to integrate the processes and systems of ~~the merged banks,~~Corpbanca and Banco Itaú Chile, which ~~contemplate~~contemplated the following three stages in order to achieve the Target Operational Model, or TOM:

•

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

•

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

·~~TOM Technology and Operations~~: This stage refers to the technological integration and implementation of improvements of both banks supported in a single core banking. This stage is in progress, and we expect to complete it by 2018.

•

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

The Itaú Colombia Acquisition

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

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

Capital Expenditures

The following table reflects our capital expenditures in the years ended December 31, ~~2015,~~ 2016, 2017 and ~~2017:~~2018:


	For the Year Ended December 31,			For the Year Ended December 31,
	2015	2016	2017	2016		2017		2018
	(in millions of Ch$)			(in millions of Ch$)
Land and buildings	—	11,002	27,125		11,002		27,125		6,207
Machinery and equipment	15,766	87,600	50,681		87,600		50,756		74,449
Furniture and fixtures	—	—	—		—		—		—
Vehicle	—	—	—		—		—		—
Other	715	6,555	9,349		6,555		9,274		2,296

Total	16,481	105,157	87,155		105,157		87,155		82,952

Total capital expenditures in ~~2017~~2018 of Ch$~~87,155~~82,952 million consisted mainly of Ch$~~42,903~~58,085 million in expenses relating to the purchase of software and computer ~~equipment and other IT-related expenses, including those related to the post-Merger integration of IT systems.~~equipment. For further details relating to these results and related divestitures, see Notes 1(m) and 13 of our consolidated financial statements included herein.

B. BUSINESS OVERVIEW

COMPETITIVE STRENGTHS

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

Banking Platform with Larger Scale

We believe that as a result of the Merger, we have greater scale and resources to grow and compete more effectively in Chile and Colombia. The merged bank has become the ~~fourth~~fifth largest private bank in Chile and will result in a banking platform for future expansion in the Andean Region. According to the SBIF, as of December 31, ~~2017,~~2018, we ranked ~~fourth~~fifth among private banks in total loans with ~~10.8%~~10.2% market share on an unconsolidated basis (taking into account only our operations in Chile). Additionally, as of the same date, the SBIF ranked us ~~fourth~~fifth in total deposits with 8.5% market share among private banks in the Chilean market.

In ~~2017,~~2018, our operations in Chile and Colombia reached an aggregate net income of Ch$ ~~62,825~~166,854 million. ~~This result was primarily driven by~~From a macroeconomic perspective, the events with the greatest impact on our results were: (i) an acceleration of economic activity in both ~~macroeconomic impacts~~Chile and ~~specific events~~Colombia, which favored the generation of new business and an improvement of the credit risk of part of the our loan portfolio; (ii) the drop in the monetary policy interest rate in Colombia, which went from 4.75% at the beginning of the year to ~~Itaú Corpbanca particularly~~4.25% at the end of December, which positively impacted our cost of funding; and (iii) the higher ~~provisions for loan losses~~inflation observed in Chile of 2.8% in 2018 compared to 2.3% in 2017, which improved our financial margin as further discussed below in “Item 5—Operating and Financial Review and Prospects—A. Operating Results—The Economy—Results of Operations for the Years Ended December 31, ~~2015,~~ 2016, 2017 and ~~2017—~~2018—Net Income.”

Unique Control and Support from a Leading Institution

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

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

Diversified Footprint in Chile and Colombia

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

We believe that our acquisitions in Colombia give us a distinct advantage over our competitors in Chile and Colombia. We are the first, and until September 30, 2015 we were the only, Chilean-based bank to acquire a universal bank outside Chile. As of today, we remain the only Chilean-based bank to have a footprint in Colombia through a universal bank. As of December 31, ~~2017,~~2018, according to the SBIF, Itaú Corpbanca was the ~~fourth~~fifth largest private bank in Chile by loans and deposits and according to the Colombian Superintendency of Finance, Itaú Corpbanca Colombia was the seventh largest bank in Colombia in terms of loans and the eighth largest in terms of deposits.

Experienced Management Team

The chairman of our board of ~~director,~~directors, Mr. Jorge Andrés Saieh Guzmán, became chairman in February 2012. He has over 1718 years of experience as a member of our board of directors. ~~Our~~On August 1, 2018, the Board of Directors of Itaú Corpbanca agreed to appoint Mr. Manuel Olivares Rossetti as the new chief executive officer (CEO)~~, Milton Maluhy, assumed office~~ of the Bank, commencing January 1, 2019. Mr. Olivares shall continue leading the Bank, consolidating all the work and progress attained so far. Mr. Manuel Olivares was most recently the CEO of Banco Bilbao Vizcaya Argentaria, Chile since 2013, after holding various positions at BBVA. Previously, he worked for 12 years in ~~2016. He is part~~different positions at Citibank in Chile. Mr. Olivares received a B.A. in Business and Administration from the Universidad de Chile and possesses more than 30 years of experience in the banking industry, both locally and internationally. Since August 2018, Mr. Olivares has been participating in a process of immersion and understanding of the business, policies, standards and culture of Itaú Corpbanca and of Itaú Unibanco, ~~since 2002~~in coordination with our former CEO, Milton Maluhy. Mr. Milton Maluhy was in his position of chief executive officer of Itaú Corpbanca between April 1, 2016 and ~~a partner since 2010.~~December 31, 2018. After accomplishing the most relevant milestones of the merger, Mr. Maluhy ~~was president director of Rede S.A. (former Redecar S.A.) and executive director of~~has returned to Itaú Unibanco ~~responsible for alliances between Itaú Unibanco and retail chains, as well as head~~in Brazil to a new position of ~~Itaú Unibanco’s credit card area.~~ Chief Financial Officer/Chief Risk Officer.

Our chief financial officer (CFO), Gabriel Moura, has over 2122 years of experience in the banking and financial industry. He is part of Itaú Unibanco since 2000 and a partner since 2010. The CEO of Itaú Corpbanca Colombia, Alvaro Pimentel, has over 21 years of experience in Itaú Unibanco. He has a degree in economics from the Universidade Estadual de Campinas—Unicamp in Brazil and an Executive ~~MBA~~M.B.A. in finance from Insper in Brazil. A number of the members of the board of directors of Itaú Corpbanca Colombia also have a wealth of experience in the Colombian market and the banking and financial services industry.

Sound Risk Management

We believe that our asset quality is superior to the market average in terms of credit risk metrics, despite negative credit events during 2017. As of December 2017, our non-performing loan to total loans and our write-offs to average outstanding loans ratios were 2.3% and 1.1%, respectively. After the Merger, we revised our risk policies to align credit criteria to Itaú’s internal risk policies. This risk management philosophy enables us to identify risks and resolve potential problems on a timely basis. We believe that our asset quality is superior to the market average in terms of credit risk metrics. As of December 2018, ournon-performing loan to total loans and our write-offs to average outstanding loans ratios were 2.1% and 0.6%, respectively.

Operating in a Stable Economic Environment Within Latin America

We conduct a majority of our business in Chile and a significant amount in Colombia. The Chilean and Colombian economies have generally demonstrated a stable macroeconomic environment in terms of growth and inflation. The Chilean economy is generally recognized as among the most stable in Latin America, as evidenced by its investment grade ratings of ~~Aa3~~A1 by Moody’s, A+ by Standard & Poor’s and A by Fitch Ratings, the highest ratings in the region. Chile has consistently received investment-grade credit ratings since Standard & Poor’s and Moody’s started coverage in 1992 and 1994, respectively. Moody’s and Fitch Ratings have an investment grade rating of Colombia of Baa2 and BBB, respectively, with a “negative” and “stable” outlook, respectively. Standard & Poor’s has an investment grade rating of Colombia ofBBB-, with a “stable” outlook.

STRATEGY

Our strategy aims at ~~enhancing our market position in the Chilean and Colombian financial services industry~~being a leading bank in terms of ~~profitability, market share~~sustainable performance and ~~service coverage.~~customer satisfaction. The key ~~elements~~strategic drivers of our strategy are:

Continue to Grow our Operations Profitably as a Universal Bank

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

Actively Pursue Cross-Selling Opportunities

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

Efficiency

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

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

Focus on Building Customer Satisfaction

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

Digital Transformation

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

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

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

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

Further Penetrate the Colombian Financial Services Market

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

~~Actively Pursue Cross-Selling Opportunities~~

~~Efficiency~~

We are committed to continuing to improve our operating efficiency and profitability. We are working to increase use of internet and mobile banking by our customers, by offering them better technology solutions. Our senior management is focused on implementing technological solutions aimed to identify means of improving our overall profitability and to optimize our cost structure, such as online time deposits which have been an innovative product of great success in Chile. Through these initiatives, we will continue to strive to improve our efficiency ratio. As of December 31, 2017, we had a consolidated efficiency ratio of 67.3% (defined as operating expenses as a percentage of operating income consisting of aggregate of net interest income, net service fee income, net gains from mark-to-market and trading, exchange differences (net) and other operating income (net)).

~~Focus on Building Customer Satisfaction~~

OWNERSHIP STRUCTURE

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

Since the consummation of the Merger on April 1, 2016, Itaú Corpbanca has been controlled by Itaú Unibanco. After the Merger, Itaú Unibanco indirectly acquired an additional 2.13%, 0.35% and ~~0.35%~~2.08% share capital of Itaú Corpbanca from the Saieh Family, on

October 26, 2016, ~~and on~~ September 15, 2017 and on October 13, 2018, respectively. As a result of these acquisitions, the current shareholder structure is as follows:

LOGO

PRINCIPAL BUSINESS ACTIVITIES

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

We operate in two main geographic areas: Chile and Colombia. The Chile segment also includes operations carried out by Itaú Corpbanca New York Branch and the Colombia segment also includes the operations carried out by Itaú S.A. (Panama) and Itaú Casa de Valores S.A. The following table sets forth a breakdown of our revenue by geographic market for the years ended December 31, ~~2015,~~ 2016 and ~~2017:~~

Net Interest Income by Geographic Market

2015

2016

2017

Chile

Colombia

Total

Chile

Colombia

Total

Chile

Colombia

Total

(in millions of Ch$)

Interest income

501,982

—

501,982

1,013,951

495,252

1,509,203

1,067,124

579,205

1,646,329

Interest expense

(278,692
)
.

(278,692
)
(554,246
)
(315,782
)
(870,028
)
(529,584
)
(333,763
)
(863,347
)
Net interest income

223,290

—

223,290

459,705

179,470

639,175

537,540

245,442

782,982

~~The business units presented~~2017 in this Annual Report correspond to the business units used by the bank after the Merger. Information for 2015, referring to former Banco Itaú Chile’s historical information, is presented using the same segmenting criteria. However, the resultsaccordance with IAS 39 and for the year ended December 31, ~~2015 are not comparable to the results for the years ended December 31, 2016 and 2017 because of the Merger. See “Item 3. Key Information—Presentation of Financial and Other Information.”~~

~~The following table provides information on the composition of our loan portfolio net of allowances as of December 31, 2015 and 2016~~2018 in accordance with IFR 9:

As of December 31,

2015

2016

Variation

Variation

(in millions of constant Ch$)

(%)

Commercial loans

Commercial loans

3,568,144

11,625,087

8,056,943

225.8%

Foreign trade loans

414,953

720,792

305,839

73.7%

Current account debtors

37,115

125,996

88,881

239.5%

Factoring operations

56,144

74,433

18,289

32.6%

Student loans

173,254

597,946

424,692

245.1%

Leasing transactions

244,627

1,043,046

798,419

326.4%

Other loans and receivables

10,234

28,243

18,009

176.0%

Subtotals

4,504,471

14,215,543

9,711,072

215.6%

Mortgage loans

Letters of credit loans

16,482

57,589

41,107

249.4%

Endorsable mutual mortgage loans

8,720

151,167

142,447

1,633.6%

Other mutual mortgage loans

1,502,395

3,344,285

1,841,890

122.6%

Leasing transactions

—

283,084

283,084

—

Other loans and receivables

—

28,920

28,920

—

Subtotal

1,527,597

3,865,045

2,337,448

153.0%

Consumer loans

Consumer loans

370,612

1,703,973

1,333,361

359.8%

Current account debtors

109,913

172,938

63,025

57.3%

Credit card debtors

192,591

396,514

203,923

105.9%

Consumer leasing transactions

308

16,519

16,211

5,263.3%

Other loans and receivables

—

74,116

74,116

—

Subtotal

673,424

2,364,060

1,690,636

251.1%

Total

6,705,492

20,444,648

13,739,156

204.9%


	Net Interest Income by Geographic Market
	2016									2017									2018
	Chile			Colombia			Total			Chile			Colombia			Total			Chile			Colombia			Total
	(in millions of Ch$)
Interest income		1,013,951			495,252			1,509,203			1,067,124			579,205			1,646,329			1,208,481			530,836			1,739,317
Interest expense		(554,246	)		(315,782	)		(870,028	)		(529,584	)		(333,763	)		(863,347	)		(593,796	)		(257,858	)		(851,654	)

Net interest income		459,705			179,470			639,175			537,540			245,442			782,982			614,685			272,978			887,663

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

As of December 31,

2016

2017

Variation

Variation

(in millions of constant Ch$)

(%)

Commercial loans

Commercial loans

11,625,087

10,734,858

(890,229
)
(7.7)%

Foreign trade loans

720,792

671,478

(49,314
)
(6.8)%

Current account debtors

125,996

134,597

8,601

6.8%

Factoring operations

74,433

140,375

65,942

88.6%

Student loans

597,946

640,209

42,263

7.1%

Leasing transactions

1,043,046

923,507

(119,539
)
(11.5)%

Other loans and receivables

28,243

24,608

(3,635
)
(12.9)%

Subtotals

14,215,543

13,269,632

(945,911
)
(6.7)%

Mortgage loans

Letters of credit loans

57,589

47,260

(10,329
)
(17.9)%

Endorsable mutual mortgage loans

151,167

134,103

(17,064
)
(11.3)%

Other mutual mortgage loans

3,344,285

3,637,164

292,879

8.8%

Leasing transactions

283,084

273,175

(9,909
)
(3.5)%

Other loans and receivables

28,920

26,032

(2,888
)
(10.0)%

Subtotal

3,865,045

4,117,734

252,689

6.5%

Consumer loans

Consumer loans

1,703,973

1,709,981

6,008

0.4%

Current account debtors

172,938

195,661

22,723

13.1%

Credit card debtors

396,514

401,505

4,991

1.3%

Consumer leasing transactions

16,519

10,778

(5,741
)
(34.8)%

Other loans and receivables

74,116

58,787

(15,329
)
(20.7)%

Subtotal

2,364,060

2,376,712

12,652

0.5%

Total

20,444,648

19,764,078

(680,570
)
(3.3)%


	As of December 31,
	2016		2017		Variation			Variation
	(in millions of constant Ch$)							(%)
Commercial loans
Commercial loans		11,625,087		10,734,858		(890,229	)		(7.7	)%
Foreign trade loans		720,792		671,478		(49,314	)		(6.8	)%
Current account debtors		125,996		134,597		8,601			6.8	%
Factoring operations		74,433		140,375		65,942			88.6	%
Student loans		597,946		640,209		42,263			7.1	%
Leasing transactions		1,043,046		923,507		(119,539	)		(11.5	)%
Other loans and receivables		28,243		24,608		(3,635	)		(12.9	)%
Subtotals		14,215,543		13,269,632		(945,911	)		(6.7	)%

Mortgage loans
Letters of credit loans		57,589		47,260		(10,329	)		(17.9	)%
Endorsable mutual mortgage loans		151,167		134,103		(17,064	)		(11.3	)%
Other mutual mortgage loans		3,344,285		3,637,164		292,879			8.8	%
Leasing transactions		283,084		273,175		(9,909	)		(3.5	)%
Other loans and receivables		28,920		26,032		(2,888	)		(10.0	)%
Subtotal		3,865,045		4,117,734		252,689			6.5	%

Consumer loans

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








Total
   20,444,648    19,764,078    (680,570 )    (3.3 )%

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


	As of December 31,⁽¹⁾
	2017		2018		Variation⁽²⁾			Variation⁽²⁾
	(in millions of constant Ch$)							(%)
Commercial loans
Commercial loans		10,734,858		11,065,601		330,743			3.1	%
Foreign trade loans		671,478		920,479		249,001			37.1	%
Current account debtors		134,597		124,299		(10,298	)		(7.7	)%
Factoring operations		140,375		210,558		70,183			50.0	%
Student loans		640,209		625,598		(14,611	)		(2.3	)%
Leasing transactions		923,507		903,047		(20,460	)		(2.2	)%
Other loans and receivables		24,608		32,611		8,003			32.5	%
Subtotals

		13,269,632		13,882,193		612,561			4.6	%

Mortgage loans
Letters of credit loans		47,260		37,892		(9,368	)		(19.8	)%
Endorsable mutual mortgage loans		134,103		110,652		(23,451	)		(17.5	)%
Other mutual mortgage loans		3,637,164		3,901,107		263,943			7.3	%
Leasing transactions		273,175		307,723		34,548			12.6	%
Other loans and receivables		26,032		22,336		(3,696	)		(14.2	)%

Subtotal		4,117,734		4,379,710		261,976			6.4	%

Consumer loans
Consumer loans		1,709,981		1,766,313		56,332			3.3	%
Current account debtors		195,661		191,913		(3,748	)		(1.9	)%
Credit card debtors		401,505		443,141		41,636			10.4	%
Consumer leasing transactions		10,778		5,727		(5,051	)		(46.9	)%
Other loans and receivables		58,787		45,373		(13,414	)		(22.8	)%

Subtotal		2,376,712		2,452,467		75,755			3.2	%

Total		19,764,078		20,714,370		950,292			4.8	%

⁽¹⁾

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

⁽²⁾

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

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

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

Wholesale Banking

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

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

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

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

Retail Banking

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

Itaú Personal Bank. In 2017 we launched a new business unit for high-income individuals, with a monthly income ~~in excess of~~between Ch$2.5 million and Ch$8.0 million. The business model for Itaú Personal Bank is based in our relationship with the customers. This is the first high-income individuals segment in Chile with differentiated branches at ground floor to be access directly from the street, and additionally with differentiated mobile and web channels. Currently, we have 2022 premium branches and 3734 traditional branches with a space for Personal Bank.

Private Banking. Within our Private Banking Division, we provide private banking services to our high-income and high net worth customers in Chile. We consider high-income individuals to be customers with a monthly income in excess of ~~US$1~~Ch$8.0 million. Each client under our private banking or “Private Banking” program is provided with a liaison officer who oversees the client’s entire relationship with us across all product lines. In addition to the products and services we provide to private banking customers, we offer tailored lending products designed to help keep their businesses growing.

Itaú (Traditional Banking). Our Traditional Banking Division is mainly oriented toward individuals in Chile with medium-high income levels (focused on clients between Ch$600,000 and Ch$2.5 million monthly income). Our traditional banking services are marketed and operated under the Itaú and Corpbanca brand names. We offer our traditional and private banking clients products in Chile such as checking accounts, credit lines, credit and debit cards, personal installment loans, mortgage loans, insurance banking, time deposits and savings accounts in Chilean pesos, Euros, UF and U.S. dollars, among others. In addition, we provide mutual fund and securities brokerage services. This segment is served under ~~120~~123 branches.

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

Treasury

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

As of December 31, ~~2017,~~2018, the outstanding loans from foreign banks to Itaú Corpbanca were US$~~1,872~~1,613 million with approximately 2621 financial institutions from the U.S., Canada, Germany, France ~~England,~~, Japan, Switzerland and other countries, including Latin America. The international global risk assets outstanding as of December 31, ~~2017~~2018 were US$~~2,734~~2,505 million.

Itaú Corpbanca Colombia

Itaú Corpbanca Colombia provides a broad range of commercial and retail banking services to its customers in Colombia, operating principally in the cities of Bogotá, Medellín, Cali, Bucaramanga, Cartagena and Barranquilla. As of December ~~31, 2017,~~2018, according to the Colombian Superintendency of Finance, Itaú Corpbanca Colombia was the ~~sixth~~seventh largest bank in Colombia in terms of total assets, the seventh largest bank in Colombia in terms of total loans and the ~~seventh~~eighth largest bank in Colombia, in terms of total deposits as reported under local regulatory and accounting principles.

As of December 31, ~~2017,~~2018, Itaú Corpbanca Colombia had total assets of Ch$~~6,253,642~~6,605,000 million (US$~~10,177~~9,507 million), including total loans of Ch$~~4,479,791~~4,439,256 million (US$~~7,290~~6,390 million), ~~total deposits of Ch$3,939,179 million (US$6,411 million)~~ and total shareholders’ equity of Ch$~~621,428~~613,243 million (US$~~1,011~~883 million). As of December 31, ~~2017,~~2018, Itaú Corpbanca Colombia had total net interest income of Ch$~~228,877~~296,088 million (US$~~372.5~~426.2 million) and a loss ~~before tax~~ of Ch$~~32,653~~13,161 million (US$~~53.1~~18.9 million). As of December 31, ~~2017,~~2018, Itaú Corpbanca Colombia had ~~174~~161 branches, ~~176~~174 ATMs and ~~3,644~~3,494 employees in Colombia and Panama.

New York Branch

Our New York Branch, ~~offers a wide range~~which supports the commercial needs of ~~credit operations and services to both~~ Chilean and ~~non-Chilean retail customers and large and medium-sized companies.~~other Latin American companies that conduct business overseas, was established in 2009. Operating with an offshore foreign branch of a Chilean bank is especially attractive to clients abroad as it provides a sense of proximity and it allows us to accompany our customers as they operate overseas, responding to their needs and service requirements. Our target market ~~on the liability side~~ consists of ~~retail customers with sophisticated financial needs,~~ medium and large Chilean companies, other Latin American companies, and Chilean and other Latin American banks without offshore branch offices, among others. ~~The~~

Our New York Branch has a Yankee Certificate of Deposits program that is placed directly to clients or through U.S. dealers.

~~Our~~ The New York Branch ~~supports the commercial needs of Chilean and Latin American companies doing business overseas. Another important service is the participation~~participates in syndicated loans, together with other international institutions, to finance a variety of investment projects. ~~Our New York Branch also has a private banking unit to provide checking accounts and other associated services.~~ As of December 31, ~~2017,~~2018, the branch had US$~~1,703~~1,590 million in ~~assets.~~assets and had a net income of US$32 million for the year ended December 31, 2018.

Financial Services Offered Through Subsidiaries

We have made several strategic long-term investments in financial services companies in Chile (each of which are regulated and supervised by either the SBIF or the CMF), which are engaged in activities complementary to our core banking activities. Through wholly-owned subsidiaries, we intend to continue to develop a comprehensive financial services group able to meet the diverse financial needs of our current and potential clients. As of December 31, ~~2017,~~2018, assets of our subsidiaries represented ~~0.8%~~1.1% of total consolidated. For the year ended December 31, ~~2017,~~2018, net income of our subsidiaries totaled Ch$~~27,019~~39,696 million (US$~~44.0~~57 million).

The following table sets forth certain financial information with respect to our financial services subsidiaries as of December 31, ~~2015,~~ 2016, 2017 and ~~2017,~~2018, in millions of Chilean pesos. Amounts relating to inter-company transactions have not been removed for purposes of this table.

~~Financial Services Offered Through Subsidiaries~~


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

As of and for the Year Ended December 31,

2015

2016

2017

Assets

Equity

Net
Income

Assets

Equity

Net
Income

Assets

Equity

Net
Income

(in millions of Ch$)

Itaú Corpbanca Corredores de Bolsa S.A. (1)

—

—

—

56,121

39,482

365

118,651

42,567

(515
)
Itaú Adm. General de Fondos S.A. (2)

37,302

35,374

6,532

14,823

11,628

5,263

15,870

11,084

4,951

Itaú Asesorías Financieras S.A. (3)

—

—

—

4,473

3,207

3,031

2,865

1,773

1,590

Itaú Corredores de Seguros S.A.(4)

—

—

—

19,792

14,681

8,056

20,589

13,666

7,421

Itaú Chile Corredora de Seguros Limitada(4)

51,998

50,945

8,049

18,168

13,093

10,499

18,965

12,389

9,796

Corp Legal S.A.

—

—

—

2,654

2,306

(277
)
1,819

1,815

(491
)
Itaú Corpbanca Recaudaciones y Cobranzas S.A. (5)

—

—

—

2,473

1,098

447

3,833

1,211

91

Itaú Corredor de Seguros Colombia S.A.

—

—

—

3,534

1,692

388

3,826

1,898

(25
)
Itaú Securities Services Colombia S.A. Sociedad Fiduciaria

—

—

—

13,888

13,484

600

12,652

12,268

945

Itaú Asset Management Colombia S.A. Sociedad Fiduciaria

—

—

—

18,771

15,530

2,392

19,188

15,807

2,916

Itaú Comisionista de Bolsa S.A.

—

—

—

11,267

10,012

890

12,303

7,214

352

Itaú (Panamá) S.A.

—

—

—

Itaú Casa de Valores S.A.

—

—

—

616

501

43

570

450

(12
)
Corpbanca Securities Inc.(6)

—

—

—

481

467

(259
)
—

—

—

₍₁₎

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

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

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

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

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

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

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

Itaú Corredores de Bolsa Ltda. (formerly Itaú Corpbanca Corredores de Bolsa S.A. ~~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.”~~

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

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

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

~~(5)~~ ~~On October 25, 2017, the legal name of Recaudaciones y Cobranzas S.A. was changed to Itaú Corpbanca Recaudaciones y Cobranzas S.A.~~

~~(6)~~ ~~Corpbanca Securities Inc., the broker-dealer in the United States, was dissolved on December 18, 2017.~~

~~Itaú Corpbanca Corredores de Bolsa S.A. (formerly Corpbanca Corredores de Bolsa S.A.~~)
Our subsidiary Itaú ~~Corpbanca~~ Corredores de Bolsa S.A., or ~~ICCB,~~ICB, is a member of the Santiago Stock Exchange and is registered with the CMF as a security broker. ~~ICCB’s~~ICB’s primary activities are providing brokerage services in equities, fixed income, and foreign currency exchange. ~~ICCB’s~~ICB’s net income was Ch$~~515~~546 million for the year ended December 31, ~~2017. ICCB~~2018. ICB had assets under custody of Ch$~~640,087 million~~450 billion as of December 31, ~~2017.~~2018. For the year ended December 31, ~~2017, ICCB’s~~2018, ICB’s net income was driven by ~~a decrease~~an increase in our local and foreign institutional customers’ investments volumes and fees, partially offset by lower revenues from retail customers that were impacted by higher volatility in the local equity ~~adversely affecting operating revenue.~~markets. Our ~~customer base is mainly comprised of the~~ retail customer ~~unit, which~~base has historically shown a higher risk aversion ~~than~~compared to other customer business ~~units.~~segments.
On January 1, 2017, Itaú BBA Corredor de Bolsa Limitada merged into Corpbanca Corredores de Bolsa S.A. Itaú BBA Corredor de Bolsa Limitada ~~or ICB,~~ was also a member of the Santiago Stock Exchange and was registered with ~~the~~former Superintendencia de Valores y Seguros (the CMF currently) as a security broker. ~~ICB’s~~Itaú BBA Corredor de Bolsa’s primary activities were providing brokerage services in equities, fixed income, and foreign currency exchange.
Itaú Administradora General de Fondos S.A. ~~(formerly Itaú Chile Administradora General de Fondos S.A.).~~
~~We incorporated~~ Itaú Administradora General de Fondos S.A., or IAGF ~~to complement~~complements our banking services offered to our individual and corporate clients. IAGF’s ~~current function is to provide~~currently provides asset management services to individual, corporate and institutional clients. For the years ended December 31, ~~2015,~~ 2016, 2017 and ~~2017,~~2018, IAGF had net income of Ch$~~6,532~~5,263 million, Ch$~~5,263~~4,951 million and Ch$~~4,951~~6,790 million, respectively. IAGF had total assets of Ch$~~37,302 million.~~14,823 million, Ch$~~14,823~~15,870 million and Ch$~~15,870~~15,195 million as of December 31, ~~2015,~~ 2016, 2017 and ~~2017,~~2018, respectively. As of December 31, ~~2017,~~2018, IAGF managed 4923 mutual funds, including fixed income funds and ETFs and had total assets under management amounting to Ch$~~1,681,483 million,~~2,225,6 billion, an increase of Ch$~~588,187 million~~300 billion as compared to December 31, ~~2016.~~2017. During ~~2017,~~2018, IAGF experienced an increase of ~~65% of its assets under management,~~37.1% in net income, explained ~~mostly~~primarily by ~~the withdrawals observed~~an increase in ~~the last quarter of 2017, due to~~volume driven by a ~~higher volatility environment observed in local and international markets.~~
simpler commercial offer focused on our competitive advantages.
On December 29, 2017, Corpbanca Administradora General de Fondos S.A., or CAGF, merged into Itaú Chile Administradora General de Fondos S.A. CAGF’s, primary activities were providing asset management services to individual, corporate and institutional clients. For the year ended December 31, 2016, CAGF had net income of Ch$3,067 million. CAGF had total assets of Ch$6,363 million as of December 31, 2016. As of December 31, 2016, CAGF managed 24 mutual funds, including fixed income funds and six private investment funds, and had total assets under management amounting to Ch$1,013,732 million. In 2016, CAGF’s assets under management were impacted mostly by the withdrawals observed in the last quarter of 2016, due to a higher volatility environment observed in local and international markets.
The legal name of the merged entity was changed to “Itaú Administradora General de Fondos S.A.” and the commercial name was changed to “Itaú Asset Management.”
Itaú Asesorías Financieras S.A.
Itaú Asesorías Financieras S.A., or ICAF, provides a broad range of financial advisory services to a variety of corporations and government agencies, including those services related to debt restructurings, syndicated loans, structured loans, structured investment funds, bilateral grants, mergers and acquisitions, privatizations and company valuations. For the year ended December 31, ~~2017,~~2018, ICAF had net income of Ch$~~1,590~~8,321 million. ICAF had total assets of Ch$~~2,865~~11,789 million as of December 31, ~~2017.~~2018.
Itaú Corredores de Seguros S.A. ~~(formerly Corpbanca Corredores de Seguros S.A.)~~
In accordance with our strategy of expanding the breadth of financial services that we offer, our subsidiary Itaú Corredores de Seguros S.A., or ICS, offers a full line of insurance products. Many of these products complement our banking services by offering clients unemployment and life insurance related to personal loans, as well as insurances in connection with mortgage loans. Through ICS, we also providenon-credit-related insurance to existing clients and the general public. For the year ended December 31, ~~2017,~~2018, ICS had net income of Ch$~~7,421~~16,630 million. ICS had total assets of Ch$~~20,589~~42,833 million as of December 31, ~~2017.~~
2018.
On April 1, 2018, Itaú Chile Corredora de Seguros Limitada, or ICCS, merged into Corpbanca Corredores de Seguros S.A. ICCS’s primary activities were providing a full line of insurance products to our clients. For the years ended December 31, 2015, 2016 and 2017, ICCS had net income of Ch$8,049 million, Ch$10,499 million and Ch$9,796 million, respectively. ICCS had total assets of Ch$51,998 million, Ch$18,168 million and Ch$18,695 million as of December 31, 2015, 2016 and 2017, respectively.
The legal name of the merged entity was changed to “Itaú Corredores de Seguros S.A.” and the commercial name was changed to “Itaú Corredores de Seguros.”
Corp Legal S.A.
Corp Legal S.A. was created in 2007 and is regulated by the SBIF. It provides standard legal services to Itaú Corpbanca, its subsidiaries and its clients.
On January 8, 2019, Itaú Corpbanca filed with the SBIF a request to buy the one share of CorpLegal S.A. that Itaú Corredores de Bolsa Ltda. owns in CorpLegal S.A. Once we acquire that share, we will have 100% ownership, which consequently will immediately terminate CorpLegal S.A. by absorption.
Recaudaciones y Cobranzas Ltda. (formerly Itaú Corpbanca Recaudaciones y Cobranzas S.A. ~~(formerly Recaudaciones y Cobranzas S.A.~~)
On February 25, 2015, former Corpbanca, directly and indirectly, acquired all of the issued and outstanding shares of Recaudaciones y Cobranzas S.A, or Instacob, a debt collection company providing court andout-of-court collections services for loans. As a result of this transaction, Instacob became a wholly owned subsidiary of ours.
On November 5, 2018 Itaú CorpBanca Recaudaciones y Cobranzas S.A. changed its legal name to Recaudaciones y Cobranzas Ltda.
~~Itaú Corredor de Seguros Colombia S.A. (formerly Helm Corredor de Seguros 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 is regulated by the Colombian Superintendency of Finance.~~
Itaú Securities Services Colombia S.A. Sociedad Fiduciaria ~~(formerly Corpbanca Investment Trust Colombia S.A. Sociedad Fiduciaria)~~
We acquired a 91.9% equity interest in Corpbanca Investment Trust Colombia S.A. Sociedad Fiduciaria, now Itaú Securities Services Colombia S.A. Sociedad Fiduciaria, or ISS Colombia, in 2012 as part of the acquisition of Banco Santander Colombia. ISS Colombia is a financial services company operating in Colombia that specializes in trust and custodial services.
During 2015, ISS Colombia completed the implementation of a new custody software and became the first custodian to be certified with the Colombia Stock Exchange for the automation of processes for the development of the custodian activities. Its operations have grown ~~starting with~~from a value of assets under custody of COP$1.6 billion (Ch$~~363~~342 million) in July 2015, to COP$5.2 billion (Ch$~~1,155~~1,112 million) as of December 31, 2016, ~~and~~ to COP$6.8 billion (Ch$~~1,399~~1,455 million) as of December 31, ~~2017.~~2017, and to COP $9.4 billion (Ch$2,011 million) as of December 31, 2018. The value of assets under local and global custody were ~~COP$3.1~~COP $4.9 billion (Ch$~~638~~1,048 million) and ~~COP$3.7~~COP $4.5 billion (Ch$~~761~~963 million)~~, respectively,~~ as of December 31, ~~2017.~~2018. ISS has contracts with entities in Panama, Mexico, Brazil and Luxembourg for global custody arrangements.
Itaú Asset Management Colombia S.A. Sociedad Fiduciaria ~~(formerly Helm Fiduciaria S.A.)~~
Itaú Asset Management Colombia S.A. Sociedad Fiduciaria, is a Colombian corporation (~~sociedad~~(sociedad anónima), which is engaged in trust portfolio management, including investment trust management, administration, security, real estate trusts and fund administration. It has its main domicile in the city of Bogota, D.C., Colombia and is regulated by the Colombian Superintendency of Finance.
Itaú Comisionista de Bolsa S.A. ~~(formerly Helm 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. ~~(formerly Helm~~

Itaú Casa de Valores (Panamá) S.A.)

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

~~SEASONALITY~~Itaú Corredor de Seguros S.A.

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

SEASONALITY

Our business is not materially affected by seasonality.

RAW MATERIALS

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

DISTRIBUTION CHANNELS, ELECTRONIC BANKING AND TECHNOLOGY

Itaú Corpbanca

Our distribution network provides integrated financial services and products to our customers through diverse channels, including ATMs, traditional branches, mobile banking, internet banking and telephone banking. As of December 31, ~~2017,~~2018, we operated ~~201~~202 branch offices in Chile and New York, which ~~includes145~~includes 145 branches operating as Itaú, 56 branches operating as Banco Condell, our consumer finance division and our New York Branch. In addition, as of December 31, ~~2017,~~2018, we owned and operated ~~469~~464 ATMs in Chile, and our customers have access to over ~~7,620~~7,490 ATMs (including Banco del Estado de Chile’s ATMs) in Chile through our agreement with Redbanc. We utilize a number of different sales channels including account executives, telemarketing and the internet to attract new clients. Our branch system serves as the main distribution network for our full range of products and services.

We offer internet and mobile banking to our customers 24 hours a day through our password-protected internet site, www.itau.cl. Our internet site offers a broad range of services, includingup-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, ~~2017,~~2018, we had ~~219,721~~246,232 customers with checking accounts who have activated internet or mobile application passwords in Chile, allowing them to access our internet banking services. We are a member of theSociedad 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 a24-hour phone-banking call center that grants them access to account information and allows them to effect certain payments by telephone.

As part of the Merger process, during 2017 we conducted an operational and brand integration in ~~Chile. As of December 31, 2017, we migrated our retail customers form the legacy IT systems to the platform used by former Banco Itaú~~ Chile. For the activities of former Corpbanca, we maintain several service and lease agreements with IBM de Chile S.A.C., which provides us with the computer hardware and networkbuild-out that we use in our headquarters and branch offices, the recovery data center is in NetGlobalis. Our main platform is Altamira. For the activities of former Corpbanca, our platform uses IBS (Integrated Banking System) with additional internal ~~developments .~~developments. We also have our own main data centers as well as a recovery data centers.

Itaú Corpbanca Colombia

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

As of December 31, ~~2017,~~2018, Itaú Corpbanca Colombia operated ~~174~~161 branch offices in Colombia and Panama and owned and operated ~~176~~174 ATMs in Colombia, ~~and~~ also ~~provided~~providing its customers with access to ~~over 15,290~~15,828 additional ATMs through Colombia’s other financial ~~institutions.~~institutions as of June 2018. Itaú Corpbanca Colombia utilizes a number of different sales channels including account executives, telemarketing and the internet to attract new clients. Itaú Corpbanca Colombia’s branch system serves as the main distribution network for its full range of products and services.

Itaú Corpbanca Colombia offers internet banking to its customers 24 hours a day through its password-protected internet site, ~~www.bancoCorpbanca.com.co.~~www.itau.co. Itaú Corpbanca Colombia’s internet site offers a broad range of services, includingup-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, ~~2017,~~2018, Itaú Corpbanca Colombia had ~~94,436~~96,758 customers with activated internet passwords who used the electronic banking service at least once during the last month, allowing them to access Itaú Corpbanca Colombia’s internet banking services. Itaú Corpbanca Colombia is a member of ACH Colombia S.A. and Cenit S.A., organizations that facilitate electronic banking transactions on behalf of its customers as well as other Colombian banks. Itaú Corpbanca Colombia also provides its customers with access to a24-hour phone-banking call center that grants them access to account information and allows them to effect certain payments by telephone.

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

PATENTS, LICENSES AND CONTRACTS

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

COMPETITION

Competition in Chile

Description of the Chilean Financial System. The Chilean financial services market consists of a variety of largely distinct sectors. The most significant sector, commercial banking, includes 1918 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 ~~2017, four~~2018, five private sector banks along with the state-owned bank together accounted for ~~75.6%~~88% of all outstanding loans by Chilean financial institutions as of December 31, ~~2017:~~2018: Banco Santander-Chile ~~(18.7%~~(18.3%), Banco de Chile ~~(17.2%~~(16.9%), Banco de Crédito e Inversiones, or Bci ~~(13.6%~~(13.9%), Scotiabank Chile (13.8%), Itaú Corpbanca ~~(10.8%~~(10.2%), and Banco del Estado de Chile ~~(15.3%~~(14.5%). All market share statistics in this paragraph are presented as reported to the SBIF calculated under local regulatory and accounting principles on an unconsolidated basis.

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

Following rapid consolidation among Chilean banks commencing in the late 1990s through today, the market has become characterized by fewer larger players. Our principal competitors in Chile are Banco de Chile, Banco Santander-Chile, Bci and ~~a new bank expected to result from~~Scotiabank Chile. The recent acquisitions ofnon-banking credit card businesses such as Promotora CMR by Bank of Falabella and Walmart Servicios Financieros by Bci have recently increased competition in the ~~merger of Scotiabank Chile with Banco Bilbao Vizcaya Argentaria Chile, announced on December 6~~th~~, 2017.~~credit card business. As compared to other Chilean banks, we believe our position in the Chilean banking industry after the Merger enables us to compete with international banks seeking to provide loans to companies operating in Chile, especially since we have ~~a greater~~ scale and resources to grow and compete more effectively. Additionally, we have a unique control and support from a leading institution such as Itaú Unibanco. Itaú Corpbanca will be able to expand its banking products’ offering through proven segmentation and digitalization models.

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

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 othernon-banking businesses involved in the issuance of private-label credit cards. We intend to remain competitive in the mortgage loan services and credit card markets through product innovation.

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

Competition in Colombia

Description of the Colombian Financial System. In recent years, the Colombian banking system has been undergoing a period of consolidation given ~~the~~a series of mergers and acquisitions that have taken place within the ~~sector, including~~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 Acquisition and the Helm Bank Acquisition. Several mergers and acquisitions have taken place since 2008, including: (a) the acquisition of the Colombian arm of ABN Amro Bank by the Royal Bank of Scotland; (b) the acquisition ofS.A. in 2013; (d) Scotiabank acquiring a majority stake in Banco Colpatria, ~~by Scotiabank; (c) the acquisition of BAC-Credomatic,~~ which ~~has operations~~ in ~~several countries in Central America, by Banco de Bogotá~~turn dissolved former Scotiabank Colombia S.A.; ~~(d)~~(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 ~~(e)~~(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. ~~During 2015, three new~~Since 2016 the number of commercial banks ~~commenced operations~~has remained stable.

One of the recent changes in ~~Colombia:~~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 ~~Mundo Mujer~~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. ~~(previously operating as a microloan originator); Banco Multibank~~For the Corpbanca-branded branches the migration towards Itaú was completed in stages beginning in the second half of 2017 and ~~Banco Compartir S.A., which converted its licenses from financing companies to banks.~~

~~Additionally, pursuant~~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 ~~CFS~~Colombian Financial Superintendency (the “CFS”) on April 7, 2017.

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

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

As of December, ~~31, 2017,~~2018, and according to the Colombian Superintendency of Finance, the ~~principal participants~~main actors in the ~~Colombian~~local financial system were the Colombian Central Bank, ~~of Colombia,~~ 25 commercial banks (14 domestic private banks, 10 foreign banks, and one domestic state-owned bank), five finance corporations and 15 financing companies (three leasing companies and 12 traditional financing companies). In addition, trust companies, cooperatives, insurance companies, insurance brokerage firms, bonded warehouse, special state-owned institutions, pension and severance pay funds also participate in the Colombian financial system.

~~The Financial Reform Act~~

Regulatory matters. On August 6, 2018, the Colombian Ministry of 2009 (Law 1328 passed July 15, 2009) authorized banks to provide merger and acquisition loans and allowed them to conduct financial leasing operations. As a result, some competitors have absorbed their financial leasing subsidiaries into their banking franchises and some leasing companies areFinance issued Decree 1477, regulating the standards of capital for credit institutions under by Basel III. Its content covers the following areas: (a) alignment in the ~~process~~definitions of ~~becoming banks.~~

capital ratio; (b) an update in the measurements of the Risk-Weighted Assets (RWA); (c) implementation of buffers; and (d) leverage ratio. The CFS is expected to publish the new instructions and methodology for the calculations of the capital ratio by May 2019. The transition towards the new regulation will have two phases: a9-month period for the credit institutions to comply with the alignment in the definitions of capital ratio and measurement of RWA and a4-year period starting on February 2020, in which banks will have to meet the new limits and buffers for the capital ratios. See “Item 4. Information on the Company—B. Business Overview—Colombian Banking Regulation and Supervision—Regulatory Developments in Colombia.”

Financial System Evolution in Colombia during ~~2016~~2017 and ~~2017~~2018. ~~2017~~2018 was a ~~challenging~~ year of moderate growth for the Colombian financial services sector. The inflation rate decreased throughout the year ~~and~~ ended ~~on 4.09%~~at 3.18% as of December 31, ~~2017, close to but still above~~2018, within the Central Bank’s target ~~rate~~range of 2%~~-4%~~ to 4%. The reference interest rate decreased by ~~225~~50 basis points ~~on 2017.~~in 2018. The Central Bank’s rate was ~~7.50%~~4.75% as of January 1, ~~2017~~2018 and ~~4.75%~~4.25% as of December 31, ~~2017. Bank lending~~2018. As of December 2018, banks increased ~~6.1% on 2017~~their gross loans by 6.0% as compared to ~~12.2% on 2016, similarly~~growths of 6.1% in 2017 and 12.2 in 2016. Similarly, deposits grew ~~6.7%~~5.1% as ~~of December 31, 2017,~~ compared to December 31, ~~2016.~~

2017.

The Colombian banking system’s level ofpast-due loans as a percentage of the system’s total loan portfolio ~~increased~~continued increasing over the first half of 2018, peaking at 5.0% in July 2018. The second half of the year showed signs of recovery and the ratio decreased to ~~4.3% for~~4.5% as of December ~~2017, after~~2018, slightly higher than the ~~3.1%~~4.3% registered for December ~~2016.~~2017. The growth rate ~~of growth~~ of past due loans above 30 days was 12.3% as of December 2018, after reaching 45.5% for the year ~~2017 until December. As a consequence, coverage,~~2017. Coverage, measured as the ratio of allowances topast-due loans, ended December ~~2017~~2018 at ~~134.0%~~137.3%, compared to ~~155.5%~~134.0% at the end of ~~2016.~~2017.

~~The~~As of December 2018 the demand for business, small business and consumer loans ~~granted by banks~~slowed down as compared to December 2017. Business loans grew 3.3% after registering 3.6% the previous year, small business loans grew 3.4%, after a growth of 7.6% in 2017, and consumer loans increased by ~~3.6% for 2017, a moderation on the dynamics compared to~~8.8% after an ~~11.4%~~ increase ~~in 2016. Consumer loans granted by banks also decreased its~~ rate of ~~growth with~~ 9.1% ~~increase in 2017 , compared to a 13.2% increase observed in 2016. A similar behavior was presented on mortgages were~~the previous year. On the other hand, the gross amount of mortgage loans increased ~~of 11.2%~~12.2%, compared to ~~15.1% on 2016. On the other hand, small business loans increased 7.6%~~11.2% in ~~2017 while on 2016 that category increased 6.1%.~~

2017.

During ~~2017,~~2018, lending ~~lost some weight~~decreased in the Colombian banks system’s structure. Net loans decreased from ~~68.5%~~67.9% of total assets at the end of ~~2016~~2017 to ~~67.9% at the end~~66.4% as of December ~~2017, and investment~~2018. Investment portfolio and derivatives, as a percentage of total assets, increased from ~~17.2% at the end of 2016 to~~ 17.8% at the end of ~~2017.~~

2017 to 18.5% at the end of 2018.

As of December 31, ~~2017,~~2018, the Colombian financial sector recorded COP$~~608,551,285~~659,310,049 million in total assets, representing a ~~5.9%~~8.4% increase as ofcompared to December 31, ~~2016.~~2017. The Colombian financial system’s total composition of assets shows banks ~~with~~hold a market share of ~~95.5%~~95.1%, followed by financial corporations ~~with 2.0%~~at 2.3%, financing companies ~~with~~at 2.0% and financial cooperatives ~~with~~at 0.5%.

As of December 31, ~~2017,~~2018, the capital adequacy ratio (Tier 1 + Tier 2) for credit institutions was ~~16.6%~~16.34% (including banks, finance corporations, financing companies and cooperative entities), ~~increasing by 73~~decreasing 24 basis points when compared to December ~~31, 2016, and which is~~2017, well above the minimum legal requirement of 9%.

Loans

As of December 31, ~~2016~~2017 and ~~2017,~~2018, our gross consolidated loan portfolio was Ch$~~21,048,484~~20,439,448 million and Ch$~~20,439,448~~21,548,899 million, respectively, as reported to the SBIF calculated under local regulatory and accounting principles. This placed us as the ~~fourth~~fifth largest financial institution among private Chilean banks and ~~fifth~~sixth place among all banks operating in Chile. Our gross consolidated loan portfolio represented ~~10.8%~~10.2% of the market for loans in the Chilean financial system (comprising all commercial banks) as of December 31, ~~2017.~~2018. In 2016, due to the Merger and the consolidation of the loan portfolios of former Corpbanca and former Banco Itaú Chile, our aggregate gross loan portfolio grew by 42.1%. However, due to the decline investment activity in Chile and a more challenging economic scenario in 2017, when compared to the combined loan portfolios in 2016, our consolidated loan portfolio decreased in 2017 by 2.9%. In 2018, our loan portfolio increased 5.4% driven primarily by (i) a positive trend in our consumer loans, particularly in installment loans, due to our strategy to grow our retail banking segment; and (ii) the growth of our commercial and mortgages loans.

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, ~~2015, 2016~~2017 and ~~2017,~~2018, based on information as reported to the SBIF calculated under local regulatory and accounting principles:


	Bank Loans (1)			Bank Loans⁽¹⁾
	As of December 31,			As of December 31,
	2015	2016	2017	2016		2017		2018
	(in millions of Ch$)			(in millions of Ch$)
Banco Santander-Chile	25,289,880	26,933,624	27,563,229		26,933,624		27,563,229		30,266,929
Banco de Chile	24,558,041	25,385,534	25,439,535		25,385,534		25,439,535		27,914,322
Banco de Crédito e Inversiones (Bci)	20,134,981	22,324,012	24,531,460		22,324,012		24,531,460		30,099,862
Itaú Corpbanca (2)	6,823,977	21,048,484	20,439,448		21,048,484		20,439,448		21,548,899
Banco Bilbao Vizcaya Argentaria, BBVA	9,002,343	9,252,921	9,702,467
Scotiabank Chile	8,227,571	8,840,341	10,448,203
Banco Bilbao Vizcaya Argentaria, BBVA⁽³⁾					9,252,921		9,702,467		—
Scotiabank Chile⁽³⁾					8,840,341		10,448,203		22,823,339
Others	47,933,251	35,771,491	38,352,083		35,771,491		38,352,083		44,375,257

Total	141,970,044	149,556,407	156,476,425		149,556,407		156,476,425		177,028,608

Source: SBIF monthly consolidated financial information

⁽¹⁾	Excludes interbank loans.

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

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

~~(1)~~ ~~Excludes interbank loans.~~

~~(2)~~ ~~The amounts under IFRS for 2015, 2016 and 2017 are Ch$6,801,071 million, Ch$21,003,952 million and Ch$20,382,605 million, respectively.~~

Deposits

We had consolidated deposits of Ch$~~14,206,910~~14,421,586 million as of December 31, ~~2017,~~2018, as reported under local regulatory and accounting principles, which consisted of our checking accounts, bankers’ drafts, savings accounts, time deposits and other commitments. Our market share of ~~8.5%~~10.2% for deposits and other obligations as of such date ranks us in ~~fourth~~fifth place among private sector banks in Chile.

The following table sets forth the aggregate deposits for us and the five other private sector banks with the largest market share as of December 31, ~~2015,~~ 2016, 2017 and ~~2017,~~2018, based on information as reported to the SBIF calculated under local regulatory and accounting principles:


	Bank Deposits and Other Obligations (1)			Bank Deposits and Other Obligations⁽¹⁾
	As of December 31,			As of December 31,
	2015	2016	2017	2016		2017		2018
	(in millions of Ch$)			(in millions of Ch$)
Banco Santander-Chile	19,538,888	20,691,024	19,682,111		20,691,024		19,682,111		21,809,236
Banco de Chile	18,234,740	18,874,049	18,983,484		18,874,049		18,983,484		20,240,662
Banco de Crédito e Inversiones (BCI)	17,349,184	18,151,951	20,226,470		18,151,951		20,226,470		24,551,315
Itaú Corpbanca	4,933,922	16,034,901	14,206,910		16,034,901		14,206,910		14,421,586
Banco Bilbao Vizcaya Argentaria Chile (BBVA)	6,689,730	6,876,369	6,810,027
Scotiabank Chile	5,204,251	6,144,361	7,024,759
Banco Bilbao Vizcaya Argentaria Chile (BBVA)⁽²⁾					6,876,369		6,810,027		—
Scotiabank Chile⁽²⁾					6,144,361		7,024,759		14,927,861
Others	47,616,730	36,739,147	40,206,196		36,739,147		40,206,196		42,974,991

Total	119,567,445	123,511,802	127,139,957		123,511,802		127,139,957		138,925,651

Source: SBIF monthly consolidated financial information

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

~~(1)~~ ~~Our aggregate deposits as calculated under IFRS for the years ended December 31, 2015, 2016 and 2017 were Ch$4,933,922 million, Ch$16,034,901 million and Ch$14,206,910 million, respectively.~~
⁽²⁾
Figures for 2018 only attributed to Scotiabank Chile after the merger with Banco Bilbao Vizcaya Argentaria.

Shareholders’ Equity

We were the ~~first~~second largest among private sector banks in Chile with Ch$~~3,149,663~~3,324,531 million in shareholders’ equity (excluding net income and ~~accrual~~provision for mandatory dividends) as of December 31, ~~2017,~~2018, as reported to the SBIF calculated under local regulatory and accounting principles.

The following table sets forth the level of shareholders’ equity for us and the five largest private sector banks in Chile (measured by shareholders’ equity) as of December 31, ~~2015,~~ 2016, 2017 and ~~2017,~~2018, based on information as reported to the SBIF calculated under local regulatory and accounting principles:

Shareholders’ Equity (1)(2)

As of December 31,

2015

2016

2017

(in millions of Ch$)

Banco Santander-Chile

2,420,484

2,538,055

2,670,809

Banco de Chile

2,505,558

2,620,394

2,842,609

Banco de Crédito e Inversiones (BCI)

1,771,113

2,280,185

2,467,862

Itaú Corpbanca (3)

740,335

3,172,486

3,149,663

Banco Bilbao Vizcaya Argentaria Chile (BBVA)

722,896

768,215

844,129

Scotiabank Chile

703,600

772,684

827,611

Others

4,933,087

4,129,791

4,083,895

Total

13,797,073

16,281,810

16,886,578


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

Total		16,281,810		16,886,578		20,228,785

Source: SBIF monthly consolidated financial information

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

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

~~(3)~~ The amounts under IFRS, excluding net income and accrual for mandatory dividends, for the years ended December 31, 2015, 2016 and 2017 were Ch$737,793 million, Ch$3,171,365 million and Ch$3,160,890 million, respectively.

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

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

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

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

CHILEAN BANKING REGULATION AND SUPERVISION

General

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

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

Following the Chilean banking crisis of 1982 and 1983, the SBIF assumed control of 21 financial institutions representing approximately 51% of the total loans in the banking system. As part of the solution to this crisis, the Central Bank of Chile acquired from financial institutions a certain portion of their distressed loan portfolios, at the book value of such loan portfolios. Each institution then repurchased such loans at their economic value (which, in most cases, was much lower than the book value at which the Central Bank of Chile had acquired the loans) and the difference was to be repaid to the Central Bank of Chile out of future income. Pursuant to Law No. 18,818, which was passed in 1989, this difference was converted into a subordinated obligation with no fixed term, known asdeuda 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 ownley orgánica constitucional, or Constitutional Act. To the extent not inconsistent with the Chilean Constitution or the Central Bank of Chile’s Constitutional Act, the Central Bank of Chile is also subject to private sector laws (but in no event it is subject to the laws applicable to the public sector). It is directed and administered by a council composed of five members designated by the President of Chile, subject to the approval of the Senate.

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

SBIF

Banks in Chile are currently supervised by the SBIF, an independent Chilean governmental agency. The main responsibilities of the SBIF are to authorize the incorporation of new banks and to interpret and enforce, with broad powers, legal and regulatory

requirements applicable to Chilean banks and other entities. Furthermore, in case ofnon-compliance with such legal and regulatory requirements, the SBIF may impose sanctions, including fines payable by the directors, managers and employees of a bank as well as the bank itself. In extreme cases it can appoint, by special resolution with the prior approval of the board of directors of the Central Bank of Chile, a provisional administrator to manage a bank. It must also approve any amendment to a bank’sby-laws (including, increase in its capital).

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

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

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

CMF

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

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~~Comisiones de ~~confianza~~Confianza) and, subject to limitations, making investments and performing financial services related to banking. Investments are restricted to real estate and physical asset for the bank’s own use, gold, foreign exchange and debt securities. In addition, local banks are allowed to engage in certain derivatives such as options, swaps and forward contracts over certain underlying assets. Through subsidiaries, banks may also engage in other specific financial service activities such as securities brokerage services, mutual fund management, investment fund management, factoring, securitization, financial advisory and leasing activities. Subject to specific limitations and the prior approval of the SBIF and the Central Bank of Chile, Chilean banks may own majority or minority interests in foreign banks.

Deposit Insurance

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

Reserve Requirements

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

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

·certain payment orders issued by pension providers; and

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

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

The Central Bank of Chile has statutory authority to require banks to maintain reserves of up to an average of 40% for demand deposits and up to 20% for time deposits (irrespective, in each case, of the currency in which they are denominated) to implement monetary policy. In addition, according to the Chilean General Banking Act and the regulations issued by the SBIF and the Central Bank of Chile, Chilean banks must maintain a technical reserve (Reserva Técnica) of 100% of all deposits and obligations a bank has acquired in its financial business that are payable on demand, except for obligations with other banks, whenever such deposits and obligations exceed 2.5 times their basic ~~capital.~~capital 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.~~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) fornon-adjustable transactions (Operaciones no Reajustables) to the daily deficit;provided, however, that the SBIF may decide not to apply this fine if the deficit lasts up to three business days and the bank has not incurred in further deficits during the same calendar month.

During 2015, the Chilean Central Bank published a final version of new liquidity standards for local banks, based on Basel III guidelines. The SBIF is the institution empowered to put these guidelines into practice and monitor them on an ongoing basis. Accordingly, the SBIF released a set of new liquidity requirements for banks (Circular No. 3,585) on July 31, 2015. These guidelines established reporting requirements for local banks with respect to management and measurement of banks’ liquidity positions, compelling banks to share financial information with the regulator and the general public regarding liquid assets, liabilities,

concentration of financial instruments by type of liability and counterparty and weighted maturity by type of liability, among other metrics. The most significant liquidity ratios that will eventually be adopted by Chilean banks are:

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

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

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

The first stage of these new liquidity requirements ~~which is currently being~~was implemented ~~is intended~~ to improve the ~~information—in quantity and quality—about~~information relating to the actual situation of banks without imposing specific limits, except liquidity mismatches for ~~30-and~~ 30 and90-day periods, for which thresholds with respect to ~~banks’~~the capital of banks are already in place. On December 28, 2018, the SBIF released an update on the liquidity requirements (Circular No. 3,644), which established a limit of 60% for the LCR as of January 1, 2019. The ~~final limits and results should begin to be published by the end of 2018 or 2019.~~

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 minimumpaid-in capital and reserves of UF800,000 (Ch$~~21,438.5~~22,052.6 million or US$~~34.9~~31.7 million as of December 31, ~~2017)~~2018).

Capital Adequacy Requirements

~~The~~According to the Chilean General Banking Act (as amended from time to time, including without limitation, by Law No. 21,130) and the Regulations of the SBIF, ~~include~~as a ~~modified version of the capital adequacy guidelines issued by the Basel Committee. According to such modified guidelines,~~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.~~allowances, as calculated in accordance with Chilean Bank GAAP. Note, however, that in any of the following events a higher effective net equity and/or a higher basic capital may be required:

(1)

(2)

Once the CMF replaces the SBIF, the following shall occur:

Within 18 months from the date in which such replacement occurs, the CMF shall issue a regulation (with the affirmative consent of the Council of the Chilean Central Bank) setting forth (i) the standardized methodology for risk weighting the assets of a bank and, (ii) in the event of banks authorized to use their own methodologies, the requirements to use and implement them. Once such regulation becomes effective, a bank will be required to have an additional basic capital equal to 2.5% of its risk weighted assets, net of required allowances, above the minimum requirements. This additional requirement will come into effect progressively during a4-year term at a ratio of 0.625% per year, starting on the date in which the CMF issues the aforementioned regulation;

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

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

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

Basic capital is defined as a bank’spaid-in capital and reserves and is similar to Tier 1 capital except that it does not deduct goodwill ~~nor~~or intangible assets.

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

·a bank’spaid-in capital and reserves;

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

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

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

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

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

·other adjustments as instructed by the SBIF.

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

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

As provided in ~~article~~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~~Article 66 of the Chilean General Banking Act and Chapter12-1 of the Regulations of the SBIF), the bank would have to comply with such legal requirements within a period of 60 days. ~~For~~Further, for each day in which the bank it fails to comply with such legal requirements, it would be subject to a daily penalty equal to one thousandth of the deficit of the effective net worth or basic capital, as the case may be.

~~In line with~~Note that once the ~~future adoption of Basel III regulations in Chile,~~CMF replaces the SBIF, ~~has maintained a proposal to increase~~ the ~~minimum effective BIS capital adequacy ratio from~~aforementioned sanction will be replaced by those set forth in Title III of Law No. 21,000 which created the ~~current 8% to 10.5%. This change requires an amendment~~CMF (i.e., the CMF may impose one or more of the following sanctions (i) censure; (ii) fines up to the ~~Chilean General~~

Banking Act by the Chilean Congress. The changes to the Chilean General Banking Ac that were proposed to the Chilean Congress, establish the main guidelines for the application of Basel III in Chile, which includes a full implementationfollowing amounts: (x) UF 15,000 (approximately US$595,000 as of December ~~2024, with a minimum total capital~~31, 2018), but in the event the entity is sanctioned for breaches of ~~10.5%, without considering~~similar nature before, the ~~cyclical buffer requirements and SIFI that must be defined by the regulator. It should be noted that there are still several key definitions pending so that all the impacts~~amount of the ~~application are not known, as well as~~fine could be up to five times the ~~exact capital deductions from the regulatory capital, specific buffer sizes, possible changes in the weight~~aforementioned amount, (y) 30% of the Risk-Weighted Assets (“RWA”), as well as the definitive models of market and operational risk, and the general roll-in phase. Given that the final regulation is not yet available, it is difficult to establish with certainty assumptions that make possible to have a precise new capital position. In this way, the bank contemplates periodic reviewsirregular operation or (z) double of the ~~premises in such~~benefits realized as a ~~way as to reduce~~result of the ~~volatility in the projections. Although we have not failed in the past to comply with our capital maintenance obligations, there can be no assurance that we will not do so in the future.~~

irregular operation; and/or (iii) revocation of its authorization of existence.

Lending Limits

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

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

·a bank cannot extend loans to another ~~financial institution~~bank subject to the Chilean General Banking Act in an aggregate amount exceeding 30% of ~~its~~the effective net ~~equity;~~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 tonon-related parties. In addition, the aggregate amount of loans to a single group of related parties cannot exceed 5% of the bank’s effective net equity or 25% if the excess thereof is secured by certain assets with a value equal to or greater than such excess, or by certain other collateral specified in the Chilean General Banking Act. The definitions of “related” and “group” for these purposes are determined by the SBIF. The aggregate amount of all credits granted to related parties of the bank cannot exceed its effective net equity.

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

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

Allowance for Loan Losses

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

Classification of Banks and Loan Portfolios

Solvency and Management. Chilean banks are classified into categories I through V based ~~upon~~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 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) it complies with the general minimum effective net equity and basic capital requirements and (z) with the following additional requirements (if applicable), once they come into effect:

~~A bank’s solvency rating is determined by its regulatory~~An additional basic capital ~~(after deducting accumulated losses during the financial year) to risk-weighted assets ratio. This ratio is~~ equal to ~~or greater than 10% for level A banks, equal to or greater than 8% and less than 10% for level B banks and less than 8% for level C banks.~~

~~With respect to~~2.5% of its risk weighted assets, net of required allowances, above the minimum requirements. This additional requirement will come into effect progressively during a 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 internal controls, 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 withfour year term at 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.~~

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

~~As stated above, Chilean Banking GAAP, as prescribed by the Compendium~~ratio of ~~Accounting Standards, differs in certain respects from IFRS. The main differences that should be considered by an investor are the following:~~

~~Effective interest rate.~~ ~~Under Chilean Banking GAAP, the Bank recognizes interest of some loans~~0.625% per year, starting on ~~a contractual basis. Under IFRS, this situation it is not permitted and interest must be recognized based on the effective interest rate.~~

~~Loan loss allowances~~. The main difference between Chilean Banking GAAP and IFRS regarding loan loss allowances is that under Chilean Banking GAAP, these are calculated based on specific guidelines set by the SBIF, which are in turn based on an expected losses approach, and under IFRS, we use an incurred loss approach. The Bank has adjusted the consolidated financial statements accordingly. The SBIF has announced that it will not be adopting IFRS 9 in 2018. The most significant impact of IFRS 9 on the Bank’s financial statements arises from the new impairment requirements. Impairment losses will increase and become more volatile for financial instruments within the scope of the IFRS 9 impairment model. Based on the assessment undertaken to date, during the second half of 2017, Itaú Corpbanca conducted simulations to obtain a better understanding of the potential effect of the new accounting standard. The transition to IFRS 9 will cause, in accordance with management’s best estimate, a reduction in stockholder’s equity of not higher than 3.8%.

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

~~Loan write-offs~~. Under Chilean Banking GAAP, write-offs of loans and accounts receivable are based on due, past due and current installments, and the term begins at the moment of default, i.e., when the default time of an installment or a portion of a loan reaches the write-off term established by the SBIF. The term corresponds to the time elapsed since the date on which payment of all or part of the obligation in default became due.

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

~~Investments in other companies~~. Investments in other companies in which the Bank does not exercise significant influence (ownership interest less than 20%) were reclassified and presented as available-for-sale financial investment in accordance with IAS 39.

~~Other assets~~. In applying IFRS, certain deferred expenses were derecognized and written off to equity as part of the adoption of the new standards. In addition, assets in lieu of payment were reclassified and recognized in accordance with IFRS 5.

~~Country risk provision and contingence loans~~. Under Chilean Banking GAAP, the Bank recognizes provisions for country risk and allowances related to the undrawn available credit lines and contingence loans in accordance with the local regulations. IFRS only permits to recognized allowances based on the incurred loss model.

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

~~Capital Markets~~

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

~~Subsidiaries and Affiliated Companies~~

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

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

~~Legal Provisions Regarding Banking Institutions with Economic Difficulties~~

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, its board of directors must correct the situation within 30 days from the date in which the ~~relevant financial statements are presented~~CMF issues the regulations concerning the methodologies for risk weighting the assets; and

An additional basic capital up to 2.5% of its risk weighted assets, net of required allowances, above the ~~board. If the board of directors is unable to do so, it must summon a special shareholders’ meeting to increase the capital of the bank~~minimum requirements. This additional requirement may be imposed by the amount necessary to return the bank to financial stability. If the shareholders reject the capital increase, or if it is not effected and paid within the term and in the manner agreed to at the meeting, or if the SBIF does not approve the board of directors proposal, the bank will be barred from increasing its loan portfolio beyond that stated in the financial statements presented to the board of directors and from making any further investments in any instrument other than in instruments issued by theChilean Central Bank on a general basis applicable to all banking institutions, as a contra-cyclical measure. The CMF shall issue a regulation setting forth the conditions that may trigger the application of Chile. In such a case, or in the event that a bank is facing solvency problems which compromise timely payment of its obligations or if a bank is under provisional administration by the SBIF, the Chilean General Banking Act provides that the bank may receive a two-year term loan from another bank which will be subordinated to other liabilities of the bank. The terms and conditions of such a loan must be approved by the directors of both banks, as well as by the SBIF, but need not be submitted to the borrowing bank’s shareholders for their approval. In any event, a creditor bank cannot grant interbank loans to an insolvent bank in an amount exceeding 25% of the creditor bank’s effective net equity. The board of directors of a bank that is facing solvency problems which compromise timely payment of its obligations must present a reorganization plan to its creditors in order to capitalize its credits, agree on extensions, obtain forgiveness of debts or adopt any other valid measures for the payment of the debts. The terms of a reorganization plan must be the same for all the proposing bank’s creditors to whom such plan is applicable. From the date of submission of the reorganization plan until there is a decision from the creditors regarding such plan, the bank will only be required to pay demand deposits and liabilities. If the board of directors of a bank submits a reorganization plan to its creditors and such arrangement is approved, and by virtue of its provisions shares shall be issued in payment of the capitalization of the credits, those shares shall be allocated to the creditors in proportion to the credits being capitalized. If the reorganization plan is rejected by the creditors, the bank must submit a new proposal which must include the capitalization in an amount required so that the ratio of effective net equity to risk-weighted assets not to be lower than 12%. If this second proposal is rejected, the SBIF will declare the bank into mandatory liquidation, which process is regulated by the Banking Law and not by the general bankruptcy rules. If a bank fails to pay an obligation, it must notify the SBIF, which shall determine if the bank is solvent. Banks can be subject to a provisional administrator if there are reasons that affect its financial stability.

~~Dissolution and Liquidation of Banks~~

The SBIF may establish that a bank must be liquidated if the safety of its depositors or other creditors so demands it, or when such bank does not have the necessary solvency to continue its operations. In such case, the SBIF must revoke such bank’s banking license and mandate its liquidation, subject to approval by the Central Bank of Chile. The SBIF must also revoke a bank’s license when that bank’s reorganization plan has been rejected twice. The SBIF’s resolution must state the reason for ordering the liquidation and must appoint a liquidator, unless the Superintendent of Banks assumes this responsibility. 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~~additional capital requirement.

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

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

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

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

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

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

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

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

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

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

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

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

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

Capital Markets

Subsidiaries and Affiliated Companies

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

Legal Provisions Regarding Banking Institutions with Financial Instability or Poor Management

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

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

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

Dissolution and Liquidation of Banks

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

Investments in Foreign Securities

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
~~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-~~	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)

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

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

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

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

Changes in the Governance of Our Regulators

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

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

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

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~~Changes in the Governance of Our Regulators~~

On February 23, 2017, Law No. 21,000, which establishes the Chilean Commission for the Financial Market (CMF), was published. This new law modifies, among other matters, the corporate governance and operation of the Chilean regulator for securities

and insurance, a role that has historically been performed by the Chilean Superintendency of Securities and Insurance. This law came into effect in March 2017. The main features of this new law are the following:

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

· The new law required the President of Chile to submit to the Chilean Congress, within one year of the publication of the law, a bill to amend the Chilean General Banking Law in order to subject banks and financial institutions to the supervision of the Commission for the Financial Market. This bill of law was submitted to the Chilean Congress in June 2017, and is currently under discussion thereunder.

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

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

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

·The sanctioning process has two different procedures: (i) a simplified procedure for cases where no crimes are involved and for cases of less materiality; and (ii) a general procedure for cases involving potential crimes and for cases which even though do not involve potential crimes, are material. The new law also established plea bargain procedures (~~delació~~Delación ~~compensada~~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.~~

Additionally, a bill of law proposing several amendments to the Chilean General Banking Act have been submitted to the Chilean Congress, and is currently under ongoing discussions. Among other things, it contains a proposal to adopt measures to strengthen the governance of the SBIF. These proposed amendments would serve to implement Basel III principles and to introduce changes in the processes related to banks insolvency.

~~Financial Stability Council~~

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

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

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

~~United States~~

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

Act of 1970, as amended, and the USA PATRIOT Act of 2001, as amended. A violation of such laws and regulations may result in substantial penalties, fines and imprisonment of our officers and/or directors.

~~Chile~~

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

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

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

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

~~Colombia~~

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

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

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

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

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

~~Recent Regulatory Developments in Chile~~

~~Capital Adequacy Requirements~~

In June 2017, a bill of law was submitted before the Chilean Congress with the purpose to amend the General Banking Act. As of the date hereof, the bill of law has been approved by the house of representatives, and is under ongoing discussion at the senate. Based on the current status of this bill of law, we can anticipate that the main amendments being proposed are the following: (i) the authority currently granted to the SBIF would be granted to the CMF, but with a broader scope, allowing CMF to determine technical criterion in several matters and to dictate general norms. The CMF would effectively replace the SBIF as the regulator of banks and financial institutions; (ii) the CMF would be granted with faculties to intervene banking institutions in case of mismanagement; and (iii) the CMF would be granted with of criminal faculties in case of certain norm breaches. Also, according to Basel III, the bill of law seeks for more security and guarantees in the banking sector. To accomplish the foregoing, the bill of law requires a higher basic capital. Also, the CMF would be entitled to increase the basic capital requirements if a bank or group of banks is considered to be an entity of systemic importance. The project also regulates a forced liquidation procedure, granting the CMF broader authority than the one currently granted to the SBIF. We anticipate that the impact of the new rules would be material once they become effective.

~~Commission for the Financial Market~~

~~On February 23, 2017, Law No. 21,000, which establishes the Chilean Commission for the Financial Market (~~~~Comisión para el Mercado Financiero~~) was published. This new law modifies, among other matters, the corporate governance and operation of the Chilean regulator for securities and insurance, a role that has historically been performed by the Chilean Superintendency of Securities and Insurance. This law came into effect in March 2017. See “—Changes in the Governance of Our Regulators.”

~~Modification to the AML Act~~

On February 18, 2015 Law N° 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.

~~Funds Law (Ley Única de Fondos)~~

Law No. 20,712 on funds was published in the Chilean Official Gazette on January 7, 2014, or the Funds Law. The Funds Law is a single legal set of regulations enacted to provide for general and special regimes applicable to all Chilean funds, setting basic provisions governing their structure, management, dividend distribution, redemption of quotas and taxation, among other things. This law is expected to have a positive effect on the operations of our subsidiary Itaú Administradora General de Fondos S.A., in its capacity as fund manager.

~~Maximum Interest Rate~~

A new Chilean law regarding maximum interest rates was enacted on December 13, 2013 upon publication of Law 20,715 in the Chilean Official Gazette. This legislation affects all Chilean businesses that charge interest (including all banks) on loans up to UF 200 (approximately U.S$7,216), including installment loans, credit cards, credit line loans and overdue loans. This regulation requires, among other things, a new method for calculating the maximum legal interest rate for loans not indexed to inflation with terms equal to or longer than 90 days, which results in a reduction of the maximum legal interest rate applicable to such debtors. We do not expect the enactment of this law to have a material effect on our results of operations.

~~Insolvency Law~~

Chilean banks are subject to special insolvency proceedings. Nevertheless, a bank can be subject to the general insolvency law in case it becomes insolvent during a voluntary liquidation of its assets. In that regard, the Chilean Congress approved a new Insolvency Act on October 29, 2013, which was published in the Official Gazette on January 9, 2014 and came into effect on October 9, 2014. The new Insolvency Act eliminates the distinction between merchants and other debtors, eliminates the classification of bankruptcies as negligent or fraudulent and modifies the Chilean Criminal Code in order to recognize certain criminal offences related to the conduct of the business of the debtor prior to the declaration of its bankruptcy, and sets forth different rules for the insolvency of an enterprise (~~empresa~~~~) and of a non-enterprise person (~~~~persona deudora~~~~) among other changes.~~

Under the new Insolvency Act, there are two types of proceedings for an enterprise: (i) liquidation proceedings which are very similar to existing bankruptcy proceedings, although they will be headed by a liquidator rather than a trustee (~~síndico~~) and (ii) reorganization proceedings. Upon completion of a liquidation procedure, the debtor recovers the free administration and disposition of its assets and any outstanding debts against the debtor incurred prior to the commencement of the liquidation procedure

will be deemed discharged as a matter of law. As a result, a creditor who fails to participate during the liquidation process will forfeit its past claims against the debtor. The reorganization proceedings, are more oriented to the continuation of the debtor’s business and, therefore, allow the debtor to seek protection from the courts, or “Insolvency Protection” (~~protección financiera concursal~~), for a term of 30 days, as from the date the reorganization proceeding is declared commenced by the competent court during which, among other effects, it cannot be put into liquidation, its assets cannot be foreclosed, the agreements entered into by it cannot be unilaterally terminated by the other party, the maturity of the indebtedness of the debtor cannot be accelerated or the securities granted by the debtor cannot be enforced by the creditor based on the commencement of the reorganization proceeding of the debtor’s insolvency. In the event that a creditor breaches this provision, its credit shall rank junior after all the other debts of the debtor. This 30-day term could be extended for 30 or 60 days if supported by creditors representing 30% or 50% of the debtors’ unrelated liabilities, respectively.

Pursuant to the provisions of the new Insolvency Act, it is possible for a debtor to commence a reorganization procedure not only through a court process, but also as an out-of-court agreement with its creditors, which shall then be approved by the court through a simple process. It is also now possible for the debtor and its creditors to agree in reorganization proposal including different conditions for different categories of creditors (e.g., secured and unsecured), which must be expressly approved by the remaining creditors.

The new Insolvency Act also allows a debtor under Insolvency Protection to acquire debt to finance its operations (up to 20% of the debt it had at the commencement of the procedure), which shall rank senior with respect to the existing creditors (except for a few statutory preferences which shall remain in force) in case the reorganization agreement is not approved and the judge orders the liquidation of the company.

The new Insolvency Act amends claw-back period rules such that as a general rule any transfer, encumbrance or other transaction executed or granted by the debtor during the term of two years prior to the commencement of the reorganization or liquidation proceedings may be rendered ineffective if its proved before the court that such transfer, encumbrance or transaction: (i) was entered with the counterparty’s knowledge of the debtor’s bad business condition; and (ii) caused damages to the bankruptcy estate or has affected the parity that shall exist among creditors (e.g., that the transaction has not been entered into terms and conditions similar to those usually prevailing in the market at the time of its execution).

Notwithstanding the above, the new Insolvency Act maintains certain specific cases of ineffectiveness of any transfer, encumbrance or other transaction executed or granted during the term of one year prior to the commencement of the insolvency proceedings (which may be extended to two years in certain events), based on objective grounds, such as pre-payments, payments in terms different as originally agreed by the parties and the creation of security interests to guarantee pre-existing obligations. Also, agreements and changes to bylaws which decrease the capital of the debtor could be deemed ineffective if made during the six months prior to the commencement of the insolvency proceeding.

Finally, the new Insolvency Act regulates for the first time cross-border insolvency issues, allowing the recognition in Chile of foreign bankruptcy/liquidation proceedings. We do not expect the enactment of this law to have a material effect on our results of operations.

~~Tax Reform~~

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

The Tax Reform currently contemplates, among other matters, changes to the corporate tax regime by allowing coexistence of two alternative tax regimes available to Chilean companies from January 1, 2017 onwards: (i) an attributed income system or (ii) a partially integrated system.

· Attributed income system: Under this system, companies are subject to a corporate tax that would gradually increase to 25% over the course of four years, commencing in 2014 (increasing each year to 21%, 22.5%, 24% and 25%, respectively). At the shareholder level, a 35% withholding tax would apply on an “attributed basis” from year 2017. As a result, any non-Chilean resident shareholder would be required to pay a 35% withholding tax, while Chilean resident shareholders would be required to pay the progressive Complementary Global Tax, with rates ranging between 0% and 35%, regardless of whether the Chilean company makes a profit distribution or a dividend payment. Shareholders would be able to credit the corporate tax already paid by the company against the withholding tax or the progressive Complementary Global Tax. The actual income distribution to the shareholders would not be taxable. This system is exclusive for companies whose shareholders or owners are individuals domiciled or residing in Chile, or individuals or entities not domiciled or resident in Chile.

· Partially integrated system: Under this system, companies are subject to a corporate tax of 25.5% on 2017 and 27% from 2018 onwards. Then, when the income is actually withdrawn from a company, non-Chilean resident shareholders would be subject to a 35% withholding tax, while Chilean resident shareholders would be required to pay the progressive Complementary Global Tax, with rates ranging between 0% and 35%, against which only a 65% of the corporate tax will be allowed to be used as a credit against the withholding tax or the Complementary Global Tax. Nevertheless, the foreign holder shall be entitled full corporate tax credit, if such holder is established on, domiciled in, or resident of a country with which Chile has a double taxation treaty in force or, until December 31, 2021, Chile has signed a double taxation treaty with such country, although not in force.

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

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

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

~~Law No. 20,855~~

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

~~New Securities Brokerage Regulation~~

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

~~Promulgation of Bill of Law Amending Consumer Protection Act~~

In March 2018, the President of Chile promulgated a bill of law approved by the Chilean Congress containing several amendments to the Chilean Consumer Protection Act. The promulgation decree is currently under review by the General Comptroller of the Republic of Chile (~~Contralor General de la Repúb~~~~lica). If (i) the promulgation decree formally complies with all applicable requirements and (ii) the bill of law promulgated therein reflects the comments provided by the Constitutional Court (~~~~Tribunal Constitutional~~) during the deliberation of the bill, the promulgation decree will be acknowledged by the Comptroller. Once acknowledged, the bill of law will be published in the Official Gazette. The law will become effective six months after its publication in the Official Gazette.

In substance, this bill of law amends the Consumer Protection Act in the following manners: (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).

~~COLOMBIAN BANKING REGULATION AND SUPERVISION~~

~~Colombian Banking Regulators~~

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

~~Central Bank of Colombia~~

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

~~Colombian Ministry of Finance and Public Credit~~

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

~~Colombian Superintendency of Finance~~

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

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

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

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

~~Self-Regulatory Organization~~

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

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

~~Superintendency of Industry and Commerce~~

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

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

~~Capital Adequacy Requirements~~

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

Financial Stability Council

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

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

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

United States

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.

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

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

Colombia

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 theGAFI-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.

Recent Regulatory Developments in Chile

Capital Adequacy Requirements

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

Commission for the Financial Market

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

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

Modification to the AML Act

The AML Act has been recently amended as follows:

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

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

Tax Reform

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

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

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

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 anon-Chilean resident is not subject to capital gains tax in Chile (according to section 11 of theLey Sobre Impuesto a la Renta, or the Chilean Income Tax Law, it would be considered a foreign source income obtained by anon-Chilean resident).

Law No. 20,855

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

New Securities Brokerage Regulation

Amendment to the Consumer Protection Act

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

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

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

COLOMBIAN BANKING REGULATION AND SUPERVISION

Colombian Banking Regulators

Central Bank of Colombia

Colombian Ministry of Finance and Public Credit

Colombian Superintendency of Finance

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

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

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

Self-Regulatory Organization

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

Superintendency of Industry and Commerce

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 bá~~Patrimonio Básico ~~ordinario~~ Ordinarioor Common Equity Tier One), additional primary capital (~~patrimonio bá~~Patrimonio Básico ~~adicional~~ Adicionalor Additional Tier One), and secondary capital (~~patrimonio adicional~~ Patrimonio Adicionalor tier two capital);

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

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

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

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

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

Minimum Capital Requirements

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

Capital Investment Limit

All investments in subsidiaries and other authorized capital investments, other than those made in order to abide by legal requirements, may not exceed 100% of the total aggregate of capital, equity reserves and the equityre-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 anyoff-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 contracts denominated in foreign currency, excluding obligations of a transaction that imply either the right or an obligation on foreign currency, plus (ii) foreign currency cash operations with settlement higher or equal to one banking day, excluding obligations of a transaction that imply either the right or an obligation on foreign currency plus (iii) the exchange rate risk exposure associated with debtor and creditor contingencies acquired in the trading of exchange rate options and derivatives. Resolution 1 sets no limit on the gross position of leverage with respect to the currency position in cash.

Deposit Insurance

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

Reserve Requirements

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

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

Private demand deposits;

Government demand deposits;

Other deposits and liabilities; and

Savings deposits.

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

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

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

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

Foreign Currency Loans

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

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 Colombianon-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 orlow-tax jurisdiction, according to paragraph of section 408 of the Colombian Tax Code; (ii) 5% when those interest payments are (a) derived from loans with an eight-year or longer term and (b) related to infrastructure projects under Law 1508 of 2012; (iii) 15% when interest payments are related to a loan with a term of more than one year; and (iv) 15% in 2018 and 20% in 2019 and onward as a general rule (i.e. in other cases different than (i), (ii) and (iii) above) according to section 408 of the Colombian Tax Code.

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

Non-Performing Loan Allowance

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

Recent Regulatory Developments in Colombia

Tax Reform

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

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


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

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

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

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

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

~~Minimum Capital Requirements~~

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

~~Capital Investment Limit~~

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

~~Mandatory Investments~~

~~Foreign Currency Position Requirements~~

According to External Resolutions 4, or Resolution 4, and 9, or Resolution 9, issued the Central Bank of Colombia issued in 2007 and 2013, respectively, as amended, a financial institution’s foreign currency position (~~posición propia en~~ m~~oneda 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 9 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 9 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 in cash cannot exceed 50% of the bank’s Technical Capital. In accordance with Resolution 9, the three day average must be calculated on a daily basis and the foreign currency position in cash can be negative but must not exceed 20% of its Technical Capital. (Resolution 9 was amended on September 25, 2015).

~~Finally, Resolution 9 requires banks to comply with a gross position of leverage (~~~~posición bruta de apalancamiento~~). Gross position of leverage is defined as the sum of (i) the rights and obligations of term and future contracts denominated in foreign currency, plus (ii) foreign currency cash operations with settlement higher or equal to one banking day, plus (iii) the exchange rate risk exposure associated with debtor and creditor contingencies acquired in the trading of exchange rate options and derivatives.

~~Resolution 9 sets a limit on the gross position of leverage, which cannot exceed 550% of the Technical Capital.~~

~~Deposit Insurance~~

~~In Colombia, the deposit insurance fund, FOGAFIN (~~~~Fondo de Garantías de Instituciones Financieras~~), guarantees up to COP$50 million (US$16,756 as of December 31, 2017) per person, for each institution calculated as the aggregate amount of time, savings and demand deposits held by individuals in a Colombian financial institution. Payment will be made in case of an administrative compulsory liquidation of the financial institution.

~~Reserve Requirements~~

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

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

· ~~Private demand deposits;~~

· ~~Government demand deposits;~~

· ~~Other deposits and liabilities; and~~

· ~~Savings deposits.~~

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

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

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

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

~~Foreign Currency Loans~~

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 8 of 2000 issued by the Central Bank of Colombia, or Resolution 8, including in the case of foreign currency loans aimed at financing Colombian investments abroad or for short-term exportation loans, provided that such loan is disbursed against the funds of ~~Banco de Comercio Exterior—Bancoldex~~. Moreover, Resolution 8 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.

~~Non-Performing Loan Allowance~~

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

~~Recent Regulatory Developments in Colombia~~

~~Tax Reform~~

~~On December 29, 2016, the Colombian Government approved a tax reform under Law No. 1819. The most relevant features of this reform are:~~

· ~~Starting in 2017, there will be a unified income tax rate:~~

2017

2018

2019 and
following years

General tax rate

34%

33%

33%

Surcharge (*)

6%

4%

—

Total

40%

37%

33%

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

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

•

· ~~Income received from leasing contracts for housing are taxed as of January 1, 2017 at a rate of 9%. Before this tax reform this income was tax-free.~~

· ~~The discount on income of two percentage points of the VAT paid for the purchase of capital goods was eliminated. As of January 2017, a deduction of a 100% of this VAT can be performed.~~

· ~~The general VAT rate for the purchase of goods and services was increased by three points, going from 16% to 19%.~~

· ~~The services provided from abroad are taxed at the general VAT rate of 19%.~~

· ~~The accounting information now must be presented according to IFRS.~~

· ~~Loan loss provision expenses that exceed the limits required by law will not be deductible.~~

·The percentage of liquid equity to calculate “assumed income” (~~renta presuntiva~~Renta Presuntiva) ~~increased~~is expected to decrease from ~~3.0% to~~ 3.5%.

· ~~The tax for equity (~~~~impuesto para la equidad~~ ~~or CREE)~~ in 2018 down to: (i) 1.5% in 2019 and ~~its corresponding surcharge are eliminated as of 2017.~~2020; and (ii) 0% in 2021.

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

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

As of 2019, the thin capitalization rule will apply only to indebtedness between related parties. In order to determine thenon-deductible interest, thedebt-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 throughback-to-back operations or any other kind of operation in which the creditor is a substantially related party. In such case, the parties involved in the operation may be jointly liable for the taxes, sanctions and interest.

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

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

•

· ~~The~~A new wealth tax (~~impuesto a la riqueza~~Impuesto al Patrimonio) will ~~be eliminated starting~~apply to individuals and certain foreign investors in 2019, ~~for individuals~~2020 and ~~was eliminated for corporations staring in 2018.~~2021.

· Fiduciary rights shall be recognized separately as assets and liabilities for equity purposes. A trust must issue a certification in favor of the beneficiary or trustor, signed by the legal representative of the trust and with the corresponding information relating to assets and liabilities of the trust. In addition, the submitted financial information must be signed by a public accountant and/or statutory auditor.

· ~~The tax reform adds Article 772-1 to the Colombian Tax Statute (~~~~Estatuto Tributario~~), which establishes that those taxpayers that are required to keep accounting books must have a system of control or reconciliation of the differences that arise between IFRS accounting and the provisions of the Tax Statute. Any failure to control or reconcile any such differences may be considered as a fiscal breach punishable by the regime of accounting irregularities.

· The country-by-country report was adopted on 2016 to require information on the global allocation of income and taxes paid by multinational groups resident in Colombia that have subsidiaries or branches abroad, as long as the parent company is domiciled in Colombia and the group has a consolidated income of approximately US$930 million.

~~Abandoned Accounts~~

As of 2019, Colombia may levy a capital gains tax on the sale of shares of anon-Colombian entity when suchnon-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 asnon-taxpayers and its beneficiaries may defer the realization of the income when certain conditions are met.

Abandoned Accounts

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

Costs of Financial Services

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

Abusive Contract Clauses and Practices

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

Total Unified Value (Valor Total Unificado or VTU)

On 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~~

~~Abusive Contract Clauses and Practices~~

~~Total Unified Value (Valor Total Unificado or VTU)~~

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

Interruptions of Services

On August 3, 2016, the Colombian Superintendence of Finance issued its External Circular No. 28, setting forth instructions applicable to all financial sector companies in connection with events that generate interruptions of services and that prevent operations from being carried out by clients. The circular aimed to guarantee that clients are informed of these interruptions and have

mechanisms to guarantee the effective exercise of their rights. The circular also includes instructions related to: (i) the information that credit institutions must provide to clients when encountering interruptions in the provision of services; and (ii) the general requirements regarding security and quality of information.

Requirements for Trust Products

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

Reversal of Payments

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

Accessibility for People with Disabilities

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

Securities Custodian

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

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

On December 7, 2017, the Colombian Ministry of Finance issued its Decree No. 2076, which amended Decree No. 2555 ~~of 2010~~ 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 throughnon-presential means, and (iv) authorize SEDPEs customers to have more than one account per SEDPE.

Publication of the Current Banking Interest Rate

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

Financial Conglomerates

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

Modification of the Initial Conditions of Credits

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

Mutual Funds Portfolio Investments

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

Properties and Investments of Financial Institutions

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

Withdrawal of Money

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

Liquidation Formula for Public-Private Association Agreements

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

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

On March 15, 2018, the Colombian Ministry of Finance issued Decree No. 521, amending Decree No. 2555, ~~of 2010,~~ which incorporates a chapter regulating the purchase of assets and assumption of liabilities from credit establishments (~~establecimientos~~Establecimientos de ~~cré~~Crédito) under a forced liquidation process.

Access to the Financial System for Former Members of FARC

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

Electronic Savings Accounts

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

Capital Adequacy levels for Financial Conglomarates

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

Foreign Exchange

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

Resolution Plans and Coordination Mechanisms

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

Cybersecurity

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

Capital Adequacy Requirements Amendment

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

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

•

Conservation Buffer (Colchón de Conservación);

•

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

•

Combined Buffer (Colchón Combinado).

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

Investments in Companies of Innovation and Financial Technology

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

SELECTED STATISTICAL INFORMATION

The following information is included for analytical purposes and should be read in conjunction with our consolidated financial statements as well as “Item 5. Operating and Financial Review and Prospects.” Unless otherwise indicated, financial data in the following tables as of December 31, ~~2015,~~ 2016, 2017 and ~~2017~~2018 has been expressed in Chilean pesos as of December 31, ~~2017.~~2018. The UF is linked to, and is adjusted daily to reflect changes in, the previous month’s CPI.

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

The average balances for interest-earning assets and interest bearing liabilities, including interest and readjustments received and paid, have been calculated on the basis of monthly balances on an unconsolidated basis. Unless otherwise set forth herein, such average balances as they apply to the operations of our subsidiaries were calculated on the basis ofmonth-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).

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=~~	-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 ~~Non-performing~~ commercial loans (those loans which do not accrue interest) consist of loans included in CategoriesC4-C6 and loans (or portions thereof) that are overdue;

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

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

The following tables show, by currency of denomination, average balances and, where applicable, interest amounts, nominal rates and rates for our assets and liabilities for the years ended December 31, ~~2015,~~2016, 2017 and 2018.

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

•

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

•

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

•

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

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

Year Ended December 31,

2015

2016

2017

Average
Balance

Interest
Earned

Average
Nominal
Rate

Average
Real
Rate

Average
Balance

Interest
Earned

Average
Nominal
Rate

Average
Real
Rate

Average
Balance

Interest
Earned

Average
Nominal
Rate

Average
Real
Rate

(in millions of Ch$ except for percentages)

INTEREST EARNING ASSETS

Deposits in Central Bank

Ch$

189,594

1,333

0.7%

(3.5)%

218,522

1,689

0.8%

(1.9)%

76,032

1,736

2.3%

—

UF

—

—

—

—

—

—

—

—

—

—

—

—

Foreign currency

7,173

—

—

12.4%

58,713

—

(9.7)%

27,145

—

—

(10.3)%

Total

196,767

1,333

0.7%

(3.0)%

277,235

1,689

0.6%

(3.5)%

103,178

1,736

1.7%

(2.7)%

Financial investments

Ch$

219,660

6,880

3.1%

(1.2)%

535,413

31,750

5.9%

3.1%

878,088

33,938

3.9%

1.5%

UF

276,560

14,000

5.1%

0.6%

409,993

2,112

0.5%

(2.1)%

489,972

8,273

1.7%

(0.6)%

Foreign currency

—

—

—

—

665,262

44,852

6.7%

(2.0)%

798,837

36,618

4.6%

(6.2)%

Total

496,220

20,881

4.2%

(0.2)%

1,610,668

78,715

4.9%

(0.3)%

2,166,896

78,830

3.6%

(1.8)%

Total loans

Ch$

2,124,186

200,490

9.4%

4.8%

5,138,512

703,514

13.7%

10.7%

5,913,408

671,628

11.4%

8.9%

UF

3,090,867

239,666

7.8%

3.2%

6,527,551

222,864

3.4%

0.7%

7,593,051

255,641

3.4%

1.0%

Foreign currency

1,195,539

43,906

3.7%

16.5%

6,135,822

464,499

7.6%

(1.2)%

7,351,083

621,450

8.5%

(2.7)%

Total

6,410,592

484,062

7.6%

6.2%

17,801,885

1,390,877

7.8%

2.9%

20,857,542

1,548,719

7.4%

1.9%

Interbank loans

Ch$

48,329

1,048

2.2%

(2.1)%

166,307

6,485

3.9%

1.2%

170,086

3,581

2.1%

(0.2)%

UF

—

—

—

—

—

—

—

—

—

—

—

—

Foreign currency

51,156

412

0.8%

13.3%

196,185

1,696

0.9%

(7.4)%

191,538

1,880

1.0%

(9.4)%

Total

99,485

1,459

1.5%

5.8%

362,492

8,180

2.3%

(3.5)%

361,624

5,460

1.5%

(5.1)%

Investment under resale agreements

Ch$

16,039

916

5.7%

1.3%

34,876

1,696

4.9%

2.1%

82,555

2,317

2.8%

0.5%

UF

—

—

—

—

—

—

—

—

—

—

—

—

Foreign currency

—

—

—

—

102,096

23,854

23.4%

38.6%

45,721

4,328

9.5%

(1.8)%

Total

16,039

916

5.7%

1.3%

136,972

25,550

18.7%

29.3%

128,275

6,645

5.2%

(0.3)%

Other interest earning assets

Ch$

—

—

—

—

122

—

—

(8.2)%

180

—

—

(10.3)%

UF

—

—

—

—

—

—

—

—

—

—

—

—

Foreign currency

218,567

(6,669
)
(3.1)%

8.9%

993,168

4,192

0.4%

12.8%

820,215

4,939

0.6%

(9.8)%

Total

218,567

(6,669
)
(3.1)%

8.9%

993,289

4,192

0.4%

12.8%

820,395

4,939

0.6%

(9.8)%

Total interest earning assets

Ch$

2,597,808

210,667

8.1%

3.4%

6,093,752

745,134

12.2%

9.3%

7,120,348

713,200

10.0%

7.5%

UF

3,367,427

253,666

7.5%

3.0%

6,937,544

224,977

3.2%

0.5%

8,083,023

263,915

3.3%

0.9%

Foreign currency

1,472,435

37,649

2.6%

15.2%

8,151,245

539,093

6.6%

(2.1)%

9,234,538

669,215

7.2%

(3.8)%

Total

7,437,670

501,982

6.7%

5.6%

21,182,541

1,509,203

7.1%

2.0%

24,437,909

1,646,329

6.7%

1.1%

	Year Ended December 31,
	2015				2016				2017					Year Ended December 31,
	Average Balance	Interest Earned	Average Nominal Rate	Average Real Rate	Average Balance	Interest Earned	Average Nominal Rate	Average Real Rate	Average Balance	Interest Earned	Average Nominal Rate	Average Real Rate		2016										2017										2018
	(in millions of Ch$)													Average Balance		Interest Earned		Average Nominal Rate			Average Real Rate			Average Balance		Interest Earned		Average Nominal Rate			Average Real Rate			Average Balance		Interest Earned		Average Nominal Rate			Average Real Rate
NON-INTEREST EARNING ASSETS
Cash
														(in millions of Ch$ except for percentages)
INTEREST EARNING ASSETS													INTEREST EARNING ASSETS
Deposits in Central Bank
Ch$	81,203				341,023				406,738						218,522		1,689		0.8	%		(1.9	)%		76,032		1,736		2.3	%		—			127,534		1,778		1.4	%		(1.2	)%
UF	—				—				—						—		—		—			—			—		—		—			—			—		—		0.0	%		—
Foreign currency	54,714				192,603				261,998						58,713				—			(9.7	)%		27,145		—		—			(10.3	)%		8,528		—		0.0	%		10.2	%

Total	135,917				533,626				668,736						277,235		1,689		0.6	%		(3.5	)%		103,178		1,736		1.7	%		(2.7	)%		136,062		1,778		1.3	%		(0.5	)%
Allowance for loan losses

Financial investments
Ch$	108,865				234,582				334,571						535,413		31,750		5.9	%		3.1	%		878,088		33,938		3.9	%		1.5	%		821,238		29,658		3.6	%		1.0	%
UF	—				—				—						409,993		2,112		0.5	%		(2.1	)%		489,972		8,273		1.7	%		(0.6	)%		704,707		26,354		3.7	%		1.1	%
Foreign currency	—				222,365				291,170						665,262		44,852		6.7	%		(2.0	)%		798,837		36,618		4.6	%		(6.2	)%		1,460,155		64,321		4.4	%		15.0	%

Total	108,865				456,948				625,741						1,610,668		78,715		4.9	%		(0.3	)%		2,166,896		78,830		3.6	%		(1.8	)%		2,986,100		120,333		4.0	%		7.9	%
Property, plant and equipment

Total loans
Ch$	33,879				64,522				85,675						5,138,512		703,514		13.7	%		10.7	%		5,913,408		671,628		11.4	%		8.9	%		5,977,972		572,181		9.6	%		6.8	%
UF	—				—				—						6,527,551		222,864		3.4	%		0.7	%		7,593,051		255,641		3.4	%		1.0	%		7,778,882		453,513		5.8	%		3.1	%
Foreign currency	—				36,006				44,105						6,135,822		464,499		7.6	%		(1.2	)%		7,351,083		621,450		8.5	%		(2.7	)%		7,226,952		582,271		8.1	%		19.1	%

Total	33,879				100,528				129,780						17,801,885		1,390,877		7.8	%		2.9	%		20,857,542		1,548,719		7.4	%		1.9	%		20,983,806		1,607,965		7.7	%		9.7	%
Derivatives

Interbank loans
Ch$	141,979				773,393				945,341						166,307		6,485		3.9	%		1.2	%		170,086		3,581		2.1	%		(0.2	)%		116,340		3,372		2.9	%		0.3	%
UF	61,628				47,967				80,983						—		—		—			—			—		—		—			—			—		—		0.0	%		—
Foreign currency	63,374				192,707				219,709						196,185		1,696		0.9	%		(7.4	)%		191,538		1,880		1.0	%		(9.4	)%		87,332		1,642		1.9	%		12.3	%

Total	266,981				1,014,067				1,246,032						362,492		8,180		2.3	%		(3.5	)%		361,624		5,460		1.5	%		(5.1	)%		203,672		5,014		2.5	%		5.4	%
Other assets

Investment under resale agreements
Ch$	265,169				1,565,969				2,095,283						34,876		1,696		4.9	%		2.1	%		82,555		2,317		2.8	%		0.5	%		103,654		2,782		2.7	%		0.1	%
UF	7,303				15,665				6,920						—		—		—			—			—		—		—			—			—		—		0.0	%		—
Foreign currency	73,017				790,266				1,027,684						102,096		23,854		23.4	%		38.6	%		45,721		4,328		9.5	%		(1.8	)%		42,789		2,206		5.2	%		15.9	%

Total	345,489				2,371,900				3,129,887						136,972		25,550		18.7	%		29.3	%		128,275		6,645		5.2	%		(0.3	)%		146,443		4,988		3.4	%		4.7	%
Total non-interest earning assets
Ch$	413,365				2,510,325				3,198,466
UF	68,931				63,632				87,902
Foreign currency	191,105				989,216				1,262,327
Total	673,401				3,563,173				4,548,696
Total assets(1)
Ch$	3,011,173	210,667			8,604,077	745,134			10,318,814	713,200
UF	3,436,358	253,666			7,001,176	224,977			8,170,925	263,915
Foreign currency	1,663,540	37,649			9,140,462	539,093			10,496,866	669,215
Total	8,111,071	501,982			24,745,715	1,509,203			28,986,605	1,646,329

Other interest earning assets

Year Ended December 31,
2016 2017 2018
Average
Balance Interest
Earned Average
Nominal
Rate Average
Real
Rate Average
Balance Interest
Earned Average
Nominal
Rate Average
Real
Rate Average
Balance Interest
Earned Average
Nominal
Rate Average
Real
Rate
(in millions of Ch$ except for percentages)
Ch$
122 —   —   (8.2 )% 180 —   —   (10.3 )% 113 —   0.0 % 10.2
UF
—   —   —   —   —   —   —   —   —   —   0.0 % —
Foreign currency
993,168 4,192 0.4 % 12.8 % 820,215 4,939 0.6 % (9.8 )% 579,539 (761 ) -0.1 % 10.1

Total
993,289 4,192 0.4 % 12.8 % 820,395 4,939 0.6 % (9.8 )% 579,652 (761 ) -0.1 % 10.1

Total interest earning assets

Ch$
6,093,752 745,134 12.2 % 9.3 % 7,120,348 713,200 10.0 % 7.5 % 7,146,851 609,771 8.5 % 5.8 %
UF
6,937,544 224,977 3.2 % 0.5 % 8,083,023 263,915 3.3 % 0.9 % 8,483,589 479,867 5.7 % 3.0
Foreign currency
8,151,245 539,093 6.6 % (2.1 )% 9,234,538 669,215 7.2 % (3.8 )% 9,405,295 649,679 6.9 % 17.8

Total
21,182,541 1,509,203 7.1 % 2.0 % 24,437,909 1,646,329 6.7 % 1.1 % 25,035,735 1,739,317 6.9 % 9.4 %

Year Ended December 31,
2016 2017 2018
Average
Balance Interest
Earned Average
Nominal
Rate Average
Real
Rate Average
Balance Interest
Earned Average
Nominal
Rate Average
Real
Rate Average
Balance Interest
Earned Average
Nominal
Rate Average
Real
Rate
(in millions of Ch$)
NON-INTEREST EARNING ASSETS

Cash

Ch$
341,023 406,738 474,207
UF
—   —   —
Foreign currency
192,603 261,998 445,823
Total
533,626 668,736 920,030
Allowance for loan losses⁽¹⁾

Ch$
234,582 334,571 482,567
UF
—   —   —
Foreign currency
222,365 291,170 271,780
Total
456,948 625,741 754,347
Property, plant and equipment

Ch$
64,522 85,675 73,524
UF
—   —   —
Foreign currency
36,006 44,105 37,100
Total
100,528 129,780 110,624
Derivatives

Ch$
773,393 945,341 892,914
UF
47,967 80,983 71,759
Foreign currency
192,707 219,709 311,364
Total
1,014,067 1,246,032 1,276,037
Other assets

Ch$
1,565,969 2,095,283 2,098,272
UF
15,665 6,920 13,324
Foreign currency
790,266 1,027,684 521,334
Total
2,371,900 3,129,887 2,632,930
Totalnon-interest earning assets

Ch$
2,510,325 3,198,466 3,056,349
UF
63,632 87,902 85,083
Foreign currency
989,216 1,262,327 1,043,840
Total
3,563,173 4,548,696 4,185,272
Total assets⁽²⁾

Ch$
8,604,077 745,134 10,318,814 713,200 10,203,200 609,771
UF
7,001,176 224,977 8,170,925 263,915 8,568,672 479,867
Foreign currency
9,140,462 539,093 10,496,866 669,215 10,449,134 649,679
Total
24,745,715 1,509,203 28,986,605 1,646,329 29,221,006 1,739,317

~~(1) Represents total of interest paying and non-interest earning assets.~~

Year Ended December 31,

2015

2016

2017

Average
Balance

Interest
Paid

Average
Nominal
Rate

Average
Real
Rate

Average
Balance

Interest
Paid

Average
Nominal
Rate

Average
Real
Rate

Average
Balance

Interest
Paid

Average
Nominal
Rate

Average
Real
Rate

(in millions of Ch$ except for percentages)

LIABILITIES AND EQUITY

INTEREST BEARING LIABILITIES

Time Deposits

Ch$

2,287,277

80,363

3.5
%
(0.8
)%
5,244,385

238,587

4.5
%
1.8
%
5,657,825

205,639

3.6
%
1.3
%
UF

1,100,267

75,553

6.9
%
2.4
%
1,480,525

55,293

3.7
%
1.0
%
1,009,946

31,833

3.2
%
0.8
%
Foreign currency

488,362

4,985

1.0
%
13.5
%
3,159,182

165,501

5.2
%
20.2
%
3,476,788

195,765

5.6
%
(5.3
)%
Total

3,875,906

160,901

4.2
%
1.9
%
9,884,092

459,381

4.6
%
7.6
%
10,144,559

433,237

4.3
%
(1.0
)%
Central Bank borrowings

Ch$

—

—

—

—

—

—

—

—

—

—

—

—

UF

—

—

—

—

—

—

—

—

—

—

—

—

Foreign currency

��

—

—

—

—

—

—

—

—

—

—

—

Total

—

—

—

—

—

—

—

—

—

—

—

—

Repurchase agreements

Ch$

57,267

1,772

3.1
%
(1.3
)%
105,389

4,528

4.3
%
1.6
%
192,502

6,103

3.2
%
0.9
%
UF

—

—

—

—

—

—

—

—

—

—

—

—

Foreign currency

—

—

—

—

294,863

43,558

14.8
%
42.8
%
403,849

26,574

6.6
%
(4.4
)%
Total

57,267

1,772

3.1
%
(1.3
)%
400,252

48,086

12.0
%
31.9
%
596,351

32,677

5.5
%
(2.7
)%
Mortgage finance bonds

Ch$

—

—

—

—

210

2,839

1,351.9
%
1,313.7
%
1,021

1,452

142.2
%
136.8
%
UF

28,123

2,187

7.8
%
3.2
%
71,532

1,402

2.0
%
(0.7
)%
71,879

1,797

2.5
%
0.2
%
Foreign currency

—

—

—

—

—

—

—

—

—

—

—

—

Total

28,123

2,187

7.8
%
3.2
%
71,742

4,241

5.9
%
3.1
%
72,900

3,249

4.5
%
2.1
%
Bonds

Ch$

31,744

1,597

5.0
%
0.6
%
140,587

82,121

58.4
%
54.2
%
1,052,950

88,288

8.4
%
5.9
%
UF

1,213,873

91,958

7.6
%
3.0
%
2,954,380

97,588

3.3
%
0.6
%
3,469,207

124,215

3.6
%
1.3
%
Foreign currency

—

—

—

—

1,111,030

51,344

4.6
%
(3.9
)%
1,523,771

67,132

4.4
%
(6.4
)%
Total

1,245,617

93,555

7.5
%
3.6
%
4,205,997

231,053

5.5
%
1.2
%
6,045,928

279,635

4.6
%
0.1
%
Other interest bearing liabilities

Ch$

586,735

9,572

1.6
%
(2.7
)%
1,236,698

24,576

2.0
%
(0.7
)%
1,555,940

7,879

0.5
%
(1.8
)%
UF

6,622

4,303

65.0
%
58.0
%
11,946

2,122

17.8
%
14.7
%
27,495

6,321

23.0
%
20.2
%
Foreign currency

662,759

6,402

1.0
%
13.5
%
2,780,526

100,569

3.6
%
(4.9
)%
3,068,671

100,349

3.3
%
(7.4
)%
Total

1,256,116

20,277

1.6
%
6.2
%
4,029,170

127,267

3.2
%
(3.5
)%
4,652,106

114,549

2.5
%
(5.3
)%
Total interest bearing liabilities

Ch$

2,963,023

93,304

3.1
%
(1.2
)%
6,727,269

352,651

5.2
%
2.5
%
8,460,238

309,361

3.7
%
1.3
%
UF

2,348,885

174,001

7.4
%
2.9
%
4,518,383

156,405

3.5
%
0.7
%
4,578,529

164,166

3.6
%
1.3
%
Foreign currency

1,151,121

11,387

1.0
%
13.5
%
7,345,601

360,972

4.9
%
(3.7
)%
8,473,079

389,820

4.6
%
(6.2
)%
Total

6,463,029

278,692

4.3
%
2.9
%
18,591,253

870,028

4.7
%
(0.4
)%
21,511,846

863,347

4.0
%
(1.7
)%

Year Ended December 31,

2015

2016

2017

Average
Balance

Interest
Paid

Average
Nominal
Rate

Average
Real
Rate

Average
Balance

Interest
Paid

Average
Nominal
Rate

Average
Real
Rate

Average
Balance

Interest
Paid

Average
Nominal
Rate

Average
Real
Rate

(in millions of Ch$)

NON-INTEREST EARNING LIABILITIES

Non-interest-bearing demand deposits

Ch$

251,259

445,473

524,668

UF

—

6,754

9,080

Foreign currency

35,784

1,446,241

1,662,949

Total

287,043

1,898,468

2,196,697

Derivatives

Ch$

174,282

641,346

769,775

UF

78,605

73,255

104,225

Foreign currency

54,967

131,319

147,662

Total

307,854

845,920

1,021,662

Other non-interest-bearing

Ch$

280,856

422,558

430,626

UF

—

66

77,431

Foreign currency

10,360

180,758

309,898

Total

291,216

603,382

817,955

Equity

Ch$

761,929

2,758,990

3,394,866

UF

—

47,688

37,177

Foreign currency

—

13

6,402

Total

761,929

2,806,690

3,438,445

Total non-interest-bearing liabilities and shareholders’ equity

Ch$

1,468,326

4,268,367

5,119,935

UF

78,605

127,763

227,913

Foreign currency

101,111

1,758,331

2,126,911

Total

1,648,042

6,154,461

7,474,759

Total liabilities and equity (1)

Ch$

4,431,349

92,827

10,995,636

352,651

13,580,173

309,361

UF

2,427,490

174,478

4,646,147

156,405

4,806,442

164,166

Foreign currency

1,252,232

11,387

9,103,931

360,972

10,599,990

389,820

Total

8,111,071

278,692

24,745,714

870,028

28,986,605

863,347

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

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


	Year Ended December 31,
	2016										2017										2018
	Average Balance		Interest Paid		Average Nominal Rate			Average Real Rate			Average Balance		Interest Paid		Average Nominal Rate			Average Real Rate			Average Balance		Interest Paid		Average Nominal Rate			Average Real Rate
	(in millions of Ch$ except for percentages)
LIABILITIES AND EQUITY
INTEREST BEARING LIABILITIES
Time Deposits
Ch$		5,244,385		238,587		4.5	%		1.8	%		5,657,825		205,639		3.6	%		1.3	%		6,171,595		184,021		3.0	%		0.4
UF		1,480,525		55,293		3.7	%		1.0	%		1,009,946		31,833		3.2	%		0.8	%		639,980		40,755		6.4	%		3.7
Foreign currency		3,159,182		165,501		5.2	%		20.2	%		3,476,788		195,765		5.6	%		(5.3	)%		3,285,676		160,958		4.9	%		15.6

Total		9,884,092		459,381		4.6	%		7.6	%		10,144,559		433,237		4.3	%		(1.0	)%		10,097,251		385,734		3.8	%		5.5

Central Bank borrowings
Ch$		—		—		—			—			—		—		—			—			—		—		—			—

~~(1)Represents total of interest bearing and non-interest bearing liabilities and shareholders’ equity.~~
Year Ended December 31,
2016 2017 2018
Average
Balance Interest
Paid Average
Nominal
Rate Average
Real
Rate Average
Balance Interest
Paid Average
Nominal
Rate Average
Real
Rate Average
Balance Interest
Paid Average
Nominal
Rate Average
Real
Rate
(in millions of Ch$ except for percentages)
UF
—   —   —   —   —   —   —   —   —   —   —   —
Foreign currency
—   —   —   —   —   —   —   —   —   —   —   —

Total
—   —   —   —   —   —   —   —   —   —   —   —

Repurchase agreements

Ch$
105,389 4,528 4.3 % 1.6 % 192,502 6,103 3.2 % 0.9 % 281,691 7,546 2.7 % 0.1
UF
—   —   —   —   —   —   —   —   —   4 0.0 % 0.0
Foreign currency
294,863 43,558 14.8 % 42.8 % 403,849 26,574 6.6 % (4.4 )% 524,532 22,114 4.2 % 14.8

Total
400,252 48,086 12.0 % 31.9 % 596,351 32,677 5.5 % (2.7 )% 806,223 29,664 3.7 % 9.7

Mortgage finance bonds

Ch$
210 2,839 1,351.9 % 1,313.7 % 1,021 1,452 142.2 % 136.8 % —   —   0.0 % 0.0
UF
71,532 1,402 2.0 % (0.7 )% 71,879 1,797 2.5 % 0.2 % 58,939 2,963 5.0 % 2.4
Foreign currency
—   —   —   —   —   —   —   —   —   —   —   0.0

��

Total
71,742 4,241 5.9 % 3.1 % 72,900 3,249 4.5 % 2.1 % 58,939 2,963 5.0 % 2.4

Bonds

Ch$
140,587 82,121 58.4 % 54.2 % 1,052,950 88,288 8.4 % 5.9 % 567,496 61,589 10.9 % 8.0
UF
2,954,380 97,588 3.3 % 0.6 % 3,469,207 124,215 3.6 % 1.3 % 4,232,986 209,261 4.9 % 2.3
Foreign currency
1,111,030 51,344 4.6 % (3.9 )% 1,523,771 67,132 4.4 % (6.4 )% 989,060 48,439 4.9 % 15.6

Total
4,205,997 231,053 5.5 % 1.2 % 6,045,928 279,635 4.6 % 0.1 % 5,789,542 319,289 5.5 % 5.1

Other interest bearing liabilities

Ch$
1,236,698 24,576 2.0 % (0.7 )% 1,555,940 7,879 0.5 % (1.8 )% 1,623,176 7,596 0.5 % (2.1 )
UF
11,946 2,122 17.8 % 14.7 % 27,495 6,321 23.0 % 20.2 % 15,607 4,833 31.0 % 27.6
Foreign currency
2,780,526 100,569 3.6 % (4.9 )% 3,068,671 100,349 3.3 % (7.4 )% 3,130,676 101,575 3.2 % 13.8

Total
4,029,170 127,267 3.2 % (3.5 )% 4,652,106 114,549 2.5 % (5.3 )% 4,769,459 114,004 2.4 % 8.4

Total interest bearing liabilities

Ch$
6,727,269 352,651 5.2 % 2.5 % 8,460,238 309,361 3.7 % 1.3 % 8,643,958 260,752 3.0 % 0.4
UF
4,518,383 156,405 3.5 % 0.7 % 4,578,529 164,166 3.6 % 1.3 % 4,947,511 257,816 5.2 % 2.5
Foreign currency
7,345,601 360,972 4.9 % (3.7 )% 8,473,079 389,820 4.6 % (6.2 )% 7,929,943 333,086 4.2 % 14.8

Total
18,591,253 870,028 4.7 % (0.4 )% 21,511,846 863,347 4.0 % (1.7 )% 21,521,412 851,654 4.0 % 6.2

Year Ended December 31,
2016 2017 2018
Average
Balance Interest
Paid Average
Nominal
Rate Average
Real
Rate Average
Balance Interest
Paid Average
Nominal
Rate Average
Real
Rate Average
Balance Interest
Paid Average
Nominal
Rate Average
Real
Rate
(in millions of Ch$)
NON-INTEREST EARNING LIABILITIES

Non-interest-bearing demand deposits

Ch$
445,473 524,668 657,388
UF
6,754 9,080 6,053
Foreign currency
1,446,241 1,662,949 1,670,808

Total
1,898,468 2,196,697 2,334,249

Derivatives

Ch$
641,346 769,775 755,182
UF
73,255 104,225 91,479
Foreign currency
131,319 147,662 241,447

Total
845,920 1,021,662 1,088,108

Othernon-interest-bearing

Ch$
422,558 430,626 381,290
UF
66 77,431 145,879
Foreign currency
180,758 309,898 259,246

Total
603,382 817,955 786,415

Equity

Ch$
2,758,990 3,394,866 3,340,551
UF
47,688 37,177 117,620
Foreign currency
13 6,402 32,650

Total
2,806,690 3,438,445 3,490,821

Totalnon-interest-bearing liabilities and shareholders’ equity

Ch$
4,268,367 5,119,935 5,134,412
UF
127,763 227,913 361,030
Foreign currency
1,758,331 2,126,911 2,204,151

Total
6,154,461 7,474,759 7,699,594

Total liabilities and equity⁽¹⁾

Ch$
10,995,636 352,651 13,580,173 309,361 13,778,370 260,752
UF
4,646,147 156,405 4,806,442 164,166 5,308,542 257,816

Year Ended December 31,
2016 2017 2018
Average
Balance Interest
Paid Average
Nominal
Rate Average
Real
Rate Average
Balance Interest
Paid Average
Nominal
Rate Average
Real
Rate Average
Balance Interest
Paid Average
Nominal
Rate Average
Real
Rate
(in millions of Ch$)
Foreign currency
9,103,931 360,972 10,599,990 389,820 10,134,094 333,086

Total
24,745,714 870,028 28,986,605 863,347 29,221,006 851,654

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

Interest-earning Assets—Net Interest Margin

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


	Year Ended December 31,			Year Ended December 31,
	2015	2016	2017	2016			2017			2018
	(in millions of constant Ch$ as of December 31, 2015, except for percentages)			(in millions of constant Ch$ except for percentages)
Total average interest earning assets
Ch$	2,597,808	6,093,752	7,120,348		6,093,752			7,120,348			7,146,851
UF	3,367,427	6,937,544	8,083,023		6,937,544			8,083,023			8,483,589
Foreign currency	1,472,435	8,151,245	9,234,538		8,151,245			9,234,538			9,405,295

Total	7,437,670	21,182,541	24,437,909		21,182,541			24,437,909			25,035,735

Net interest earned (1)
Ch$	117,840	393,041	403,839		393,041			403,839			349,019
UF	79,188	68,014	99,749		68,014			99,749			222,051
Foreign currency	26,261	178,120	279,394		178,120			279,394			316,593

Total	223,289	639,175	782,982		639,175			782,982			887,663

Net interest margin, nominal basis (2)
Ch$	4.5%	6.4%	5.7%		6.4	%		5.7	%		4.9	%
UF	2.4%	1.0%	1.2%		1.0	%		1.2	%		2.6	%
Foreign currency	1.8%	2.2%	3.0%		2.2	%		3.0	%		3.4	%

Total	3.0%	3.0%	3.2%		3.0	%		3.2	%		3.5	%

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

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

⁽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 ~~2015~~2016 to 2017 and 2017 to 2018.

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

•

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

•

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

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

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

   Increase (Decrease)
from 2016 to 2017 due to changes in
   Volume    Rate    Net Change
from 2016
to 2017
   (in millions of Ch$)
ASSETS

INTEREST EARNING ASSETS

Deposits in Central Bank

Ch$
   4,387    (4,340 )    47
UF
   —      —      —
Foreign currency
   —      —      —






Total
   4,387    4,340    47






Financial Investments

Ch$
   (16,647 )    18,835    2,188
UF
   396    5,765    6,161
Foreign currency
   9,264    (17,498 )    (8,234 )






Total
   (6,987 )    7,102    115






Total Loans

Ch$
   104,644    (136,530 )    (31,886 )
UF
   35,230    (2,453 )    32,777
Foreign currency
   93,445    63,506    156,951






Total
   233,320    (75,478 )    157,842






Interbank Loans

Ch$
   147    (3,051 )    (2,904 )
UF
   —      —      —
Foreign currency
   (67 )    251    184






Total
   80    (2,800 )    (2,720 )






Investment under resale agreements

Ch$
   2,386    (1,765    621
UF
   —      —      —
Foreign currency
   (13,167 )    (6,359 )    (19,526 )






Total
   (10,781 )    (8,124 )    (18,905 )






Other interest earning assets

Ch$
   —      —      —
UF
   —      —      —
Foreign currency
   (535 )    1,282    747






Total
   (535 )    1,282    747






Total interest earning assets

Ch$
   94,917    (126,852 )    (31,934 )
UF
   35,626    3,312    38,938
Foreign currency
   88,940    41,182    130,122






Total
   219,484    (82,358 )    137,126

Increase (Decrease)
from 2015 to 2016 due to changes in

Volume

Rate

Net Change
from 2015
to 2016

(in millions of Ch$)

ASSETS

INTEREST EARNING ASSETS

Deposits in Central Bank

Ch$

171

185

356

UF

—

—

—

Foreign currency

—

—

—

Total

171

185

356

Financial Investments

Ch$

15,046

9,824

24,870

UF

6,711

(18,599
)
(11,888
)
Foreign currency

—

44,852

44,852

Total

21,757

36,077

57,834

Total Loans

Ch$

284,505

218,519

523,024

UF

235,183

(251,985
)
(16,802
)
Foreign currency

182,143

238,450

420,593

Total

701,832

204,983

906,815

Interbank Loans

Ch$

2,602

2,835

5,437

UF

—

—

—

Foreign currency

1,098

186

1,284

Total

3,701

3,020

6,721

Investment under resale agreements

Ch$

1,054

(274
)
780

UF

—

—

—

Foreign currency

—

23,854

23,854

Total

1,054

23,580

24,634

Other interest earning assets

Ch$

—

—

—

UF

—

—

—

Foreign currency

(24,265
)
35,126

10,861

Total

(24,265
)
35,126

10,861

Total interest earning assets

Ch$

303,379

231,088

534,467

UF

241,894

(270,584
)
(28,690
)
Foreign currency

158,977

342,467

501,444

Total

704,250

302,971

1,007,221

Increase (Decrease)
from 2015 to 2016 due to changes in

Volume

Rate

Net change
from 2015
to 2016

(in millions of Ch$)

LIABILITIES AND SHAREHOLDERS’ EQUITY

INTEREST BEARING LIABILITIES

Time deposits

Ch$

105,013

53,211

158,224

UF

25,147

(45,407
)
(20,260
)
Foreign currency

26,896

133,620

160,516

Total

157,056

141,424

298,480

Central Bank borrowings

Ch$

—

—

—

UF

—

—

—

Foreign currency

—

—

—

Total

—

—

—

Repurchase agreements

Ch$

1,135

1,621

2,756

UF

—

—

—

Foreign currency

—

43,558

43,558

Total

1,135

45,179

46,314

Mortgage finance bonds

Ch$

—

2,839

2,839

UF

3,484

(4,269
)
(785
)
Foreign currency

—

—

—

Total

3,484

(1,430
)
2,054

Bonds

Ch$

5,443

75,081

80,524

UF

142,118

(136,488
)
5,630

Foreign currency

—

51,344

51,344

Total

147,561

(10,063
)
137,498

Other interest bearing liabilities

Ch$

10,168

4,836

15,004

UF

3,466

(5,647
)
(2,181
)
Foreign currency

21,335

72,832

94,167

Total

34,968

72,022

106,990

Total interest bearing liabilities

Ch$

121,758

137,589

259,347

UF

174,215

(191,811
)
(17,596
)
Foreign currency

48,232

301,353

349,585

Total

344,204

247,132

591,336

Increase (Decrease)
from 2016 to 2017 due to changes in

Volume

Rate

Net Change
from 2016
to 2017

(in millions of Ch$)

ASSETS

INTEREST EARNING ASSETS

Deposits in Central Bank

Ch$

4,387

(4,340
)
47

UF

—

—

—

Foreign currency

—

—

—

Total

4,387

4,340

47

Financial Investments

Ch$

(16,647
)
18,835

2,188

UF

396

5,765

6,161

Foreign currency

9,264

(17,498
)
(8,234
)
Total

(6,987
)
7,102

115

Total Loans

Ch$

104,644

(136,530
)
(31,886
)
UF

35,230

(2,453
)
32,777

Foreign currency

93,445

63,506

156,951

Total

233,320

(75,478
)
157,842

Interbank Loans

Ch$

147

(3,051
)
(2,904
)
UF

—

—

—

Foreign currency

(67
)
251

184

Total

80

(2,800
)
(2,720
)
Investment under resale agreements

Ch$

2,386

(1,765
)
621

UF

—

—

—

Foreign currency

(13,167
)
(6,359
)
(19,526
)
Total

(10,781
)
(8,124
)
(18,905
)
Other interest earning assets

Ch$

—

—

—

UF

—

—

—

Foreign currency

(535
)
1,282

747

Total

(535
)
1,282

747

Total interest earning assets

Ch$

94,917

(126,852
)
(31,934
)
UF

35,626

3,312

38,938

Foreign currency

88,940

41,182

130,122

Total

219,484

(82,358
)
137,126

Increase (Decrease)
from 2016 to 2017 due to changes in

Volume

Rate

Net change
from 2016
to 2017

(in millions of Ch$)

LIABILITIES AND SHAREHOLDERS’ EQUITY

INTEREST BEARING LIABILITIES

Time deposits

Ch$

20,192

(53,140
)
(32,948
)
UF

(17,801
)
(5,659
)
(23,460
)
Foreign currency

15,874

14,390

30,264

Total

18,264

(44,408
)
(26,144
)
Central Bank borrowings

Ch$

—

—

—

UF

—

—

—

Foreign currency

—

—

—

Total

—

—

—

Repurchase agreements

Ch$

3,755

(2,180
)
1,575

UF

Foreign currency

16,053

(33,037
)
(16,984
)
Total

19,807

(35,216
)
(15,409
)
Mortgage finance bonds

Ch$

10,964

(12,351
)
(1,387
)
UF

7

388

395

Foreign currency

—

—

—

Total

10,971

(11,963
)
(992
)
Bonds

Ch$

531,253

(525,086
)
6,167

UF

16,930

9,697

26,627

Foreign currency

18,706

(2,918
)
15,788

Total

566,888

(518,306
)
48,582

Other interest bearing liabilities

Ch$

6,325

(23,022
)
(16,697
)
UF

2,771

1,428

4,199

Foreign currency

(9,126
)
8,906

(220
)
Total

(30
)
(12,688
)
(12,718
)
Total interest bearing liabilities

Ch$

572,488

(615,778
)
(43,290
)
UF

1,907

5,854

7,761

Foreign currency

41,506

(12,658
)
28,848

Total

615,901

(622,582
)
(6,681
)

   Increase (Decrease)
from 2016 to 2017 due to changes in
   Volume    Rate    Net Change
from 2016
to 2017
   (in millions of Ch$)
LIABILITIES AND SHAREHOLDERS’ EQUITY

INTEREST BEARING LIABILITIES

Time deposits

Ch$
   20,192    (53,140 )    (32,948 )
UF
   (17,801 )    (5,659 )    (23,460 )
Foreign currency
   15,874    14,390    30,264






Total
   18,264    (44,408 )    (26,144 )






Central Bank borrowings

Ch$
   —      —      —
UF
   —      —      —
Foreign currency
   —      —      —






Total
   —      —      —
Repurchase agreements

Ch$
   3,755    (2,180 )    1,575
UF

Foreign currency
   16,053    (33,037 )    (16,984 )






Total
   19,807    (35,216 )    (15,409 )






Mortgage finance bonds

Ch$
   10,964    (12,351 )    (1,387 )
UF
   7    388    395
Foreign currency
   —      —      —






Total
   10,971    (11,963 )    (992 )






Bonds

Ch$
   531,253    (525,086 )    6,167
UF
   16,930    9,697    26,627
Foreign currency
   18,706    (2,918 )    15,788






Total
   566,888    (518,306 )    48,582






Other interest bearing liabilities

Ch$
   6,325    (23,022 )    (16,697 )
UF
   2,771    1,428    4,199
Foreign currency
   (9,126 )    8,906    (220 )






Total
   (30 )    (12,688 )    (12,718 )






Total interest bearing liabilities

Ch$
   572,488    (615,778 )    (43,290 )
UF
   1,907    5,854    7,761
Foreign currency
   41,506    (12,658 )    28,848






Total
   615,901    (622,582 )    (6,681 )






   Increase (Decrease)
from 2017 to 2018 due to changes in
   Volume    Rate    Net Change
from 2017
to 2018
   (in millions of Ch$)
ASSETS

INTEREST EARNING ASSETS

Deposits in Central Bank

Ch$
   1,176    (1,134 )    42
UF
   —      —      —
Foreign currency
   —      —      —






Total
   1,176    (1,134 )    42

Financial Investments

Ch$
   (2,197 )    (2,083 )    (4,280 )
UF
   3,626    14,455    18,081
Foreign currency
   30,314    (2,611 )    27,703






Total
   31,743    9,761    41,504






Total Loans

Ch$
   7,333    (106,780 )    (99,447 )
UF
   6,257    191,615    197,872
Foreign currency
   (10,494 )    (28,685 )    (39,179 )






Total
   3,096    56,150    59,246






Interbank Loans

Ch$
   (1,132 )    923    (209 )
UF
   —      —      —
Foreign currency
   (1,023 )    785    (238 )






Total
   (2,155 )    1,708    (447 )






Investment under resale agreements

Ch$
   592    (127 )    465
UF
   —      —      —
Foreign currency
   (277 )    (1,845 )    (2,122 )






Total
   315    (1,972 )    (1,657 )






Other interest earning assets

Ch$
   —      —      —
UF
   —      —      —
Foreign currency
   (1,449 )    (4,251 )    (5,700 )






Total
   (1,449 )    (4,251 )    (5,700 )






Total interest earning assets

Ch$
   5,772    (109,201 )    (103,429 )
UF
   9,882    206,071    215,953
Foreign currency
   17,071    (36,607 )    (19,536 )






Total
   32,725    60,263    92,988






   Increase (Decrease)
from 2017 to 2018 due to changes in
   Volume    Rate    Net change
from 2017
to 2018
   (in millions of Ch$)
LIABILITIES AND SHAREHOLDERS’ EQUITY INTEREST BEARING LIABILITIES

Time deposits

Ch$
   18,673    (40,287 )    (21,614 )
UF
   (11,661 )    20,583    8,922
Foreign currency
   (10,761 )    (24,046 )    (34,807 )






Total
   (3,749 )    (43,750 )    (47,499 )






Central Bank borrowings

Ch$
   —      —      —
UF
   —      —      —
Foreign currency
   —      —      —
Total
   —      —      —
Repurchase agreements

Ch$
   2,828    (1,385 )    1,443
UF
   —      —      —
Foreign currency
   7,941    (12,401 )    (4,460 )

   Increase (Decrease)
from 2017 to 2018 due to changes in
   Volume    Rate    Net change
from 2017
to 2018
   (in millions of Ch$)
Total
   10,769    (13,786 )    (3,017 )






Mortgage finance bonds

Ch$
   (1,452 )    —      (1,452 )
UF
   (324 )    1,490    1,166
Foreign currency
   —      —      —






Total
   (1,776 )    1,490    (286 )






Bonds

Ch$
   (40,704 )    14,005    (26,699 )
UF
   27,347    57,699    85,046
Foreign currency
   (23,557 )    4,864    (18,693 )






Total
   (36,914 )    76,568    39,654






Other interest bearing liabilities

Ch$
   340    (623 )    (283 )
UF
   (2,733 )    1,245    (1,488 )
Foreign currency
   2,028    (802 )    1,226






Total
   (365 )    (180 )    (545 )






Total interest bearing liabilities

Ch$
   (20,315 )    (28,290 )    (48,605 )
UF
   12,629    81,017    93,646
Foreign currency
   (24,349 )    (32,385 )    (56,734 )






Total
   (32,035 )    20,342    (11,693 )

Return on Equity and Assets

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


	Years ended December 31,			Years ended December 31,
	2015	2016	2017	2016			2017			2018
	(in millions of Ch$, except for percentages)			(in millions of Ch$, except for percentages)
Net income	105,766	13,969	62,825		13,969			62,825			166,854
Net income attributable to the equity holders of the bank	105,757	14,407	67,821
Net income attributable to equity holders of the Bank					14,407			67,821			171,331
Average total assets	8,111,071	24,745,715	28,986,605		24,745,715			28,986,605			29,221,006
Average equity	761,929	2,806,690	3,438,445		2,806,690			3,438,445			3,490,821
Net income as a percentage of:
Average total assets	1.30%	0.06%	0.22%		0.06	%		0.22	%		0.57	%
Average equity	13.88%	0.50%	1.83%		0.50	%		1.83	%		4.78	%
Average equity as a percentage of:
Average total assets	9.39%	11.34%	11.86%		11.34	%		11.86	%		11.95	%
Proposed annual cash dividend (*)	52,168	618	22,979
Annual cash dividend					52,168			618			22,979
Dividend payout ratio, based on net income attributable to shareholders under local GAAP	50.00%	30.00%	40.00%		50.00	%		30.00	%		40.00	%

~~(*)~~ ~~Dividend proposed by the board of directors for shareholders’ approval in Annual General Shareholders’ Meeting.~~

Investment Portfolio

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

Financial investments as of December 31, ~~2015,~~ 2016 and 2017 and 2018 are as follows:

	As of December 31,
	2015	2016	2017	As of December 31,
	(in millions of Ch$)			2016		2017		2018
Held-for-trading:
				(in millions of Ch$)
Held-for-trading (2016 and 2017) \| Financial Instruments at Fair Value Through Profit or Loss (2018)
Chilean Central Bank and Government securities:
Chilean Central Bank bonds	1,583	8,349	1,705
Chilean Central Bank notes	—	—	2,258
Chilean Central Bank securities					8,349		3,963		21,736
Other Chilean Central Bank and Government securities	4,828	17,855	3,163		17,855		3,163		14,872

Other national institution securities:
Bonds	—	786	5		786		5		3
Notes	—	—	—		—		—		—
Other securities	—	12,608	—		12,608		—		4,014

Foreign institution securities:
Bonds	—	547,499	381,262		547,499		381,262		23,276
Notes	—	—	—		—		—		—
Other securities	—	11,727	8,147		11,727		8,147		19,505

Mutual funds investments
Funds managed by related organizations	11,354	33,733	18,521		33,733		18,521		3,532
Funds managed by third parties	—	—	—		—		—		10,005

Total	17,765	632,557	415,061		632,557		415,061		96,943

As of December 31,

2015

2016

2017

(in millions of Ch$)

Available-for-sale

Chilean Central Bank and Government securities

Chilean Central Bank and Government securities

218,757

901,239

687,945

Chilean Central Bank Notes

32,112

272,734

1,081,879

Other Government securities

—

—

14,053

Other financial instruments

Promissory notes related to deposits in local banks

31,193

397,898

114,038

Chilean mortgage finance bonds

—

76

64

Chilean financial institutions bonds

230,448

2,607

9,032

Other local investments

—

32,230

6,159

Financial instruments issued abroad

Foreign government and central banks instruments

—

284,444

420,687

Other foreign investments

—

162,882

300,740

Impairment provision

—

—

Unquoted securities in active markets

Chilean corporate bonds

—

—

18,469

Other investments

2,475

19,967

10,412

Impairment provision

—

—

—

Total

514,985

2,074,077

2,663,478

	As of December 31,
	2015	2016	2017	As of December 31,
	(in millions of Ch$)			2016		2017		2018
Held to maturity
				(in millions of Ch$)
Central Bank and Government securities
Chilean Central Bank securities	—	—	—
Chilean treasury bonds	—	—	—
Available-for-sale (2016 and 2017)\| Financial Instruments at Fair Value Through Other Comprehensive Income (2018)
Chilean Central Bank and Government securities
Chilean Central Bank and Government securities					901,239		687,945		411,431
Chilean Treasury bonds					272,734		1,081,879		913,041
Other Government securities	—	—	—		—		14,053		27,612

Other financial securities
Other financial instruments
Promissory notes related to deposits in local banks	—	—	—		397,898		114,038		185,501
Chilean mortgage finance bonds	—	—	—		76		64		50
Chilean financial institution bonds	—	—	—
Chilean financial institutions bonds					2,607		9,032		—
Other local investments	—	—	—		32,230		6,159		5,979

Financial instruments issued abroad
Foreign government and central banks instruments	—	226,433	—		284,444		420,687		769,693
Other foreign investments	—	—	202,030		162,882		300,740		332,560
Impairment provision	—	—	—		—		—		—

Unquoted securities in active markets
Chilean corporate bonds	—	—	—		—		18,469		4,909
Other investments	—	—	—		19,967		10,412		6,378
Impairment provision	—	—	—		—		—		—

Total	—	226,433	202,030		2,074,077		2,663,478		2,657,154


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

Total		226,433		202,030		198,923

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

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, ~~2017:~~2018:

In one
year or
less

Weighted
average
Nominal
Rate

After
one
year
through
five
years

Weighted
average
Nominal
Rate

After
five
years
through
ten
years

Weighted
average
Nominal
Rate

After
ten
years

Weighted
average
Nominal
Rate

Total

Ch$

%

Ch$

%

Ch$

%

Ch$

%

Ch$

(in millions of Ch$, except for percentages)

Held—for—trading

Central Bank and Government securities:

Chilean Central Bank securities

573

0.9

818

2.3

293

1.3

150

2.1

1,834

Chilean Central Bank notes

2,147

0.20

—

—

—

—

—

—

2,147

Others Government securities

406

4.0

2,222

6.6

—

—

516

3.5

3,144

Other national institution securities:

Bonds

—

—

—

—

—

—

5

6.7

5

Notes

—

—

—

—

—

—

—

—

—

Other securities

—

—

—

—

—

—

—

—

—

Other local investments

—

—

—

—

—

—

—

—

—

Foreign institution securities:

Bonds

166,591

0.1

193,631

4.99

21,040

0.1

—

—

381,262

Notes

—

—

—

—

—

—

—

—

—

Other securities

3,233

3.29

—

—

—

—

4,914

—

8,147

Mutual fund investments:

Funds managed by related organizations

18,521

—

—

—

—

—

—

—

18,521

Funds managed by third parties

—

—

—

—

—

—

—

—

—

Total Held—for—trading

191,471

0.1

196,670

5.0

21,333

0.1

5,586

0.4

415,061

In one
year or less

Weighted
average
Nominal
Rate

After
one year
through
five years

Weighted
average
Nominal
Rate

After five
years
through
ten years

Weighted
average
Nominal
Rate

After ten
years

Weighted
average
Nominal
Rate

Total

Ch$

%

Ch$

%

Ch$

%

Ch$

%

Ch$

(in millions of Ch$, except for percentages)

Available—for—sale

Chilean Central Bank and Government securities:

Chilean Central Bank securities

309,502

0.7

356,246

3.0

22,197

3.6

—

—

687,945

Chilean treasury bonds

—

—

669,794

2.4

402,930

3.4

9,155

3.0

1,081,879

Others Government securities

—

—

14,053

2.3

—

—

—

—

14,053

Other financial instruments:

Promissory notes related to deposits in local banks

114,038

0.2

—

—

—

—

—

—

114,038

Chilean mortgage finance bonds

—

—

1

3.6

64

3.4

—

—

64

Chilean financial institution bonds

—

—

—

—

9,032

1.9

—

—

9,032

Other local investments

6,159

—

—

—

—

—

—

—

6,159

Financial instruments issued abroad:

Foreign Government and central bank instruments

53,573

0.1

305,394

0.1

61,720

0.1

—

—

420,687

Other foreign investments

102,021

—

171,469

0.05

16,197

0.1

11,053

3.37

300,740

Impairment provision

—

—

—

—

—

—

—

—

—

Unquoted securities in active markets

Chilean corporate bonds

9,660

2.9

8,809

5.3

—

—

—

—

18,469

Other foreign investments

10,412

—

—

—

—

—

—

—

10,412

Impairment provision

—

—

—

—

—

—

—

—

—

Total

605,365

0.5

1,525,765

1.8

512,140

2.8

20,208

3.2

2,663,478

Within one
year

Weighted
average
Nominal
Rate

After
one
year
through
five
years

Weighted
average
Nominal
Rate

After
five
years
through
ten years

Weighted
average
Nominal
Rate

After ten
years

Weighted
average
Nominal
Rate

Total

Ch$

%

Ch$

%

Ch$

%

Ch$

%

Ch$

(in millions of Ch$, except for percentages)

Held to maturity

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

186,738

2.2

15,292

0.1

—

—

—

—

202,030

Other foreign investments

—

—

—

—

—

—

—

—

—

Impairment provision

—

—

—

—

—

—

—

—

—

Unquoted securities in active markets

Chilean corporate bonds

—

—

—

—

—

—

—

—

—

Other investments

—

—

—

—

—

—

—

—

—

Impairment provision

—

—

—

—

—

—

—

—

—

Total

186,738

2.2

15,292

0.1

—

—

—

—

202,030


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

Total		65,725		0.16		26,609		1.64		2,755		1.45		1,854		0.01		96,943


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

   In one
year or
less    Weighted
average
Nominal
Rate    After
one year
through
five years    Weighted
average
Nominal
Rate    After five
years
through
ten years    Weighted
average
Nominal
Rate    After ten
years    Weighted
average
Nominal
Rate    Total
   Ch$    %    Ch$    %    Ch$    %    Ch$    %    Ch$
   (in millions of Ch$, except for percentages)
Other financial instruments:

Promissory notes related to deposits in local banks
   185,501    0.27    —      —      —      —      —      —      185,501
Chilean mortgage finance bonds
   —      —      —      —      50    3.37    —      —      50
Chilean financial institution bonds
   —      —      —      —      —      —      —      —      0
Other local investments
   5,979    —      —      —      —      —      —      —      5,979
Financial instruments issued abroad:

Foreign Government and central bank instruments
   437,265    2.47    262,270    5.12    70,158    0.06    —      —      769,693
Other foreign investments
   152,836    0.04    152,952    0.05    15,779    0.05    10,993    0.06    332,560
Impairment provision
   —      —      —      —      —      —      —      —      0
Unquoted securities in active markets

Chilean corporate bonds
   —      —      46    5.30    4,863    5.95    —      —      4,909
Other foreign investments
   —      —      —      —      —      —      —      —      0
Impairment provision
   —      —      —      —      —      —      —      —      0
Other investment
   6,378                         6,378


















Total
   795,806    1.4    1,620,950    2.7    212,238    1.5    21,781    1.1    2,657,154

Within
one year

Weighted
average
Nominal
Rate

After
one
year
through
five
years

Weighted
average
Nominal
Rate

After
five
years
through
ten years

Weighted
average
Nominal
Rate

After ten
years

Weighted
average
Nominal
Rate

Total

Ch$

(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

—

   Within
one year    Weighted
average
Nominal
Rate    After
one
year
through
five
years    Weighted
average
Nominal
Rate    After
five
years
through
ten years    Weighted
average
Nominal
Rate    After ten
years    Weighted
average
Nominal
Rate    Total
   Ch$    %    Ch$    %    Ch$    %    Ch$    %    Ch$
   (in millions of Ch$, except for percentages)
Financial instruments issued abroad:

Foreign government and central bank instruments
   198,923    3.21    —      —      —      —      —      —      198,923
Other foreign investments
   —      —      —      —      —      —      —      —      —
Impairment provision
   —      —      —      —      —      —      —      —      —
Unquoted securities in active markets

Chilean corporate bonds
   —      —      —      —      —      —      —      —      —
Other foreign investments
      —      —      —      —      —      —      —      —
Other investment
   —                           —
Impairment provision
   —      —      —      —      —      —      —      —      —


















Total
   198,923    3.21    —      —      —      —      —      —      198,923

Loan Portfolio

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


	As of December 31,			As of December 31,
	2015	2016	2017	2016		2017		2018
Commercial loans:
Commercial loans	3,604,521	11,956,364	11,116,076		11,956,364		11,116,076		11,457,388
Foreign trade loans	429,320	754,144	700,733		754,144		700,733		928,443
Checking account debtors	39,114	133,701	139,348		133,701		139,348		131,100
Factoring operations	57,232	76,141	140,738		76,141		140,738		210,567
Student loans	177,023	610,315	653,003		610,315		653,003		676,689
Leasing transactions	248,755	1,073,506	940,789		1,073,506		940,789		928,160
Other loans and receivables	10,501	30,300	25,859		30,300		25,859		34,553

Subtotals	4,566,466	14,634,471	13,716,546		14,634,471		13,716,546		14,366,900

Mortgage loans:
Letters of credit loans	16,526	57,708	47,400		57,708		47,400		38,364
Endorsable mutual mortgage loans	8,753	152,320	135,919		152,320		135,919		118,668
Other mutual mortgage loans	1,508,569	3,360,950	3,660,900		3,360,950		3,660,900		3,953,245
Leasing transactions	—	288,329	282,135		288,329		282,135		312,118
Other loans and receivables	—	29,210	26,399		29,210		26,399		23,432

Subtotals	1,533,848	3,888,517	4,152,753		3,888,517		4,152,753		4,445,827

Consumer loans:
Consumer loans	389,356	1,786,004	1,810,049		1,786,004		1,810,049		1,921,785
Checking account debtors	113,667	182,832	207,501		182,832		207,501		209,492
Credit card debtors	197,425	414,903	421,169		414,903		421,169		481,567
Consumer leasing transactions	309	17,091	11,176		17,091		11,176		6,203
Other loans and receivables	—	80,134	63,411		80,134		63,411		50,716

Subtotals	700,757	2,480,964	2,513,306		2,480,964		2,513,306		2,669,763

Loans	6,801,071	21,003,952	20,382,605		21,003,952		20,382,605		21,482,490

Loans and receivables from Banks	99,468	150,780	36,281		150,780		36,281		341,707

Total	6,900,539	21,154,732	20,418,886		21,154,732		20,418,886		21,824,197

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 a30-day or360-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 apre-approved credit limit. This category includes overdrafts loans.

Factoring operations: Factoring operations refer to the transactions in which our customers assign their accounts receivable (invoices, bills, among others) to us, which allows them to convert their sales into cash regardless the original terms agreed for payment, improving their liquidity, financial indices and also delegating the collection management efforts to us and/or our subsidiaries.

Student loans: Loans with a government guarantee for college education, known asCréditos 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 ornon-endorsable instruments/credit operations and letters of credit, ~~or other endorsable instruments/credit operations.~~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 followingsub-categories:

~~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. At the time of the approval of the relevant loan by the bank, these mortgage loans cannot exceed 75% of the lower of the purchase price or the appraised value of the mortgaged property. Letter of credit loans are our general obligations, and we are liable for all principal and accrued interest on such Notes. The main difference between Letter of credit loans or Mortgages Bonds is the fact that Letter of credit loans fund specific mortgage loans (on a credit by credit basis) while Mortgages Bonds fund portfolios of mortgage loans.

Endorsable mutual mortgage loans: Thissub-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: Thissub-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: Thissub-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: Thissub-category includes outstanding balances owed by tenants in financial leases transactions

Letters of credit loans: Thissub-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: Thissub-category includes loans that are ancillary or that complement mutual mortgage loans.

The balances of the renegotiated mortgage loans as of December 31 ~~2015,~~ 2016, 2017 and ~~2017~~2018 were as follows:


	As of December 31,						As of December 31,
	2015		2016		2017		2016			2017			2018
	(in millions of Ch$)						(in millions of Ch$)
Opening balance(1)	1,307		1,360		15,660			1,360			15,660			10,933
Integration Itaú Corpbanca	—		13,315		—			13,315			—			—
Renegotiated(2)	385		4,584		1,519			4,584			1,519			2,779
Recovery(3)	—		(2,279	)	(5,248	)		(2,279	)		(5,248	)		(2,567	)
Write-offs(4)	(332	)	(1,320	)	(998	)		(1,320	)		(998	)		(33	)

Final balance	1,360		15,660		10,933			15,660			10,933			11,112

⁽¹⁾

~~(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.~~

₍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 ~~utilization~~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 followingsub-categories:

Consumer loans: Thissub-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: Thissub-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: Thissub-category includes outstanding balances arising from the use of credit cards by individuals.

Consumer leasing transactions: Thissub-category includes outstanding balances owed by tenants of consumer goods under financial leasing transactions.

Other loans and receivables: Thissub-category includes other revolving consumer loans and other accounts receivable granted to individuals not included in the above categories.

The balances of the renegotiated consumer loans as of December 31, ~~2015,~~ 2016, 2017 and ~~2017~~2018 were as follows:


	As of December 31,						As of December 31,
	2015		2016		2017		2016			2017			2018
	(in millions of Ch$)						(in millions of Ch$)
Opening balance(1)	26,658		25,996		128,722			25,996			128,722			150,706
Integration Itaú Corpbanca	—		93,542		—			93,542			—			—
Renegotiated(2)	15,471		78,496		91,837			78,496			91,837			48,318
Recovery(3)	(8,622	)	(44,485	)	(33,778	)		(44,485	)		(33,778	)		(14,937	)
Write-offs(4)	(7,511	)	(24,827	)	(36,074	)		(24,827	)		(36,074	)		2,232

Final balance	25,996		128,722		150,706			128,722			150,706			186,319

⁽¹⁾

~~(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.~~

⁽²⁾	Corresponds to the additions to the renegotiated loans portfolio during each respective period.

⁽³⁾	Corresponds to the recovery (which may include payments, or settlements by judicial action) obtained from renegotiated loans during each respective period.

⁽⁴⁾	Corresponds to write-offs of renegotiated loans during each respective period.

As part of our business model we seek to be able to assist our customers when they are experiencing financial problems that cause them to fall behind on their payments. As a result, we make certain concessions when we renegotiate a loan, which may include the following: (i) extension of payment period; (ii) modifications to the interest rate based on each customer’s ability to pay; and (iii) forgiveness of interest payments.

The above-mentioned concessions are considered on acase-by-case basis. The grant of any concessions will depend on the situation of each customer and pursuant to the analysis by ~~the branch agent in charge~~our collection department.

Furthermore, we offer a range of ~~such loan. We do not quantify the balance of consumer loans we have renegotiated by type of concession.~~

~~We use several types of concessions, frequently used in the market,~~products to renegotiate ~~our~~ loans, such as payment extensions or new operations ~~or external refinancing~~ to reduce the probability of ~~losing the amount of the loan that the client has with us and improve collections.~~write-offs.

~~With respect to~~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 ~~are~~is based on ~~the fair value less estimated cost to sell~~a probability of ~~the underlying collateral~~default of ~~each loan.~~100%. To reclassify a renegotiated loan out of the impaired classification, we ~~conduct an individualized analysis of each customer. We consider if~~used the ~~customer has paid its loan for a reasonable period of time and~~criteria defined by the ~~expected behavior of~~SBIF, i.e. the customer for paying the remainder of the loan. In order to remove the renegotiated status from a loan, a customer must have improved its payment ability (credit risk profile) and must also demonstrate an improvement in its payment history. Once a minimum period of four to six months has passed, and a debtor’s situation has been duly rectified and documented, an executive in the commercial loan department may request that the renegotiated statusdelinquency of such ~~loan~~loans must be ~~removed by the Assets Control~~for at least four consecutive months with less than 90 days past due.

Remedial Management team (which is an independent group in the commercial loan department that has the sole authority to change the risk classification of a loan). An executive in the commercial loan department has the exclusive authority to request a new classification on behalf of a customer.

The method of determining the allowance and provision for loan losses described in this section represents Chilean Banking GAAP accounting and is a regulatory required disclosure. 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.

~~Remedial~~ Portfolio ~~(formerly Normalization 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 ~~“Normalizació~~Normalización ~~Mayorista”~~Mayorista or ~~Wholesale Remedial)~~“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:~~
process.
The main difference between remedial portfolio and renegotiated portfolio for commercial loans is that loans may be transferred to the remedial portfolio prior to the commencement of the renegotiation process to the extent, as defined internally, and that the loan has demonstrated evidence of credit deterioration through deterioration in rating category, among others, requiring specific portfolio management procedures:

As of December 31,

2015

2016

2017

(in millions of Ch$)

Opening balance(1)

63,996

75,600

237,197

Integration Itaú Corpbanca

—

189,709

—

Additions to normalization portfolio(2)

23,505

69,454

392,476

Recovery(3)

(5,508
)
(44,455
)
(103,061
)
Write-offs(4)

(6,393
)
(53,111
)
(34,077
)
Final balance(5)

75,600

237,197

492,534

~~(1)~~                     ~~Opening balance of the normalization portfolio.~~
~~(2)~~                     ~~Additions to the normalization loans portfolio during each respective period.~~
~~(3)~~                     ~~Recovery (which may include payments, or settlements by judicial action) obtained from normalization loans during each respective period.~~
~~(4)~~                     ~~Loans and leasing operations write-offs of~~wholesale remedial management ~~portfolio during each respective period.~~
~~(5)~~                     ~~Ending balance of the remedial management portfolio (outstanding and contingent exposures)~~
The increase between 2016 and 2017 was driven by a significant amount added to the remedial management portfolio related to Corporate Banking deteriorated portfolio transferred to the Remedial Management Team (Normalización Mayorista), in the context of changes in our processes (as described below). These changes were implemented in order to improve the management of such debtors, with a specialized team like our “unit (Normalización Mayorista~~”. Before these changes were implemented, this portfolio was~~) managed ~~by the Corporate Banking team directly.~~a deteriorated exposure (internal classification of B3 or worse) of over Ch$500 million in 2018.

   As of December 31,
   2016    2017    2018
   (in millions of Ch$)
Opening balance⁽¹⁾
   75,600    237,197    492,534
Integration Itaú Corpbanca
   189,709    —      —
Additions to normalization portfolio⁽²⁾
   69,454    392,476    57,184
Recovery⁽³⁾
   (44,455    (103,061    (61,078 )
Write-offs⁽⁴⁾
   (53,111    (34,077    (45,599 )






Final balance⁽⁵⁾
   237,197    492,534    443,041






⁽¹⁾
Opening balance of the remedial portfolio.
⁽²⁾
Additions to remedial portfolio during each respective period.
⁽³⁾
Recovery (which may include payments, or settlements by judicial action) obtained during each respective period.
⁽⁴⁾
Loans and leasing operations write-offs of remedial management portfolio during each respective period.
⁽⁵⁾
Ending balance of the remedial management portfolio (outstanding and contingent exposures)
Currently, our remedial management portfolio is handled by a designated and specialized team ~~internally~~(internally named ~~“Normalizació~~Normalización ~~Mayorista” (Wholesale Remedial)~~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 ~~regulatory~~internal classification.
During ~~2017, our credit risk management redefined~~2018, remedial management processes were reinforced, introducing two mayor changes:

·      ~~Wholesale~~To improve our recovery opportunities, the Remedial (“~~Normalización Mayorista~~~~”) will manage deteriorated exposure (regulatory classification on B3 or worse) over Ch$500 million; and~~Management Unit has worked more closely with the Early Warning Unit, providing a deeper analysis of the cases as compared to previous years.

·      ~~Wholesale Remedial manage corporate deteriorated exposures, that before were managed by Corporate Banking.~~To monitor the cases with pending judicial proceedings more closely, we changed the committee’s frequency of review from six months to two months.
As established in our remedial management process, ~~for our business segments as Large Companies, Corporate and Real Estate Banking~~ customers with a deteriorated economic situation will be transferred to the ~~remedial management unit~~Remedial Management Unit (Normalization team), under the following conditions:

·Customers with ~~a regulatory~~an internal classification of B3 or worse (note that itwe will ~~be transferred~~transfer the relationship as a whole);

·Defaulted customers (for 89 days or more);
·
Customers involved in judicial proceedings;
Customers that experience a sudden and severe deterioration in their financial position; and

·Any customer that could result in a loss to the bank.
The remedial portfolio management team is responsible for determining any action that will be taken related to the customer (renegotiation of the exposure or collection), within a period not exceeding 30 days.
Risk Index of Our Loan Portfolio
The risk index is calculated as ratio of the allowance for loan losses over total loans. Allowance for loan losses as of December 31, 2018 refers to allowances for loans at amortized cost according to IFRS 9 and allowance for loan losses for periods are in accordance with IAS 39. Our risk index for commercial loans is calculated by including commercial current account debtors, foreign trade loans, commercial leases, factoring and other commercial loans. Mortgage loans include mortgage leasing arrangements and consumer mortgage loans, which include consumer leasing.
Commercial loans. Our risk index as of December 31, ~~2015,~~ 2016, 2017 and ~~2017~~2018 was ~~1.4%~~2.9%, ~~2.9%~~3.3% and ~~3.3%~~3.4%, respectively. The quality of our commercial loans depends on Chilean GDP growth, interest rates, changes in regulations, the general level of indebtedness and other economic conditions. Commercial loans include foreign trade loans, leasing contracts and factored receivables.
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, ~~throughout the bank,~~ reinforced by ongoing training for sales and risk executives. The division also directly manages higher risk loans in order to maximize recovery using a specialized approach.
Finally, the division’s assets quality ratios developed less favorably in comparison to 2015. Nevertheless, our asset quality ratios, including the risk index, thenon-performing loans and thepast-due loans, continued to outperform the financial system.
Mortgage loans. The risk index of our residential mortgage loans as of December 31, ~~2015,~~ 2016, 2017 and ~~2017~~2018 was ~~0.4%~~0.6%, ~~0.6%~~0.8% and ~~0.8%~~1.5%, respectively.
Itaú Corpbanca’s model for mortgage loans collectively evaluated for impairment recognizes loan losses only when they are incurred, in accordance with the guidance in IAS 39.BC109, and consistent with paragraph BC108 and BC110 of the same (as indicated in paragraph IAS 39.108 “a deterioration in the credit quality of an asset or a group of assets after their initial recognition”) and does not recognize impairment on the basis of expected future transactions or events. Thus, for a loss to be incurred, an event that provides objective evidence of impairment must have occurred and be supported by current observable data.
Consumer loans. The risk index of our consumer loans as of December 31, ~~2015,~~ 2016, 2017 and ~~2017~~2018 was ~~3.9%~~4.7%, ~~4.7%~~5.4% and ~~5.4%~~8.1%, respectively.
The division also created a risk committee, or the Risk Committee, comprised of directors and senior executives that continuously monitor division activities based on the objectives of the ~~bank~~Bank and the business unit.
We consider Itaú Corpbanca’s Risk Index to be an important indicator of the quality of Itaú Corpbanca’s loan portfolio.
~~Our Risk Index as of December 31, 2015 and 2016 (calculated using general ledger balances) was:~~
RISK INDEX

% Change

as of December 31,

from

2015

2016

2016/2015

(in millions of constant Ch$ as of December 31,
2016 except for percentages)

Total loans (calculated pursuant to IFRS)

6,801,071

21,003,952

208.8%

Commercial loans

4,566,466

14,634,471

220.5%

Mortgage loans

1,533,848

3,888,517

153.5%

Consumer loans

700,757

2,480,964

254.0%

Allowances for loan losses (calculated pursuant to IFRS)

95,579

559,304

485.2%

Commercial loans

61,995

418,928

575.7%

Mortgage loans

6,251

23,472

275.5%

Consumer loans

27,333

116,904

327.7%

Allowances for loan losses as a percentage of total loans

1.4%

2.7%

89.5%

Commercial loans

1.4%

2.9%

110.9%

Mortgage loans

0.4%

0.6%

48.1%

Consumer loans

3.9%

4.7%

20.8%

During 2016, our loan portfolio and, therefore, our allowances for loan losses were negatively impacted by (i) the slowdown in the Chilean and Colombian economies, and (ii) the review of risk policies to align our credit criteria with Itaú Unibanco’s risk internal policies, which derived from rating downgrades for our corporate clients, impacting our commercial risk index and our total risk index (ratio of allowance for loans losses over total loans).
Our Risk Index as of December 31, 2016 and 2017 (calculated using general ledger ~~balances)~~balances and using the IAS 39 standard for allowance for loan losses) was:
RISK INDEX
RISK INDEX

as of December 31,

% Change
from

2016

2017

2017/2016

(in millions of constant Ch$ as of December 31,
2017 except for percentages)

Total loans (calculated pursuant to IFRS)

21,003,952

20,382,605

(3.0)%

Commercial loans

14,634,471

13,716,546

(6.3)%

Mortgage loans

3,888,517

4,152,753

6.8%

Consumer loans

2,480,964

2,513,306

1.3%

Allowances for loan losses (calculated pursuant to IFRS)

559,304

618,527

10.6%

Commercial loans

418,928

446,914

6.7%

Mortgage loans

23,472

35,019

49.2%

Consumer loans

116,904

136,594

16.8%

Allowances for loan losses as a percentage of total loans

2.7%

3.0%

14.0%

Commercial loans

2.9%

3.3%

13.8%

Mortgage loans

0.6%

0.8%

39.7%

Consumer loans

4.7%

5.4%

15.3%

   as of December 31, % Change
from
   2016 2017 2017/2016

(in millions of constant Ch$ as of December 31,
2017 except for percentages)

Total loans
   21,003,952 20,382,605 (3.0 )%
Commercial loans
   14,634,471 13,716,546 (6.3 )%
Mortgage loans
   3,888,517 4,152,753 6.8 %
Consumer loans
   2,480,964 2,513,306 1.3 %
Allowances for loan losses
   559,304 618,527 10.6 %
Commercial loans
   418,928 446,914 6.7 %
Mortgage loans
   23,472 35,019 49.2 %
Consumer loans
   116,904 136,594 16.8 %
Allowances for loan losses as a percentage of total loans
   2.7 % 3.0 % 14.0 %
Commercial loans
   2.9 % 3.3 % 13.8 %
Mortgage loans
   0.6 % 0.8 % 39.7 %
Consumer loans
   4.7 % 5.4 % 15.3 %
During 2017, our loan portfolio and, ~~therefore,~~consequently, our allowances for loan losses, were negatively impacted by (i) lower credit demand from companies for investment purposes limiting our commercial loan portfolio expansion in Chile, and (ii) a downward trajectory of the economic activity in Colombia also impacting our loan portfolio growth.
Our loan portfolio decreased 3.0% and was mainly impacted by the decrease in our commercial loans from Ch$14,634,471 million to Ch$13,716,546 million. On the other hand, both our mortgage loan portfolio, and our consumer loan portfolio increased (6.8% and 1.3%, respectively). Our mortgage loans, which is the business unit with the lowest level of risk, increased from Ch$3,888,517 million in 2016 to Ch$4,152,753 million in 2017 and our consumer loans, the business unit with the highest level of risk, increased from Ch$2,480,964 million in 2016 to Ch$2,513,306 million in ~~2017~~2017. As of December 31, 2017, commercial loans, mortgage loans and consumer loans represented 67.3%, 20.4% and 12.3% of our total loan portfolio.
Our Risk Index (calculated using general ledger balances) presented below as of December 31, 2017 is not comparable to the data as of December 31, 2018 due to the differences between the IFRS 9 standard we applied in 2018 and the IAS 39 standard we applied in 2017.
RISK INDEX
   as of December 31, % Change
from
   2017 2018 2018/2017

(in millions of constant Ch$ as of December 31,
2018 except for percentages)

Total loans
   20,382,605 21,482,490 5.4 %
Commercial loans
   13,716,546 14,366,900 4.7 %
Mortgage loans
   4,152,753 4,445,827 7.1 %
Consumer loans
   2,513,306 2,669,763 6.2 %
Allowances for loan losses⁽¹⁾
   618,527 768,120 24.2 %
Commercial loans
   446,914 484,707 8.5 %
Mortgage loans
   35,019 66,117 88.8 %
Consumer loans
   136,594 217,296 59.1 %
Allowances for loan losses as a percentage of total loans⁽¹⁾
   3.0 % 3.6 % 20.0 %
Commercial loans
   3.3 % 3.4 % 3.0 %
Mortgage loans
   0.8 % 1.5 % 76.4 %
Consumer loans
   5.4 % 8.1 % 49.8 %
(1)
Allowance for loan losses as of December 31, 2018 corresponds to allowances for loans and accounts receivable from customers at amortized cost according to IFRS 9. Prior periods are in accordance with IAS 39.
During 2018, our loan portfolio and, consequently, our allowances for loan losses, were positively impacted by (i) an acceleration of economic activity in both Chile and Colombia, which led to a partial improvement in the credit risk of our loan portfolio and (ii) a decrease in exposure to major corporate single-names made after the merger, producing favourable credit risk adjustments. Higher allowances for loan losses in 2018 resulted primarily from the effects of our first time adoption of IFRS 9.
Our loan portfolio increased by 5.4% in 2018 as compared to 2017 as a result of the different dynamics we saw in our business segments. We continued to see a good performance throughout the year in our retail portfolio, particularly our consumer loans led by our strategy that began in the second quarter of 2017, to grow our retail segment in order to produce a more balanced portfolio in terms of retail and wholesale loans. Thus our mortgage loan portfolio, and our consumer loan portfolio increased (7.1% and 6.2%, respectively). Our mortgage loans, which is the business unit with the lowest level of risk, increased from Ch$4,152,753 million in 2017 to Ch$4,445,827 million in 2018 and our consumer loans, the business unit with the highest level of risk, increased from Ch$2,513,306 million in 2017 to Ch$2,669,763 million in 2018. When looking at our commercial loan portfolio, which still was a drag on overall growth in 2018, we did see a stronger performance in terms of margins. As of December 31, 2018, commercial loans, mortgage loans and consumer loans represented 66.9%, 20.7% and 12.4% of our total loan portfolio.
Consumer loans represent the single highest level of risk in our loan portfolio. As of December 31, ~~2017,~~2018, the risk index of this business unit was ~~5.4%~~8.1%, while our commercial loans had a risk index of ~~3.3%~~3.4%. Our mortgage loans had the lowest risk index of ~~0.8%~~1.5%.
Our consumer loan portfolio may experience loan losses due to the absence of collateral in respect of unsecured loans, insufficient collateral in collateralized loans, and risks relating to the circumstances of individual borrowers, including unemployment or incapacitation of our consumer borrowers.
Maturity and Interest Rate Sensitivity of Loans
The following table sets forth an analysis of our loans by type and time remaining to maturity as of December 31, ~~2017:~~2018:

Due in 1
year

Due after
1 year
through
5 years

Due after
5 years

Balance as of
December 31,
2017

(in millions of constant Ch$ as of December 31, 2017)

Commercial loans

4,176,320

2,785,705

4,154,051

11,116,076

Foreign trade loans

671,660

19,216

9,857

700,733

Checking account debtors

139,348

0

0

139,348

Factoring operations

138,416

2,322

0

140,738

Student loans

211

8,120

644,672

653,003

Leasing transactions

53,781

326,713

560,295

940,789

Other loans and receivables

21,877

3,982

0

25,859

Subtotals

5,201,613

3,146,058

5,368,875

13,716,546

Letters of credit loans

546

9,667

37,187

47,400

Endorsable mutual mortgage loans

403

6,258

129,258

135,919

Other mutual mortgage loans

59,545

44,227

3,557,128

3,660,900

Leasing transactions

1,227

11,021

269,887

282,135

Other loans and receivables

14

616

25,769

26,399

Subtotals

61,735

71,789

4,019,229

4,152,753

Consumer loans

296,448

1,193,118

320,483

1,810,049

Checking account debtors

207,501

0

0

207,501

Credit card debtors

343,949

77,220

0

421,169

Consumer leasing transactions

725

9,012

1,439

11,176

Other loans and receivables

63,411

0

0

63,411

Subtotals

912,034

1,279,350

321,922

2,513,306

Subtotal loans

6,175,382

4,497,197

9,710,026

20,382,605

Loans and receivables to banks

36,281

Total loans

20,418,886

   Due in 1
year    Due after
1 year
through
5 years    Due after
5 years    Balance as of
December 31,
2018
   (in millions of constant Ch$ as of December 31, 2018)
Commercial loans
   4,011,492    3,150,844    4,295,052    11,457,388
Foreign trade loans
   909,499    12,054    6,890    928,443
Checking account debtors
   131,100    —      —      131,100
Factoring operations
   210,131    436    —      210,567
Student loans
   221    8,343    668,125    676,689
Leasing transactions
   50,370    339,882    537,908    928,160
Other loans and receivables
   32,090    2,328    135    34,553








Subtotals
   5,344,903    3,513,887    5,508,110    14,366,900








Letters of credit loans
   1,313    6,606    30,445    38,364
Endorsable mutual mortgage loans
   240    6,839    111,589    118,668
Other mutual mortgage loans
   4,543    51,867    3,896,835    3,953,245
Leasing transactions
   1,477    13,155    297,486    312,118
Other loans and receivables
   21    587    22,824    23,432








Subtotals
   7,594    79,054    4,359,179    4,445,827








Consumer loans
   88,045    1,490,536    343,204    1,921,785
Checking account debtors
   209,492    —      —      209,492
Credit card debtors
   407,067    72,708    1,792    481,567
Consumer leasing transactions
   546    5,525    132    6,203
Other loans and receivables
   50,716    —      —      50,716








Subtotals
   755,866    1,568,769    345,128    2,669,763








Subtotal loans
            21,482,490
Loans and receivables to banks
            341,707


Total loans
            21,824,197


The following table presents the interest rate analysis of our outstanding loans due after one year as of December 31, ~~2017.~~2018.

As of December 31, ~~2017~~
2018
Variable interest rate
Ch$
~~964,368~~
943,349
UF
~~983,214~~
389,645
Ch$ indexed to US$
~~269~~
13,824
Foreign currency
~~2,758,273~~
2,781,384
~~Subtotal~~
~~4,706,124~~

~~Fixed interest rate~~Subtotal
4,128,202

Fixed interest rate
Ch$
~~2,277,049~~
2,608,633
UF
~~5,590,795~~
5,796,355
Ch$ indexed to US$
~~5,151~~
803
As of December 31, 2018
Foreign currency
~~1,628,104~~
2,840,134

~~Subtotal~~

~~9,501,099~~
~~Total~~Subtotal
11,245,925

~~14,207,223~~Total
15,374,127

The following table sets forth an analysis of our foreign loans by type and time remaining to maturity as of December 31, ~~2017:~~2018:

2017

Due in 1 year
or less

Due after 1 year
through 5 years

Due after 5
year

Total

2018
   Due in 1
year
or less    Due after 1 year
through 5 years    Due after 5
year    Total

(in millions of constant Ch$ as of December 31, 2017)

   (in millions of constant Ch$ as of December 31, 2018)
Commercial loans

8,658

50,063

85,492

144,214

   119,044    6,062    107,613    232,719
Foreign loans (*)

1,688,511

1,172,685

2,085,815

4,947,010

   1,445,603    1,716,136    2,240,323    5,402,063









Total

1,697,169

1,222,748

2,171,307

5,091,224

   1,564,647    1,722,198    2,347,936    5,634,781








^(*)
Includes commercial, mortgage and consumer loans.
~~(*)~~                     ~~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 ~~before provisions~~ based on the borrower’s principal business ~~activity:~~activity. Loans for 2018 refer to loans and accounts receivable from customers at amortized cost; and for prior periods, loans refer to loans and accounts receivable from customers, net:
Loans by Economic Activity

~~20-F 2017~~
Domestic Loans as of
December 31, Foreign Loans as of
December 31, Total Loans as of
December 31, Distribution
percentage as of
December 31,
2016 2017 2018 2016 2017 2018 2016 2017 2018 2016 2017 2018
Loans by Economic Activity

Manufacturing
1,065,647 987,900 982,497 155,749 52,591 114,714 1,221,396 1,040,491 1,097,211 5.81 % 5.11 % 5.11 %
Mining and Petroleum
428,384 445,907 424,883 275,056 198,154 252,894 703,440 644,061 677,777 3.35 % 3.16 % 3.16 %
Electricity, Gas and Water
720,818 531,474 600,667 414,511 405,009 356,706 1,135,329 936,483 957,373 5.41 % 4.59 % 4.46 %
Agriculture and Livestock
262,449 298,517 207,271 165,296 117,413 139,098 427,745 415,930 346,369 2.04 % 2.04 % 1.61 %
Forestry and wood extraction
28,853 8,213 24,511 6,494 30,594 5,172 35,347 38,807 29,683 0.17 % 0.19 % 0.14 %
Fishing
58,770 13,912 1,945 —   —   1,530 58,770 13,912 3,475 0.28 % 0.07 % 0.02 %
Transport and storage
442,468 424,223 509,354 251,885 244,254 191,047 694,353 668,477 700,401 3.31 % 3.28 % 3.26 %
Communications
31,712 29,377 23,886 48,448 65,062 62,191 80,160 94,439 86,077 0.38 % 0.46 % 0.40 %
Construction
1,359,125 1,368,244 1,436,096 265,669 269,876 310,530 1,624,794 1,638,120 1,746,626 7.74 % 8.04 % 8.13 %
Commerce
912,877 999,639 861,291 801,712 713,211 758,817 1,714,589 1,712,850 1,620,108 8.16 % 8.40 % 7.54 %
Services
2,869,113 2,619,520 2,735,023 1,418,260 1,161,213 1,137,037 4,287,373 3,780,733 3,872,060 20.41 % 18.55 % 18.02 %
Others
2,465,332 2,384,400 2,436,337 185,843 347,843 793,403 2,651,175 2,732,243 3,229,740 12.62 % 13.41 % 15.03 %

Subtotal Commercial Loans
10,645,548 10,111,327 10,243,761 3,988,923 3,605,219 4,123,139 14,634,471 13,716,546 14,366,900 69.68 % 67.30 % 66.88 %

Mortgage Loans⁽¹⁾
3,360,930 3,635,993 3,852,962 527,587 516,760 592,865 3,888,517 4,152,753 4,445,827 18.51 % 20.37 % 20.70 %
Consumer Loans⁽¹⁾
1,353,422 1,544,062 1,750,986 1,127,542 969,244 918,777 2,480,964 2,513,306 2,669,763 11.81 % 12.33 % 12.43 %

Total
15,359,900 15,291,382 15,847,709 5,644,052 5,091,223 5,634,781 21,003,952 20,382,605 21,482,490 100 % 100 % 100 %

Domestic Loans as of
December 31,

Foreign Loans as of
December 31,

Total Loans as of
December 31,

Distribution percentage as of
December 31,

2015

2016

2017

2015

2016

2017

2015

2016

2017

2015

2016

2017

Loans by Economic Activity

Manufacturing

444,647

1,065,647

987,900

—

155,749

52,591

444,647

1,221,396

1,040,491

6.54%

5.81%

5.11%

Mining and Petroleum

203,501

428,384

445,907

—

275,056

198,154

203,501

703,440

644,061

2.99%

3.35%

3.16%

Electricity, Gas and Water

293,538

720,818

531,474

29,761

414,511

405,009

323,299

1,135,329

936,483

4.75%

5.41%

4.59%

Agriculture and Livestock

74,460

262,449

298,517

44,379

165,296

117,413

118,839

427,745

415,930

1.75%

2.04%

2.04%

Forestry and wood extraction

25,146

28,853

8,213

—

6,494

30,594

25,146

35,347

38,807

0.37%

0.17%

0.19%

Fishing

30,433

58,770

13,912

—

—

—

30,433

58,770

13,912

0.45%

0.28%

0.07%

Transport and storage

253,955

442,468

424,223

56,575

251,885

244,254

310,530

694,353

668,477

4.57%

3.31%

3.28%

Communications

13,954

31,712

29,377

—

48,448

65,062

13,954

80,160

94,439

0.21%

0.38%

0.46%

Construction

294,772

1,359,125

1,368,244

1,550

265,669

269,876

296,322

1,624,794

1,638,120

4.36%

7.74%

8.04%

Commerce

473,926

912,877

999,639

6,719

801,712

713,211

480,645

1,714,589

1,712,850

7.07%

8.16%

8.40%

Services

1,458,307

2,869,113

2,619,520

63,870

1,418,260

1,161,213

1,522,177

4,287,373

3,780,733

22.38%

20.41%

18.55%

Others

796,973

2,465,332

2,384,400

—

185,843

347,843

796,973

2,651,175

2,732,243

11.72%

12.62%

13.41%

Subtotal Commercial Loans

4,363,612

10,645,548

10,111,327

202,854

3,988,923

3,605,219

4,566,466

14,634,471

13,716,546

67.14%

69.68%

67.30%

Mortgage Loans (1)

1,533,848

3,360,930

3,635,993

—

527,587

516,760

1,533,848

3,888,517

4,152,753

22.56%

18.51%

20.37%

Consumer Loans (1)

700,757

1,353,422

1,544,062

—

1,127,542

969,244

700,757

2,480,964

2,513,306

10.30%

11.81%

12.33%

Total

6,598,217

15,359,900

15,291,382

202,854

5,644,052

5,091,223

6,801,071

21,003,952

20,382,605

100%

100%

100%

⁽¹⁾
Figures prepared according to IFRS. We have classified our loan portfolio taking into account the debtor that receives the loan.
~~(1)~~                     ~~Figures prepared according to IFRS. We have classified our loan portfolio taking into account the debtor that receives the loan.~~
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, ~~2015,~~ 2016, 2017 and ~~2017.~~2018. This table does not include foreign trade-related loans to Chilean borrowers.

As of December 31

2015

2016

2017

(in millions of constant Ch$)

Argentina

—

107

3,028

Bahamas

3,568

—

—

Brazil

9,508

7,128

4,386

British Virgin Islands

—

6,725

6,154

Colombia

112,637

5,199,713

4,807,040

Costa Rica

—

1,683

—

France

—

—

923

Luxembourg

—

1,677

—

Mexico

9,334

47,923

29,199

Netherlands

—

47,701

22,974

Panama

13,237

16,509

7,047

Peru

10,191

198,428

182,712

Switzerland

44,379

40,179

—

United States

—

76,278

27,761

Total

202,854

5,644,052

5,091,223

   As of December 31
   2016    2017    2018
   (in millions of constant Ch$)
Argentina
   107    3,028    30,939
Bahamas
   —      —      —
Brazil
   7,128    4,386    —
British Virgin Islands
   6,725    6,154    —
Colombia
   5,199,713    4,807,040    5,087,740
Costa Rica
   1,683    —      —
France
   —      923    1,046
Luxembourg
   1,677    —      —
Mexico
   47,923    29,199    43,327
Netherlands
   47,701    22,974    —
Panama
   16,509    7,047    2,983
Peru
   198,428    182,712    262,023
Switzerland
   40,179    —      —
United States
   76,278    27,761    206,722






Total
   5,644,052    5,091,223    5,634,781






We also maintain deposits abroad (primarily demand deposits) in foreign banks, as needed to conduct our foreign trade transactions. The table below lists the amounts of foreign deposits by country as of December 31, ~~2015,~~ 2016, 2017 and ~~2017.~~2018.

As of December 31

2015

2016

2017

(in millions of constant Ch$)

Australia

6

173

523

Belgium

—

2,045

1,593

Canada

2

166

186

China

—

5

3

Colombia

—

278,098

125,597

Denmark

—

362

939

England

—

—

69

Germany

2,284

11,971

2,940

Italy

—

18

132

Japan

—

887

69

London

—

—

3,337

Mexico

—

44

31

New Zealand

5

—

20

Norway

—

39

2

Panama

—

270

755

Peru

—

—

32

Spain

—

4,620

3,713

Sweden

—

269

56

Switzerland

38

163

113

United Kingdom

—

2,012

1,051

United States

156,755

701,819

505,462

Venezuela

—

7

7

Total

159,090

1,002,968

646,630

   As of December 31
   2016    2017    2018
   (in millions of constant Ch$)
Australia
   173    523    147
Belgium
   2,045    1,593    25
Canada
   166    186    315
China
   5    3    9
Colombia
   278,098    125,597    158,787
Denmark
   362    939    —
England
   —      69    60
Germany
   11,971    2,940    8,715
Italy
   18    132    —
Japan
   887    69    634
London
   —      3,337    —
Mexico
   44    31    1
New Zealand
   —      20    —
Norway
   39    2    1
Panama
   270    755    242
Peru
   —      32    24
South Korea
   —      —      22
Spain
   4,620    3,713    27
Sweden
   269    56    3
Switzerland
   163    113    770
United Kingdom
   2,012    1,051    2,988
United States
   701,819    505,462    484,595
Venezuela
   7    7    —






Total
   1,002,968    646,630    657,365






~~Companies~~ Credit Risk ~~Division~~Governance
Credit risk management is the responsibility of the Corporate Risk Management Unit, which reports to the CEO. Its objective is to ensure that risk management is a competitive advantage for the ~~bank,~~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 ~~appetite defined by~~strategy of the ~~bank.~~
Bank.
To accomplish this goal, the Corporate Risk Management Unit combines, among others, a well-defined credit process in terms of approval, monitoring and collection procedures, a strong supervision of all stages of the credit cycle, monitoring the quality and performance of our loan portfolio and taking promptly measures over potentiallynon-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, ~~and~~ Operational Risk and ~~Compliance.~~Compliance, Retail Collection and Risk Architecture.
Wholesale Credit Risk is accountable for the credit process of the wholesale banking business segments comprised of Corporate, Real Estate Companies, Large Enterprises, Financial Institutions, Representative Office in Peru, Risk Countries, Subsidiaries and Wholesale Remedial Unit.
Retail Credit Risk is responsible for the ~~whole~~ credit ~~cycle, covering from the credit assessment to recovery management~~acceptance process of the ~~Retail Bank,~~Bank’s retail segments, comprised of Retail Companies, SME’s, Private Bank, Personal Bank, Itaú Branches and Banco Condell.
Credit Risk Control has a transversal function focused on monitoring the performance of the credit portfolio, assets classification and models development. Additionally, it verifies the consistency of credit policies and procedures and also generates information and analysis related to credit risk for the decision making of the different units.
Retail Collection is responsible for the full collection process, including the strategy and operations of the Bank’s retail segments, composed of Retail Companies, Private Banking, Personal Bank, Itau Branches and Banco Condell. The collection strategy is designed based on the products, business segmentation, days past due, channels, legal actions, geographic cover and collection operations, using an internal collections group and vendors.
Risk Architecture has a transversal function, focused on the analysis and coordination of technological projects that involve the improvement of our business processes. Additionally, Risk Architecture controls the efficiency of our resources, using technological or robotics tools, in addition to the development of analytics and machine learning.
Credit Review Process
Credit risk and the exposure to be assumed with regard to our clients are evaluated in accordance with the credit policies and the risk appetite that have been approved by the Board of Directors.
Risk analysis, both of our Wholesale and Retail Banking customers, is periodically performed. In Wholesale Banking, customers’ credit exposure is reviewed at least once a year, and credit limits can be reduced if potential weaknesses in loan repayment capability are detected.
A wholesale borrower’s assessment focuses on the credit history and on the reputation and management capacity of its owners, on their market position and on the demand for their products or services, on their current and projected cash, their solvency and, when applicable, on the guarantees offered in connection with the loan.
In the case of Retail Banking customers, we mainly use a centralized evaluation and decision-making process, but also acase-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.~~Bank.
Wholesale Credit Risk
The credit evaluation process is carried out on acase-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~~Bank and collateral.
Credit committees are structured according to the customer’s credit risk rating and the credit limit submitted to the committee’s decision. Any rejection by the committee of a credit proposal may be raised to be evaluated by the upper committee instance.
Retail Credit Risk
In Retail Banking, credit risk management is responsible for the ~~entire~~ credit ~~cycle, from~~evaluation of all the ~~credit assessment to the collection~~segments that are part of the ~~retail business units.~~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~~.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 offerpre-approved offers of consumer loans, credit cards and revolving credit lines to our current customers, whose risk profile is within thecut-off~~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 decliningnon-credit~~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~~(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 andnon-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 aspre-approved~~Renewals/Non-Renewals (Revolving Products). Renewals and non-renewals are based on customer payment behavior and profitability.~~
·~~Campaigns. Top-up and cross-selling offers are implemented. Credits are offered permanently to our current customers, such as pre-approved~~ installments credits, revolving credit lines and credit cards. Our goal is maximize the share of client base in our most profitable business units.
Collection.
We focus on having a high quality collection process, with a consistent strategy in terms of products, policies, suppliers, means of payment and specialized ~~vendors, products and differentiated policies.~~vendors. The collection process is composed of:

·~~Collection Strategy. Our collection strategy is currently based on geographic coverage and delinquency buckets. Delinquent customers~~
•
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.

·~~Vendors~~. Our vendors provide physical collection coverage, benchmarks and sometimes testing pilots with special strategies (champion/challenger). Also, the continuity plan requires the use of vendors in cases of emergency
•
Collection Operations. Our collection operations strategy is based on internal teams and suppliers. The collection operations teams provide coverage through different channels (e.g., digital collection, telephone collection, property collection, collection in branches and judicial collection) and operate under a performance model and merit considerations. In addition, our continuity plan requires the use of external collection emergencies in cases of emergency or union instability, among others.

·~~Policies and Products. Rewrites, remedial offers and payments agreements are made according to the proposal and real payment intention of the debtors. The objective is to maximize the capital recovery.~~
•
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~~
•
Control Environment and Support. Reliable information management systems are used, which allow us to have a controlled process. We have a collection system and predictive dialers for telephony.
Write-off Policy, Recovery and Planning.
Thewrite-off policy, recovery and planning process consists of:

·~~Write-off Policy~~. Our write-off policy is in accordance with the regulations defined by the regulatory entity in Chile, the SBIF. This is based on the type of product and the existence of collateral. For the consumer portfolio, the write-off is made after six months of delinquency; for commercial loans, the write-off is made at 24 or 36 months of delinquency, depending on the existence of collateral, and at 48 months for mortgages loans.
·~~Loan Loss Reserve~~. History of defaults, recoveries, write-offs and collection expenses are used to calculate each portfolio. Back Testing Analyses are periodically performed in order to ensure the right coverage, as well as models performance.
•
Write-off Policy. As a general rule, charge-offs should be done when all collection efforts have been exhausted. These charge-offs consisted of derecognition from the consolidated statements of financial position of the corresponding loans transactions in their entirety, and, therefore, included portions of loans that were not past due in the case of installments loans or leasing transactions (no partial charge-offs exist). For portfolios without guarantees (consumer loans in installments), thewrite-off is made at 180 days of delinquency; for commercial loans, thewrite-off is made at 24 to 36 months of delinquency (depending on the type of guarantees); and for the mortgage portfolio, thewrite-off is made at four years of delinquency.

•
Loan Loss Reserve. History of defaults, recoveries, write-offs and collection expenses are used to calculate the allowances of each portfolio. Back Testing Analyses are periodically performed in order to ensure the right coverage, as well as the correct models performance.
Classification of Loan Portfolio
Loan Portfolio is divided into: (1) consumer loans (including loans granted to individuals for the purpose of financing the acquisition of consumer goods or payment of services); (2) residential mortgage loans (including loans granted to individuals for the acquisition, construction or repair of residential real estate, in which the value of the property covers at least 125% of the amount of the loan); and (3) commercial loans (including all loans other than consumer loans and residential mortgage loans).
Impairment Assessment as of January 1, 2018 (Under IFRS 9)
Starting from January 1, 2018, we replaced the “incurred loss” model of IAS 39 with an “expected credit loss” (“ECL”) model established by IFRS 9. The new impairment model applies to all financial assets measured at amortized cost and debt securities measured at fair value through other comprehensive income (FVOCI), including commitment and contingent loans. Investments in equity are outside of the scope of the new impairment requirements.
We accounted for ECL related to financial assets measured at amortized cost as a loss allowance in the statements of financial position, but the carrying amount of these assets is stated net of the loss allowance. ECL related to contingent loans is accounted for as a provision in the statements of financial position. We recognize in profit or loss, as an impairment gain or loss, the amount of ECL (or reversal) that was required to adjust the loss allowance at the reporting date to the amount that is required to be recognized in accordance IFRS 9 for financial assets measured at amortized cost and contingent loans.
The new model uses a dual measurement approach, under which the loss allowance is measured as either:
12-month ECL
Lifetime ECL
We have defined default on an individual or collective basis as follows:
Individual: when exposure is more than 89 days past due, it has been restructured, it is in judicial collection, or it has beenwritten-off.
Collective: when exposure is more than 89 days past due, it has been restructured, or has been identified as impaired by an internal risk committee.
For collective assessment purposes, financial assets are grouped based on characteristics of shared credit risk, considering the type of instrument, credit risk classifications, initial recognition date, remaining term, industry, geographical location of the counterparty, among other significant factors.
The ECL measurement basis depends on whether there has been a significant increase in credit risk (“SICR”) since initial recognition. Based on changes in credit quality since initial recognition, IFRS 9 outlines a “three-stage” model impairment in accordance with the following diagram:
Change in credit quality since initial recognition
Stage 1 Stage 2 Stage 3
Initial recognition SICR since initial recognition Credit impaired assets
12-month ECL Lifetime ECL Lifetime ECL
We, at the end of each reporting period, evaluates whether a financial instrument’s credit risk has significantly increased since initial recognition or whether an asset is considered to be credit-impaired, and consequently classify financial instruments into the respective stage:
Stage 1: When loans are first recognized, the Bank recognizes an allowance based on12-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. An actual or expected significant change in the operating results of the borrower.
d. Significant increases in credit risk on other financial instruments of the same borrower.
e. Significant changes in the value of the collateral supporting the obligation or in the quality of third-party guarantees or credit enhancements.
f. Reductions in financial support from a parent entity or other affiliate.
g. Expected changes in the loan documentation including an expected breach of contract that may lead to covenant waivers or amendments, interest payment holidays, interest ratestep-ups, requiring additional collateral or guarantees, or other changes to the contractual framework of the instrument.
We have considered that if contractual payments are more than 30 days past due, the credit risk is deemed to have increased significantly since initial credit recognition, but is not an absolute indicator. We did not rebut the backstop presumption of IFRS 9 relating to SICR or default.
Expected Credit loss Measurement
The ECL are the probability-weighted estimate of credit losses, i.e. the present value of all cash shortfalls. A cash shortfall is the difference between the cash flows that are due to an entity in accordance with the contract and the cash flows that the entity expects to receive. The three main components to measure the ECL are:
PD: The probability of default is an estimate of the likelihood of default over a given time horizon. A default may only happen at a certain time over the assessed period, if the facility has not been previously derecognized and is still in the portfolio.
LGD: The loss given default is an estimate of the loss arising in the case where a default occurs at a given time. It is based on the difference between the contractual cash flows due and those that the lender would expect to receive, including from the realization of any collateral.
EAD: The exposure at default is an estimate of the exposure at a future default date, taking into account expected changes in the exposure after the reporting date, including repayments of principal and interest, whether scheduled by contract or otherwise, expected drawdown on committed facilities, and accrued interest from missed payments.
For measuring12-month and lifetime ECL, cash shortfalls are identified as follows:
12-month ECL: the portion of lifetime ECL that represents the ECL that result from default events on the financial instruments that are possible within the 12 months after the reporting date.
Lifetime ECL: the ECL that result from all possible default events over the expected life of the financial instrument.
We considered a multi-factor analysis to perform our credit risk analysis. The type of portfolio or transactions, and whether individually or collectively assessed.
We divide our portfolio into commercial loans, mortgage loans, consumer loans and contingent loans.
We evaluate individually whether objective evidence of impairment exists for loans that are individually significant, then collectively assess loans that are not individually significant and loans which are significant but for which there is no objective evidence of impairment available under individually assessment.
Contingent loans
We enter into various irrevocable loan commitments and contingent liabilities. Even though these obligations may not be recognized on our statements of financial position, they contain credit risk and, therefore, form part of our overall risk.
We estimate the ECL for contingent loans, we estimate the expected portion of the loan commitment that will be drawn down over its expected life.
Forward looking information
The ECL model includes a broad range of forward looking information as economic inputs, such as:
GDP growth
Unemployment rates
Central Bank interest rates
Real estate prices
Modifications of financial assets
When a loan measured at amortized cost has been renegotiated or modified but not derecognized, the Bank recognizes the resulting gains or losses as the difference between the carrying amount of the original loans, and modified contractual cash flows discounted using the Effective Interest Rate (“EIR”) before modification. The EIR is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial asset or financial liability to the gross carrying amount of a financial asset or to the amortized cost of a financial liability.
For ECL estimation purposes of financial assets that have been modified, we are required to distinguish between modification that result in derecognition from those that does not result in derecognition. If the modification does not result in derecognition, then the subsequent assessment of whether there is a significant increase in credit risk is made comparing the risk at the reporting date based on the modified contractual term and the risk at initial recognition based on the original, unmodified contractual term.
If the modification results in derecognition, then the modified asset is considered to be a new asset. Accordingly, the date of modification is treated as the date of initial recognition for the purposes of the impairment requirements.
Collateral
We seek to use collateral to mitigate our credit risks on financial assets, where possible. Types of collateral are cash, securities, letters of credit, real estate and inventories. Our accounting policy for collateral assigned to us through our lending arrangements under IFRS 9 is the same is it was under IAS 39. Collateral, unless repossessed, is not recorded our statements of financial position. However, the fair value of collateral affects the calculation of ECLs. The main collateral associated to mortgage loans are real estate, which are valued based on data provided by specialized third parties.
The estimation of ECL reflects the cash flows expected from collateral and other credit enhancement that are part of the contractual terms of the financial instruments.
Our policy when an asset (real estate) is repossessed, it is transferred to assets held for sale at its fair value less cost to sell and classified asnon-financial assets at the repossession date.
Guarantees
Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it occurs because a specified debtor fails to make payments when due, in accordance with the terms of a debt instruments. Such financial guarantees are given to banks, financial institutions and others on behalf of customers to secure loans, overdrafts and other banking facilities.
Financial guarantee contracts are initially measured at fair value and subsequently measured at the higher of:
The amount of the loss allowance (calculated as described in Note 19 of our consolidated financial statements); and
The premium received on initial recognition less income recognized in accordance with the principles of IFRS 15.
Loan commitments provided by us are measured as the amount of the loss allowance (calculated as described in Note 28 of our consolidated financial statements). We have not provided any commitment to provide loans at a below-market interest rate, or that can be settled net in cash or by delivering or issuing another financial instrument.
For loan commitments and financial guarantee contracts, the loss allowance is recognized as a provision. However, for contracts that include both a loan and an undrawn commitment and we cannot separately identify the ECLs on the undrawn commitment component from those on the loan component, the ECLs on the undrawn commitment are recognized together with the loss allowance for the loan. To the extent that the combined ECLs exceed the gross carrying amount on the loan, the ECLs are recognized as a provision.
Charge-offs
The gross carrying amount of a financial asset is reduced when there is no reasonable expectation of recovery. Acharge-off constitutes a derecognition event of the corresponding loan transaction in its entirety, and therefore, include portions notpast-due for installments loans or leasing operation (no partialcharge-off).
Subsequent recoveries of amounts previouslycharge-off are credited to the income statements, as recovery of loans previouslycharged-off, as a deduction from provisions for loan losses.
Loan and accounts receivable charge-offs are recorded for overdue and current installments based on the time periods expired since reaching overdue status, as described below:
Type of loan
Term
Consumer loans with or without collateral
Other transactions without collateral
Commercial loans with collateral
Mortgage loans
Consumer leasing
Othernon-mortgage leasing transactions
Mortgage leasing (household and business)
6 months
24 months
36 months
48 months
6 months
12 months
36 months
Impairment Assessment prior to January 1, 2018 (Under IAS 39)
Loans Analyzed on an Individual Basis
For individually analyzed commercial loans, ~~we use~~the Bank uses a risk classification process that combines parametrical variables with expert judgment, to assign risk categories to each individually analyzed customer. This process considers financial risk factors such as profitability, payment ability and financial indebtedness, and qualitative risk factors such as the economic sector in which the customer develops its activities, the management and experience of the owners, and its historical payment behavior.
As a result of this classification process, ~~we differentiate~~the Bank differentiates the normal loans from the impaired ones, identifying three mayor categories:

1.                          ~~Customers classified in risk categories A1, A2, A3, A4, A5 or A6. These customers~~
1.
Debtors classified in risk categories A1, A2, A3, A4, A5 or A6. These debtors are current or have less than 30 days overdue on their payment obligations and show no significant signs of deterioration in their credit quality.

2.                          ~~Customers classified in risk categories B1, B2, B3 or B4. These customers are~~
2.
Debtors classified in risk categories B1, B2, B3 or B4. These debtors overdue between 30 and 89 days on their payment obligations, thus showing a certain level of deterioration in their credit quality.

3.                          ~~Customers classified as C1, C2, C3, C4, C5 or C6. This portfolio includes customers whose loans with us have been in default (over 90)~~
3.
Debtors classified as C1, C2, C3, C4, C5 or C6. This portfolio includes debtors whose loans with us have been in default (over 90 days) or are being managed by a specialized collection area.
For loans classified as A1, A2, A3, A4, A5, A6, B1, B2, B3 and B4, ~~we assign~~the Bank assigns a specific allowance percentage on an individual basis to each rating. The amount of the allowance for loan losses is determined based on debt servicing capacity, the company’s financial history, solvency and capacity of shareholders and management and projections for the industry sector in which the customer operates. There is a determined allowance percentage by group of ~~customers~~debtors with similar characteristics (i.e., A1, A2, A3, A4, A5, A6, B1, B2, B3 and B4).
Estimated Incurred Loan Loss = Allowance for Loan Losses
The Estimated Incurred Loan Loss (EIL), is how much could be lost in the event a debtor does not perform the obligations under the loan, and it is determined by multiplying the risk factors as defined in the following equation:

EIL
=
EAD X Pd X LGD X LIP
EAD
=
Exposure at Default
PD
=
Probability of Default
LGD
=
Loss Given the Default
LIP
=
Loss Identification Period
~~Estimated Incurred Loss (EIL)~~ means the amount of impairment losses that are incurred, only if there is objective evidence that the estimated future cash flows of the financial asset or group of financial assets is impaired as a result of a loss event.
Exposure at Default (EAD) is the loan amount outstanding at the balance sheet date that is considered in the calculation and not any future movements and draw downs.
Probability of Default (PD) ~~means~~ is the probability, expressed as a percentage that a ~~customer~~debtor will default within the next 12 months. This percentage is associated with the rating that given to each ~~client.~~debtor.
Loss Identification Period (LIP) ~~means~~ is the period between the time at which the event occurs and the date when the entity identifies it.
Loss Given Default (LGD) ~~means~~ is the effective loss rate given for default to ~~customers~~debtors in the same risk category, which is determined statistically based on the historical effective losses.
Allowances for loan losses for each C risk category are based mainly on the value of the collateral, adjusted for the estimated expenses associated with the recovery and asset sale discounted by the effective interest rate. The allowance percentage for each category is then based mostly on the level of collateral.
Loans Analyzed on a Group Basis
For the consumer loan and group-evaluated commercial loan portfolio the allowances for credit risk are determined by statistical models. The population (clients) is first profiled with a wide range of variables such as demographic variables, payment behavior, aging of the balance of the loan, in order to determine “probability of default” factors indicating transfer into the normalization portfolio.
Each profile in the group-evaluated loan portfolio has aggregated information basically, historical loss experience (less recoveries).
This historical loss experience, which represents the derived loan loss allowance percentage, is applied by profile to the consumer and commercial loan portfolio, taking into consideration, if applicable, any additional factors, such as increase in the unemployment rate in the country, economic downswings, etc. based upon more recent experience, should they affect the level of necessary loan loss reserves.
The sufficiency of provisions is permanently monitored, with the objective of ensuring an adequate coverage. For this, loan loss allowances are compared against the effective losses and against the default portfolio, with thresholds ofpre-defined alerts and with an established governance framework for the review of these parameters.
Total Loans — Models Based on Group Analysis
The following tables provide statistical data regarding the classification of our loans as of the ~~end of each of the years~~dates indicated below, applying the classification explained in prior pages:

As of December 31, 2015

   As of December 31, 2016

Total Loans

Allowances for loan losses

Risk Index (%)

   Total Loans    Allowances
for loan losses    Risk Index (%)

(in millions of Ch$ except for percentages)

   (in millions of Ch$ except for percentages)
Commercial

682,579

7,061

1.0
%
   1,418,823    36,816    2.6 %
Leasing commercial

18,519

132

0.7
%
   111,455    3,508    3.2 %
Factoring commercial

4,883

119

2.4
%
   4,052    177    4.4 %
Student loans

177,023

3,769

2.1
%
   610,315    12,369    2.0 %
Consumer

700,448

27,332

3.9
%
   2,463,873    116,332    4.7 %
Leasing consumer

309

1

0.3
%
   17,091    572    3.4 %
Mortgage

1,533,848

6,251

0.4
%
   3,600,188    18,227    0.5 %
Leasing mortgage

—

—

—

   288,329    5,245    1.8 %
   As of December 31, 2017
   Total Loans    Allowances
for loan losses    Risk Index (%)
   (in millions of Ch$ except for percentages)
Commercial
   1,202,416    129,038    10.7 %
Leasing commercial
   77,352    6,837    8.8 %
Factoring commercial
   12,267    93    0.8 %
Student loans
   653,003    12,794    2.0 %
Consumer
   2,502,130    136,196    5.4 %
Leasing consumer
   11,176    398    3.6 %
Mortgage
   3,870,618    26,059    0.7 %
Leasing mortgage
   282,135    8,960    3.2 %
   As of December 31, 2018
   Total Loans    Allowances
for loan losses⁽¹⁾    Risk Index (%)
   (in millions of Ch$ except for percentages)
Commercial
   1,208,771    274,884    22.7 %
Leasing commercial
   73,863    25,113    34.0 %
Factoring commercial
   16,418    9    0.1 %
Student loans
   676,689    51,091    7.6 %
Consumer
   2,663,560    216,820    8.1 %
Leasing consumer
   6,203    476    7.7 %
Mortgage
   4,133,709    61,722    1.5 %
Leasing mortgage
   312,118    4,395    1.4 %

As of December 31, 2016

Total Loans

Allowances for loan losses

Risk Index (%)

(in millions of Ch$ except for percentages)

Commercial

1,418,823

36,816

2.6
%
Leasing commercial

111,455

3,508

3.2
%
Factoring commercial

4,052

177

4.4
%
Student loans

610,315

12,369

2.0
%
Consumer

2,463,873

116,332

4.7
%
Leasing consumer

17,091

572

3.4
%
Mortgage

3,600,188

18,227

0.5
%
Leasing mortgage

288,329

5,245

1.8
%
⁽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.

As of December 31, 2017

Total Loans

Allowances for loan losses

Risk Index (%)

(in millions of Ch$ except for percentages)

Commercial

1,202,416

129,038

10.7
%
Leasing commercial

77,352

6,837

8.8
%
Factoring commercial

12,267

93

0.8
%
Student loans

653,003

12,794

2.0
%
Consumer

2,502,130

136,196

5.4
%
Leasing consumer

11,176

398

3.6
%
Mortgage

3,870,618

26,059

0.7
%
Leasing mortgage

282,135

8,960

3.2
%
Consumer Loans — Models Based on Group Analysis

As of December 31, 2015

   As of December 31, 2016

Total Loans

Allowances
for loan losses

Risk Index (%)

   Total Loans    Allowances for loan
losses    Risk Index (%)

(in millions of Ch$ except for percentages)

   (in millions of Ch$ except for percentages)
Credit cards

197,425

4,834

2.4
%
   414,903    18,390    4.4 %
Lines of credit

113,341

3,428

3.0
%
   259,045    15,244    5.9 %
Other revolving

326

326

100
%
   3,889    655    16.9 %
Installment consumer loans

358,481

8,378

2.3
%
   1,060,901    31,652    3.0 %
Card loans

—

—

—

   26,252    859    3.3 %
Salary discount loans

4,862

122

2.5
%
   570,120    20,316    3.6 %
Renegotiation

26,009

10,243

39.4
%
   128,722    29,205    22.7 %
Others

3

—

—

   42    12    29.6 %
   As of December 31, 2017
   Total Loans    Allowances for loan
losses    Risk Index (%)
   (in millions of Ch$ except for percentages)
Credit cards
   421,169    20,182    4.8 %
Lines of credit
   267,001    18,306    6.9 %
Other revolving
   3,893    581    14.9 %
Installment consumer loans
   1,168,078    33,195    2.8 %
Card loans
   21,308    775    3.6 %
Salary discount loans
   469,951    20,699    4.4 %
Renegotiation
   150,706    42,450    28.2 %
Others
   24    8    33.7 %
   As of December 31, 2018
   Total Loans    Allowances for loan
losses⁽¹⁾    Risk Index (%)
   (in millions of Ch$ except for percentages)
Credit cards
   481,567    38,426    6.4 %
Lines of credit
   256,456    25,585    10.0 %
Other revolving
   3,752    575    15.3 %
Installment consumer loans
   1,368,909    68,237    5.0 %
Card loans
   14,676    769    5.2 %
Salary discount loans
   372,671    23,668    6.4 %
Renegotiation
   165,529    67,200    40.6 %
Others
   —      —      —

As of December 31, 2016

Total Loans

Allowances for loan
losses

Risk Index (%)

(in millions of Ch$ except for percentages)

Credit cards

414,903

18,390

4.4
%
Lines of credit

259,045

15,244

5.9
%
Other revolving

3,889

655

16.9
%
Installment consumer loans

1,060,901

31,652

3.0
%
Card loans

26,252

859

3.3
%
Salary discount loans

570,120

20,316

3.6
%
Renegotiation

128,722

29,205

22.7
%
Others

42

12

29.6
%
⁽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.

As of December 31, 2017

Total Loans

Allowances for loan
losses

Risk Index (%)

(in millions of Ch$ except for percentages)

Credit cards

421,169

20,182

4.8
%
Lines of credit

267,001

18,306

6.9
%
Other revolving

3,893

581

14.9
%
Installment consumer loans

1,168,078

33,195

2.8
%
Card loans

21,308

775

3.6
%
Salary discount loans

469,951

20,699

4.4
%
Renegotiation

150,706

42,450

28.2
%
Others

24

8

33.7
%
Analysis of Our Loan Classification
The following tables provide statistical data regarding the classification of our loans as of the ~~end of each of the three years,~~dates indicated below, applying the classification explained in prior pages:
~~2015~~2016

Individual Portfolio

Group Portfolio

Normal Portfolio

Impaired Portfolio

Normal
Portfolio

Impaired
Portfolio

As of December 31,
2016

A1

A2

A3

A4

A5

A6

B1

B2

Impaired

Total

Total

General
Total

(in millions of Ch$)

Loans and receivables from banks

35,506

60,395

3,567

—

—

—

—

—

—

99,468

—

—

—

99,468

Allowances for loan losses

13

49

8

—

—

—

—

—

—

70

—

—

—

70

As percentage of total loans

0.04%

0.08%

0.22%

—

—

—

—

—

—

0.07%

—

—

—

0.07%

Loans and receivable from customers Commercial loans:

��

Commercial loans

12,155

162,931

1,259,304

1,059,879

152,478

231,136

12,627

29,873

37,617

2,958,000

598,460

48,061

646,521

3,604,521

Foreign trade loans

—

70,317

186,081

92,216

25,507

22,099

2,933

6,057

18,748

423,958

5,351

11

5,362

429,320

Checking account debtors

2

2,865

3,735

5,443

1,268

1,315

528

47

948

16,151

21,977

986

22,963

39,114

Factoring operations

5,559

5,740

21,619

15,119

2,053

1,430

112

—

717

52,349

4,854

29

4,883

57,232

Student loans

—

—

—

—

—

—

—

—

—

—

167,195

9,828

177,023

177,023

Leasing transactions

—

11,614

90,037

63,768

21,626

15,527

3,322

2,167

22,175

230,236

18,088

431

18,519

248,755

Other loans and receivables

52

93

1,487

640

180

215

12

12

77

2,768

7,718

15

7,733

10,501

Subtotal Commercial loans

17,768

253,560

1,562,263

1,237,065

203,112

271,722

19,534

38,156

80,282

3,683,462

823,643

59,361

883,004

4,566,466

Allowances for loan losses

9

254

1,691

5,297

3,984

4,615

1,681

4,905

28,590

51,026

5,350

5,619

10,969

61,995

As percentage of total loans

0.05%

0.10%

0.11%

0.43%

1.96%

1.70%

8.61%

12.86%

35.61%

1.39%

0.65%

9.47%

1.24%

1.36%

Consumer loans

662,936

37,821

700,757

700,757

Allowances for loan losses

—

—

—

—

—

—

—

—

—

—

13,721

13,612

27,333

27,333

As percentage of total loans

—

—

—

—

—

—

—

—

—

—

2.07%

35.99%

3.90%

3.90%

Mortgage loans

1,469,501

64,347

1,533,848

1,533,848

Allowances for loan losses

—

—

—

—

—

—

—

—

—

—

2,846

3,405

6,251

6,251

As percentage of total loans

—

—

—

—

—

—

—

—

—

—

0.19%

5.29%

0.41%

0.41%

Total loans and receivable to customers

17,768

253,560

1,562,263

1,237,065

203,112

271,722

19,534

38,156

80,282

3,683,462

2,956,080

161,529

3,117,609

6,801,071

Allowances for loan losses

9

254

1,691

5,297

3,984

4,615

1,681

4,905

28,590

51,026

21,917

22,636

44,553

95,579

As percentage of total loans

0.05%

0.10%

0.11%

0.43%

1.96%

1.70%

8.61%

12.86%

35.61%

1.39%

0.74%

14.01%

1.43%

1.41%

Financial investments

—

—

—

—

—

—

—

—

—

—

—

—

—

—

Corporate Portfolio Group Portfolio
Normal Portfolio Impaired Portfolio Normal
Portfolio Impaired
Portfolio
As of December 31, 2016
A1 A2 A3 A4 A5 A6 B1 B2 Impaired Total Total General Total
(in millions of Ch$)
Loans and receivables from banks
37,960 76,834 33,751 2,235 —   —   —   —   —   150,780 —   —   —   150,780
Allowances for loan losses
14 85 74 39 —   —   —   —   —   212 —   —   —   212
As percentage of total loans
0.04 % 0.11 % 0.22 % 1.74 % —   —   —   —   —   0.14 % —   —   —   0.14 %
Loans and receivable from customers

Commercial loans:

Commercial loans
47,699 204,313 2,647,749 3,852,211 2,438,286 509,927 288,559 124,372 533,585 10,646,701 1,195,886 113,777 1,309,663 11,956,364
Foreign trade loans
—   727 150,548 337,499 113,418 34,313 21,950 7,419 67,299 733,173 20,198 773 20,971 754,144
Checking account debtors
2 407 10,443 19,249 20,847 7,218 2,140 914 3,452 64,672 65,640 3,389 69,029 133,701
Factoring operations
11,811 9,550 20,040 15,093 11,729 2,903 128 —   835 72,089 3,713 339 4,052 76,141
Student loans
—   —   —   —   —   —   —   —   —   —   583,776 26,539 610,315 610,315
Leasing transactions
4,234 6,064 107,786 307,019 325,678 62,920 54,327 6,998 87,025 962,051 104,279 7,176 111,455 1,073,506
Other loans and receivables
111 312 2,101 3,264 3,318 664 493 51 826 11,140 17,446 1,714 19,160 30,300

Subtotal Commercial loans
63,857 221,373 2,938,667 4,534,335 2,913,276 617,945 367,597 139,754 693,022 12,489,826 1,990,938 153,707 2,144,645 14,634,471

Allowances for loan losses
—   28 5,463 33,775 47,643 23,149 14,663 21,760 219,577 366,058 21,337 31,533 52,870 418,928
As percentage of total loans
—   0.01 % 0.19 % 0.74 % 1.64 % 3.75 % 3.99 % 15.57 % 31.68 % 2.93 % 1.07 % 20.52 % 2.47 % 2.86 %
Consumer loans
2,387,009 93,955 2,480,964 2,480,964
Allowances for loan losses
—   —   —   —   —   —   —   —   —   —   65,934 50,970 116,904 116,904
As percentage of total loans
—   —   —   —   —   —   —   —   —   —   2.76 % 54.25 % 4.71 % 4.71 %
Mortgage loans
3,755,370 133,147 3,888,517 3,888,517
Allowances for loan losses
—   —   —   —   —   —   —   —   —   —   12,494 10,978 23,472 23,472
As percentage of total loans
—   —   —   —   —   —   —   —   —   —   0.50 % 12.51 % 0.60 % 0.60 %

Total loans and receivable to customers
63,857 221,373 2,938,667 4,534,335 2,913,276 617,945 367,597 139,754 693,022 12,489,826 8,133,317 380,809 8,514,126 21,003,952

Allowances for loan losses
—   28 5,463 33,775 47,643 23,149 14,663 21,760 219,577 366,058 99,765 93,481 193,246 559,304
As percentage of total loans
—   0.09 % 0.11 % 0.82 % 1.80 % 2.86 % 4.6 % 14.3 % 33.8 % 3.06 % 1.23 % 24.55 % 2.27 % 2.66 %
Financial investments
—   —   —   —   —   —   —   —   —   —   —   —   —   —
~~2016~~
2017

Individual Portfolio

Group Portfolio

Normal Portfolio

Impaired Portfolio

Normal
Portfolio

Impaired
Portfolio

As of
December 31,
2016

A1

A2

A3

A4

A5

A6

B1

B2

Impaired

Total

Total

General Total

(in millions of Ch$)

Loans and receivables from banks

37,960

76,834

33,751

2,235

—

—

—

—

—

150,780

—

—

—

150,780

Allowances for loan losses

14

85

74

39

—

—

—

—

—

212

—

—

—

212

As percentage of total loans

0.04%

0.11%

0.22%

1.74%

—

—

—

—

—

0.14%

—

—

—

0.14%

Loans and receivable from customers

Commercial loans:

Commercial loans

47,699

204,313

2,647,749

3,852,211

2,438,286

509,927

288,559

124,372

533,585

10,646,701

1,195,886

113,777

1,309,663

11,956,364

Foreign trade loans

—

727

150,548

337,499

113,418

34,313

21,950

7,419

67,299

733,173

20,198

773

20,971

754,144

Checking account debtors

2

407

10,443

19,249

20,847

7,218

2,140

914

3,452

64,672

65,640

3,389

69,029

133,701

Factoring operations

11,811

9,550

20,040

15,093

11,729

2,903

128

—

835

72,089

3,713

339

4,052

76,141

Student loans

—

—

—

—

—

—

—

—

—

—

583,776

26,539

610,315

610,315

Leasing transactions

4,234

6,064

107,786

307,019

325,678

62,920

54,327

6,998

87,025

962,051

104,279

7,176

111,455

1,073,506

Other loans and receivables

111

312

2,101

3,264

3,318

664

493

51

826

11,140

17,446

1,714

19,160

30,300

Subtotal Commercial loans

63,857

221,373

2,938,667

4,534,335

2,913,276

617,945

367,597

139,754

693,022

12,489,826

1,990,938

153,707

2,144,645

14,634,471

Allowances for loan losses

—

28

5,463

33,775

47,643

23,149

14,663

21,760

219,577

366,058

21,337

31,533

52,870

418,928

As percentage of total loans

—

0.01%

0.19%

0.74%

1.64%

3.75%

3.99%

15.57%

31.68%

2.93%

1.07%

20.52%

2.47%

2.86%

Consumer loans

2,387,009

93,955

2,480,964

2,480,964

Allowances for loan losses

—

—

—

—

—

—

—

—

—

—

65,934

50,970

116,904

116,904

As percentage of total loans

—

—

—

—

—

—

—

—

—

—

2.76%

54.25%

4.71%

4.71%

Mortgage loans

3,755,370

133,147

3,888,517

3,888,517

Allowances for loan losses

—

—

—

—

—

—

—

—

—

—

12,494

10,978

23,472

23,472

As percentage of total loans

—

—

—

—

—

—

—

—

—

—

0.50%

12.51%

0.60%

0.60%

Total loans and receivable to customers

63,857

221,373

2,938,667

4,534,335

2,913,276

617,945

367,597

139,754

693,022

12,489,826

8,133,317

380,809

8,514,126

21,003,952

Allowances for loan losses

—

28

5,463

33,775

47,643

23,149

14,663

21,760

219,577

366,058

99,765

93,481

193,246

559,304

As percentage of total loans

—

0.09%

0.11%

0.82%

1.80%

2.86%

4.6%

14.3%

33.8%

3.06%

1.23%

24.55%

2.27%

2.66%

Financial investments

—

—

—

—

—

—

—

—

—

—

—

—

—

—

~~2017~~
Corporate Portfolio Group Portfolio
Normal Portfolio Impaired Portfolio Normal
Portfolio Impaired
Portfolio
As of December 31, 2017
A1 A2 A3 A4 A5 A6 B1 B2 Impaired Total Total General Total
(in millions of Ch$)
Loans and receivables from banks
862 42,105 23,025 4,293 —   —   —   —   —   70,285 —   —   —   70,285
Allowances for loan losses
—   76 132 —   —   —   —   —   —   208 —   —   —   208
As percentage of total loans
—   0.18 % 0.57 % —   —   —   —   —   —   0.30 % —   —   —   0.30 %
Loans and receivable from customers

Commercial loans:

Commercial loans
34,371 188,865 2,651,517 3,263,945 2,423,298 593,069 158,313 106,093 606,942 10,026,413 980,093 109,570 1,089,663 11,116,076
Foreign trade loans
—   —   150,154 244,954 145,609 13,995 17,078 8,085 85,032 664,907 27,168 8,658 35,826 700,733
Checking account debtors
633 922 13,317 25,229 24,647 5,443 4,345 640 4,447 79,623 48,594 11,131 59,725 139,348
Factoring operations
27,456 9,726 17,735 50,559 18,656 3,443 598 —   298 128,471 12,202 65 12,267 140,738
Student loans
—   —   —   —   —   —   —   —   —   —   598,717 54,286 653,003 653,003
Leasing transactions
2,186 7,059 94,226 269,425 310,915 66,536 25,076 5,783 82,231 863,437 70,641 6,711 77,352 940,789
Other loans and receivables
3 59 508 2,972 3,509 563 126 39 878 8,657 13,817 3,385 17,202 25,859

Subtotal Commercial loans
64,649 206,631 2,927,457 3,857,084 2,926,634 683,049 205,536 120,640 779,828 11,771,508 1,751,232 193,806 1,945,038 13,716,546

Allowances for loan losses
21 197 2,153 22,819 52,873 16,509 6,087 2,315 195,178 298,152 57,057 91,705 148,762 446,914
As percentage of total loans
—   0.10 % 0.07 % 0.59 % 1.81 % 2.42 % 2.96 % 1.92 % 25.03 % 2.53 % 3.26 % 47.32 % 7.65 % 3.26 %
Consumer loans
2,396,246 117,060 2,513,306 2,513,306
Allowances for loan losses
—   —   —   —   —   —   —   —   —   —   93,255 43,339 136,594 136,594
As percentage of total loans
—   —   —   —   —   —   —   —   —   —   3.89 % 37.02 % 5.43 % 5.43 %
Mortgage loans
3,975,744 177,009 4,152,753 4,152,753
Allowances for loan losses
—   —   —   —   —   —   —   —   —   —   22,730 12,289 35,019 35,019
As percentage of total loans
—   —   —   —   —   —   —   —   —   —   0.57 % 6.94 % 0.84 % 0.84 %

Total loans and receivable to customers
64,649 206,631 2,927,457 3,857,084 2,926,634 683,049 205,536 120,640 779,828 11,771,508 8,123,222 487,875 8,611,097 20,382,605

Allowances for loan losses
21 197 2,153 22,819 52,873 16,509 6,087 2,315 195,178 298,152 173,042 147,333 320,375 618,527
As percentage of total loans
—   0.10 % 0.07 % 0.59 % 1.81 % 2.42 % 2.96 % 1.92 % 25.03 % 2.53 % 2.13 % 30.20 % 3.72 % 3.03 %
Financial investments
—   —   —   —   —   —   —   —   —   —   —   —   —   —
Corporate Portfolio Group Portfolio
As of December 31, 2018
Normal Portfolio Impaired Portfolio (*) Normal
Portfolio Impaired
Portfolio

A1
MCh$ A2
MCh$ A3
MCh$ A4
MCh$ A5
MCh$ A6
MCh$ B1
MCh$ B2
MCh$ Impaired
MCh$ Subtotal
MCh$ MCh$ MCh$ Total
MCh$ General
Total
MCh$
Loans and receivables from banks
9,648 256,680 62,699 12,680 —      —   —   —   —   341,707 —   —   —   341,707
Allowances for loan losses
3 414 46 —   —   —   —   —   —   463 —   —   —   463
As percentage of total loans
0.03 % 0.16 % 0.07 % 0.00 % —   —   —   —   —   0.14 % —   —   —   0.14 %
Loans and receivable from customers

Commercial loans

Commercial loans
77,530 401,697 2,825,432 3,624,000 2,359,123 544,098 230,739 65,738 592,765 10,721,122 732,307 3,959 736,266 11,457,388
Foreign trade loans
—   —   120,431 194,385 132,301 10,015 16,595 7,695 71,030 552,452 275,178 100,813 375,991 928,443
Current account debtors
—   917 8,625 12,407 13,189 3,579 3,420 383 8,947 51,467 62,083 17,550 79,633 131,100
Factoring operations
33,027 44,471 42,572 36,018 28,489 1,092 4,349 —   4,131 194,149 16,305 113 16,418 210,567
Student loans
—   —   —   —   —   —   —   —   —   —   604,599 72,090 676,689 676,689
Leasing transactions
—   6,283 93,172 291,530 302,280 56,196 22,572 2,942 79,322 854,297 68,929 4,934 73,863 928,160
Other loans and receivables
8 45 6,769 3,028 5,484 487 150 67 1,634 17,672 12,992 3,889 16,881 34,553

Subtotal Commercial loans
110,565 453,413 3,097,001 4,161,368 2,840,866 615,467 277,825 76,825 757,829 12,391,159 1,772,393 203,348 1,975,741 14,366,900

Allowances for loan losses
508 475 3,506 37,403 58,360 27,477 18,067 9,793 233,242 388,831 37,352 58,524 95,876 484,707
As percentage of total loans
0.46 % 0.10 % 0.11 % 0.90 % 2.05 % 4.46 % 6.50 % 12.75 % 30.78 % 3.14 % 2.11 % 28.78 % 4.85 % 3.37 %
Consumer loans
—   —   —   —   —   —   —   —   —   —   2,532,331 137,432 2,669,763 2,669,763
Allowances for loan losses
—   —   —   —   —   —   —   —   —   —   135,521 81,775 217,296 217,296
As percentage of total loans
—   —   —   —   —   —   —   —   —   —   5.35 % 59.50 % 8.14 % 8.14 %
Mortgage loans
—   —   —   —   —   —   —   —   —   —   4,235,934 209,893 4,445,827 4,445,827
Allowances for loan losses
—   —   —   —   —   —   —   —   —   —   39,755 26,362 66,117 66,117
As percentage of total loans
—   —   —   —   —   —   —   —   —   —   0.94 % 12.56 % 1.49 % 1.49 %

Total loans and receivable to customers
110,565 453,413 3,097,001 4,161,368 2,840,866 615,467 277,825 76,825 757,829 12,391,159 8,540,658 550,673 9,091,331 21,482,490

Allowances for loan losses
508 475 3,506 37,403 58,360 27,477 18,067 9,793 233,242 388,831 212,628 166,661 379,289 768,120
As percentage of total loans
0.46 % 0.10 % 0.11 % 0.90 % 2.05 % 4.46 % 6.50 % 12.75 % 30.78 % 3.14 % 2.49 % 30.26 % 4.17 % 3.58 %

Individual Portfolio

Group Portfolio

Normal Portfolio

Impaired Portfolio

Normal
Portfolio

Impaired
Portfolio

As of
December 31,
2017

A1

A2

A3

A4

A5

A6

B1

B2

Impaired

Total

Total

General Total

(in millions of Ch$)

Loans and receivables from banks

862

42,105

23,025

4,293

—

—

—

—

—

70,285

—

—

—

70,285

Allowances for loan losses

—

76

132

—

—

—

—

—

—

208

—

—

—

208

As percentage of total loans

—

0.18%

0.57%

—

—

—

—

—

—

0.30%

—

—

—

0.30%

Loans and receivable from customers

Commercial loans:

Commercial loans

34,371

188,865

2,651,517

3,263,945

2,423,298

593,069

158,313

106,093

606,942

10,026,413

980,093

109,570

1,089,663

11,116,076

Foreign trade loans

—

—

150,154

244,954

145,609

13,995

17,078

8,085

85,032

664,907

27,168

8,658

35,826

700,733

Checking account debtors

633

922

13,317

25,229

24,647

5,443

4,345

640

4,447

79,623

48,594

11,131

59,725

139,348

Factoring operations

27,456

9,726

17,735

50,559

18,656

3,443

598

—

298

128,471

12,202

65

12,267

140,738

Student loans

—

—

—

—

—

—

—

—

—

—

598,717

54,286

653,003

653,003

Leasing transactions

2,186

7,059

94,226

269,425

310,915

66,536

25,076

5,783

82,231

863,437

70,641

6,711

77,352

940,789

Other loans and receivables

3

59

508

2,972

3,509

563

126

39

878

8,657

13,817

3,385

17,202

25,859

Subtotal Commercial loans

64,649

206,631

2,927,457

3,857,084

2,926,634

683,049

205,536

120,640

779,828

11,771,508

1,751,232

193,806

1,945,038

13,716,546

Allowances for loan losses

21

197

2,153

22,819

52,873

16,509

6,087

2,315

195,178

298,152

57,057

91,705

148,762

446,914

As percentage of total loans

—

0.10%

0.07%

0.59%

1.81%

2.42%

2.96%

1.92%

25.03%

2.53%

3.26%

47.32%

7.65%

3.26%

Consumer loans

2,396,246

117,060

2,513,306

2,513,306

Allowances for loan losses

—

—

—

—

—

—

—

—

—

—

93,255

43,339

136,594

136,594

As percentage of total loans

—

—

—

—

—

—

—

—

—

—

3.89%

37.02%

5.43%

5.43%

Mortgage loans

3,975,744

177,009

4,152,753

4,152,753

Allowances for loan losses

—

—

—

—

—

—

—

—

—

—

22,730

12,289

35,019

35,019

As percentage of total loans

—

—

—

—

—

—

—

—

—

—

0.57%

6.94%

0.84%

0.84%

Total loans and receivable to customers

64,649

206,631

2,927,457

3,857,084

2,926,634

683,049

205,536

120,640

779,828

11,771,508

8,123,222

487,875

8,611,097

20,382,605

Allowances for loan losses

21

197

2,153

22,819

52,873

16,509

6,087

2,315

195,178

298,152

173,042

147,333

320,375

618,527

As percentage of total loans

—

0.10%

0.07%

0.59%

1.81%

2.42%

2.96%

1.92%

25.03%

2.53%

2.13%

30.20%

3.72%

3.03%

Financial investments

—

—

—

—

—

—

—

—

—

—

—

—

—

—

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,

2015

2016

2017

(in millions of Ch$, except for percentages)

Current

6,524,210

19,763,116

19,266,605

Overdue 1-29 days

110,765

615,893

396,178

Overdue 30-89 days

74,999

272,243

257,807

Overdue 90-180 days

27,200

143,166

177,728

Overdue 181-240 days

7,331

52,791

58,703

Overdue 241-360 days

11,012

56,011

80,146

Overdue more than 360 days

45,554

100,732

145,437

Total loans (excludes interbank loans)

6,801,071

21,003,952

20,382,605

   As of December 31,
   2016    2017    2018
   (in millions of Ch$, except for percentages)
Current
   19,763,116    19,266,605    20,358,662
Overdue1-29 days
   615,893    396,178    429,791
Overdue30-89 days
   272,243    257,807    241,090
Overdue90-180 days
   143,166    177,728    148,234
Overdue181-240 days
   52,791    58,703    28,977
Overdue241-360 days
   56,011    80,146    52,176
Overdue more than 360 days
   100,732    145,437    223,560






Total loans (excludes interbank loans)
   21,003,952    20,382,605    21,482,490






Analysis of Impaired Loans, Non-Performing Loans and Past Due Loans
The following tables analyze our impaired loans and past due loans and the allowances for loan losses existing as of the dates indicated:

As of December 31,

2015

2016

2017

   As of December 31,

(in millions of Ch$ except for percentages)

   2016 2017 2018
Total loans

6,801,071

21,003,952

20,382,605

Impaired loans(1)

241,811

1,073,831

1,267,703

Allowance for loan losses

95,579

559,304

618,527

   (in million of Ch$ except for percentages)
Total loans⁽¹⁾
   21,003,952 20,382,605 21,482,490
Impaired loans⁽²⁾
   1,073,831 1,267,703 1,299,226
Allowance for loan losses⁽³⁾
   559,304 618,527 768,120
Impaired loans as a percentage of total loans

3.6%

5.1%

6.2%

   5.1 % 6.2 % 6.0 %
Non-performing loans(2)

91,097

352,700

462,015

Non-performing loans as a percentage of total loans(1)

1.3%

1.7%

2.3%

Past due loans(3)

51,241

112,450

131,021

Non-performing loans⁽⁴⁾
   352,700 462,015 452,947
Non-performing loans as a percentage of total loans⁽⁴⁾
   1.7 % 2.3 % 2.1 %
Past due loans⁽⁵⁾
   112,450 131,021 179,875
Past due loans as a percentage of total loans

0.8%

0.5%

0.6%

   0.5 % 0.6 % 0.8 %
Allowance for loans losses as a percentage of:


Total loans

1.4%

2.7%

3.0%

   2.7 % 3.0 % 3.6 %
Total impaired loans

39.5%

52.1%

48.8%

   52.1 % 48.8 % 59.1 %
Total non-performing loans

104.9%

158.6%

133.9%

Total Non-performing loans
   158.6 % 133.9 % 169.6 %
Total amounts past due

186.5%

497.4%

472.1%

   497.4 % 472.1 % 427.0 %
Reported ECL
   —   —   782,713
Reported Coverage (Reported ECL/ loans and accounts receivable at amortized cost)
   —   —   3.6 %

⁽¹⁾
Total loans as of December 31, 2018 corresponds to loans and accounts receivable from customers at amortized cost according to IFRS 9. Prior periods are in accordance with IAS 39.
⁽²⁾
Impaired loans include those loans on which there is objective evidence that debtors will not meet some of their contractual payment obligations. For 2018, impaired loans include loans classified in stage 3 according to IFRS 9. For prior periods impaired loans include (a) for loans individually evaluated for impairment: (i) the carrying amount of all loans to clients that are rated C1 through C4, D1 and D2 and (ii) the carrying amount of all loans to an individual client with at least one non-performing loan (which is not a residential mortgage loan past due less than 90 days), regardless of category; and (b) for loans collectively evaluated for impairment, the carrying amount of all loans to a client, when at least one loan to that client is not performing or has been renegotiated. Renegotiated loans on which payments are not past-due are not ordinarily classified as non-performing loans, but do not accrue interest.
⁽³⁾
Allowance for loan losses as of December 31, 2018 corresponds to allowances for loans and accounts receivable from customers at amortized cost according to IFRS 9. Prior periods are in accordance with IAS 39.
⁽⁴⁾
Non-performing loans include the principal and interest on any loan with one installment more than 90 days overdue. Total loans in 2018 corresponds to loans at amortized cost. Our loan portfolio classified as stage 3 under IFRS 9 was Ch$884,977 million as of December 31, 2018 with an ECL coverage of 3.6%.
⁽⁵⁾
Past due loans include all installments and lines of credit more than 90 days overdue. Past due loans do not include the aggregate principal amount of such loans.
~~(1)~~                     ~~Impaired loans includes those loans on which there is objective evidence that debtors will not meet some of their contractual payment obligations.~~
~~(2)~~                     ~~Non-performing loans include the principal and interest on any loan with one installment more than 90 days overdue.~~
~~(3)~~                     ~~Past due loans include all installments and lines of credit more than 90 days overdue. Does not include the aggregate principal amount of such loans.~~
The following table provides further information on ournon-performing loans:

As of December 31, 2017

Between 90-180
days

Between 181-240
days

Between 241-360
days

More than 360
days

Total

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

(in millions of Ch$)

   (in millions of Ch$)
Commercial Loans

95,917

50,327

69,079

104,054

319,378

   98,718    41,043    64,904    110,205    314,870
Mortgages Loans

32,958

8,376

11,067

41,383

93,784

   27,215    8,868    18,341    36,683    91,107
Consumer Loans

48,853

—

—

—

48,853

   46,970    —      —      —      46,970
Total loans (excludes interbank loans)

177,728

58,703

80,146

145,437

462,015











Total loans (excludes interbank loans)
   172,903    49,911    83,245    146,888    452,947










As of December 31, 2016

Between 90-180
days

Between 181-240
days

Between 241-360
days

More than 360
days

Total

(in millions of Ch$)

Commercial Loans

58,494

44,543

45,334

73,827

222,198

Mortgages Loans

39,268

8,248

10,677

26,905

85,098

Consumer Loans

45,404

—

—

—

45,404

Total loans (excludes interbank loans)

143,166

52,791

56,011

100,732

352,700

As of December 31, 2015

Between 90-180
days

Between 181-240
days

Between 241-360
days

More than 360
days

Total

(in millions of Ch$)

Loans and receivables to customers

Commercial Loans

7,238

4,651

8,137

29,496

49,522

Mortgages Loans

6,417

2,680

2,875

16,058

28,030

Consumer Loans

13,545

—

—

—

13,545

Total loans (excludes interbank loans)

27,200

7,331

11,012

45,554

91,097

As of December 31, 2017
   Between 90-180
days    Between 181-240
days    Between 241-360
days    More than 360
days    Total
   (in millions of Ch$)
Commercial Loans
   95,917    50,327    69,079    104,054    319,378
Mortgages Loans
   32,958    8,376    11,067    41,383    93,784
Consumer Loans
   48,853    —      —      —      48,853










Total loans (excludes interbank loans)
   177,728    58,703    80,146    145,437    462,015










As of December 31, 2016
   Between 90-180
days    Between 181-240
days    Between 241-360
days    More than 360
days    Total
   (in millions of Ch$)
Commercial Loans
   58,494    44,543    45,334    73,827    222,198
Mortgages Loans
   39,268    8,248    10,677    26,905    85,098
Consumer Loans
   45,404    —      —      —      45,404










Total loans (excludes interbank loans)
   143,166    52,791    56,011    100,732    352,700










Analysis of Allowances for Loan Losses
The following table analyzes our provisions for loan losses charged to income and changes in the allowances attributable to write-offs, allowances released, recoveries, allowances on loans ~~acquired:~~acquired for years ended December 31, 2016 and 2017 according to IAS 39:

As of December 31,

   As of December 31,

2015

2016

2017

   2016 2017

(in millions of Ch$ except for percentages)

   (in millions of Ch$ except for percentages)
Allowances for loan losses at beginning of period

98,349

95,579

559,304

   95,579 559,304
Allowances on acquired loans


Charge-offs

(52,485
)
(188,095
)
(233,361
)
   (188,095 ) (233,361 )
Provisions established

199,353

674,034

819,268

   674,034 819,268
Provisions released (1)

(148,136
)
(404,794
)
(472,305
)
Provisions released(1)
   (404,794 ) (472,305 )
Integration Itaú Corpbanca

—

442,947

—

   442,947 —
Impairment

—

—

—

   —   —
Use provision

(1,502
)
(58,746
)
(9,760
)
   (58,746 ) (9,760 )
Exchange rate differences (2)

—

(1,621
)
(44,619
)
   (1,621 ) (44,619 )


Allowances for loan losses at end of period

95,579

559,304

618,527

   559,304 618,527


Ratio of charge-offs to average loans

0.8%

1.1%

1.1%

   1.1 % 1.1 %
Allowances for loan losses at end of period as a percentage of total loans

1.4%

2.7%

3.0%

   2.7 % 3.0 %


Allowances for loan losses at end of period

95,579

559,304

618,527

   559,304 618,527


⁽¹⁾
Represents the aggregate amount of provisions for loan losses released during the year as a result of charge-offs, recoveries or a determination by management that the level of risk existing in the loan portfolio has been reduced.
⁽²⁾
~~(1)~~                     Represents the aggregate amount of provisions for loan losses released during the year as a result of charge-offs, recoveries or a determination by management that the level of risk existing in the loan portfolio has been reduced.
~~(2)~~Reflects the effect of inflation on the allowances for loan losses at the beginning of each period.
The following sets forth the movements in our allowances for loan losses atduring the ~~beginning~~year ended December 31, 2018, according to IFRS 9. For a description of ~~each period.~~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).”
   Individually assessed Group assessed
   Stage 1    Stage 2 Stage 3 Stage 1 Stage 2 Stage 3
   12-Month
ECL    Lifetime
ECL Lifetime
ECL Subtotals 12-Month
ECL Lifetime
ECL Lifetime
ECL Subtotals Totals
Balances as of January 1, 2018
   —      49,389 32,736 82,125 126,230 248,129 284,089 658,448 740,573
Changes in the allowances

- Net transfers to stage 1
   —      —   —   —   —   36,325 41,471 77,796 77,796
- Net transfer to stage 2
   —      —   —   —   (5,233 ) —   49,097 43,864 43,864
- Net transfer to stage 3
   —      —   —   —   (4,354 ) (22,811 ) —   (27,165 ) (27,165 )
- Increases due to change in credit risk
   —      3,732 16,587 20,319 18,307 18,459 28,670 65,436 85,755
- Decreases due to change in credit risk
   —      (532 ) (1,706 ) (2,238 ) (23,460 ) (27,162 ) (9,105 ) (59,727 ) (61,965 )
- Charge-offs
      (21,316 ) (18,559 ) (95,091 ) (134,966 ) (134,966 )
- Changes due to modifications that did not result in derecognition
      —
New financial assets originated or purchased
   —      6,428 17,037 23,465 66,074 54,568 77,069 197,711 221,176
Financial assets that have been derecognized
   —      (20,636 ) (15,355 ) (35,991 ) (19,950 ) (58,405 ) (78,728 ) (157,083 ) (193,074 )
Net transfer from (to) group assessed
   —      7,772 38,158 45,930 138 (1,761 ) (38,158 ) (39,781 ) 6,149
Foreign exchange and other movements
      2,056 3,664 4,257 9,977 9,977
Balances as of December 31, 2018
   —      46,153 87,457 133,610 138,492 232,447 263,571 634,510 768,120
Our policy with respect to write-offs is as disclosed in Note 1(q) to our financial statement included herein. The following table shows the write-offs breakdown by loan category:

As of December 31,

2015

2016

2017

(in millions of Ch$)

Consumer loans

32,132

94,294

115,708

Mortgage loans

2,964

8,157

8,303

Commercial loans

17,389

85,644

109,350

Total

52,485

188,095

233,361

   As of December 31,
   2016    2017    2018
   (in millions of Ch$)
Consumer loans
   94,294    115,708    164,680
Mortgage loans
   8,157    8,303    8,035
Commercial loans
   85,644    109,350    102,450






Total
   188,095    233,361    275,165






The following table shows loan loss recoveries by loan category for the periods indicated:

As of December 31,

2015

2016

2017

(in millions of Ch$)

Bank debt

—

—

—

Consumer loans

5,818

13,088

16,419

Mortgage loans

616

1,285

1,908

Commercial loans

1,871

8,898

13,236

Total

8,305

23,271

31,563

   As of December 31,
   2016    2017    2018
   (in millions of Ch$)
Bank debt
   —      —      —
Consumer loans
   13,088    16,419    25,959
Mortgage loans
   1,285    1,908    2,588
Commercial loans
   8,898    13,236    19,921






Total
   23,271    31,563    48,468






Based on information available regarding our debtors, ~~we believe~~the Bank believes that our allowances for loan losses are sufficient to cover known probable losses and losses inherent in a loan portfolio of the size and nature of our loan portfolio.
Allocation of Allowances for Loan Losses
The following tables set forth, as of December 31, ~~2015,~~ 2016, 2017 and ~~2017,~~2018, allowances for loan losses that were attributable to our commercial, consumer and mortgage loans as of each date. Under IFRS, the fair value of a loan portfolio acquired should be shown as recorded upon acquisition under IFRS 3, business combination.

As of December 31, 2017

   As of December 31, 2018⁽¹⁾

Allowance
amount

Allowance Amount
as a percentage of
loans in category

Allowance Amount
as a percentage of
total loans

Loans in
category as
percentage of
total

   Allowance
amount    Allowance Amount
as a percentage of
loans in category Allowance Amount
as a percentage of
total loans Loans in
category as
percentage of
total

(in millions of Ch$ except for percentages)

   (in millions of Ch$ except for percentages)
Commercial loans

446,914

3.3%

2.2%

67.2%

   484,707    3.4 % 2.2 % 65.8 %
Consumer loans

136,594

5.4%

0.7%

12.3%

   217,296    8.1 % 1.0 % 12.2 %
Residential mortgage loans

35,019

0.8%

0.2%

20.3%

   66,117    1.5 % 0.3 % 20.4 %
Loans and receivables to banks

208

0.6%

0.0%

0.2%

   463    0.1 % 0.0 % 1.6 %




Total allocated allowances

618,735

3.0%

3.0%

100%

   768,583    3.5 % 3.5 % 100.0 %




As of December 31, 2016

Allowance
amount

Allowance Amount
as a percentage of
loans in category

Allowance Amount
as a percentage of
total loans

Loans in
category as
percentage of
total

(in millions of Ch$ except for percentages)

Commercial loans

418,928

2.9%

2.0%

69.2%

Consumer loans

116,904

4.7%

0.6%

11.7%

Residential mortgage loans

23,472

0.6%

0.1%

18.4%

Loans and receivables to banks

212

0.1%

0.0%

0.7%

Total allocated allowances

559,516

2.6%

2.6%

100%

As of December 31, 2015

Allowance
amount

Allowance Amount
as a percentage of
loans in category

Allowance Amount
as a percentage of
total loans

Loans in
category as
percentage of
total

(in millions of Ch$ except for percentages)

Commercial loans

61,995

1.4%

0.9%

66.2%

Consumer loans

27,333

3.9%

0.4%

10.2%

Residential mortgage loans

6,251

0.4%

0.1%

22.2%

Loans and receivables to banks

70

0.1%

0.0%

1.4%

Total allocated allowances

95,649

1.4%

1.4%

100%

⁽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.
   As of December 31, 2017
   Allowance
amount    Allowance Amount
as a percentage of
loans in category Allowance Amount
as a percentage of
total loans Loans in
category as
percentage of
total
   (in millions of Ch$ except for percentages)
Commercial loans
   446,914    3.3 % 2.2 % 67.2 %
Consumer loans
   136,594    5.4 % 0.7 % 12.3 %
Residential mortgage loans
   35,019    0.8 % 0.2 % 20.3 %
Loans and receivables to banks
   208    0.6 % 0.0 % 0.2 %




Total allocated allowances
   618,735    3.0 % 3.0 % 100 %




   As of December 31, 2016
   Allowance
amount    Allowance Amount
as a percentage of
loans in category Allowance Amount
as a percentage of
total loans Loans in
category as
percentage of
total
   (in millions of Ch$ except for percentages)
Commercial loans
   418,928    2.9 % 2.0 % 69.2 %
Consumer loans
   116,904    4.7 % 0.6 % 11.7 %
Residential mortgage loans
   23,472    0.6 % 0.1 % 18.4 %
Loans and receivables to banks
   212    0.1 % 0.0 % 0.7 %




Total allocated allowances
   559,516    2.6 % 2.6 % 100 %




Composition of Deposits and Other Commitments
The following table sets forth the composition of our deposits and similar commitments as of December 31, ~~2015,~~ 2016, 2017 and ~~2017.~~2018.

As of December 31,

2015

2016

2017

(in millions of Ch$)

Checking accounts

769,258

2,591,618

2,473,283

Other demand liabilities

212,091

1,861,573

1,668,384

Saving accounts

—

32,425

28,410

Time deposits

3,952,573

11,549,010

10,036,583

Other commitments

—

275

250

Total

4,933,922

16,034,901

14,206,910

   As of December 31,
   2016    2017    2018
   (in millions of Ch$)
Checking accounts
   2,591,618    2,473,283    2,570,436
Other demand liabilities
   1,861,573    1,668,384    1,730,039
Saving accounts
   32,425    28,410    27,156
Time deposits
   11,549,010    10,036,583    10,093,703
Other commitments
   275    250    252






Total
   16,034,901    14,206,910    14,421,586






Maturity of Deposits
The following table sets forth information regarding the currency and maturity of our deposits as of December 31, ~~2017,~~2018, expressed in percentages.UF-denominated deposits are similar to Chilean peso-denominated deposits in all respects, except that the principal is readjusted periodically based on variations in the CPI.

As of December 31, 2017

   As of December 31, 2018

Ch$

UF

Foreign
Currency

Total

   Ch$ UF Foreign
Currency Total

(In %)

   (In %)
Demand deposits

24.45

0.95

40.41

29.15

   24.02 0.69 42.74 29.82
Savings accounts

—

0.97

0.38

0.20

   —   1.21 0.38 0.19
Time deposits:


Maturing within 3 months

38.07

33.31

25.53

33.03

   47.53 33.32 27.01 39.48
Maturing after 3 but within 6 months

16.57

15.52

10.07

14.04

   13.35 2.15 9.92 11.63
Maturing after 6 but within 12 months

17.94

1.57

11.26

14.45

   10.46 6.71 10.08 10.16
Maturing after 12 months

2.96

47.68

12.35

9.12

   4.64 55.92 9.87 8.72


Total time deposits

75.55

98.08

59.21

70.65

   75.98 98.10 56.88 69.99


Total deposits

100%

100%

100%

100%

   100 % 100 % 100 % 100 %


The following table sets forth information regarding the maturity of the outstanding time deposits in excess of US$100,000 (or its equivalent) issued by us as of December 31, ~~2017.~~2018.

As of December 31, 2017

Ch$

UF

Foreign
Currency

Total

(in millions of constant Ch$)

Maturing within 3 months

2,237,081

257,925

1,524,871

4,019,877

Maturing after 3 but within 6 months

1,310,465

125,062

501,039

1,936,566

Maturing after 6 but within 12 months

1,431,266

12,456

589,631

2,033,353

Maturing after 12 months

236,436

392,014

656,238

1,284,688

Total time deposits

5,215,248

787,457

3,271,779

9,274,484

   As of December 31, 2018
   Ch$    UF    Foreign
Currency    Total
   (in millions of constant Ch$)
Maturing within 3 months
   3,240,793    181,984    1,450,814    4,873,591
Maturing after 3 but within 6 months
   398,177    342,971    429,309    1,170,457
Maturing after 6 but within 12 months
   1,127,000    10,953    503,931    1,641,884
Maturing after 12 months
   895,021    40,255    543,235    1,478,511








Total time deposits
   5,660,991    576,163    2,927,289    9,164,443








Minimum Capital Requirements
The following table sets forth our minimum capital requirements as of December 31, ~~2015,~~ 2016, 2017 and ~~2017.~~2018.

As of December 31,

2015

2016

2017

(in millions of constant Ch$ except for percentages)

Net capital base

792,503

3,173,516

3,189,876

3% total assets net of provisions

(293,014
)
(957,058
)
(915,261
)
Excess over minimum required equity

499,489

2,216,458

2,274,615

Net capital base as a percentage of the total assets, net of provisions

8.11%

9.95%

10.46%

Effective net equity

871,029

3,252,175

3,249,572

10% of the risk-weighted assets*

(587,087
)
(2,319,500
)
(2,215,179
)
Excess over minimum required equity

283,942

932,675

1,034,393

Effective equity as a percentage of the risk-weighted assets

11.9%

14.0%

14.7%

* Except for 2015, which was 8% of the risk-weighted assets.
   As of December 31,
   2016 2017 2018
   (in millions of constant Ch$ except for
percentages)
Net capital base
   3,173,516 3,189,876 3,324,531
3% total assets net of provisions
   (957,058 ) (915,261 ) (953,445 )


Excess over minimum required equity
   2,216,458 2,274,615 2,371,086


Net capital base as a percentage of the total assets, net of provisions
   9.95 % 10.46 % 10.46 %
Effective net equity
   3,252,175 3,249,572 3,415,845
10% of the risk-weighted assets
   (2,319,500 ) (2,215,179 ) (2,331,556 )


Excess over minimum required equity
   932,675 1,034,393 1,084,289


Effective equity as a percentage of the risk-weighted assets
   14.0 % 14.7 % 14.6 %


Our capital ratios levels increased ~~from 11.9% to 14.0% between 2015 and 2016, following the Merger, and an increase~~ from 14.0% to 14.7% between 2016 and ~~2017.~~
2017 and decreased to 14.6% as of December 31, 2018.
Short-term Borrowings
Our short-term borrowings (other than deposits and other obligations) totaled Ch$~~115,450~~1,071,295 million, Ch$~~1,071,295~~1,114,716 million and Ch$~~1,114,716~~2,009,621 million as of December 31, ~~2015,~~ 2016, 2017 and ~~2017,~~2018, respectively, in accordance with IFRS.
The principal categories of our short-term borrowings are amounts borrowed under foreign trade lines of credit, domestic interbank loans and repurchase agreements.
The table below presents the amounts outstanding at the end of each period indicated and the weighted average nominal interest rate for each such period by type of short-term borrowing.

As of and for the Year Ended December 31,

2015

2016

2017

Year End
Balance

Weighted
Average
Nominal
Interest Rate

Year End
Balance

Weighted
Average
Nominal
Interest
Rate

Year End
Balance

Weighted
Average
Nominal
Interest
Rate

(in millions of constant Ch$ except for percentages)

Investments under repurchase agreements

43,727

0.34%

373,879

0.13%

416,972

0.10%

Central Bank borrowings

—

—

—

—

—

—

Domestic interbank loans

—

—

—

—

—

—

Borrowings under foreign trade credit lines

71,723

0.05%

697,416

0.08%

697,744

0.06%

Total short-term borrowings

115,450

0.16%

1,071,295

0.10%

1,114,716

0.07%

   As of and for the Year Ended December 31,
   2016 2017 2018
   Year End
Balance    Weighted
Average
Nominal
Interest Rate Year End
Balance    Weighted
Average
Nominal
Interest
Rate Year End
Balance    Weighted
Average
Nominal
Interest
Rate
   (in millions of constant Ch$ except for percentages)
Obligations under repurchase agreements
   373,879    0.13 % 420,920    0.10 % 1,015,614    0.05 %
Central Bank borrowings
   —      —   —      —   —      —
Domestic interbank loans
   —      —   —      —   —      —
Borrowings under foreign trade credit lines
   697,416    0.08 % 697,744    0.06 % 1,000,481    0.08 %


Total short-term borrowings
   1,071,295    0.10 % 1,118,664    0.07 % 2,016,095    0.06 %







The following table shows the average balance and the weighted average nominal rate for each short-term borrowing category during the periods indicated:

As of and for the Year Ended December 31,

2015

2016

2017

Year End
Balance

Weighted
Average
Nominal
Interest Rate

Year End
Balance

Weighted
Average
Nominal
Interest
Rate

Year End
Balance

Weighted
Average
Nominal
Interest
Rate

(in millions of constant Ch$ except for percentages)

Investments under repurchase agreements

57,267

0.26%

400,252

0.12%

596,022

0.07%

Central Bank borrowings

—

—

—

—

—

—

Domestic interbank loans

—

—

3,333

0.09%

27,917

0.20%

Borrowings under foreign trade credit lines

54,015

0.06%

496,186

0.12%

578,252

0.07%

Total short-term borrowings

111,282

0.16%

899,772

0.12%

1,202,191

0.07%

   As of and for the Year Ended December 31,
   2016 2017 2018
   Average
Balance    Weighted
Average
Nominal
Interest Rate Average
Balance    Weighted
Average
Nominal
Interest
Rate Average
Balance    Weighted
Average
Nominal
Interest
Rate
   (in millions of constant Ch$ except for percentages)
Obligations under repurchase agreements
   400,252    0.12 % 596,022    0.07 % 798,696    0.06 %
Central Bank borrowings
   —      —   —      —   —      —
Domestic interbank loans
   3,333    0.09 % 27,917    0.20 % 15,417    0.42 %
Borrowings under foreign trade credit lines
   496,186    0.12 % 578,252    0.07 % 794,359    0.10 %
Total short-term borrowings
   899,772    0.12 % 1,202,191    0.07 % 1,608,472    0.08 %








The following table presents the maximummonth-end balances of our principal sources of short-term borrowings during the periods indicated:

Maximum 2015
Month-End
Balance

Maximum 2016
Month-End
Balance

Maximum 2017
Month-End
Balance

(in millions of constant Ch$)

Investments under repurchase agreements

78,987

848,219

948,657

Central Bank borrowings

—

—

—

Domestic interbank loans

—

40,017

215,858

Borrowings under foreign trade credit lines

118,484

774,636

1,074,498

Other obligations

20,733

31,392

24,488

   Maximum 2016
Month-End
Balance    Maximum 2017
Month-End
Balance    Maximum 2018
Month-End
Balance
   (in millions of constant Ch$)
Obligations under repurchase agreements
   848,219    948,657    1,015,614
Central Bank borrowings
   —      —      —
Domestic interbank loans
   40,017    215,858    132,179
Borrowings under foreign trade credit lines
   774,636    1,074,498    1,108,097
Other obligations
   31,392    24,488    20,642
C. ORGANIZATIONAL STRUCTURE
The following diagram presents our current corporate structure, including our principal subsidiaries, as of the date of this Annual Report.
ITAÚ CORPBANCA & SUBSIDIARIES-CORPORATE STRUCTURE

~~April 2, 2018~~
Itaú ~~Corpbanca~~ Corredores de Bolsa ~~S.A.~~Ltda., Itaú Administradora General de Fondos S.A., Itaú Asesorías Financieras S.A., Itaú Corredores de Seguros S.A., CorpLegal S.A., and ~~Itaú Corpbanca~~ Recaudaciones y Cobranzas ~~S.A.~~Ltda. are incorporated and domiciled in Chile. Itaú Corpbanca New York Branch is incorporated and domiciled in the State of New York, United States. Itaú Corpbanca Colombia S.A., Itaú Securities Services Colombia S.A. Sociedad Fiduciaria, Itaú Comisionista de Bolsa Colombia S.A., Itaú Corredor de Seguros Colombia S.A. and Itaú Asset Management Colombia S.A. Sociedad Fiduciaria are incorporated and domiciled in Colombia. Itaú (Panamá) S.A. and Itaú Casa de Valores S.A. are incorporated and domiciled in Panama.
For more information about the services our subsidiaries and our New York Branch provide see “Item 4. Information on the Company—B. Business Overview—Principal Business Activities—Financial Services Offered Through Subsidiaries.”
D. PROPERTY
Our principal executive offices are located at Rosario Norte 660, Las Condes, Santiago, Chile since 2007. As of December 31, ~~2017,~~2018, we owned 38 of the ~~447~~436 properties where our branches were located. Total branch space as of December 31, ~~2017~~2018 was approximately ~~68,073~~17,775 square meters ~~(732,728square~~(191,328 square feet). Our branches are located throughout Chile, including the Santiago metropolitan region, and Colombia, including in the cities of Bogotá, Medellín, Cali, Bucaramanga and Barranquilla.
ITEM 4A. UNRESOLVED STAFF COMMENTS
None.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
A. OPERATING RESULTS
The following discussion should be read in conjunction with our consolidated financial statements, together with the notes thereto, included elsewhere in this Annual Report, and in conjunction with the information included under “Item 3A. Selected Financial Data” and “Item 4B. Business Overview — Selected Statistical Information.” Our consolidated financial statements as of December 31, 2015, 2016, 2017 and ~~2017~~2018 and for the years ended December 31, 2015, 2016, 2017 and ~~2017~~2018 have been prepared in accordance with IFRS.
Our financial statement data as of and for the years ended December 31, 2015 and 2016 are not comparable to the data as of and for the ~~year~~years ended December 31, 2017 and 2018 because of the Merger, which was consummated on April 1, 2016. The Merger has been accounted for as a reverse acquisition, based on guidance in IFRS 3 “Business Combinations,” with Banco Itaú Chile (the legal acquiree) considered as the accounting acquirer and Corpbanca (the legal acquirer) considered as the accounting acquiree. Accordingly, the financial statements of Itaú Corpbanca for periods prior to the acquisition date of April 1, 2016 reflect the historical financial information of Banco Itaú Chile. Before the Merger, former Banco Itaú Chile (the legal acquiree) only produced financial statements pursuant to Chilean Banking GAAP, while former Corpbanca (the legal acquirer) from 2009 to 2015 issued financial statements according to Chilean Banking GAAP and according to IFRS.
The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from these discussed in forward-looking statements as a result of various factors, including those set forth in “Cautionary Statement Regarding Forward-Looking Information” and “Item 3D. Risk Factors.”
INTRODUCTION
We are a banking corporation organized under the laws of Chile. Our common shares are listed on the Santiago Stock Exchange and the Chilean Electronic Exchange, and our ADSs are listed on the NYSE. We are regulated by the SBIF. We offer general commercial and consumer banking services and provide other services including factoring, collection, leasing, securities and insurance brokerage, asset management and investment banking.
The following classification of revenues and expenses is based on our consolidated financial statements:
Revenues
We have three main sources of revenues, which include both cash andnon-cash items:
Interest income
We earn interest income from our interest-earning assets, which are mainly represented by loans to customers.
Income from service fees
We earn income from service fees related to checking accounts, loans, mutual funds, credit cards and other financial services.
Other operating income
We earn income relating to changes in the fair value of our securities portfolio, other trading activities and foreign exchange transactions.
Expenses
We have three main sources of expenses, which include both cash andnon-cash items:
Interest Expense
We incur interest expense on our interest bearing liabilities, such as deposits, short-term borrowings and long-term debt.
Provisions for Loan Losses
Our allowance and provision for loan losses as recorded in our consolidated financial statements included herein have been determined in accordance with IFRS.
Other Operating Expenses
We incur expenses relating to salaries and benefits, administrative expenses and othernon-interest expenses.
THE ECONOMY
Primary Markets in Which We Operate
A majority of our investments are located in Chile and Colombia. Accordingly, our financial condition and results of operations are substantially dependent upon economic conditions prevailing in Chile and Colombia.
Developments in the Chilean Economy
~~Chile experienced a fourth year~~After four years of below-potential growth, Chile saw a significant recovery in ~~2017, still affected~~2018, favored by ~~the end~~external conditions and an improved private sector sentiment. The recovery of ~~the commodity boom cycle. In this context of weak activity,~~ the labor market ~~gradually weakened and~~was slower, while external accounts remained at sustainable levels. ~~International developments~~Financial market volatility led the Chilean peso to ~~appreciate~~depreciate from the beginning of the year, ~~and to a significant deceleration in~~while tradable goods ~~inflation. The latter, coupled with~~inflation remained stable. In spite of low inflationary pressures, the ~~expectation~~Central Bank announced that a gradual monetary normalization cycle would begin in the fourth quarter of ~~a still weak economy ahead, prompted~~2018 as they believed narrowing output gap could lead to inflation down the ~~central bank to implement a monetary easing cycle in early 2017.~~road.
~~Activity~~Given that there was ~~hindered by~~ a major mining strike in the first quarter of the year ~~2017. The recovery of copper prices toward year-end and improving exports led~~2017, it is difficult to a mining boost in the second half of 2017. Consumption was a principal driver of activity in the year, first boosted by the front-loading of public expenditure and thereafter supported by recovering service consumption in the economy. Throughout the year, durable consumption was robust, aided by low inflation, a stronger currency and expansionary monetary policy. The evolvement of consumption came despite some weakening of the labor market, with the unemployment rate averaging 6.7% in 2017, up from 6.5% in 2016 and 6.2% in 2015, and the highest since 2011. Low-quality self-employment and the public sector were the driving forces behind job creation, while there was shedding of private salaried jobs.
~~After two consecutive years of contraction, investment boosted growth in~~compare the first half of ~~2016. However, investments again contracted in~~2018 (when the ~~second~~Chilean economy experienced robust growth) with the first half of ~~2016. Investment contracted for a fourth consecutive year in~~ 2017. ~~Low confidence continued to hamper investment as did~~Recovering mining production drove the ~~slowdown of construction following~~4.9% growth rate during the end of a tax-incentivized boom of the sector. As a result, in 2017, investments contracted by an estimated 2.4%, from the -0.8% in 2016. With copper prices recovering and a change in the political cycle, the outlook is for an investment recovery ahead. Meanwhile, the contribution from net exports improved as the year unfolded linked to the recovery copper exports and limited internal demand.
~~The Chilean economy expanded 1.5% during 2017, and 1.6% in 2016, the lowest growth since the international financial crisis.~~
Meanwhile, external accounts evolved favorably in 2017. In 2017, the current account deficit stood at US$3.6 billion (-1.5% of GDP), similar to the rate in 2016. Improving trade figures aided the full year current account balance. The trade balance saw a US$6.9 billion surplus in 2017, up from US$5.3 billion in 2016 and the highest since 2011. The low deficit highlights Chile’s limited external vulnerabilities. With copper prices set to perform favorably for mostfirst half of 2018, ~~the current account deficit will likely stay at low levels in 2018. Despite the positive evolution~~while a gradual recovery of ~~the current account, weak activity and low copper prices affected foreign direct~~ investment in 2017. In 2017, foreign direct investment fell to around US$8 billion (3.0% of GDP), from US$12.2 billion in 2016 (4.9% of GDP) and US$20.5 billion in 2015 (8.6% of GDP), its lowest dollar value since 2006.
A contained current account deficit alongside with rising copper prices resulted in a favorable performance of the Chilean peso. The gradual normalization of monetary policy by the Federal Reserve also aided the currency. After ending 2016 at Ch$670 per US$1.0, the exchange rate peaked over Ch$678 in May 2017. However, the currency declinedfueled growth in the second half of the ~~year along~~year. Meanwhile, consumption has seen an uneven recovery, with durable consumption thriving (particularly led by automobile sales), whilenon-durable consumption remained weak. Additionally, the Argentinean economic crisis has limited consumption, resulting in low rates and low inflation. In terms of the labor market, it has not followed the economic recovery trend, with an average unemployment rate of 7.0% in 2018, slightly higher than the 6.7% observed in 2017.
The widespread improvement of investment was another factor of the end of four years of contraction in 2018. The improvement began in late 2017, when purchases of machinery and equipment recovered, with construction growth picking up throughout the year. The improvement was fueled by higher copper prices in 2018, as compared to 2017, thereby increasing investment in mining; increased business confidence after the conclusion of the presidential elections was also likely a contributing factor. Investment, measured as the net increase in physical assets (investment minus disposals), expanded to 5%, as compared to the negative 1.1% decrease in 2017. The contribution from net exports continued to improve due to higher copper volume exports, despite improvement in domestic demand. Overall, the Chilean economy expanded 4.0% in 2018, as compared to 1.5% in 2017.
On the other hand, external accounts were hurt by falling copper prices and higher average oil prices during the year. The 2018 current account deficit increased to US$7.8 billion (negative 2.6% of GDP), from US$4.1 billion (negative 1.5% of GDP in 2017). The trade balance surplus decreased to US$5.4 billion in 2018, as compared to US$7.9 billion in 2017. As copper prices remained below US$3/lb in 2018, it is expected that the current account deficit may increase in 2019. However, despite a larger current account deficit, foreign direct investment remained robust and fully funded the external imbalance. In 2018, foreign direct investment remained stable as compared to 2017, at US$7 billion (2.5% of GDP).
Falling copper prices and a general global risk aversion hurt the Chilean peso. After ending 2017 at Ch$~~615. Going forward,~~615 per US$1.00, the ~~currency could experience some depreciation amid diverging monetary policy stance between Chile and~~exchange rate did appreciate to approximately Ch$600 per US$1.00 during the ~~U.S., while~~first third of the year, as copper prices ~~moderate gradually throughout~~were above average. However, as risk aversion increased primarily due to the ~~year.~~
~~A widening output gap~~trade dispute between the United States and ~~a stronger currency helped inflation decelerate to 2.3% by December 31, 2017, from 2.7% in December 2016. On the back~~China and expectations of ~~the stronger currency, tradable goods led the disinflation process.~~
~~In this context,~~swift monetary tightening worldwide and commodity prices decreased, the Chilean ~~Central Bank maintained the monetary policy interest~~peso/U.S. dollar exchange rate ~~at 2.5% after implementing the 100-bp easing cycle in the first five months of the year. However, given the slowdown in inflation and weak activity, the door remained open~~
~~for additional easing during the year. In its 4Q17 Monetary Policy Report, the Chilean Central Bank anticipated stable rates for most of 2018, before initiating a mild normalization process~~moved towards Ch$700 in the second half of ~~2018 once~~the year. The exchange rate closed at Ch$694 in 2018. Expectations of a resolution of the trade dispute between the United States and China could aid copper prices and lead to some appreciation of the Chilean peso.
Some narrowing of the output gap ~~begins~~and a weaker currency helped inflation accelerate to ~~narrow.~~2.6% by December 31, 2017, as compared to 2.3% in December 2018, despite falling fuel prices in the last months of the year. It is expected that inflation will continue rising towards the 3% target set by the Chilean Central Bank this year.
The Chilean Central Bank expressed that the current degree of monetary stimulus is unnecessary, considering the output gap narrowing that took place in the first half of 2018. Thus, in its Monetary Policy Report for the third quarter of 2018, the board of the Chilean Central Bank indicated that a tightening cycle (from the 2.5% monetary policy rate level) would begin shortly. The board implemented one 25 basis points rate hike to 2.75% in October and retained the tightening bias, despite holding the rate steady at its December meeting. It was generally expected that the Chilean Central Bank would make several rate hikes this year; however, there may be bias towards fewer, given the continued elevated uncertainty in the global financial markets.
~~As for~~President Piñera’s second administration, which took office in March 2018, made fiscal policy ~~the deterioration of Chile’s debt position raised alerts and led to one notch downgrades from two rating agencies.~~a priority given that Fitch Ratings and Standard and Poor’s revised the sovereign debt rating to ‘A’ and ‘A+’, ~~respectively. Meanwhile,~~respectively, and Moody’s changed its ~~outlook from Stable~~rating to ~~Negative but retained~~‘A1’ with a stable outlook. Despite this rating downgrade, 2018 was a better year for fiscal accounts. It is expected that the ~~‘Aa+’ rating. Low growth and~~nominal deficit was below the ~~rapid increase~~1.9% estimated deficit, as compared to 2.8% in ~~government~~2017. The 2019 budget includes a 1.7% deficit, with narrowing figures in coming years as the administration aims at curbing debt are key drivers in the rating amendment. The fiscal deficit in 2017 was similar to 2016 at 2.7%, the largest rates since the international financial crisis. Going forward, the expectation of higher copper prices and a growth pick up will support a narrowing of the budget deficit.growth.
A general election was held on November 19, where a new Congress, part of the Senate and a new president of Chile was elected. The composition of the Chilean Congress and the Senate showed the coalition from the right gaining ground but failing to capture a majority. Meanwhile, former president Sebastian Piñera defeated the governing coalition’s candidate Alejandro Guillier in a December 2017 runoff vote.
Developments in the Colombian Economy
2018 brought mixed news for Colombia’s economy. Activity remained subdued, despite improving at the end of the year, inflationary pressures were contained, interest rates remained stable, and the correction of external accounts moderated amid recovering domestic demand and flailing oil prices. Arising from last year’s congressional and the presidential elections, a continuity government was elected, a stabilizing development that soothed markets. However, it is widely believed that President Duque’s administration faces an uphill battle in order to keep fiscal accounts healthy.
~~Colombia’s 2017 economic~~In the absence of supply-side shocks, inflation normalization progressed, measuring 3.18% in December 2018, as compared to 4.09% in 2017. Weak domestic demand likely aided this normalization as tradable inflation remained contained despite the depreciation of the Colombian peso against the U.S. dollar throughout the year. In this context, ~~was characterized by~~the Colombian Central Bank applied two 25 basis points rate cuts (in January and April) decreasing its reference rate to 4.25%, where it remained for the rest of the year. As Colombian inflationary pressures remained contained and the output gap continued to widen despite recovering growth, the board of the Colombian Central Bank has indicated it remains comfortable with the current degree of monetary stimulus.
The Presidential elections cycle, falling private sector sentiment, and lower oil prices kept activity subdued in the first half of the year. While the economy did recover in the second half of 2018, uncertainty about external conditions likely limited such recovery. Investment remained weak, but construction showed signs of recovery, alongside industrial activity. However, the prolonged period of weak activity ~~reduction on inflation, an easing monetary policy cycle, improving~~has affected the labor market (with the unemployment rate remaining broadly unchanged from 2017 at 9.4% and job creation falling to historically low levels) and consumer confidence, posing a risk to the expected recovery ahead. Overall, GDP grew to 2.7% last year, as compared to 1.8% in 2017.
The fiscal and external deficits remain points of attention. On the fiscal side, last year’s nominal was likely a 3.1% of GDP deficit, ~~and still significant fiscal challenges. The monetary loosening came as~~a decrease from the ~~supply shocks from El Niño~~3.6% deficit recorded in 2017 and the ~~previous currency~~lowest since 2015. President Duque’s administration inherited a budget containing a target of 2.4% of GDP deficit in 2019, which included adjustments to investment expenditure growth to reach the structural balance target. However, the authorities deemed it necessary to reinstate part of investment expenditure in order to boost growth in an expenditure bill that was approved in October. To keep fiscal accounts balanced, the ministry of finance raised the need of a tax reform, which included higher VAT on food staples, a provision that faced widespread opposition. A less robust version of the bill, raising just half of the needed resources, was approved by year end. The authorities have yet to announce whether they will opt to exceed the deficit target or cut expenditure by the revenue shortfall.
Rating agencies have been lenient regarding Colombia’s fiscal situation. Fitch, for instance, commented that gross general government debt will remain stable at around 41% of GDP in 2018—near the ‘BBB’ rating category median, assuming continued fiscal adjustment. Late last year, S&P retained its‘BBB-’ rating with a stable outlook, and stated Colombia might not meet the mandated 2.4% of GDP deficit target this year, but that would not necessarily prompt a rating downgrade, which would lead to a loss of the investment grade rating. Meanwhile, Moody’s Investors Service and Fitch Ratings continue to rate Colombia two notches above investment grade.
Higher imports led the trade deficit to reach US$6 billion in 2018, as compared to US$6.1 billion in 2017. Despite the weakening ~~diminished. Weak internal demand and recovering~~of the Colombian peso, lower oil prices have hampered the outlook for an external account correction. Rather than narrowing mildly in 2018, we saw the current account deficit ~~decline to near 3.7%~~ended the year at 3.3% of GDP, the same rate recorded in the previous two years. The tax reform adjustment to the withholding tax from government bond interest payments to foreigners (from ~~4.3% in 2016), reducing Colombia’s vulnerability~~14% to ~~external shocks~~5%) could aid portfolio investments and ~~supporting a looser monetary policy.~~
Onhelp finance the ~~back of tighter monetary policy in 2016~~current account deficit. Falling oil prices,risk-off mode and fiscal concerns have led to the ~~normalization of food prices following~~weakest level for the Colombian peso since early 2016. In this context, the Colombian peso traded at COP3,248.52 per US$1.000 at the end of ~~the El Niño weather phenomenon, inflation moderated from 5.75% in December 2016~~2018, as compared to 4.09% in December 2017. Meanwhile, private consumption slowed in 2017 affected by the contractionary monetary policy in 2016, increased consumption taxes and a loosening labor market. On the other hand, investment improved from 2016 but remained weak. Overall, activity slowed to 1.8% in 2017 from the 2.0% in 2016, one of the lowest growth rates so far this century.
With inflation on a downward trend and inflation expectations for 2017 and 2018 edging closer to the central bank’s target, the central bank embarked on a 300-bp easing cycle taking the policy rate to 4.75% byCOP2,985.78 per US$1.000 at the end of 2017. With inflation seemingly under control and activity continuing to underwhelm. Although the Colombian Central Bank maintained its policy rate during the first quarter of 2018, the expectation is for the central bank to continue lowering the policy rate during 2018.
Despite the implementation of the tax reform in 2017 (that included raising the VAT rate from 16% to 19%), underwhelming activity and still low oil prices kept the pressure on fiscal metrics. This led Standard & Poor’s rating agency to lower Colombia’s long-term foreign currency sovereign credit rating by a notch, to ‘BBB-’. There is concern over Colombia’s ability to meet the fiscal targets starting in 2019 (the fiscal rule has a 1% of GDP nominal deficit target to be gradually reached by 2024, from the 4.0% deficit for 2016). The other two major rating agencies still rate Colombia one notch higher and two above investment grade. Taken a bit by surprise from the downgrade, the Finance Ministry made adjustments to spending for 2017 and 2018 to ensure alignment with the fiscal rule targets: 3.6% deficit for 2017 and 3.1% for 2018.
Colombia will hold presidential elections in May 2018 and, if necessary, a second round in June 2018. The next government taking office in August 2018 will inherit high levels of spending and the recent S&P downgrade highlights the risks ahead. Regardless of who is elected, the next president will be reluctant to meaningfully slash investment. This will make it difficult for the next administration to meet the fiscal deficit targets. Senator Iván Duque (right), recently backed by former president Alvaro Uribe, former vice president German Vargas Lleras (center-right), centrist former Medellin mayor Sergio Fajardo, and former Bogota mayor Gustavo Petro (left) look like the most competitive candidates at this stage. Duque’s plan will include cuts in corporate and consumption taxes, although these would likely be restrained by fiscal accounts. Vargas Lleras has promised a tax reform that includes a reduction in the corporate taxes and stricter control of tax evasion. He has been vocally in favor of a more flexible fiscal rule. Despite an alliance with some center-left and leftist players, Fajardo would aim to ensure macroeconomic continuity, while less eager to lower taxes. Meanwhile, Gustavo Petro has expressed his intentions to increase property and corporate taxes.
Inflation
General
In the past, Chile has experienced high levels of inflation, which has significantly affected our financial condition and results of operations during such periods. In recent years, Chile has experienced relatively low inflation rates, with sporadic episodes where price growth deviated from the Chilean Central Bank’s2%-4% target range. In ~~2014, 2015,~~ 2016, 2017 and ~~2017~~2018 the inflation rate was ~~4.6%~~2.7%, ~~4.4%~~2.3%, ~~2.7%~~ and ~~2.3%,~~2.6% respectively. Our results of operations reflect the effect of inflation in the following ways:

·                  a substantial portion of our assets and liabilities are denominated in UF. The UF is a unit of account, the peso value of which is indexed daily to reflect inflation recorded in the previous month. The net increase or decrease in the nominal peso value of ourUF-denominated assets and liabilities is reflected as income or loss in our income statement, and

·the rates of interest earned and paid on peso-denominated assets and liabilities reflect, to a certain degree, inflation and expectations regarding inflation.
Under Chilean law, banks are authorized to earn interest income on loans that are adjustable for the effects of inflation. Most banks, including Itaú Corpbanca, charge an interest rate that includes an estimate of future inflation. In addition, the peso-denominated value of our assets and liabilities that are denominated in UF fluctuate as the UF is adjusted based on inflation. In the case of assets, these fluctuations are recorded as income (for increases in the peso-denominated value) and losses (for decreases in the peso-denominated value). In the case of liabilities, these fluctuations are recorded as losses (for increases in the peso-denominated value) and income (for decreases in the peso-denominated value).
Colombia has experienced high levels of inflation recently amid its currency depreciation and supply-side shocks affecting food prices. The rate of inflation in Colombia in ~~2014, 2015,~~ 2016, 2017 and ~~2017~~2018 was ~~3.7%~~5.8%, ~~6.8%, 5.8%~~4.09% and ~~4.09%~~3.18%, respectively. At its peak, the12-month inflation rate reached 9% in July 2016. The components that led the elevated level of inflation inyear-end 2016 were food (with a 7.2% increase from 2015), housing (a 4.8% increase from 2015) and transport (a 4.5% increase from 2015), while the normalization of food production in 2017 (1.9% food inflation from 2016) helped pull inflation down.
UF-Denominated Assets and Liabilities
The UF is revalued by the INE on a monthly basis. Every day in the period beginning the tenth day of the current month through the ninth day of the succeeding month, the nominal Chilean peso value of the UF is indexed up (or down in the event of deflation) in order to reflect each day a proportional amount of the prior calendar month’s change in the CPI. One UF was equal to Ch$~~25,629.09,~~26,347.98, Ch$~~26,347.98~~26,798.14 and Ch$~~26,798.14~~27,565.79 as of December 31, ~~2015,~~ 2016, 2017 and ~~2017,~~2018, respectively. The effect of any changes in the nominal Chilean peso value of ourUF-denominated assets and liabilities is reflected in our results of operations as an increase (or decrease, in the event of deflation) in interest income and expense, respectively. Our net interest income is positively affected by increases in inflation to the extent that our averageUF-denominated assets exceed our averageUF-denominated liabilities. Conversely, our net interest income will be negatively affected by inflation in any period in which our averageUF-denominated liabilities exceed our averageUF-denominated assets. Our averageUF-denominated assets exceeded our averageUF-denominated liabilities by Ch$~~1,088,868~~2,402,718 million, Ch$~~2,402,718~~3,401,660 million and Ch$~~3,401,660~~3,377,750 million during the years ended December 31, ~~2015,~~ 2016, 2017 and ~~2017,~~2018, respectively. See “Item 4. Information on the Company—B. Business Overview—Principal Business Activities—Selected Statistical Information— Average Balance Sheets, Income Earned from Interest-Earning Assets and Interest Paid on Interest Bearing Liabilities.”
Chilean Peso-Denominated Assets and Liabilities
Interest rates prevailing in Chile are materially affected by the current rate of inflation during the period and market expectations concerning future inflation. The responsiveness to such prevailing rates of our Chilean peso-denominated interest-earning assets and interest bearing liabilities varies. See “—“Item 5. Operating and Financial Review and Prospects—Interest ~~Rates”~~Rates,” Item 5. Operating and ~~“—Results~~Financial Review and Prospects —Results of Operations” below and “Item 11. Quantitative and Qualitative Disclosures about Financial Risk.” We maintain a substantial amount ofnon-interest bearing Chilean peso-denominated demand deposits. The ratio of the average balance of such demand deposits to average interest-earning assets was ~~3.4%~~2.1%, 2.1% and ~~2.1%~~2.6% during the years ended December 31, ~~2015,~~ 2016, 2017 and ~~2017,~~2018, respectively. Because such deposits are not sensitive to inflation or changes in the market interest rate environment, any decline in interest rates or the rate of inflation adversely affects our net interest margin on assets funded with such deposits and any increase in the rate of inflation increases the net interest margin on such assets.
Interest Rates
Interest rates earned and paid on our assets and liabilities, respectively, reflect, to a certain degree, inflation, expectations regarding inflation, shifts in short-term interest rates set by the Central Bank of Chile and the Central Bank of Colombia and movements in long-term real rates.
Interest Rates in Chile
The Central Bank of Chile manages short-term interest rates based on its objective of maintaining currency stability. Because our liabilities are generallyre-priced to reflect interest rate changes more frequently than our interest-earning assets, changes in the rate of inflation or in the monetary policy interest rate published by the Central Bank of Chile are reflected in the interest rates we pay on our liabilities before such changes are reflected in the interest rates we earn on our assets. Therefore, when short-term interest rates fall, our net interest margin is positively impacted, but when short-term rates increase, our interest margin is negatively affected. At the same time, our net interest margin tends to be adversely affected in the short term by a decrease in inflation because generally ourUF-denominated assets exceed ourUF-denominated liabilities. See “Item 5. Operating and Financial Overview and Prospects—A.
Operating Results—The Economy—Developments in the Chilean Economy” and “—“—UF-denominated Assets and Liabilities” above. An increase in long-term interest rates also has a positive effect on our net interest margin, because our interest-earning assets generally have a longer duration than our interest bearing liabilities.
In addition, because our Chilean peso-denominated liabilities have relatively shortre-pricing periods, they are generally more responsive to changes in inflation or short-term rates than ourUF-denominated liabilities. As a result, during periods when current inflation or expected inflation exceeds the previous month’s inflation, customers often switch funds from Chilean peso-denominated deposits to more expensiveUF-denominated deposits, thereby adversely affecting our net interest margin. See “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Sources of Liquidity—Financial Investments.”
Interest Rates in Colombia
The Central Bank of Colombia manages short-term interest rates based on its objectives of maintaining a low and stable inflation rate, stabilizing output around its natural levels and contributing to the preservation of financial stability.
Colombian commercial banks, finance corporations and financing companies are required to report data to the Central Bank of Colombia on a weekly basis regarding the total volume (in Colombian pesos) of certificates of deposit issued during the prior week and the average interest rates paid for certificates of deposit with maturities of 90 days. Based on such reports, the Central Bank of Colombia calculates the Depósito a Término Fijo ~~(Fixed~~(“Fixed Term Deposit Interest ~~Rate,~~Rate” or ~~DTF)~~“DTF”) rate, which is the main benchmark interest rate in Colombia and is published at the beginning of the following week. The DTF is the weighted average interest rate paid by commercial banks, finance corporations and financing companies for certificates of deposit with maturities of 90 days.
As of ~~April 2, 2018,~~March 31, 2019 the DTF rate was ~~4.89%~~4.51%. The Central Bank of Colombia also calculates the interbank rate ~~(Interé~~(Interés Bancario de ~~Referencia),~~Referencia or ~~IBR,~~“IBR”), which acts as a reference of overnight andone-month interbank loans, based on quotations submitted each business day by eight participating banks to the Central Bank of Colombia. Using a weighted average of the quotations submitted, the Central Bank of Colombia calculates the overnight IBR each business day. Theone-month IBR is calculated each Tuesday. Article 884 of the Colombian Commercial Code provides for a limit on the amount of interest that may be charged in commercial transactions. The limit is 1.5 times the current banking interest rate ~~(Interé~~(Interés Bancario ~~Corriente)~~Corriente), calculated as the average of the interest ordinarily charged by banks within a set period of time. The current banking interest rate is certified by the Colombian Superintendency of Finance.
A significant portion of our banking subsidiaries’ assets are linked to the DTF; accordingly, changes in the DTF affect our banking subsidiaries’ net interest income. The Central Bank of Colombia increased its decreased rate to 3.25% on March 26, 2013, and the interest rate remained stable until March of 2014. On average, the DTF went from 7.96% in 2007 to 3.88% in the first quarter of 2014.
From April 2014 to August 2014, the Central Bank of Colombia increased the Repo Rate by 125 ~~bps~~basis points to 4.50%, a level consistent with neutral conditions. After a year on hold, amid accelerating inflation, which led to increasing inflation expectations, and a rapid deterioration of the current account deficit above 6% of GDP, the Central Bank began a monetary tightening cycle in September 2015, taking the policy rate to 5.75% byyear-end. The tightening cycle ended in July 2016, with the policy rate at 7.75%. As inflation began to slow down in the third quarter of the year, the Central Bank moved back to loosening the monetary policy stance with a 25 basis point cut to 7.50% in December 2016. The easing cycle continued in 2017, with further cuts totaling 275 ~~bps~~basis points leading to the policy rate ending 2017 at 4.75%.
Rates reached 4.25% in April 2018.
In response to the changing monetary policy conditions, the DTF adjusted upward moving from 4.34% in 2014 to 5.22% at the end of December 2015 and 7.59% by the end of July 2016, before retreating to 6.86% byyear-end 2016. As monetary loosening proceeded in 2017, the DTF rate dropped to 5.21% byyear-end.
Currency Exchange Rates
A material portion of our assets and liabilities is denominated in foreign currencies, principally the U.S. dollar and the Colombian peso. Our reported income is affected by changes in the value of the Chilean peso with respect to foreign currencies (principally the U.S. dollar and Colombian peso) because such assets and liabilities, as well as interest earned or paid on such assets and liabilities, and gains (losses) realized upon the sale of such assets, are converted to Chilean pesos in preparing our consolidated financial statements. The Chilean government’s economic policies and any future changes in the value of the Chilean peso against the U.S. dollar could adversely affect our financial condition and results of operations. In the past, the Chilean peso has been subject to significant volatility when compared to the U.S. dollar. In 2014, the Chilean peso depreciated against the U.S. dollar by 15.0% as compared to 2013. In 2015 the Chilean peso depreciated against the U.S. dollar by 17.3% as compared to 2014. In 2016, the Chilean peso appreciated against the U.S. dollar by 5.7% as compared to 2015. In 2017, the Chilean peso appreciated against the U.S. dollar by 1.3% as compared to 2016. In 2018, falling copper prices and a risk aversion sentiment led to a 12% depreciation of the Chilean peso. The exchange rate between the Chilean peso and the U.S. dollar as of December 31, 2016, 2017 and ~~2017~~2018 was Ch$669.81, Ch$615.22, and Ch$~~615.22~~694.00 per US$1.00, respectively. The Chilean peso may be subject to significant fluctuations in the future.
Entering into forward exchange transactions enables us to reduce the negative impact of material gaps between the balances of our foreign currency-denominated assets and liabilities. As of December 31, ~~2015,~~ 2016, 2017 and ~~2017,~~2018, the gap between foreign currency denominated assets and foreign currency denominated liabilities, including forward contracts, was Ch$~~235,611~~(481,755) million, Ch$(531,771) million and Ch$~~(481,755) million and Ch$(502,542)~~793,218 million, respectively.
Critical Accounting Policies and Estimates
General
In our filings with the SEC, we prepare our consolidated financial statements in accordance with IFRS. In preparing our consolidated financial statements, we use estimates and assumptions to account for certain assets, liabilities, revenues, expenses and other transactions. While we review these estimates and assumptions in the ordinary course of business, the portrayal of our financial condition and results of operations often require our management to make judgments regarding the effects on our financial condition and results of operations on matters that are inherently uncertain. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances. The following discussion describes those areas that require the most judgment or involve a higher degree of complexity in the application of the accounting policies that currently affect our financial condition and results of operations. Actual results may differ from those estimated under different variables, assumptions or conditions, and if these differences could have a material impact on our reported results of operations. Note 1 to our consolidated financial statements contains a summary of our significant accounting policies.
In addition to the critical accounting policies described below, information regarding other accounting policies is set forth in the notes to our consolidated financial statements.
Allowance for Loan Losses
WeStarting January 1, 2018, we record our allowances following our internal models for the recording of expected credit losses according to IFRS 9. For further details see “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information—Impairment Assessment as of January 1, 2018 (Under IFRS 9).”
Until December 31, 2017, we recorded our allowances following our internal models for the recording of incurred ~~debt.~~debt in accordance with IAS 39. To establish impairment losses, the ~~bank carries~~Bank carried out an evaluation of outstanding loans and accounts receivable from customers, as detailed below:

·~~Individual assessment of debtors: When debtors are recorded as individually significant,~~ ~~i.e.~~, when they have significant debt levels or, even for those that do not have these levels, could be classified in a group of financial assets with similar credit risk features and who, due to the size, complexity or level of exposure, require
•
Individual assessment of debtors: Conducted for debtors who were recorded as individually significant (i.e., when they had significant debt levels) or could be classified in a group of financial assets with similar credit risk features and that, due to the size, complexity or level of exposure, required detailed information. See “Item 4. Information on the Company—Business Overview—Selected Statistical Information— Classification of Banks and Loan Portfolios; Allowances for Loan Losses” and “Note 1—General Information and Summary of Significant Accounting Policies—q. Allowances for loan losses” of our consolidated financial statements.

·~~Group assessment of debtors~~: When there is no evidence of impairment for individually-assessed debtors and debtors with loans grouped collectively—whether or not significant—the bank groups debtors with similar credit risk features and assesses them for impairment. Debtors individually assessed for impairment and for whom a loss due to impairment has been recorded are not included in the group assessment of impairment. See “Item 4. Information on the Company—Business Overview—Selected Statistical Information— Classification of Banks and Loan Portfolios; Allowances for Loan Losses”, and “Note 1—General Information and Summary of Significant Accounting Policies—q. Allowances for loan losses” of our consolidated financial statements.
•
Group assessment of debtors: Conducted when there was no evidence of impairment for individually-assessed debtors and debtors with loans treated collectively regardless of significance status. Individually-assessed debtors with a recorded loss due to impairment were not included in the group assessment.
For a further description ~~of regulations~~ relating to loan classification and provisioning, see “Item 4. Information on the Company—B. Business Overview—~~Principal~~Selected Statistical Information—Impairment Assessment as of January 1, 2018 (Under IFRS 9)” and “Item 4. Information on the Company—B. Business Overview—~~Chilean Banking Regulation and Supervision— Classification of Banks and Loan Portfolios; Allowances for Loan Losses.~~Selected Statistical Information—Impairment Assessment prior to January 1, 2018 (Under IAS 39).”
Derivative Financial Instruments
Derivative financial instruments are recorded at fair value. Fair values are based on market quotes, discounted cash flow models and option valuations, as appropriate. If market information is limited or in some instances, not available, management applies its professional judgment. Other factors that may also affect estimates are incorrect model assumptions, market dislocations and unexpected correlations. Notwithstanding the level of subjectivity in determining fair value, we believe our estimates of fair value are adequate. The use of different models or assumptions could lead to changes in our reported results. See “Note 1—General Information and Summary of Significant Accounting Policies.”
In addition, we make loans and accept deposits in amounts denominated in foreign currencies, principally the U.S. dollar. Such assets and liabilities are translated at the applicable exchange rate at the balance sheet date.
Financial Investments
See “Item 5. Operating and Financial ~~investments are summarized as follows:~~
~~Trading Instruments~~~~. Instruments~~Review and Prospects—Operating Results—The Economy—Recently Adopted and New Accounting Pronouncements” for ~~trading are securities acquired for which we have the intent to generate earnings from short-term price fluctuations or through brokerage margins or that are included in~~ a ~~portfolio created for such purposes. Instruments for trading are valued at their fair value according to market prices on the closing date~~detailed description of ~~the balance sheet. See “Note 1—General Information and Summary of Significant Accounting Policies.”~~
~~Investment Instruments~~. Investment instruments are classified into two categories: held to maturity investments and instruments available-for-sale. Held to maturity investments only include those instruments for which we have the intent and ability to hold to maturity. Investment instruments not classified as held to maturity or trading are considered to be available-for-sale. Investment instruments are recorded initially at cost. Instruments available-for-sale are valued at each subsequent period-end at their fair value. Gains or losses from changes in fair value are recognized in other comprehensive income within line item “financial instruments available for sale.” All purchases and sales of investment instruments to be delivered within the deadline stipulated by market regulations and conventions are recognized on the trade date, which is the date on which the commitment is made to purchase or sell the asset. Other purchases or sales are treated as forwards until they are liquidated. See “Note 1— General Information and Summary of Significant Accounting Policies.”
We enter into security repurchase agreements as a form of borrowing. The liability for the repurchase of the investment is classified as “obligations under repurchase agreements” and is carried at cost plus accrued interest.
We also enter into resale agreements as a form of investment. Under these agreements we purchase securities, which are included as assets under the caption “investments under agreements to resell” and are carried at cost plus accrued interest.
our financial investments.
Estimate of Impairment of Goodwill
We assess annually, or when there is a triggering event, whether goodwill has experienced any impairment, according to the accounting policy described in our consolidated financial statements. The recoverable amount of the cash generating units (“CGUs”) has been determined using the methodology of a dividend discount model. This methodology considers the cash flows that would generate the dividends distributed to its shareholders in a perpetual forecast projection, discounted at their rate of cost of capital at the valuation date. In this way, the economic equity value can be estimated, using projections of cash flows derived from financial budgets and other assumptions approved by the management. The projection of cash flows is carried out using the functional currency of each country and considering a horizon of ~~six~~five years, after which the cash flows are projected to perpetuity using growth rates of the gross domestic product aligned with those rates expected for the markets in which a particular CGU operates. These calculations are carried out by each CGU. Thesix-year period projections are based on historical information from the previous year and the main macroeconomic variables affecting the markets involved in the calculations.
Estimates and judgments included in the calculations of recoverable amounts are based on historical experience and other factors, including the expectations of management for future events that are considered reasonable in the current circumstances. Due to the inherent uncertainty associated with considering these estimates, actual results could differ from those estimates. Future events and changing market conditions may impact the Bank’s assumptions as to future interest and commissions’ revenue, net interest margin growth rates or discount rates, which may result in changes in the estimates of the Bank’s future cash flows.
The following factors, among others, could significantly impact the impairment analysis and may result in future goodwill impairment charges that, if incurred, could have a material adverse effect on the Company’s financial condition and results of operations:

·The macroeconomic factors in both the Chilean and Colombian markets may not recover and evolve from ~~2018~~2019 onwards in line with current expectations.

·The operational integration of the banks in Chile is not completed by 2019.

·The operational integration, introduction of the Itaú brand and client segmentation in the Colombian market may not have the expected impact. Additionally, the Bank may not achieve the change in the product mix as stated in its formal budgets and plans. ~~As a result, the Colombia CGU may not be able to achieve breakeven result during 2018 and a business recovery from 2019 onwards.~~

·The recovery of the Bank’spre-merger market share in Colombia expected to occur by 2023, depends on the achievement of the projection of an annual composed average growth rate for the loans portfolio, during the first years.
Recently Adopted and New Accounting Pronouncements
See Note ~~1 of~~2 to our consolidated financial statements for a detailed description of recently adopted and new accounting pronouncements in ~~IFRS.~~IFRS, the most significant of which is IFRS 9:
IFRS 9 Financial Instruments
We adopted IFRS 9 as issued by the IASB in July 2014 with a date of transition of January 1, 2018, which resulted in changes to our accounting policies. The adoption of IFRS 9 has resulted in changes in our accounting policies for recognition, classification and measurement of financial assets and financial liabilities and impairment of financial assets. IFRS 9 also significantly amends other standards dealing with financial instruments such as IFRS 7 “Financial Instruments: Disclosures”.
As per the permitted transitional provisions of IFRS 9, we elected not to revise comparative figures; accordingly, some IFRS 9 disclosures presented in our consolidated financial statements and this Annual Report with respect to certain financial assets are not comparable since their classification and measurement may differ between IFRS 9 and the prior standard of IAS 39.
Any adjustments to the carrying amounts of financial assets and liabilities as of the date of transition were recognized as an adjustment to the opening retained earnings. We have elected to continue to apply the hedge accounting requirements of IAS 39 on the adoption of IFRS 9.
Consequently, for disclosures purposes, the amendments to IFRS 7 have also been applied to the current period only. The comparative period disclosures shows those disclosures made in the prior year.
Set out below are disclosures regarding the impact of the adoption of IFRS 9 on us and further details of the specific IFRS 9 accounting policies applied in the current period (as well as the previous IAS 39 accounting policies applied in the comparative period).
Classification and Measurement of Financial Instruments

IAS 39 as of December 31, 2017

IFRS 9 as of January 1, 2018

Balance

Measurement
category

Portfolio
   Book Value
MCh$
Measurement
category

Portfolio
   Book Value
MCh$
Trading investments
   Fair value through profit or loss    Financial instruments classified as trading investments    415,061    Financial instruments at fair value through profit or loss    Financial instruments at fair value through profit or loss    423,855
Investments instruments
   Fair value through profit or loss    Financial assets available for sale (including those that were valued at cost at December)    2,663,478    Financial instruments at fair value through other comprehensive income    Financial instruments at fair value through other comprehensive income    2,658,739
   Amortized cost    Financial assets classified as held to maturity    202,030    Amortized cost    Financial instruments at fair value through profit or loss    201,993
Loans and accounts receivable from customers
   Amortized cost    Loans and accounts receivable from customers, net of allowances for loan losses according to IAS 39.    19,764,078    Amortized cost    Loans and accounts receivable from customers, net of allowances for loan losses according to IFRS 9.    19,612,201
Interbank loans
   Amortized cost    Interbank loans, net of allowances for loan losses according to IAS 39.    70,077    Amortized cost    Interbank loans, net of allowances for loan losses according to IFRS 9.    70,077
•
Classification of financial assets
Financial assets are classified into a measurement category based on both our business model for managing the financial asset and the contractual cash flow characteristics of our financial asset.
Contractual cash flow assessment determine if the cash flows from the financial asset meet the SPPI (solely payment of principal and interest) criterion, i.e. whether the contractual terms of the financial asset give rise, on specific dates, to cash flows that are solely payments of principal and interest. Principal is the fair value of the financial assets at initial recognition, and interest is the consideration for the time value of money, the credit risk associated with the principal outstanding, and also may include liquidity risk, administrative cost and profit margin.
For classification process we perform the SPPI test, which assesses the contractual term to identify whether they meet SPPI criterion, the contract is a basic lending arrangement. We apply judgment and consider relevant factors such as currency in which the financial asset is denominated, and period for which the interest rate is set.
Business model refers to how we manage our financial assets in order to generate cash flows. We determined our business model on initial application of IFRS 9 at the level that best reflects how it manages groups of financial assets to achieve its business objective.
Our business model represents how financial assets are managed to generate cash flows and does not depend on our management’s intention regarding an individual instrument, but at a higher level of aggregated portfolio and is based on observable factors such as: risks that affect the performance of business model; how business managers are compensated; how the performance of business model is assessed and reported to our management.
In addition, our business model is not assessed on aninstrument-by- instrument basis, but at a higher level of aggregated portfolio and is based on observable factors such as: performance of the financial assets, the risk that affect the performance, and the expected frequency, value and timing of sales, among others.
In accordance with IFRS 9 the business models are:
•
Held to collect business model (HTC). Financial assets that are held within a business model whose objective is to hold assets in order to collect contractual cash flows are managed to realize cash flows by collecting contractual payments over the life of the instrument, under this business model sales made when there is an increase in the credit risk, or to manage credit concentration risk are not inconsistent with a business model whose objective is to hold financial assets to collect contractual cash flows.
•
Held to collect and sell (HTC&S). Financial assets under this business model achieve the objective by both collecting contractual cash flows and selling financial assets, then involve a greater frequency and value of sales than HTC business model.
•
Other business model. Financial assets held in this business has the objective of realizing cash flows through the sale of the assets. We make decisions based on our assets’ fair values and manage the assets to realize those fair values.
Reclassification
Reclassification of financial assets is required if, and only if, the objective of our business model for managing those financial assets changes. Financial liabilities cannot be reclassified.
Measurement of Financial Instruments
Initial measurement
On initial recognition, financial assets and financial liabilities are measured at the transaction price, i.e. the fair value of the consideration given or received (IFRS 13). In the case of financial instruments not at fair value through profit or loss, transaction costs of financial assets and financial liabilities carried at fair value are expensed in profit or loss.
Subsequent measurement- financial assets
After initial recognition, we measure a financial asset at:
•
Amortized cost.Financial assets that are held in a business model to collect the contractual cash flows and contain contractual terms that give rise on specific dates to cash flows that are SPPI, are measured at amortized cost. The effective interest method is used in the calculation of the amortized cost of a financial asset or a financial liability and in the allocation and recognition of the interest revenue or interest expense in profit or loss over the relevant period.
•
FVOCI.Financial assets that are debt instruments held in a business model that is achieved by both collecting contractual cash flows and selling, and that contain contractual terms that give rise on specific dates to cash flows that are SPPI, are measured at FVOCI. They are subsequently remeasured at fair value and changes therein (except for those relating to impairment, interest income and foreign currency exchange gains and losses) are recognized in other comprehensive income, until the assets are sold. Upon disposal, the cumulative gain and losses in OCI are recognized in the income statements.
•
Fair value through profit or loss (FVTPL).Financial assets that do not contain contractual terms that give rise on specified dates to cash flows that are SPPI, or if the financial assets, or if the financial asset is not held in a business model that is either (i) a business model to collect the contractual cash flows or (ii) a business model that is achieved by both collecting contractual cash flows and selling. Financial assets held for trading are recognized at fair value through profit or loss, likewise derivatives contracts for trading purposes.
For certain equity instruments, we may make an irrevocable election to present subsequent changes in the fair value of the instrument in other comprehensive income, except for dividend income which is recognized in profit or loss. Gains or losses on derecognition of these equity instruments are not transferred to profit or loss.
Subsequent measurement- financial liabilities
After initial recognition, we measure a financial liability at amortized cost, except for derivatives that are measured at fair value through ptofit or loss.
Derecognition of financial assets and liabilities
Financial assets are derecognized when, and only when:
the contractual rights to the cash flows from the financial asset expire, or
we transfer substantially all the risks and rewards of ownership of the financial asset, and therefore we derecognize the financial asset and recognize separately any rights and obligations created or retained in the transfer.
In some cases, we enter into transactions for which it retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows in an arrangement that meets all the conditions required, i.e. we only transfer collected amounts from original assets, selling or pledging original assets is prohibited, and we have the obligation to remit cash flows collected without material delay.
When a financial asset is sold and we simultaneously agree to repurchase it (or an asset that is substantially the same) at a fixed price on a future date, we continue to recognize the financial assets in their entirety in the statements of financial position because it retains substantially all of the risks and rewards of ownership. The cash consideration received is recognized as a financial asset and a financial liability is recognized for the obligation to pay the repurchase price.
Financial liabilities are derecognized when, and only when, they are extinguished, cancelled or expired.
Contingent loans
We issue contingent loans (including letters of credit, foreign letters of credit and performance guarantee) and loan commitments. Contingent loans and undrawn loan commitments are commitments under which, over the duration of the commitment, we are required to provide a loan withpre-specified term to the customer.
The nominal contractual loan value, when the loan agreed to be provided is on market terms, is not recorded in the statements of financial position. The related ECL allowances are disclosed in Note 19.
Offsetting
Financial assets and financial liabilities are offset in the balance sheet only when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously. As of December 31, 2018, we do not have balance offsetting of financial instruments.
Derivatives and hedging activities
We have elected to continue applying the hedge accounting requirements of IAS 39 on adoption of IFRS 9. We have not provided comparative information for prior periods on the date of initial application of IFRS 9 for the new disclosures introduced by IFRS 9 as a consequential amendment to IFRS 7, as permitted by IFRS 7 paragraph 44z. For presentation purposes, derivatives are presented in accordance with their positive or negative fair value as assets or liabilities, respectively, and include trading and hedging instruments separately (see Note 8).
Expected credit losses allowance – under IFRS 9
Starting from January 1, 2018, we replaced the “incurred loss” model of IAS 39 with an “expected credit loss” (“ECL”) model established by IFRS 9. For a description of the expected credit loss model, see “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information—Impairment Assessment as of January 1, 2018 (Under IFRS 9).”
IFRS 15 Revenue from Contracts with Customers
On January 1, 2018, IFRS 15 “Revenues from contracts with customers” became effective. In accordance with our activities, income and expenses arising from fees and commission are under the scope of this new standard. Consequently a review over fees and commissions has been performed, to ensure the five step approach is fully met.
We have elected to adopt IFRS 15 using a modified retrospective approach where the cumulative effect of initially applying it was recognized as an adjustment to the opening balance of retained earnings and comparative information was not restated.
We concluded that there was no impact as of January 1, 2018, however new note disclosure requirements were adopted. See Note 1 and Note 24 to our consolidated financial statements included in this Annual Report.
In addition, new standards and interpretations to IFRS standards have been issued but not yet adopted in our consolidated financial statements as of December 31, ~~2017,~~2018, such as ~~IFRS 9, IFRS 15 and~~ IFRS 16, among others:
IFRS ~~9 Financial Instruments~~16 Leases. ~~We currently expect to adopt~~On January 13, 2016, the IASB published a new standard, IFRS ~~9 on our consolidated~~16 “Leases.” The new standard shall imply that most leases are presented in the lessee’s balance under a single model, eliminating the distinction between operating and financial ~~statements~~leases. However, the accounting for the ~~year ending December 31, 2018.~~
~~During~~lessors remains largely unchanged and the ~~second half of 2017, we have conducted simulations to obtain a better understanding of the potential effect of this new accounting standard. The transition to~~distinction between operating and financial leases is retained. IFRS ~~9 will cause, based~~16 replaces IAS 17 “Leases” and related interpretations and is effective for periods beginning on ~~management’s best estimates, a reduction not higher than 3.8% of stockholders’ equity.~~
or after January 1, 2019. Its early application is allowed, provided that IFRS 15 “Revenue from Contracts with Customers~~. Management has estimated~~” is also applied.
Our management evaluated the impact of the adoption of this new standard ~~and concluded that its adoption~~through the valuation of our lease agreements, recording an asset forright-of-use for an amount equal to the lease liability for an amount of Ch$176,795, which will ~~not have~~generate a ~~significant~~negative impact on our ~~consolidated financial statements.~~
~~IFRS 16 Leases~~~~. IFRS 16 will be effective for the annual periods beginning~~solvency indicator of 11 basis points, going from 14.65% to 14.54% on ~~or after~~ January 1, 2019. Management has estimated the potential impact of the adoption of this new pronouncement by conducting an analysis of the bank’s lease agreements in order to obtain a better understanding of the potential effect of this new accounting standard on both the consolidated financial statements and solvency ratios.
For a description of these new accounting standards, see Note ~~1(gg)~~1(hh) of our consolidated financial statements.
Results of Operations for the Years Ended December 31, ~~2015,~~ 2016, 2017 and ~~2017~~
2018
~~Introduction~~Comparability of the Results
As per the permitted transitional provisions of IFRS 9, we elected not to revise comparative figures; accordingly, some IFRS 9 disclosures presented in our consolidated financial statements and this Annual Report with respect to certain financial assets are not comparable since their classification and measurement may differ between IFRS 9 and the prior standard of IAS 39.
~~In 2016 we focused~~
Introduction
We ended 2018 with Ch$166,854 million in consolidated net income, the strongest result since the merger, posting a 165.6% increase when compared to 2017 based on stronger loan growth with lower delinquency, the ~~integration~~highest net interest income and fee revenues and the lowest cost of ~~operations, brand,~~credit since the Merger, with operating expenses virtually flat when compared to 2017. We believe this is a solid improvement and an important step forward towards the construction of competitive and sustainable results.
The acceleration of economic activity in both Chile and Colombia favored the generation of new business and the credit risk ~~management framework and other policies,~~of part of our loan portfolio. Also, the drop in the monetary policy interest rate in Colombia, which ~~we aligned with~~went from 4.75% at the ~~practices and policies~~beginning of ~~Itaú Unibanco. As~~the year to 4.25% at the end of December, positively impacted our cost of funding in 2018. Finally, a ~~result, we strengthened~~higher inflation in Chile, 2.8% in 2018 compared to a variation of the CPI of 2.3% in 2017, led to an improvement in our ~~balance sheet and liquidity levels but incurred higher extraordinary expenses associated with the integration during this period.~~
financial margin.
In 2017 our main focus was to comply with the terms of the Merger by minimizing its effects on the quality of our service. ~~In this~~That transition year we completed retail migration and client segmentation in Chile.
Economic activity in 2017 was lower than what we initially expected, especially in Chile. While it accelerated toward the end of the year, 2017 showed the lowest growth since 2009. This translated into the lowest loan growth rates in Chile in over seven years. Investment showed a fourth consecutive year of contraction, and commercial loans grew only 1.2% year-over-year. Due to our current portfolio mix, this has noticeable effects on our revenues growth. On the other hand, inflation and interest rates decreased, especially in Colombia where the275-basis point reduction in the year positively affected our banking book.
Net Income (Loss)
~~Our consolidated net loss as reported in our consolidated financial statements for~~For the year ended December 31, ~~2016 was Ch$13,969 million, a 86.8% or Ch$91,797 million decrease from our net income of Ch$105,766 million in 2015.~~
The decrease in our consolidated net income for the year ended December 31, 2016 was primarily due to: (i) higher provisions for loan losses; (ii) higher operating expenses due to the integration process related to the Merger; and (iii) the negative impact of lower inflation in Chile on net interest margin and increased policy rates throughout most of the year in Colombia.
~~As for the year ended December 31, 2017,~~2018, our consolidated financial statements reported a consolidated net income of Ch$~~62,825~~166,854 million, a ~~349.7%~~165.6% or Ch$~~48,856~~104,029 million increase from our net income of Ch$~~13,969~~62,825 million in ~~2016.~~
2017.
The increase in our consolidated net income for the year ended December 31, ~~2017~~2018 was primarily due to: (i) higher net interest income ~~favored by~~and net service fee income as a ~~reduction in~~result of increased activity with our ~~cost of funding, especially in Colombia,~~clients and more favorable market conditions and (ii) ~~gains on the sale of the former Banco Itaú Chile headquarters and (iii) income taxes related to our operations in Colombia.~~
lower provisions for loan loss expenses.
The following table sets forth the components of our net income for the years ended December 31, ~~2015,~~ 2016, 2017 and ~~2017:~~2018:

For the Year Ended December 31,

% Change
from

% Change
from

2015

2016

2017

2016/2015

2017/2016

(in millions of constant Ch$ except for percentages)

Components of net income:

Net interest income

223,290

639,175

782,982

186.3%

22.5%

Net service fee income

71,088

150,796

177,571

112.1%

17.8%

Trading and Investment, foreign exchange gains and other operating income

50,040

83,551

95,965

67.0%

14.9%

Provisions for loan losses

(42,929
)
(245,990
)
(315,417
)
473.0%

28.2%

Total operating expenses

(178,460
)
(616,627
)
(731,147
)
245.5%

18.6%

Income before income taxes

123,029

10,905

9,954

(91.1)%

(8.7)%

Income taxes

(17,263
)
3,568

52,871

(120.7)%

1,381.8%

Income from continuing operations

105,766

14,473

62,825

(86.3)

334.1%

Income from discontinued operations

—

(504
)
—

—

—

Net income for the year

105,766

13,969

62,825

(86.8)%

349.7%

   For the Year Ended December 31,
% Change
from

% Change
from

   2016 2017 2018 2017/2016 2018/2017
   (in millions of constant Ch$ except for percentages)
Components of net income:

Net interest income
   639,175 782,982 887,663 22.5 % 13.4 %
Net fees and commissions
   150,796 177,571 186,129 17.8 % 4.8 %
Trading and Investment, foreign exchange gains and other operating income
   83,551 95,965 181,446 14.9 % 89.1 %
Provisions for loan losses
   (245,990 ) (315,417 ) (279,798 ) 28.2 % 11.3 %
Total operating expenses
   (616,627 ) (731,147 ) (741,527 ) 18.6 % 1.4 %
Income before income taxes
   10,905 9,954 233,913 (8.7 )% 2,249.9 %
Income taxes
   3,568 52,871 (67,059 ) 1,381.8 % (226.8 )%
Income from continuing operations
   14,473 62,825 166,854 334.1 % 165.6 %
Income from discontinued operations
   (504 ) —   —   —   —


Net income for the year
   13,969 62,825 166,854 349.7 % 165.6 %


Net Interest Income
The following table sets forth the components of our net interest income for the years ended December 31, ~~2015,~~ 2016, 2017 and ~~2017:~~2018:

For the Year Ended December 31,

% Change
from

% Change
from

2015

2016

2017

2016/2015

2016/2017

(in millions of constant Ch$ except for percentages)

Interest income

501,982

1,509,203

1,646,329

200.6%

9.1%

Interest expense

(278,692
)
(870,028
)
(863,347
)
212.2%

(0.8)%

Net interest income

223,290

639,175

782,982

186.3%

22.5%

   For the Year Ended December 31,
% Change
from

% Change
from

   2016 2017 2018 2017/2016 2018/2017
   (in millions of constant Ch$ except for percentages)
Interest income
   1,509,203 1,646,329 1,739,317 9.1 % 5.6 %
Interest expense
   (870,028 ) (863,347 ) (851,654 ) (0.8 )% (1.4 )%


Net interest income
   639,175 782,982 887,663 22.5 % 13.4 %


The following table sets forth information as to the components of our interest income for the years ended December 31, ~~2015,~~ 2016, 2017 and ~~2017:~~2018:

For the Year Ended December 31,

% Change
from

% Change
from

2015

2016

2017

2016/2015

2017/2016

(in millions of constant Ch$ except for percentages)

Interest income

501,982

1,509,203

1,646,329

200.6%

9.1%

Average interest-earning assets:

Loans

6,410,592

17,801,885

20,857,542

177.7%

17.2%

Financial investments

496,220

1,610,668

2,166,896

224.6%

34.5%

Interbank deposits

99,485

362,492

361,624

264.6%

(0.2)%

Total average interest-earning assets

7,006,297

19,775,044

23,386,062

182.2%

18.3%

   For the Year Ended December 31,
% Change
from

% Change
from

   2016    2017    2018    2017/2016 2018/2017
   (in millions of constant Ch$ except for percentages)
Interest income
   1,509,203    1,646,329    1,739,317    9.1 % 5.6 %
Average interest-earning assets:

Loans
   17,801,885    20,857,542    20,983,806    17.2 % 0.6 %
Financial investments
   1,610,668    2,166,896    2,986,100    34.5 % 37.8 %
Interbank deposits
   362,492    361,624    203,672    (0.2 )% (43.7 )%








Total average interest-earning assets
   19,775,044    23,386,062    24,173,577    18.3 % 3.4 %








The following table sets forth information as to the components of our interest expense for the years ended December 31, ~~2015,~~ 2016, 2017 and ~~2017:~~2018:

For the year end December 31,

% Change
from

% Change
from

2015

2016

2017

2016/2015

2017/2016

(in millions of constant Ch$ except for percentages)

Interest expense

278,692

870,028

863,347

212.2%

(0.8)%

Average interest-earning liabilities:

Bonds

1,245,617

4,205,997

6,045,928

237.7%

43.7%

Time deposits

3,875,906

9,884,092

10,144,559

155.0%

2.6%

Repurchase agreements

57,267

400,252

596,351

598.9%

49.0%

Mortgage finance bonds

28,123

71,742

72,900

155.1%

1.6%

Other interest-bearing liabilities

1,256,116

4,029,170

4,652,106

220.8%

15.5%

Total average interest-bearing liabilities

6,463,029

18,591,253

21,511,844

187.7%

15.7%

   For the year end December 31,
% Change
from

% Change
from

   2016    2017    2018    2017/2016 2018/2017
   (in millions of constant Ch$ except for percentages)
Interest expense
   870,028    863,347    851,654    (0.8 )% (1.4 )%
Average interest-earning liabilities:

Bonds
   4,205,997    6,045,928    5,789,542    43.7 % (4.2 )%
Time deposits
   9,884,092    10,144,559    10,097,251    2.6 % (0.5 )%
Central Bank borrowings
   —      —      —      —   —
Repurchase agreements
   400,252    596,351    806,223    49.0 % 35.2 %
Mortgage finance bonds
   71,742    72,900    58,939    1.6 % (19.2 )%
Other interest-bearing liabilities
   4,029,170    4,652,106    4,769,459    15.5 % 2.5 %








Total average interest-bearing liabilities
   18,591,253    21,511,844    21,521,414    15.7 % 0.0 %








2018 Compared to 2017
Our net interest income was Ch$887,663 million for the year ended December 31, 2018, an increase of 13.4% as compared to Ch$782,982 million for the year ended December 31, 2017. The increase in interest income was primarily the result of (i) an increase in inflation-related income in Chile and (ii) the decrease in monetary policy rates in Colombia (4.25% as of December 31, 2018, as compared to 4.75% as of December 31, 2017), which positively affected our net interest margin given that our interest-earning assets in Colombia are mostly fixed-rate and with a long duration, whereas our interest-bearing liabilities are mostly floating-rate and with a shorter duration.
The aforementioned factors had a total Ch$104,681 million impact in our net interest margin (net interest income divided by average interest-earning assets), which increased by 32 basis points to 3.67% in 2018 from 3.35% in 2017.
2017 Compared to 2016
Our net interest income was Ch$782,982 million for the year ended December 31, 2017, an increase of 22.5% as compared to Ch$639,175 million for the year ended December 31, 2016. The increase in interest income was primarily the result of (i) the consolidation of former Corpbanca into former Banco Itaú Chile from April 1, 2016 and (ii) the decrease in monetary policy rates in Colombia (4.75% as of December 31, 2017 coming from 7.5% as of December 31, 2016), which positively affected our net interest margin ~~because~~given that our interest-earning assets in Colombia are mostly fixed-rate and with a long duration, ~~and~~whereas our interest-bearing liabilities are mostly floating-rate and with a shorter duration.
The aforementioned factors had a total Ch$143,807 million impact in our net interest margin (net interest income divided by average interest-earning assets), which increased by 12 basis points to 3.35% in 2017 from 3.23% in 2016.
Allowances for Loan Losses
~~2016 Compared to 2015~~
~~Our net interest income was Ch$639,175 million~~Allowance for the year ended December 31, 2016, an increase of 186.3% as compared to Ch$223,290 million for the year ended December 31, 2015. The increase in interest income was primarily the result of the consolidation of former Corpbanca into former Banco Itaú Chile from April 1, 2016. In addition to this factor, our net interest margin was impacted by a lower UF variation in Chile (2.8% in 2016 vs. 4.1% in 2015) and by increased monetary policy rates in Colombia (5.8%loan losses as of December 31, ~~2015, reaching 7.8%~~2018 corresponds to allowances for loans and accounts receivable from customers at amortized cost according to IFRS 9. Prior periods are in ~~August 1, 2016 before declining to 7.5% in December 19, 2016), which negatively affected our net interest margin since our interest-earning assets in Colombia are mostly fixed-rate and~~accordance with a long duration and our interest-bearing liabilities are mostly floating-rate and with a shorter duration. Although decreasing through most of the year, net interest margin in Colombia is higher than in Chile.
The aforementioned factors had a total almost neutral impact in our net interest margin (net interest income divided by average interest-earning assets), which increased by four basis points to 3.23% in 2016 from 3.19% in 2015.
~~Allowances for Loan Losses~~
IAS 39. The following table sets forth information relating to our allowances for loan losses as of December 31, ~~2015,~~ 2016, 2017 and ~~2017:~~2018 2018 (allowance for loan losses as of December 31, 2018 corresponds to allowances for loans and accounts receivable from customers at amortized cost according to IFRS 9 and prior periods are in accordance with IAS 39):

As of December 31,

% Change
from

% Change

2015

2016

2017

2016/2015

from 2016/2017

As of December 31,
% Change
from

% Change
from

(in millions of constant Ch$ except for percentages)

2016 2017 2018 2017/2016 2018/2017

(in millions of constant Ch$ except for percentages)
Total loans (excludes interbank loans)

6,801,071

21,003,952

20,382,605

208.8%

(3.0)%

21,003,952 20,382,605 21,482,490 (3.0 )% 5.4 %
Past due loans(1)

51,241

112,450

131,021

119.5%

16.5%

112,450 131,021 179,875 16.5 % 37.3 %
Non-performing loans(2)

91,097

352,700

462,015

287.2%

31.0%

352,700 462,015 452,947 31.0 % (2.0 %)
Impaired loans(3)

241,811

1,073,831

1,267,703

344.1%

18.1%

1,073,831 1,267,703 1,299,226 18.1 % 2.5 %
Allowances for loan losses

95,579

559,304

618,527

485.2%

10.6%

559,304 618,527 768,120 10.6 % 24.2 %
Allowances for loan losses as a percentage of total loans

1.4%

2.7%

3.0%

89.5%

14.0%

2.7 % 3.0 % 3.6 % 14.0 % 20.1 %

Allowances for loan losses as a percentage of non-performing loans

104.9%

158.6%

133.9%

51.1%

(15.6)%

158.6 % 133.9 % 169.6 % (15.6 )% 26.7 %
Allowances for loan losses as a percentage of impaired loans

39.5%

52.1%

48.8%

31.8%

(6.3)%

52.1 % 48.8 % 59.1 % (6.3 )% 21.1 %
Non-performing loans as a percentage of total loans

1.3%

1.7%

2.3%

25.4%

35.0%

1.7 % 2.3 % 2.1 % 35.0 % (7.0 %)
Allowances for loan losses as a percentage of past due loans

186.5%

497.4%

472.1%

166.7%

(5.1)%

497.4 % 472.1 % 427.0 % (5.1 )% (9.6 %)

⁽¹⁾
Past due loans include all installments and lines of credit more than 90 days overdue. Do not include the aggregate principal amount of such loans.
⁽²⁾
Non-performing loans include the principal and interest on any loan with one installment more than 90 days overdue.
⁽³⁾
Impaired loans include those loans on which there is objective evidence that debtors will not meet some of their contractual payment obligations.
2018 Compared to 2017
Allowances for loan losses (excluding allowances for loan loss on loans and receivables to banks) increased by 24.2% to Ch$768,120 million as of December 31, 2018 compared to Ch$618,527 million as of December 31, 2017. Higher allowances for loan losses resulted primarily from the effects of the first adoption of IFRS 9 in 2018 and provisions we took for new financial assets originated or purchased.
Our~~(1)~~non-performing ~~Past due~~ loans, ~~include all installments~~as a percentage of total loans, decreased to 2.1% as of December 31, 2018 compared to 2.3% as of December 31, 2017. This decrease was the result of lower delinquency rates in our retail and ~~lines~~wholesale operations in Chile, while in Colombia the reduction in delinquency of ~~credit more than 90 days overdue. Do not include~~consumer loans was partially offset by increases in the ~~aggregate principal amount~~delinquency of ~~such loans.~~both the commercial and mortgage portfolios.
~~(2)~~                     ~~Non-performing loans include the principal and interest on any loan with one installment more than 90 days overdue.~~
~~(3)~~                     ~~Impaired loans include those loans on which there is objective evidence that debtors will not meet some of their contractual payment obligations.~~
2017 Compared to 2016
Allowances for loan losses (excluding allowances for loan loss on loans and receivables to banks) increased by 10.6% to Ch$618,527 million as of December 31, 2017 compared to Ch$559,304 million as of December 31, 2016. Higher allowances for loan losses resulted primarily from an increase in provisions for certain corporate clients, both in Chile and in Colombia, as well as higher delinquency rates in our retail operations, especially in Colombia due to the worsening of economic conditions.
Our~~Our~~ non-performing loans, as a percentage of total loans, increased to 2.3% as of December 31, 2017 compared to 1.7% as of December 31, 2016. This increase was the result of higher delinquency rates in our retail operations.
Provisions for Loan Losses
~~2016~~2018 Compared to ~~2015~~2017
~~Allowances~~Provisions for loan losses ~~(excluding allowances~~decreased by 11.3% to Ch$279,798 million for ~~loan loss on loans and receivables to banks) increased by 485.2% to Ch$559,304 million as of~~the year ended December 31, ~~2016~~2018, compared to Ch$~~95,579~~315,417 million ~~as of~~for the year ended December 31, ~~2015. Higher allowances~~2017. The decrease in our provisions for loan losses ~~resulted~~was primarily ~~from the consolidation of former Corpbanca into former Banco Itaú Chile from April 1, 2016. Another important factor leading~~due to ~~the increase in~~lower provisions ~~was the lower economic activity~~expense for corporate clients, both in Chile and ~~Colombia that affected the credit rating of some of our corporate clients after a thorough revision of all of our individually assessed credit exposures.~~in Colombia.
Our non-performing loans, as a percentage of total loans, increased to 1.7% as of December 31, 2016 compared to 1.3% as of December 31, 2015. This increase was the result of increased delinquency in Colombia that affected the local market as a whole due to the reduction in economic activity, as well as an increased delinquency observed in Chile in the fourth quarter of 2016 in personal loans, also as a consequence of the continued slowdown in the economy.
~~Provisions for Loan Losses~~
2017 Compared to 2016
Provisions for loan losses increased by 28.2% to Ch$315,417 million for the year ended December 31, 2017, compared to Ch$245,990 million for the year ended December 31, 2016. The increase in our provisions for loan losses was due ~~to(i)~~to (i) the consolidation of former Corpbanca into former Banco Itaú Chile from April 1, 2016, (ii) provision for some specific corporate clients and (iii) higher delinquency in our retail operations, especially in Colombia.
Net Service Fee Income
~~2016~~2018 Compared to ~~2015~~2017
~~Provisions~~Our net service fee income (including income from financial advisory services) for ~~loan losses increased by 473%~~the year ended December 31, 2018 was Ch$186,129 million, representing a 4.8% increase when compared to Ch$~~245,990~~177,571 million for the year ended December 31, ~~2016, compared~~2017. Our income from service fees during the year ended December 31, 2018 increased by 10.0% to Ch$~~42,929~~237,956 million from Ch$216,420 million for the year ended December 31, ~~2015.~~ 2017. Our expenses from service fees increased by a 33.4% to Ch$51,827 million for the year ended December 31, 2018, from Ch$38,849 million for the year ended December 31, 2017.
The increase in our ~~provisions for loan losses~~net service fee income was ~~due~~driven primarily by higher financial advisory services fees and higher revenues from sales of insurance products to ~~(i) the consolidation of former Corpbanca into former Banco Itaú Chile from April 1, 2016; (ii) lower economic activity both in Chile and Colombia that affected the credit rating of some of~~ our clients in the corporate business unit; and (iii) a thorough revision of all of our individually assessed credit exposures in line with the revised credit policies defined for the merged bank, as part of the integration process.retail clients.
~~Net Service Fee Income~~
2017 Compared to 2016
Our net service fee income (including income from financial advisory services) for the year ended December 31, 2017 was Ch$177,571 million, representing a 17.8% increase when compared to Ch$150,796 million for the year ended December 31, 2016. Our income from service fees during the year ended December 31, 2017 increased by 11.7% to Ch$216,420 million from Ch$193,801 million for the year ended December 31, 2016. Our expenses from service fees decreased by a 9.7% to Ch$38,849 million for the year ended December 31, 2017, from Ch$43,005 million for the year ended December 31, 2016.
The increase in our net service fee income was driven primarily by the consolidation of former Corpbanca into former Banco Itaú Chile from April 1, 2016.
~~2016 Compared to 2015~~
Our net service fee income (including income from financial advisory services) for the year ended December 31, 2016 was Ch$150,796 million, representing a 112.1% increase when compared to Ch$71,088 million for the year ended December 31, 2015. Our income from service fees during the year ended December 31, 2016 increased by 138.2% to Ch$193,801 million from Ch$81,375 million for the year ended December 31, 2015. This increase was partially offset by a 318.1% increase in our expenses from service fees to Ch$43,005 million for the year ended December 31, 2016, from Ch$10, 287 million for the year ended December 31, 2015.
The increase in our net service fee income was driven primarily by the consolidation of former Corpbanca into former Banco Itaú Chile from April 1, 2016. Other than this factor, we experienced lower flat fees due to a reduction in the number of new credit structuring operations in the wholesale business unit in light of reduced investment levels in the Chilean economy.
Other Net Operating Income
The following table sets forth the components of our other net operating income for the years ended December 31, ~~2015,~~ 2016, 2017 and ~~2017:~~2018:

For the Year Ended December 31,

% Change
from

% Change
from

   For the Year Ended December 31,
% Change
from

% Change
from

2015

2016

2017

2016/2015

2017/2016

   2016 2017    2018 2017/2016 2018/2017

(in millions of constant Ch$ as of December 31, 2015 except for percentages)

   (in millions of constant Ch$ except for percentages)
Trading and investment income, net

(33,182
)
112,952

8,268

(440.4)%

(92.7)%

   112,952 8,268    172,755 (92.7 )% 1989.4 %
Foreign exchange gains (losses), net

74,461

(48,848
)
46,165

(165.6)%

(194.5)%

   (48,848 ) 46,165    (17,965 ) (194.5 )% (138.9 )%
Other operating revenue

8,761

19,447

41,532

122.0%

113.6%

   19,447 41,532    26,656 113.6 % (35.8 )%




Trading and investment, foreign exchange gains and other operating income

50,040

83,551

95,965

67.0%

14.9%

   83,551 95,965    181,446 14.9 % 89.1 %




2018 Compared to 2017
In the year ended December 31, 2018, trading and investment, foreign exchange gains and other net operating income increased by 89.1 % to Ch$181,446 million from Ch$95,965 million in 2017. This increase was mainly the result of more favorable market environment and by the result of the hedge position for the tax effect of our investments in Colombia and New York. For tax purposes, the “Servicio de Impuestos Internos” (Chilean Internal Revenue Service) considers that our investments abroad are denominated in U.S. dollars, which for Colombia and our New York Branch, based on the exchange rates of each of the disbursements (not current exchange rates), amounts to US$1,437 million, and for our New York branch amounts to US$ 166 million, respectively. Because we are obligated to translate the valuation of this investment from U.S. dollars to Chilean pesos in our book, the volatility of the exchange rate generates an impact on the net income attributable to shareholders. In order to limit that effect, management has decided to hedge this exposure with financial instruments to be analyzed along with income tax expenses.
2017 Compared to 2016
In the year ended December 31, 2017, trading and investment, foreign exchange gains and other net operating income increased by 14.9% to Ch$95,965 million from Ch$83,551 million in 2016. This increase was mainly the result of the consolidation of former Corpbanca and former Banco Itaú Chile from April 1, 2016 and gains on the sale of the former Banco Itaú Chile headquarters. This was partially offset by the result of the hedge position for the tax effect of our investment in Colombia. For tax purposes, the “Servicio de Impuestos Internos” (Chilean Internal Revenue Service) considers that our investment in Colombia is denominated in U.S. dollars, which, based on the exchange rates of each of the disbursements (not current exchange rates), amounts to US$1,437.51 million. Because we are obligated to translate the valuation of this investment from U.S. dollars to Chilean pesos in our book, the volatility of the exchange rate generates an impact on the net income attributable to shareholders. In order to limit that effect, management has decided to hedge this exposure with financial instruments to be analyzed along with income tax expenses.
~~2016 Compared to 2015~~
In the year ended December 31, 2016, trading and investment, foreign exchange gains and other net operating income increased by 67.0% to Ch$83,551 million from Ch$50,040 million in 2015. This increase was mainly the result of the consolidation of former Corpbanca and former Banco Itaú Chile from April 1, 2016, partially compensated by lower commercial activity of our distribution desk both in derivatives transactions with customers and in regular loan portfolio sales.
Operating Expenses
The following table sets forth the components of our operating expenses for the years ended December 31, ~~2015,~~ 2016, 2017 and ~~2017:~~2018:

For the Year Ended December 31,

% Change
from

% Change
from

   For the Year Ended December 31,
% Change
from

% Change
from

2015

2016

2017

2016/2015

2017/2016

   2016    2017    2018    2017/2016 2018/2017

(in millions of constant Ch$ except for percentages)

   (in millions of constant Ch$ except for percentages)
Personnel salary and expenses

86,711

245,665

281,323

183.3%

14.5%

   245,665    281,323    294,747    14.5 % 4.8 %
Administration expenses

66,831

235,204

305,622

251.9%

29.9%

   235,204    305,622    291,736    29.9 % (4.5 )%
Depreciation and amortization

9,785

63,692

81,845

550.9%

28.5%

   63,692    81,845    86,817    28.5 % 6.1 %
Impairment

—

351

27

—

(92.3)%

   351    27    28    (92.3 )% 3.7 %
Other operating expenses

15,133

71,715

62,330

373.9%

(13.1)%

   71,715    62,330    68,199    (13.1 )% 9.4 %








Total operating expenses

178,460

616,627

731,147

245.5%

18.6%

   616,627    731,147    741,527    18.6 % 1.4 %








2018 Compared to 2017
Operating expenses increased by 1.4% to Ch$741,527 million for the year ended December 31, 2018 from Ch$731,147 million for the year ended December 31, 2017. This increase was primarily the result of higher personnel salary and expenses, an increase in depreciation and amortization that reflects the investments made in technology and a fine in the amount of Ch$ 5,985 million imposed by the SBIF by means of Resolution No. 101 as described in “Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Legal Proceedings.”
2017 Compared to 2016
Operating expenses increased by 18.6% to Ch$731,147 million for the year ended December 31, 2017 from Ch$616,627 million for the year ended December 31, 2016. This increase was primarily the result of the consolidation of former Corpbanca and former Banco Itaú Chile from April 1, 2016.
Income Taxes
~~2016~~2018 Compared to ~~2015~~2017
~~Operating expenses increased by 245.5%~~Our income tax for the year ended December 31, 2018 was an expense of Ch$67,059 million compared to an income of Ch$~~616,627~~52,871 million for the year ended December 31, ~~2016 from Ch$178,460 million for the year ended December 31, 2015.~~2017. This ~~increase was primarily the result of the consolidation of former Corpbanca and former Banco Itaú Chile from April 1, 2016. In addition, our operating expenses were impacted~~change is mostly explained by (i) the ~~integration process, which generated increased severance indemnities with~~change in the ~~reduction of 715 employees~~statutory tax rate from ~~overlapping functions between the merged banks;~~25.5% to 27%; (ii) ~~higher administration expenses from third-party services, such as consultancy;~~a Ch$223,959 million increase in profits before taxes; and (iii) ~~office rental charges, as we start to move to new corporate headquarters; and (iv) higher amortization of intangible asset expenses, as~~ a ~~consequence~~depreciation of the ~~recognition~~Chilean peso against the U.S. dollar observed exchange rate in 2018 that increased the valuation of ~~intangible assets from~~our taxable investment and consequently our tax expense. As we have previously discussed, for tax purposes, our investments in Colombia and New York are considered by the ~~business combination.~~
~~Income Taxes~~
Chilean Internal Revenue Service to be denominated in U.S. dollars and the appreciation/depreciation of this currency when compared to the Chilean peso generates a taxable gain/loss.
2017 Compared to 2016
Our income tax for the year ended December 31, 2017 was Ch$52,871 million compared to an ~~expense~~income of Ch$3,568 million for the year ended December 31, 2016. This change is mostly explained by the consolidation of our operations in Colombia as for tax ~~purposes,~~purposes; the ~~“Servicio~~Chilean Internal Revenue Service (Servicio de Impuestos ~~Internos” (Chilean Internal Revenue Service)~~Internos) considers that our investment in Colombia is denominated in U.S. dollars and the depreciation of this currency when compared to the Chilean peso generated a taxable loss. This loss is compensated by the result of the aforementioned hedge position in Other Net Operating Income. Other factors explaining the change are the local taxes for our U.S. and ~~Panamaian~~Panamanian operations, among other differences, including the tax benefit derived from the acquisition of Helm Bank in 2013 (Ch$20,568 million in 2017 compared with Ch$14,276 million in 2016). These effects were partially offset by the impact of the U.S. tax reform.
~~2016 Compared to 2015~~
Our income tax for the year ended December 31, 2016 was Ch$3,568 million compared to an expense of Ch$17,263 million for the year ended December 31, 2015. This change is mostly explained by (i) the reduction in income before income taxes, from a Ch$123,029 million for the year ended December 31, 2015 to a loss before income taxes of Ch$10,905 million for the year ended December 31, 2016 and (ii) the consolidation of Corpbanca’s Colombian operation into our consolidated financial statements.
Results of Our Operating Segments
The following discussion should be read in conjunction with our consolidated financial statements, especially Note 4 regarding segment information included elsewhere in this ~~annual report.~~Annual Report. The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from these discussed in forward-looking statements as a result of various factors, including those set in forth in “Cautionary Statement Regarding Forward-Looking Statements” and “Item 3D. Risk Factors.”
Overview
Reported segments are determined based on our operating segments: Chile—which includes our New York Branch—and Colombia. Each of Chile and Colombia mainly differentiates by the risks and returns that affect them in their own markets. Reported segments are in accordance with IFRS 8 “Operating Segments.”
The segments presented in this Annual Report correspond to the segments used by the bank after the Merger. Information for 2015, referring to former Banco Itaú Chile’s historical information, is presented using the same segmenting criteria. However, the results for the years ended December 31, 2015 are not comparable to the results for the years ended December 31, 2016 and 2017 because of the Merger. See “Item 3. Key Information—Presentation of Financial and Other Information.”
Chile. The ~~bank’s~~Bank’s commercial activities in Chile have been strategically aligned in four commercial areas directly related to the needs of its clients and the ~~bank’s~~Bank’s strategy: 1) Wholesale Banking (a. Corporate, b. Large Companies and c. Real Estate ); 2) Retail Banking (a. Itaú Personal Bank, b. Itaú, c. Itaú Private Bank, d. Midsize Companies, e.Small-to-Medium-Sized Enterprises or SMEs and f. Banco Condell, our Consumer Finance Division); and 3) Treasury.
The Bank manages these business areas under a managerial reporting system for profitability purposes. The operating results are regularly reviewed by our senior management for operating decisions as one single cash generating unit (“CGU”), to decide about resource allocation for each segment and to evaluate its performance accordingly.
Colombia: Colombia has been identified as a separate operating segment based on the business activities. Its operating results are regularly reviewed by our senior management for operating decisions as one single CGU, to decide about resource allocation for the segment and to evaluate its performance.
The bank’s commercial activities in Colombia are carried out by Itaú Corpbanca Colombia S.A. (former Banco Corpbanca Colombia S.A) and its subsidiaries. The operations and businesses carried out by these entities in that country are related to the needs of their clients and the ~~bank’s~~Bank’s strategy.
Year Ended December 31, 2018 Results
The following table presents summary information related to each of our operating segments for the year ended December 31, 2018:
   As of December 31, 2018
   Chile    Colombia    Total
   MCh$    MCh$    MCh$
Net interest income
   591,575    296,088    887,663
Net fees and commissions
   149,673    36,456    186,129
Net Trading and investment income
   128,264    44,491    172,755
Net foreign exchange gain (loss)
   5,726    (23,691 )    (17,965 )
Other operating income
   14,337    12,319    26,656
Provision for loan losses
   (127,804 )    (151,994 )    (279,798 )






Total operating income, net of provision for loan losses
   761,771    213,669    975,440






Depreciation and amortization
   (53,544 )    (33,273 )    (86,817 )
Other operating expenses
   (442,943 )    (211,767 )    (654,710 )






Total operating expenses
   (496,487 )    (245,040 )    (741,527 )






Income before taxes
   265,284    (31,371 )    233,913






Income (loss) taxes
   (85,269 )    18,210    (67,059 )
Income from continuing operations
   180,015    (13,161 )    166,854
Income (loss) from continuing operations
   —      —      —






Net income for the period
   180,015    (13,161 )    166,854






Average loans
   16,250,960    4,732,846    20,983,806
Average investments
   1,764,400    1,303,562    3,067,962
Year Ended December 31, 2017 Results
The following table presents summary information related to each of our operating segments for the year ended December 31, 2017:

As of December 31, 2017

Chile

Colombia

Total

MCh$

MCh$

MCh$

Net interest income

537,540

245,442

782,982

Net services fees income

135,624

41,947

177,571

Trading and investment income, net

(49,615
)
57,883

8,268

Foreign exchange gains (losses), net

34,661

11,504

46,165

Other operating income

33,398

8,134

41,532

Provision for loan losses

(169,233
)
(146,184
)
(315,417
)
Total operating income, net of provision for loan losses, interest and fees

522,375

218,726

741,101

Other income and expenses

—

—

—

Depreciation and Amortization

(51,213
)
(30,632
)
(81,845
)
Other Operating expenses

(424,733
)
(224,569
)
(649,302
)
Total operating expenses

(475,946
)
(255,201
)
(731,147
)
Income before taxes

46,429

(36,475
)
9,954

Income (loss) taxes

31,188

21,683

52,871

Income from continuing operations

77,617

(14,792
)
62,825

Income (loss) discontinued operations

—

—

—

Net income for the period

77,617

(14,792
)
62,825

Average loans

15,950,784

4,906,758

20,857,542

Average investments

1,565,017

1,141,938

2,706,955

   As of December 31, 2017
   Chile    Colombia    Total
   MCh$    MCh$    MCh$
Net interest income
   537,540    245,442    782,982
Net fees and commissions
   135,624    41,947    177,571
Net trading and investment income
   (49,615 )    57,883    8,268
Net foreign exchange gains (losses)
   34,661    11,504    46,165
Other operating income
   33,398    8,134    41,532
Provision for loan losses
   (169,233 )    (146,184 )    (315,417 )






Total operating income, net of provision for loan losses
   522,375    218,726    741,101






Depreciation and amortization
   (51,213 )    (30,632 )    (81,845 )
Other operating expenses
   (424,733 )    (224,569 )    (649,302 )
Total operating expenses
   (475,946 )    (255,201 )    (731,147 )






Income before taxes
   46,429    (36,475 )    9,954






Income (loss) taxes
   31,188    21,683    52,871
Income from continuing operations
   77,617    (14,792 )    62,825
Income (loss) discontinued operations
   —      —      —






Net income for the period
   77,617    (14,792 )    62,825






Average loans
   15,950,784    4,906,758    20,857,542
Average investments
   1,565,017    1,141,938    2,706,955
Year Ended December 31, 2016 Results
The following table presents summary information related to each of our operating segments for the year ended December 31, 2016:

As of December 31, 2016

Chile

Colombia

Total

MCh$

MCh$

MCh$

Net interest income

459,705

179,470

639,175

Net services fees income

112,147

38,649

150,796

Trading and investment income, net

38,642

74,310

112,952

Foreign exchange gains (losses), net

(26,744
)
(22,104
)
(48,848
)
Other operating income

9,058

10,389

19,447

Provision for loan losses

(146,812
)
(99,178
)
(245,990
)
Total operating income, net of provision for loan losses, interest and fees

445,996

181,536

627,532

Other income and expenses

—

—

—

Depreciation and Amortization

(40,610
)
(23,082
)
(63,692
)
Other Operating expenses

(397,060
)
(155,875
)
(552,935
)
Total operating expenses

(437,670
)
(178,957
)
(616,627
)
Income before taxes

8,326

2,579

10,905

Income (loss) taxes

(84
)
3,652

3,568

Income from continuing operations

8,242

6,231

14,473

Income (loss) discontinued operations

(504
)
—

(504
)
Net income for the period

7,738

6,231

13,969

Average loans

12,645,761

5,156,124

17,801,885

Average investments

830,584

1,142,595

1,973,180

   As of December 31, 2016
   Chile    Colombia    Total
   MCh$    MCh$    MCh$
Net interest income
   459,705    179,470    639,175
Net fees and commissions
   112,147    38,649    150,796
Net trading and investment income
   38,642    74,310    112,952
Net foreign exchange gains (losses)
   (26,744 )    (22,104 )    (48,848 )
Other operating income
   9,058    10,389    19,447
Provision for loan losses
   (146,812 )    (99,178 )    (245,990 )






Total operating income, net of provision for loan losses
   445,996    181,536    627,532






Depreciation and amortization
   (40,610 )    (23,082 )    (63,692 )
Other operating expenses
   (397,060 )    (155,875 )    (552,935 )
Total operating expenses
   (437,670 )    (178,957 )    (616,627 )






Income before taxes
   8,326    2,579    10,905






Income (loss) taxes
   (84 )    3,652    3,568
Income from continuing operations
   8,242    6,231    14,473
Income (loss) discontinued operations
   (504 )    —      (504 )






Net income for the period
   7,738    6,231    13,969






Average loans
   12,645,761    5,156,124    17,801,885
Average investments
   830,584    1,142,595    1,973,180
~~Year Ended December 31, 2015~~Analysis of Segment Results
2018 Compared to 2017
~~The following table presents summary information related~~We ended 2018 with Ch$166,854 million in consolidated net income, which consisted of a gain of Ch$180,015 million in Chile and a loss of Ch$13,161 million in Colombia. This is the strongest result since the merger, posting a 165.6% increase when compared to ~~each~~2017, based on stronger loan growth with lower delinquency, the highest net interest income and fee revenues and the lowest cost of credit since the merger, with operating expenses virtually flat when compared to 2017. We believe this is a solid improvement and an important step forward towards the construction of competitive and sustainable results.
From a macroeconomic perspective, the events with the greatest impact on our results by segments were: (i) an acceleration of economic activity in both Chile and Colombia, which favored both the generation of new business and an improvement in the credit risk of part of our ~~operating segments for~~portfolio; (ii) the drop in the monetary policy rate in Colombia, which went from 4.75% at the beginning of the year ~~ended~~to 4.25% at the end of December, ~~31, 2015:~~positively impacting our cost of funding in 2018; and (iii) a higher inflation in Chile, 2.8% in 2018 against a variation of the CPI of 2.3% in 2017, which improved our financial margin.

As of December 31, 2015

Chile

Colombia

Total

MCh$

MCh$

MCh$

Net interest income

223,290

—

223,290

Net services fees income

71,088

—

71,088

Trading and investment income, net

(33,182
)
—

(33,182
)
Foreign exchange gains (losses), net

74,461

—

74,461

Other operating income

8,761

—

8,761

Provision for loan losses

(42,929
)
—

(42,929
)
Total operating income, net of provision for loan losses, interest and fees

301,489

—

301,489

Other income and expenses

—

—

—

Depreciation and Amortization

—

—

—

Other Operating expenses

—

—

—

Total operating expenses

(178,460
)
—

(178,460
)
Income before taxes

123,029

—

123,029

Income (loss) taxes

(17,263
)
—

(17,263
)
Income from continuing operations

105,766

—

105,766

Income (loss) discontinued operations

—

—

—

Net income for the period

105,766

—

105,766

Average loans

6,410,592

—

6,410,592

Average investments

496,220

—

496,220

Despite the positive factors in Colombia mentioned in the paragraph above, in 2018, we did not achieve the expected turn-around point in Colombia mainly due to the effects of our first time adoption of IFRS 9. Nevertheless, despite a continued challenging environment in Colombia, our gross operating income showed a more sustainable trend primarily as a result of two main factors: (i) the normalization of our interest margins as we incorporated the effects of the normalization of market risk in our banking book; and (ii) a strong focus on cost management and efficiency as this is part of the culture we are establishing at the bank in Colombia.
Overall, we believe that despite a prolonged slow economic cycle, we are on track to achieving a gradual increase in sustainable results that are more in line with the overall markets in both of our segments.
2017 Compared to 2016
Our consolidated net income for 2017 was a gain of Ch$62,825 million, which is composed of a gain of Ch$77,617 million in Chile and a loss of Ch$14,792 million in Colombia, showing a recovery compared to 2016.
Macroeconomic and other factors specific to Itaú Corpbanca influenced our 2017 result. From the macroeconomic perspective, the events with the greatest impact on our results were: (i) the reduction in economic activity in both Chile and Colombia, which negatively affected both the generation of new business as well as the credit risk of a part of our loan portfolio; (ii) the drop in the monetary policy interest rate in Colombia, which went from 7.50% at the beginning of the year to 4.75% at the end of December, positively impacting our cost of funding in the year; and (iii) lower inflation in Chile, 1.7% in 2017 against a variation of the CPI of 2.7% in 2016, which reduced our financial margin.
B. LIQUIDITY AND CAPITAL RESOURCES
We maintain adequate liquidity to ensure our ability to honor withdrawals of deposits, make repayments of other liabilities at maturity, extend loans and meet our own working capital requirements.
Sources of Liquidity
Our funding strategy aims for diversification by counterparties and maturities, both in the domestic and foreign markets. We are permanently monitoring the main vulnerability factors that could affect our current and potential capacity to obtain funding. Our objective is to ensure a diversified funding base by tenors within a risk appetite framework and cost structure. Stable and diversified financing is obtained through different sources by types of providers, products and markets. In this way, we have generated robust liquidity levels to face potential liquidity stress scenarios.
Regarding mismatches, our Assets and Liabilities Committee (ALCO) defines the limitation framework. Within this framework, each unit manages term mismatches. Once the ALCO has set the limits of term mismatches, they are confirmed by our board of directors.
From a liquidity point of view, the ALCO also proposes to the board of directors the liquidity reserves that each unit must maintain and manage. The determination of these limits depends, among other things, on the maturity structure for the next 30 days, on the type of customers holding short-term deposits andon-demand deposits and on other obligations we maintain. The ALCO also defines the type of eligible instruments to be considered liquidity reserves, and it periodically monitors the liquidity levels maintained at all time. The compliance of the entire structure of limits is monitored daily by our Market Risk department.
For our operations in Chile, the main source of funding are deposits provided by three major types of clients: (i) institutional investors; (ii) large corporations; and (iii) retail clients.
For short-term funding (less than one year), we usually issue deposits. Interest rates granted to clients consider characteristics of stability of the funding by type of customer and terms associated with the operation.
If the funding requirements are longer than one year, we may also carry out other operations such as bilateral credits with correspondent banks, syndicated loans with foreign banks, and the issuance of bonds in both the local and foreign markets.
The choice of one or the other of the aforementioned options will depend, among other factors, on the tenor, the specific price conditions and the amount. In general, in transactions between one and three years, bilateral credits are used with correspondent banks
and syndicated loans. For operations exceeding these terms, we access the capital markets through bonds. The price conditions and the size of the transaction will determine if the issuance will be carried out in the domestic or in the foreign market.
On the other hand, our funding strategy considers not having currency mismatches and, therefore, for operations carried out in foreign markets to finance operations in local currency, derivatives are used to transform the foreign currency into local currency. Any mismatch of currencies presented on the balance sheet is measured in our currency risk reports that are daily calculated.
Within this context, in ~~2017~~2018 Itaú Corpbanca successfully placed Ch$~~1,014~~383 billion senior bonds in the local market ~~between the first and third quarters of 2017~~ (ChS$~~612~~1,032 billion in ~~2016)~~2017) seeking longer tenor and maintaining comfortable liquidity levels under BIS III standards. In addition, the spreads obtained on these issuances have allowed for an improvement in the cost of funds.
Our strategy of diversification also includes two syndicated loans, one for US$465 million (Ch$~~285,733~~323,496 million) maturing in April 2020 and a US$200 million (Ch$~~122,896~~139,138 million) AB Loan arranged by the International Finance Corporation (“ IFC”) (a five-year tenor for the A Loan and a three-year tenor for the B Loan, maturing in December 2020 and December 2018, respectively)~~, and a five-year tenor subordinated loan granted by IFC to Itaú Corpbanca Colombia in 2017 for US$105 million (Ch$64,520 million)~~.
Capital
As of December 31, ~~2017,~~2018, our shareholders’ equity was in excess of that required by Chilean regulatory requirements. According to the Chilean General Banking Act (as amended, including by Law No. 21,130), as a general rule a bank must have (1) an effective net equity of at least 8% of its risk-weighted assets, net of required reserves, and(2) paid-in capital and reserves (basic capital) not lower than (y) 4.5% of ~~at least~~its risk weighted assets and (z) 3% of its total assets, in both cases, net of required reserves. Nevertheless, when approving the Merger, the SBIF required that Itaú Corpbanca must have an effective net equity of at least 10% of its risk-weighted assets, net of required reserves.
Note, however, that in any of the following events a higher effective net equity and/or a higher basic capital may be required:
(1)
If at the moment in which the incorporation deed of a bank is granted (or at the moment in which the authorization of existence of a branch of a foreign bank is granted), at least 50% of the minimumpaid-in capital and reserves, or basic capital (capital básico) (i.e., UF800,000 (Ch$22,052.6 million or US$31.7 million as of December 31, 2018)) has not been paid, the respective bank shall have an additional basic capital equal to 2% of its risk weighted assets, net of required allowances, above the general minimum basic capital of 4.5%plus any additional basic capital that may be applicable pursuant to number (2) below. The additional 2% requirement will be reduced to 1% once the bank’s paid basic capital reaches UF 600,000 (Ch$16,539.5 million or US$23.8 million as of December 31, 2018).
(2)
Once the CMF replaces the SBIF, the following shall occur:
a.
Within 18 months from the date in which such replacement occurs, the CMF shall issue a regulation (with the affirmative consent of the Council of the Chilean Central Bank) setting forth (i) the standardized methodology for risk weighting the assets of a bank and, (ii) in the event of banks authorized to use their own methodologies, the requirements to use and implement them. Once such regulation becomes effective, a bank will be required to have an additional basic capital equal to 2.5% of its risk weighted assets, net of required allowances, above the minimum requirements. This additional requirement will come into effect progressively during a4-year term at a ratio of 0.625% per year, starting on the date in which the CMF issues the aforementioned regulation;
b.
Within 18 months from the date in which such replacement occurs, the CMF shall issue a regulation setting forth the conditions that may trigger the imposition by the Chilean Central Bank of an additional basic capital requirement of up to 2.5% of a bank’s risk weighted assets, net of required allowances, above the minimum requirements. This additional requirement may be imposed by the Chilean Central Bank on a general basis applicable to all banking institutions, as a contra-cyclical measure;
c.
Within 18 months from the date in which such replacement occurs, the CMF shall issue a regulation (with the affirmative consent of the Council of the Chilean Central Bank), which shall set forth the criteria for considering a bank or group of banks of systemic importance. Further, with the affirmative vote of the Chilean Central Bank, the CMF may determine, through a grounded resolution, that a bank is of systemic importance. In such event, the CMF will be entitled to impose, among others, one or more of the following conditions: (y) an increase between 1% and 3.5% to the basic capital over risk weighted assets, net of required allowances, above the aforementioned 8% minimum effective net equity (Patrimonio Efectivo) requirement; and (z) an increase of up to 2% to the basic capital over total assets, net of required allowances, above the aforementioned 3% minimum basic capital requirement.
The conditions imposed on a bank qualified of systemic importance, may be terminated in the event the Council of the CMF determines that a bank no longer has systemic importance; and
d.
If after a review process, to the judgment of the CMF, a bank presents risks not properly protected with the equity requirements mentioned above, the CMF may impose additional equity requirements. Such additional equity requirements may consist in an additional basic capital, or one or more of the instruments listed in numbers (ii), (iii) and (iv) of the following paragraph. In any event, the additional equity requirements shall not exceed 4% of its risk weighted assets, net of required allowances. For these purposes, the CMF shall issue a regulation which shall set forth the criteria applicable in these cases.
For these purposes, the effective net equity of a bank is the sum of (i) a bank’s basic capital, (ii) bonds issued without a maturity date and preferred stock issued once the CMF issues a regulation authorizing their issuance. These instruments shall be valued at their issue price, for an amount up to one third of its basic capital, (iii) subordinated bonds issued by a bank valued at their ~~placement~~issue price up to 50% of its net capital base; provided that the value of the bonds shall decrease 20% for each year that lapses during the period commencing six years prior to their maturity, and ~~(iii)~~(iv) voluntary loan loss allowances in an amount up to 1.25% of a bank’s risk-weighted assets (if a bank has goodwill, this value would be required to be deducted from the calculation of the effective net equity). Note that the CMF shall issue a regulation setting forth (A) the standardized methodology for risk weighing the assets of a bank, and (B) in the event of banks authorized to use their own methodologies, the requirements to use and implement them. Once such regulations are issued, voluntary allowances shall be considered up to the following amounts: (y) up to 1.25% of its credit risk weighted assets, if standard methodologies are applied, or (z) 0.625% in the eventnon-standard methodologies are applied, (v) minority interests of up to 20% of the basic capital (provided that if such minority interests exceed 20%, only 20% will be taken into account), minus (vi) goodwill or premiums, paid balances and investments in companies that are not consolidated and (vii) certain deductions to be made in accordance with provisions of chapter12-1 of the regulations of the SBIF (Recopilación Actualizada de Normas), or the Regulations of the SBIF.
The calculation of the effective net equity does not include the capital contributions made to subsidiaries of a bank and is made on a consolidated basis rather than on an unconsolidated basis. ~~For purposes~~
Pursuant to Transitory Article First of ~~weighing~~Law No. 21,130, until the date in which the CMF issues the regulations that shall set forth (i) the standardized methodology for calculating risk-weighted assets, and (ii) in the event of banks authorized to use their own methodologies, the requirements to use and implement them, in order to weight the risk of a bank’s assets, the ~~Chilean General Banking Act considers the~~ following five different categories of assets ~~based on the nature of the issuer, availability of funds, nature of the assets and existence of collateral securing such assets:~~will apply:

Category

Weighting
1

0%
2

10%
3

20%
4

60%
5

100%
Category
   Weighting
1
   0 %
2
   10 %
3
   20 %
4
   60 %
5
   100 %
Basic capital is defined as a bank’spaid-in capital and reserves and is similar to Tier 1 capital, except that does not deduct goodwill nor intangible assets.
Reserves
Under the Chilean General Banking Act in effect as of December 31, 2018 (i.e., without considering the amendments under Law No. 21,130), a bank must have a minimumpaid-in capital and reserves of UF 800,000 (Ch$~~21,438.5~~22,052.6 million or US$~~34.9~~31.7 million as of December 31, ~~2017)~~2018). However, a bank may begin its operations with 50% of such amount, provided that it has a total capital ratio (defined as effective net equity as a percentage of risk weighted assets) of not less than 12%. When such bank’spaid-in capital reaches UF600,000 (Ch$~~16,078.9~~16,539.5 million or US$~~26.2~~23.8 million as of December 31, ~~2017)~~2018) the total capital ratio required is reduced to 10%.
The following table sets forth our minimum capital requirements as of the dates indicated. See Note 34 to our consolidated financial statements included herein for a description of the minimum capital requirements.

As of December 31,

2015

2016

2017

(in millions of constant Ch$ except
for percentages)

Net capital base

792,503

3,173,516

3,189,876

3% total assets net of provisions

(293,014
)
(957,058
)
(915,261
)
Excess over minimum required equity

499,489

2,216,458

2,274,615

Net capital base as a percentage of the total assets, net of provisions

8.11%

9.95%

10.46%

Effective net equity

871,029

3,252,175

3,249,572

10% of the risk-weighted assets*

(587,087
)
(2,319,500
)
(2,215,179
)
Excess over minimum required equity

283,942

932,675

1,034,393

Effective equity as a percentage of the risk-weighted assets

11.87%

14.02%

14.67%

*Except for 2015, which was 8% of the risk-weighted assets.
   As of December 31,
   2016 2017 2018

(in millions of constant Ch$ except
for percentages)

Net capital base
   3,173,516 3,189,876 3,324,531
3% total assets net of provisions
   (957,058 ) (915,261 ) (953,445 )


Excess over minimum required equity
   2,216,458 2,274,615 2,371,086


Net capital base as a percentage of the total assets, net of provisions
   9.95 % 10.46 % 10.46 %
Effective net equity
   3,252,175 3,249,572 3,415,845
10% of the risk-weighted assets
   (2,319,500 ) (2,215,179 ) (2,331,556 )


Excess over minimum required equity
   932,675 1,034,393 1,084,289


Effective equity as a percentage of the risk-weighted assets
   14.0 % 14.7 % 14.6 %
Our capital ratio levels ~~increased from 14.0%~~decreased to ~~14.7% between 2016 and~~14.6% in 2018 when compared to 2017 ~~principally~~primarily due to the ~~reduction~~increase of ~~risk weighted~~risk-weighted assets ~~especially commercial loans~~being partly compensated by an increase in core capital, driven by higher net income.
With respect to the minimumpaid-in capital and ~~available~~reserves applicable to a bank under the Chilean Banking Act as amended by Law No. 21,130, See “Item 3. Key Information—Presentation of Financial and Other Information—Specific Loan Information.”
Financial Investments
Since 2018, our financial investments are classified into measurement categories based on both our business model for ~~sale securities.~~
managing the financial asset and the contractual cash flow characteristics of the financial asset. For periods prior to 2018, our financial investments are classified at the time of purchase, based on our management’s determination, as trading or investment instruments, the latter being categorized as~~Financial Investments~~available-for-sale
~~The following tables set forth~~ or held to maturity. For additional details on our investment in Chilean government and corporate securities and certain other financial investments as of December 31, ~~2015,~~ 2016, 2017 and ~~2017. Financial investments are classified at~~2018, please see “Item 4. Information on the ~~time of the purchase, based on management’s intentions, as either trading or investment instruments, the latter of which are categorized as available-for-sale or held to maturity.~~Company—Business Overview—Selected Statistical Information — Investment Portfolio.”

As of December 31,

2015

2016

2017

(in millions of Ch$)

Held-for-trading:

Chilean Central Bank and Government securities:

Chilean Central Bank bonds

1,583

8,349

1,705

Chilean Central Bank notes

—

—

2,258

Other Chilean Central Bank and Government securities

4,828

17,855

3,163

Other National institution securities:

Bonds

—

786

5

Notes

—

—

—

Other securities

—

12,608

—

Foreign institution securities:

Bonds

—

547,499

381,262

Notes

—

—

—

Other securities

—

11,727

8,147

Mutual funds investments

Funds managed by related organizations

11,354

33,733

18,521

Funds managed by third parties

—

—

—

Total

17,765

632,557

415,061

As of December 31,

2015

2016

2017

(in millions of Ch$)

Available-for-sale

Chilean Central Bank and Government securities

Chilean Central Bank securities

218,757

901,239

687,945

Chilean Treasury bonds

32,112

272,734

1,081,879

Other Government securities

—

—

14,053

Other financial instruments

Promissory notes related to deposits in local banks

31,193

397,898

114,038

Chilean mortgage finance bonds

—

76

64

Chilean financial institutions bonds

230,448

2,607

9,032

Other local investments

—

32,230

6,159

Financial instruments issued abroad

Foreign governments and central bank instruments

—

284,444

420,687

Other foreign investments

—

162,882

300,740

Impairment provision

—

—

Unquoted securities in active markets

Chilean corporate bonds

—

—

18,469

Other investments

2,475

19,967

10,412

Impairment provisions

—

—

—

Total

514,985

2,074,077

2,663,478

As of December 31,

2015

2016

2017

(in millions of Ch$)

Held to maturity

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 institutions bonds

—

—

—

Other local investments

—

—

—

Financial instruments issued abroad

Foreign governments and central bank instruments

—

226,433

—

Other foreign investments

—

—

202,030

Impairment provision

—

—

—

Unquoted securities in active markets

Chilean corporate bonds

—

—

—

Other investments

—

—

—

Impairment provisions

—

—

—

Total

—

226,433

202,030

We do not hold securities of any issuer other than the Central Bank of Chile and the Colombian Ministry of Finance, in which the aggregate book value of which the investment exceeds 10% of our shareholders’ equity as of the end of the latest reported period.
~~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, 2017:~~

In one
year or
less

Weighted
average
Nominal
Rate

After
one
year
through
five
years

Weighted
average
Nominal
Rate

After
five
years
through
ten
years

Weighted
average
Nominal
Rate

After
ten
years

Weighted
average
Nominal
Rate

Total

Ch$

%

Ch$

%

Ch$

%

Ch$

%

Ch$

(in millions of Ch$, except for percentages)

Held—for—trading

Central Bank and Government securities:

Chilean Central Bank securities

573

0.9

818

2.3

293

1.3

150

2.1

1,834

Chilean Central Bank notes

2,147

0.20

—

—

—

—

—

—

2,147

Others Government securities

406

4.0

2,222

6.6

—

—

516

3.5

3,144

Other national institution securities:

Bonds

—

—

—

—

—

—

5

6.7

5

Notes

—

—

—

—

—

—

—

—

—

Other securities

—

—

—

—

—

—

—

—

—

Other local investments

—

—

—

—

—

—

—

—

—

Foreign institution securities:

Bonds

166,591

0.1

193,631

4.99

21,040

0.1

—

—

381,262

Notes

—

—

—

—

—

—

—

—

—

Other securities

3,233

3.29

—

—

—

—

4,914

—

8,147

Mutual fund investments:

Funds managed by related organizations

18,521

—

—

—

—

—

—

—

18,521

Funds managed by third parties

—

—

—

—

—

—

—

—

—

Total Held—for—trading

191,471

0.1

196,670

5.0

21,333

0.1

5,586

0.4

415,061

In one
year or less

Weighted
average
Nominal
Rate

After
one year
through
five years

Weighted
average
Nominal
Rate

After five
years
through
ten years

Weighted
average
Nominal
Rate

After ten
years

Weighted
average
Nominal
Rate

Total

Ch$

%

Ch$

%

Ch$

%

Ch$

%

Ch$

(in millions of Ch$, except for percentages)

Available—for—sale

Chilean Central Bank and Government securities:

Chilean Central Bank securities

309,502

0.7

356,246

3.0

22,197

3.6

—

—

687,945

Chilean treasury bonds

—

—

669,794

2.4

402,930

3.4

9,155

3.0

1,081,879

Others Government securities

—

—

14,053

2.3

—

—

—

—

14,053

Other financial instruments:

Promissory notes related to deposits in local banks

114,038

0.2

—

—

—

—

—

—

114,038

Chilean mortgage finance bonds

—

—

1

3.6

64

3.4

—

—

64

Chilean financial institution bonds

—

—

—

—

9,032

1.9

—

—

9,032

Other local investments

6,159

—

—

—

—

—

—

—

6,159

Financial instruments issued abroad:

Foreign Government and central bank instruments

53,573

0.1

305,394

0.1

61,720

0.1

—

—

420,687

Other foreign investments

102,021

—

171,469

0.05

16,197

0.1

11,053

3.37

300,740

Impairment provision

—

—

—

—

—

—

—

—

—

Unquoted securities in active markets

Chilean corporate bonds

9,660

2.9

8,809

5.3

—

—

—

—

18,469

Other foreign investments

10,412

—

—

—

—

—

—

—

10,412

Impairment provision

—

—

—

—

—

—

—

—

—

Total

605,365

0.5

1,525,765

1.8

512,140

2.8

20,208

3.2

2,663,478

Within one
year

Weighted
average
Nominal
Rate

After
one
year
through
five
years

Weighted
average
Nominal
Rate

After
five
years
through
ten years

Weighted
average
Nominal
Rate

After ten
years

Weighted
average
Nominal
Rate

Total

Ch$

%

Ch$

%

Ch$

%

Ch$

%

Ch$

(in millions of Ch$, except for percentages)

Held to maturity

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

186,738

2.2

15,292

0.1

—

—

—

—

202,030

Other foreign investments

—

—

—

—

—

—

—

—

—

Impairment provision

—

—

—

—

—

—

—

—

—

Unquoted securities in active markets

Chilean corporate bonds

—

—

—

—

—

—

—

—

—

Other investments

—

—

—

—

—

—

—

—

—

Impairment provision

—

—

—

—

—

—

—

—

—

Total

186,738

2.2

15,292

0.1

—

—

—

—

202,030

Unused Sources of Liquidity
As part of our liquidity policy, we maintain at all times a diversified portfolio of highly liquid assets that can be quickly monetized, including cash, financial investments and Central Bank of Chile and other government securities.
Working Capital
The majority of our funding is derived from deposits and other borrowings from the public. In the opinion of management, our working capital is sufficient for our present needs.
Liquidity Management
We seek to ensure that, even under adverse conditions; we have access to the funds necessary to cover client needs, maturing liabilities and capital requirements. Liquidity risk arises in the general funding for our financing, trading and investment activities. It includes the risk of unexpected increases in the cost of funding the portfolio of assets at appropriate maturities and rates, the risk of being unable to liquidate a position in a timely manner at a reasonable price and the risk that we will be required to repay liabilities earlier than anticipated. See “Item 11. Quantitative and Qualitative Disclosures about Financial Risk” for more detailed information relating to the methods we employ in managing our liquidity.
Cash Flow
The tables below set forth information about our main sources and uses of cash. No legal or economic restrictions exist on the ability of our Chilean subsidiaries to transfer funds to us in the form of loans or cash dividends as long as these subsidiaries abide by the regulations in the Chilean Corporations Law regarding loans to related parties, and dividend payments. In addition, no legal or economic restrictions exist on the ability of our Colombian subsidiaries to transfer funds to us in the form of cash dividends. However, in the case of Itaú Corpbanca Colombia, for the following four to five years there is a possibility that shareholders may vote to capitalize such dividends in order to meet current capital adequacy requirements following Basel standards, as they did in respect of 2013 dividends, 2014 dividends and 2015 dividends. Itaú Corpbanca Colombia may also transfer funds to Itaú Corpbanca in the form of loans, as long as they abide by the regulations in the Colombian financial law regarding loans to related parties. Colombian subsidiaries (other than Itaú Corpbanca Colombia) may not transfer funds to us in the form of loans, due to their limited corporate purpose.
Net Cash (Used in) Provided by Operating Activities

For the Year Ended December 31,

2015

2016

2017

(in millions of constant Ch$ as of December 31, 2017)

Net cash (used in) provided by operating activities

(421,705
)
(978,898
)
(1,390,863
)
   For the Year Ended December 31,
   2016    2017    2018
   (in millions of constant Ch$ as of December 31, 2018)
Net cash (used in) provided by operating activities
   (978,898 )    (1,390,863 )    695,755






Our net cash used in operating activities for the year ended December 31, ~~2017~~2018 increased from Ch$~~978,898~~(1,390,863) million in ~~2016~~2017 to Ch$~~1,390,863~~695,755 million in ~~2017.~~2018. This increase in net cash provided by operating activities was mainly due to increased collections of our trading andnon-trading portfolio related to financial ~~assets available for sale and savings accounts and time deposits decreases.~~
instruments.
Net Cash (Used in) Provided by Investing Activities

For the Year Ended December 31,

2015

2016

2017

(in millions of constant Ch$ as of December 31, 2017

Net cash used in investing activities

(16,481
)
1,589,074

(87,155
)
   For the Year Ended December 31,
   2016    2017 2018
   (in millions of constant Ch$ as of December 31, 2018)
Net cash (used in) provided by investing activities
   1,589,074    (87,155 ) (41,874 )




Our net cash used in investing activities decreased from Ch$~~1,589,074~~(87,155) million for the year ended December 31, ~~2016~~2017 to ~~Ch$87,155~~Ch(41,874) million for the year ended December 31, ~~2017.~~2018. This decrease in net cash used in investing activities was mainly due to ~~a decrease~~an increase in cash ~~and cash equivalents resulting~~inflow from the ~~Corpbanca integration in 2016.~~sales of properties.
Net Cash (Used in) Provided by Financing Activities

For the Year Ended December 31,

2015

2016

2017

(in millions of constant Ch$ as of December 31, 2017

Net cash provided by financing activities

413,217

874,784

349,602

   For the Year Ended December 31,
   2016    2017    2018
   (in millions of constant Ch$ as of December 31, 2018)
Net cash (used in) provided by financing activities
   874,784    349,602    (449,272 )






~~Our~~We saw a reversal in our financing cash flows from a net cash ~~provided by financing activities decreased from Ch$874,784 million for the year ended December 31, 2016 to~~inflow of Ch$349,602 million for the year ended December 31, ~~2017. This 60.0% decrease in~~2017 to a net cash ~~provided by financing activities~~outflow of Ch(449,272) million for the year ended December 31, 2018. This reversal was mainly due to ~~the~~cash outflows associated with our redemption of debt ~~issued and to decrease in capital increase.~~issued.
Deposits and Other Borrowings
The following table sets forth our averagemonth-end balance of our liabilities for the years ended December 31, ~~2015,~~ 2016, 2017 and ~~2017,~~2018, in each case together with the related average nominal interest rates paid thereon.

As of December 31,

2015

2016

2017

Average
Balance

Interest
Paid

Average
Normal
Rate

Average
Balance

Interest
Paid

Average
Normal
Rate

Average
Balance

Interest
Paid

Average
Normal
Rate

(in millions of Ch$ except for percentages

Time deposits

3,875,906

160,901

4.2%

9,884,092

459,381

4.6%

10,144,561

433,237

4.3%

Central Bank borrowings

—

—

—

—

—

—

—

—

Repurchase agreements

57,267

1,772

3.1%

400,252

48,086

12.0%

596,351

32,677

5.5%

Mortgage finance bonds

28,123

2,187

7.8%

71,742

4,241

5.9%

72,900

3,249

4.5%

Bonds

1,245,617

93,555

7.5%

4,205,997

231,053

5.5%

6,045,928

279,635

4.6%

Other interest bearing-liabilities

1,256,116

20,277

1.6%

4,029,170

127,267

3.2%

4,652,106

114,549

2.5%

Subtotal interest-bearing liabilities

6,463,029

278,692

4.3%

18,591,253

870,028

4.7%

21,511,846

863,347

4.0%

Non-interest bearing liabilities:

Non-interest bearing deposits

287,043

1,898,469

2,196,697

Derivatives

307,854

845,920

1,021,662

Other non-interest bearing liabilities

291,216

603,382

817,955

Shareholders’ equity

761,929

2,806,690

3,438,445

Subtotal non-interest bearing liabilities

1,648,042

6,154,461

7,474,759

Total

8,111,071

278,692

24,745,714

870,028

28,986,605

863,347

   As of December 31,
   2016 2017 2018
   Average
Balance    Interest
Paid    Average
Normal
Rate Average
Balance    Interest
Paid    Average
Normal
Rate Average
Balance    Interest
Paid    Average
Normal
Rate
   (in millions of Ch$ except for percentages)
Time deposits
   9,884,092    459,381    4.6 % 10,144,561    433,237    4.3 % 10,097,251    385,734    3.8 %
Central Bank borrowings
   —      —      —   —      —      —   —      —
Repurchase agreements
   400,252    48,086    12.0 % 596,351    32,677    5.5 % 806,223    29,664    3.7 %
Mortgage finance bonds
   71,742    4,241    5.9 % 72,900    3,249    4.5 % 58,939    2,963    5.0 %
Bonds
   4,205,997    231,053    5.5 % 6,045,928    279,635    4.6 % 5,789,542    319,289    5.5 %
Other interest bearing-liabilities
   4,029,170    127,267    3.2 % 4,652,106    114,549    2.5 % 4,769,459    114,004    2.4 %














Subtotal interest-bearing liabilities
   18,591,253    870,028    4.7 % 21,511,846    863,347    4.0 % 21,521,414    851,654    4.0 %














Non-interest bearing liabilities:

Non-interest bearing deposits
   1,898,469       2,196,697       2,334,249
Derivatives
   845,920       1,021,662       1,088,108
Othernon-interest bearing liabilities
   603,382       817,955       786,415
Shareholders’ equity
   2,806,690       3,438,445       3,490,821

Subtotalnon-interest bearing liabilities
   6,154,461       7,474,759       7,699,593






   ��


Total
   24,745,714    870,028    28,986,605    863,347    29,221,007    851,654













Our current funding strategy is to continue to utilize all sources of funding in accordance with their cost, their availability and our general asset and liability management strategy. Our most important source of funding is our time deposits. Time deposits represented ~~47.2%~~46.9% of our average interest bearing liabilities for the year ended December 31, ~~2017.~~2018. We continue to place special emphasis on increasing deposits from retail customers, which consist primarily of checking accounts that do not bear interest and accordingly represent an inexpensive source of funding for us. Our total checking accounts and other demand liabilities ~~increased~~increased/decreased by ~~15.7%~~3.8% as of December 31, ~~2017~~2018 compared to December 31, ~~2016.~~2017. To the extent that these types of deposits represent a larger percentage of our funding base, the percentage represented by time deposits is expected to decrease and, accordingly, we believe that the materiality to our business of uncertainties relating to rolling over deposits will be diminished. We also intend to continue to broaden our customer deposit base, to emphasize core deposit funding and to fund our mortgage loans with the matched funding available through the issuance of letters of credit loans in Chile’s domestic capital markets. Management believes that broadening our deposit base by increasing the number of account holders has created a more stable funding source.
Total Borrowings
The following tables set forth the long-term, short-term and total outstanding amounts of our principal categories of borrowings for the years ended December 31, ~~2015,~~ 2016, 2017 and ~~2017:~~2018.

As of December 31, 2015

Long term

Short term

Total

MCh$

MCh$

MCh$

Loans obtained from the Chilean Central Bank (a)

—

—

—

Obligations under repurchase agreements

—

43,727

43,727

Loans obtained from domestic financial institutions (b)

—

—

—

Loans obtained from foreign financial institutions (b)

20,798

637,802

658,600

Letters of credit (c)

25,261

—

25,261

Bonds (d)

1,382,976

—

1,382,976

Subordinated bonds (e)

96,098

—

96,098

Other financial obligations (f)

13,011

7,722

20,733

Total borrowings

1,538,144

689,251

2,227,395

   As of December 31, 2016
   Long term    Short term    Total
   MCh$    MCh$    MCh$
Loans obtained from the Chilean Central Bank^(a)
   —      —      —
Obligations under repurchase agreements
   —      373,879    373,879
Loans obtained from domestic financial institutions^(b)
   —      —      —
Loans obtained from foreign financial institutions^(b)
   973,294    1,206,576    2,179,870
Letters of credit^(c)
   71,239    14,971    86,210
Bonds^(d)
   3,836,778    453,969    4,290,747
Subordinated bonds^(e)
   1,051,148    32,148    1,083,296
Other financial obligations^(f)
   23,298    2,265    25,563






Total borrowings
   5,955,757    2,083,808    8,039,565






As of December 31, 2016

Long term

Short term

Total

MCh$

MCh$

MCh$

Loans obtained from the Chilean Central Bank (a)

—

—

—

Obligations under repurchase agreements

—

373,879

373,879

Loans obtained from domestic financial institutions (b)

—

—

—

Loans obtained from foreign financial institutions (b)

973,294

1,206,576

2,179,870

Letters of credit (c)

71,239

14,971

86,210

Bonds (d)

3,836,778

453,969

4,290,747

Subordinated bonds (e)

1,051,148

32,148

1,083,296

Other financial obligations (f)

23,298

2,265

25,563

Total borrowings

5,955,757

2,083,808

8,039,565

   As of December 31, 2017
   Long term    Short term    Total
   MCh$    MCh$    MCh$
Loans obtained from the Chilean Central Bank^(a)
   —      —      —
Obligations under repurchase agreements
   —      420,920    420,920
Loans obtained from domestic financial institutions^(b)
   —      21,958    21,958
Loans obtained from foreign financial institutions^(b)
   720,542    1,453,630    2,174,172
Letters of credit^(c)
   55,678    12,260    67,938
Bonds^(d)
   4,178,313    662,605    4,840,918
Subordinated bonds^(e)
   1,041,182    —      1,041,182
Other financial obligations^(f)
   16,255    811    17,066






Total borrowings
   6,011,970    2,572,184    8,584,154






As of December 31, 2017

Long term

Short term

Total

MCh$

MCh$

MCh$

Loans obtained from the Chilean Central Bank (a)

—

—

—

Obligations under repurchase agreements

—

420,920

420,920

Loans obtained from domestic financial institutions (b)

—

21,958

21,958

Loans obtained from foreign financial institutions (b)

720,542

1,453,630

2,174,172

Letters of credit (c)

55,678

12,260

67,938

Bonds (d)

4,178,313

662,605

4,840,918

Subordinated bonds (e)

1,041,182

—

1,041,182

Other financial obligations (f)

16,255

811

17,066

Total borrowings

6,011,970

2,572,184

8,584,154

   As of December 31, 2018
   Long term    Short term    Total
   MCh$    MCh$    MCh$
Loans obtained from the Chilean Central Bank^(a)
   —      —      —
Obligations under repurchase agreements
   —      1,015,614    1,015,614
Loans obtained from domestic financial institutions^(b)
   —      5,863    5,863
Loans obtained from foreign financial institutions^(b)
   497,909    1,823,951    2,321,860
Letters of credit^(c)
   43,029    10,434    53,463
Bonds^(d)
   4,220,626    661,715    4,882,341
Subordinated bonds^(e)
   1,052,111    22,209    1,074,320
Other financial obligations^(f)
   —      12,400    12,400






Total borrowings
   5,813,675    3,552,186    9,365,861






(a)
~~(a)~~ Loans obtained from the Chilean Central Bank
Central Bank borrowings include credit lines for the renegotiations of loans and other Central Bank borrowings. The maturities of the outstanding amounts due are as follows:

As of December 31, ~~2015 (in~~
~~millions of Ch$)~~2016

~~As of December 31, 2016~~
(in millions of
Ch$)
As of
December 31,
2017
(in millions of
Ch$)
As of

December 31,
2018
(in millions of
Ch$)
Loans obtained from Chilean Central Bank
—   —   —
—

—

—

~~Total~~

Total
— —   —

—

—

~~(b) Loans obtained from domestic and foreign financial institutions (foreign borrowings)~~

(b)
Loans obtained from domestic and foreign financial institutions (foreign borrowings)
These are short-term and long-term borrowings from domestic and foreign banks used to fund our foreign trade business. The maturities of the outstanding amounts are as follows:

As of December 31, 2015
(in millions of Ch$)

As of December 31, 2016
(in millions of Ch$)

As of December 31, 2017
(in millions of Ch$)

   As of
December 31,
2016
(in millions of
Ch$)    As of
December 31,
2017
(in millions of
Ch$)    As of
December 31,
2018
(in millions of
Ch$)
Due within 1 year

637,802

1,206,576

1,475,588

   1,206,576    1,475,588    1,829,814
Due after 1 year but within 2 years

10,687

730,642

422,911

   730,642    422,911    319,870
Due after 2 years but within 3 years

10,111

5,068

106,260

   5,068    106,260    17,595
Due after 3 years but within 4 years

—

12,887

15,154

   12,887    15,154    77,993
Due after 4 years but within 5 years

—

6,889

73,536

   6,889    73,536    11,644
Due after 5 years

—

217,808

102,681

   217,808    102,681    70,807






Total

658,600

2,179,870

2,196,130

   2,179,870    2,196,130    2,327,723






~~(c) Letters of credit~~
(c)
Mortgage finance bonds
These securities are used to finance mortgage loans. The range of maturities of these securities is between five and twenty years. Loans are indexed to UF and pay a yearly interest rate.

As of December 31, 2015
(in millions of Ch$)

As of December 31, 2016
(in millions of Ch$)

As of December 31, 2017
(in millions of Ch$)

   As of
December 31,
2016
(in millions of
Ch$)    As of
December 31,
2017
(in millions of
Ch$)    As of
December 31,
2018
(in millions of
Ch$)
Due within 1 year

—

14,971

12,260

   14,971    12,260    10,434
Due after 1 year but within 2 years

—

11,056

9,965

   11,056    9,965    7,612
Due after 2 years but within 3 years

—

10,128

8,114

   10,128    8,114    7,092
Due after 3 years but within 4 years

—

8,158

7,554

   8,158    7,554    6,516
Due after 4 years but within 5 years

—

5,346

6,952

   5,346    6,952    5,908
Due after 5 years

25,261

36,551

23,093

   36,551    23,093    15,901
Total letters of credit

25,261

86,210

67,938







Total mortgage finance bonds
   86,210    67,938    53,463






(d) ~~Bonds~~
Bonds
The bonds are denominated principally in UFs and are primarily used to fund assets with similar durations. The maturities of these bonds are as follows:

As of December 31, 2015
(in millions of Ch$)

As of December 31, 2016
(in millions of Ch$)

As of December 31, 2017
(in millions of Ch$)

Due within 1 year

129,905

453,969

662,605

Due after 1 year but within 2 years

82,349

716,695

516,061

Due after 2 years but within 3 years

135,596

562,914

653,601

Due after 3 years but within 4 years

50,981

657,866

199,908

Due after 4 years but within 5 years

103,172

695,324

312,597

Due after 5 years

880,973

1,203,979

2,496,146

Total bonds

1,382,976

4,290,747

4,840,918

   As of
December 31,
2016
(in millions of
Ch$)    As of
December 31,
2017
(in millions of
Ch$)    As of
December 31,
2018
(in millions of
Ch$)
Due within 1 year
   453,969    662,605    661,715
Due after 1 year but within 2 years
   716,695    516,061    637,595
Due after 2 years but within 3 years
   562,914    653,601    216,695
Due after 3 years but within 4 years
   657,866    199,908    446,323
Due after 4 years but within 5 years
   695,324    312,597    276,047
Due after 5 years
   1,203,979    2,496,146    2,643,966






Total bonds
   4,290,747    4,840,918    4,882,341






The following table sets forth as of the dates indicated our issued bonds. In ~~2017,~~2018, the Bank issued bonds in UF for ~~UF33 million~~UF11,450,000 and in Chilean pesos for Ch$~~130,000~~70,000 million detailed as follows:

As of December 31,

Expiration

Interest

2015

2016

2017

Date

rate

Currency

MCh$

MCh$

MCh$

A

7/1/2017

3.75%

UF

65,223

67,084

—

B

10/1/2017

3.50%

UF

64,682

66,466

—

E

6/1/2032

5.00%

UF

40,809

41,871

42,493

F

1/1/2032

4.00%

UF

26,243

26,961

27,399

G

3/1/2032

4.00%

UF

40,821

41,894

42,529

H

9/1/2015

3.00%

UF

—

—

—

I

10/1/2030

4.00%

UF

26,819

27,533

27,961

J

1/1/2031

4.00%

UF

26,497

27,203

27,625

K

6/1/2021

3.50%

UF

25,638

26,406

26,906

L-2

10/1/2022

3.50%

UF

25,271

26,039

26,543

M-2

10/1/2018

3.50%

UF

25,568

26,332

26,829

N

5/1/2019

3.50%

UF

25,620

26,364

26,839

O

3/1/2021

3.50%

UF

25,343

26,118

26,630

P

3/1/2026

3.75%

UF

25,529

26,262

26,725

Q-1

3/1/2023

3.75%

UF

25,719

26,451

26,912

R-2

2/1/2028

3.75%

UF

25,656

26,387

26,846

S

9/1/2020

3.50%

UF

25,560

26,321

26,814

T

9/10/2022

3.50%

UF

25,573

26,320

26,797

U

9/1/2024

3.75%

UF

25,399

26,144

26,621

V

9/1/2027

3.75%

UF

25,201

25,945

26,425

W

9/1/2029

3.75%

UF

25,176

25,914

26,388

X

3/1/2024

3.80%

UF

51,693

53,118

53,993

Y

3/1/2028

3.80%

UF

51,500

52,943

53,840

Z

2/1/2033

3.80%

UF

26,021

26,739

27,181

AA

6/1/2018

6.70%

CLP

31,161

30,765

27,868

AB

10/1/2029

3.80%

UF

40,741

41,770

42,360

AC

10/1/2033

3.80%

UF

53,437

54,867

55,727

AF

6/1/2022

3.50%

UF

52,328

53,663

54,437

AG

6/1/2024

3.50%

UF

158,130

162,150

164,469

AH

6/1/2029

3.60%

UF

53,415

54,792

55,595

AI

4/1/2020

3.50%

UF

135,596

137,924

138,739

AJ

6/1/2025

3.60%

UF

53,529

58,620

55,554

AL-2

7/1/2025

3.50%

UF

53,078

54,483

55,321

Sub total Ex Itaú

1,382,976

1,421,849

1,300,366

BCORAF0710

7/1/2017

3.00%

UF

—

166,897

—

BCORAG0710

9/10/2018

3.00%

UF

—

81,084

77,592

BCORAI0710

7/1/2020

3.00%

UF

—

195,199

197,220

BCOR-L0707

7/1/2017

3.40%

UF

—

107,869

—

BCORAJ0710

8/3/2021

3.00%

UF

—

75,080

104,654

BCOR-P0110

7/9/2020

7.30%

CLP

—

24,982

23,838

BCORBW0914

8/30/2020

5.00%

CLP

—

46,669

45,379

BCOR-R0110

7/9/2020

4.00%

UF

—

140,226

140,265

BCORUSD0118

1/15/2018

3.13%

USD

—

495,871

452,172

BCORUSD0919

9/22/2019

3.88%

USD

—

517,724

471,546

BCORAL0710

8/3/2023

3.00%

UF

—

110,845

112,173

BCORAN0710

7/1/2025

3.00%

UF

—

179,460

181,908

BCORAO0710

7/1/2026

3.00%

UF

—

234,079

324,089

BCORBX0914

8/30/2021

5.00%

CLP

—

43,336

41,718

BCORCA0914

9/1/2024

5.00%

CLP

—

99,917

100,105

BCORBZ0914

9/1/2023

5.00%

CLP

—

102,921

BCORBY0914

9/1/2022

5.00%

CLP

—

31,306

BCORAP0710

7/1/2027

3.00%

CLF

—

380,404

BCORAQ0710

7/1/2028

3.00%

CLF

—

293,884

BCORAK0710

7/1/2022

3.00%

CLF

—

173,514

Sub total Ex Corpbanca

—

2,519,238

3,254,688

BBSA168B18

3/2/2018

8.99%

COP

—

48,144

45,255

BBSA26SA48

8/10/2020

8.74%

COP

—

46,181

43,406

BBSA316SA060

11/23/2020

8.03%

COP

—

40,364

37,940

BBCR1109B84

10/28/2017

10.33%

COP

—

26,606

—

BBCR3119B84

8/3/2018

10.57%

COP

—

21,005

19,686

BBCR1099B120

12/10/2019

11.30%

COP

—

18,826

17,676

BBSA69C120

8/10/2026

10.68%

COP

—

23,198

21,732

BBSA69C180

8/10/2031

10.95%

COP

—

43,316

40,578

BBSA3169C180

11/23/2031

10.80%

COP

—

49,479

46,388

BBSA168B18

9/2/2017

9.74%

COP

—

19,047

—

BBCR3117C84

8/3/2018

4.58%

COP

—

13,494

13,203

Sub total Corpbanca Colombia

—

349,660

285,864

Total

1,382,976

4,290,747

4,840,918

         As of December 31,
   Expiration
Date    Interest
rate    2016    2017    2018
Currency    MCh$    MCh$    MCh$
A
   7/1/2017    3.75 % UF    67,084    —      —
B
   10/1/2017    3.50 % UF    66,466    —      —
E
   6/1/2032    5.00 % UF    41,871    42,493    43,595
F
   1/1/2032    4.00 % UF    26,961    27,399    28,151
G
   3/1/2032    4.00 % UF    41,894    42,529    43,649
H
   9/1/2015    3.00 % UF    —      —      —
I
   10/1/2030    4.00 % UF    27,533    27,961    28,707
J
   1/1/2031    4.00 % UF    27,203    27,625    28,362
K
   6/1/2021    3.50 % UF    26,406    26,906    27,721
L-2
   10/1/2022    3.50 % UF    26,039    26,543    27,359
M-2
   10/1/2018    3.50 % UF    26,332    26,829    —
N
   5/1/2019    3.50 % UF    26,364    26,839    27,626
O
   3/1/2021    3.50 % UF    26,118    26,630    27,454
P
   3/1/2026    3.75 % UF    26,262    26,725    27,498
Q-1
   3/1/2023    3.75 % UF    26,451    26,912    27,683
R-2
   2/1/2028    3.75 % UF    26,387    26,846    27,616
S
   9/1/2020    3.50 % UF    26,321    26,814    27,621
T
   9/10/2022    3.50 % UF    26,320    26,797    27,587
U
   9/1/2024    3.75 % UF    26,144    26,621    27,409
V
   9/1/2027    3.75 % UF    25,945    26,425    27,212
W
   9/1/2029    3.75 % UF    25,914    26,388    27,168
X
   3/1/2024    3.80 % UF    53,118    53,993    55,488
Y
   3/1/2028    3.80 % UF    52,943    53,840    55,357
Z
   2/1/2033    3.80 % UF    26,739    27,181    27,936
AA
   6/1/2018    6.70 % CLP    30,765    27,868    —
AB
   10/1/2029    3.80 % UF    41,770    42,360    43,430
AC
   10/1/2033    3.80 % UF    54,867    55,727    57,224
AF
   6/1/2022    3.50 % UF    53,663    54,437    55,828
AG
   6/1/2024    3.50 % UF    162,150    164,469    168,660
AH
   6/1/2029    3.60 % UF    54,792    55,595    57,032
AI
   4/1/2020    3.50 % UF    137,924    138,739    141,066
AJ
   6/1/2025    3.60 % UF    58,620    55,554    56,904
AL-2
   7/1/2025    3.50 % UF    54,483    55,321    56,791






         As of December 31,
   Expiration
Date    Interest
rate    2016    2017    2018
Currency    MCh$    MCh$    MCh$
Sub total Former Banco Itaú Chile
         1,421,849    1,300,366    1,278,134






BCORAF0710
   7/1/2017    3.00 % UF    166,897    —      —
BCORAG0710
   9/10/2018    3.00 % UF    81,084    77,592    —
BCORAI0710
   7/1/2020    3.00 % UF    195,199    197,220    202,909
BCOR-L0707
   7/1/2017    3.40 % UF    107,869    —      —
BCORAJ0710
   8/3/2021    3.00 % UF    75,080    104,654    107,049
BCOR-P0110
   7/9/2020    7.30 % CLP    24,982    23,838    23,792
BCORBW0914
   8/30/2020    5.00 % CLP    46,669    45,379    45,254
BCOR-R0110
   7/9/2020    4.00 % UF    140,226    140,265    143,237
BCORUSD0118
   1/15/2018    3.13 % USD    495,871    452,172    —
BCORUSD0919
   9/22/2019    3.88 % USD    517,724    471,546    529,363
BCORAL0710
   8/3/2023    3.00 % UF    110,845    112,173    114,787
BCORAN0710
   7/1/2025    3.00 % UF    179,460    181,908    246,007
BCORAO0710
   7/1/2026    3.00 % UF    234,079    324,089    332,122
BCORBX0914
   8/30/2021    5.00 % CLP    43,336    41,718    42,507
BCORCA0914
   9/1/2024    5.00 % CLP    99,917    100,105    100,303
BCORAR0710
   7/1/2029    3.00 % CLF    —      —      219,939
BCORBZ0914
   9/1/2023    5.00 % CLP    —      102,921    100,992
BCORBY0914
   9/1/2022    5.00 % CLP    —      31,306    103,268
BCORAP0710
   7/1/2027    3.00 % CLF    —      380,404    388,654
BCORAQ0710
   7/1/2028    3.00 % CLF    —      293,884    359,509
BCORAK0710
   7/1/2022    3.00 % CLF    —      173,514    176,185






Sub total Former Corpbanca
         2,519,238    3,254,688    3,235,877






BBSA168B18
   3/2/2018    8.99 % COP    48,144    45,255    —
BBSA26SA48
   8/10/2020    8.74 % COP    46,181    43,406    44,739
BBSA316SA060
   11/23/2020    8.03 % COP    40,364    37,940    39,076
BBCR1109B84
   10/28/2017    10.33 % COP    26,606    —      —
BBCR3119B84
   8/3/2018    10.57 % COP    21,005    19,686    —
BBSA4188B024
   6/21/2020    5.41 % COP    —      —      53,716
BBSA4189C060
   6/21/2023    6.41 % COP    —      —      32,585
BBCR1099B120
   12/10/2019    11.30 % COP    18,826    17,676    18,208
BBSA69C120
   8/10/2026    10.68 % COP    23,198    21,732    22,375
BBSA69C180
   8/10/2031    10.95 % COP    43,316    40,578    41,779
BBSA3169C180
   11/23/2031    10.80 % COP    49,479    46,388    47,792
BBSA168B18
   9/2/2017    9.74 % COP    19,047    —      —
BBCR3117C84
   8/3/2018    4.58 % COP    13,494    13,203    —
BBSA5188B030
   5/22/2021    1.20 % COP    —      —      11,964
BBSA5189C048
   11/22/2022    2.91 % COP    —      —      56,096






Sub total Itaú Corpbanca Colombia
         349,660    285,864    368,330






Total
         4,290,747    4,840,918    4,882,341






(e)
~~(e)~~ Subordinated bonds
The following table sets forth, at the dates indicated our issued subordinated bonds. The subordinated bonds are denominated principally in UFs and are primarily used to fund the ~~bank’s~~Bank’s mortgage portfolio. These bonds are considered to be a part of our regulatory capital.

As of December 31, 2015
(in millions of Ch$)

As of December 31, 2016
(in millions of Ch$)

As of December 31, 2017
(in millions of Ch$)

   As of December 31, 2016
(in millions of Ch$)    As of December 31, 2017
(in millions of Ch$)    As of December 31, 2018
(in millions of Ch$)
Due within 1 year

—

32,148

—

   32,148    —      22,209
Due after 1 year but within 2 years

—

—

21,500

   —      21,500    —
Due after 2 years but within 3 years

—

23,622

—

   23,622    —      —
Due after 3 years but within 4 years

—

—

—

   —      —      18,604
Due after 4 years but within 5 years

—

—

22,303

   —      22,303    22,484
Due after 5 years

96,098

1,027,526

997,379

   1,027,526    997,379    1,011,023






Total subordinated bonds

96,098

1,083,296

1,041,182

   1,083,296    1,041,182    1,074,320






In ~~2017,~~2018, we did not issue subordinated bonds. The following table sets forth as of the dates indicated our issued subordinated bonds:

As of December 31,

Expiration

Interest

2015

2016

2017

Date

rate

Currency

MCh$

MCh$

MCh$

AE1

1/1/2034

3.80%

UF

52,200

53,669

54,585

C1

4/1/2033

3.50%

UF

6,774

6,572

6,285

C2

4/1/2033

3.50%

UF

14,676

14,273

13,681

D

10/1/2033

4.50%

UF

22,448

21,833

20,934

Sub total Ex Itaú

96,098

96,347

95,485

UCOR-V0808

8/1/2033

4.60%

UF

—

157,444

159,479

UCOR-Y1197

11/1/2022

6.50%

UF

—

7,786

6,689

UCOR-Z1197

11/1/2022

6.50%

UF

—

18,176

15,614

UCORAA0809

8/9/2035

4.90%

UF

—

143,413

145,174

UCORBF0710

7/1/2032

4.00%

UF

—

13,795

14,013

UCORBI0710

7/1/2035

4.00%

UF

—

31,723

32,230

UCORBJ0710

7/1/2036

4.00%

UF

—

150,861

153,334

UCORBL0710

7/1/2038

4.00%

UF

—

109,868

111,668

UCORBN0710

7/1/2040

4.00%

UF

—

84,573

85,968

UCORBP0710

7/1/2042

4.00%

UF

—

41,237

41,917

Sub total Ex Corpbanca

—

758,876

766,086

US05968TAB17

3/8/2024

LIBOR +SPREAD 4

USD

—

115,706

106,041

BBSA1099B1

3/30/2019

10.79%

COP

—

483

445

BBSA110BAVA

9/23/2017

10.68%

COP

—

32,148

—

BBSA1099B4

3/30/2019

12.85%

COP

—

23,139

21,055

BBSA1139AS10

2/7/2023

10.08%

COP

—

23,542

21,659

BBSA1139AS15

2/7/2028

10.20%

COP

—

33,055

30,411

Sub total Corpbanca Colombia

—

228,073

179,611

Total

96,098

1,083,296

1,041,182

~~(f) Other financial obligations~~
         As of December 31,
   Expiration    Interest    2016    2017    2018
   Date    rate Currency    MCh$    MCh$    MCh$
AE1
   1/1/2034    3.80 % UF    53,669    54,585    56,130
C1
   4/1/2033    3.50 % UF    6,572    6,285    6,051
C2
   4/1/2033    3.50 % UF    14,273    13,681    13,204
D
   10/1/2033    4.50 % UF    21,833    20,934    20,214






Sub total Former Banco Itaú Chile
         96,347    95,485    95,599






UCOR-V0808
   8/1/2033    4.60 % UF    157,444    159,479    163,359
UCOR-Y1197
   11/1/2022    6.50 % UF    7,786    6,689    5,580
UCOR-Z1197
   11/1/2022    6.50 % UF    18,176    15,614    13,024
UCORAA0809
   8/9/2035    4.90 % UF    143,413    145,174    148,585
UCORBF0710
   7/1/2032    4.00 % UF    13,795    14,013    14,395
UCORBI0710
   7/1/2035    4.00 % UF    31,723    32,230    33,121
UCORBJ0710
   7/1/2036    4.00 % UF    150,861    153,334    157,602
UCORBL0710
   7/1/2038    4.00 % UF    109,868    111,668    114,789
UCORBN0710
   7/1/2040    4.00 % UF    84,573    85,968    88,378
UCORBP0710
   7/1/2042    4.00 % UF    41,237    41,917    43,092






Sub total Former Corpbanca
         758,876    766,086    781,925






US05968TAB17
   3/8/2024    LIBOR +SPREAD 4 USD    115,706    106,041    463
BBSA1099B1
   3/30/2019    10.79 % COP    483    445    120,535
BBSA110BAVA
   9/23/2017    10.68 % COP    32,148    —      —
BBSA1099B4
   3/30/2019    12.85 % COP    23,139    21,055    21,746
BBSA1139AS10
   2/7/2023    10.08 % COP    23,542    21,659    22,484
BBSA1139AS15
   2/7/2028    10.20 % COP    33,055    30,411    31,568






Sub total Itaú Corpbanca Colombia
         228,073    179,611    196,796






Total
         1,083,296    1,041,182    1,074,320






(f)
Other financial obligations
Other obligations are summarized as follows:

As of December 31, 2015
(in millions of Ch$)

As of December 31, 2016
(in millions of Ch$)

As of December 31, 2017
(in millions of Ch$)

   As of December 31, 2016
(in millions of Ch$)    As of December 31, 2017
(in millions of Ch$)    As of December 31, 2018
(in millions of Ch$)
Due within 1 year

7,722

2,265

811

   2,265    811    —
Due after 1 year but within 2 years

—

—

—

   —      —      —
Due after 2 years but within 3 years

—

—

—

   —      —      —
Due after 3 years but within 4 years

—

—

—

   —      —      —
Due after 4 years but within 5 years

—

—

—

   —      —      —
Due after 5 years

—

—

—

   —      —      —







Total long obligation

7,722

2,265

811

   2,265    811    —







The detail of other short term financial obligations is as follows:


Amounts due to credit card operations

13,011

23,298

16,255

   23,298    16,255    12,400
Others

—

—

—

   —      —      —






Total short term financial obligations

13,011

23,298

16,255

   23,298    16,255    12,400






Total other financial obligations

20,733

25,563

17,066

   25,563    17,066    12,400






C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES
We do not currently conduct any significant research and development activities.
D. TREND INFORMATION
Our net interest income for the year ended December 31, ~~2017~~2018 increased to Ch$~~782,982~~887,663 million, or by ~~22.5%~~13.4%, when compared to the year ended December 31, ~~2016.~~2017. Generally, our net interest income is positively affected by an inflationary environment to the extent that our averageUF-denominated assets exceed our averageUF-denominated liabilities, while our net interest income is negatively affected by inflation in any period in which our averageUF-denominated liabilities exceed our averageUF-denominated assets. Currently, we have moreUF-denominated assets than liabilities.
Our operating income depends significantly on our net interest income. For the years ended December 31, ~~2015, 2106~~2016, 2017 and ~~2017,~~2018, net interest income over total operating income before provision for loan losses represented ~~64.8%~~73.2%, ~~73.2%~~74.1% and ~~74.1%~~70.7%, respectively. Changes in market interest rates may affect the interest rates earned on our interest-earning assets and the interest rates paid on our interest bearing liabilities, which may result in a further reduction in our net interest income.
Consolidation in the market, which can result in the creation of larger and stronger competitors, may adversely affect our financial condition and results of operations by decreasing the net interest margins we are able to generate and increasing our costs of
operation. In addition, we expect to continue to face competition fromnon-banking financial entities such as department stores, leasing, factoring and automobile finance companies, mutual funds, pension funds and insurance companies.
The following are the most important trends, uncertainties and events that are reasonably likely to affect us or that would cause the financial information disclosed herein not to be indicative of our future operating results or financial condition:

·Higher levels of uncertainty related to the expectation of a possible global economic recession and a higher than expected slowdown of Chinese economic activity, which may translate into an upward adjustment of risk premium and higher global interest rates;

·In this context, the upturn in the Chilean and/or Colombian economies could be weaker than expected. Higher than anticipated unemployment rates and lower economic growth could increase provision expenses and decrease our rate of loan growth in the future; and

·Finally, uncertainty relating to the implementation of the Labor Reform do not allow us to predict its effects.
Also see “Item 5. Operating and Financial Review and Prospects—A. Operating Results.”
E.E. OFF-BALANCE SHEET ARRANGEMENTS
We are party to transactions withoff-balance-sheet risk in the normal course of our business. These transactions expose us to credit risk in addition to amounts recognized in ~~the~~our consolidated financial statements and include commitments to extend credit. These commitments include contractual arrangements to which an unconsolidated entity is a party, under which Itaú Corpbanca has:

·Any obligation under certain guarantee contracts;

·A retained or contingent interest in assets transferred to an unconsolidated entity or similar arrangement that serves as credit, liquidity or market risk support to that entity for such assets;

·Any obligation under certain derivative instruments;

·Any obligation under a material variable interest held by Itaú Corpbanca in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to Itaú Corpbanca, or engages in leasing, hedging or research and development services Itaú Corpbanca.
Such commitments are agreements to lend money to a customer at a future date, subject to the customer’s compliance with contractual terms. Since a substantial portion of these commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent our actual future cash requirements. The aggregate amount outstanding of these commitments was Ch$~~17,919,793~~5,383,914 million as of December 31, ~~2017.~~
2018.
Contingent loans are those operations or commitments in which the ~~bank~~Bank assumes a credit risk upon committing itself to third parties, before the occurrence of a future event, to make a payment or disbursement that must be recovered from its clients.
The ~~bank~~Bank keeps a record of the following balances related to commitments or to liabilities of its own line of business in memorandum accounts: collateral and guarantees, confirmed foreign letters of credit, letters of credit, bank guarantees, cleared lines of credit, other credit commitments and other contingencies.
The total amount of contingent loans held off balance sheet as of December 31, ~~2015,~~ 2106, 2017 and ~~2017~~2018 was ~~Ch$2,292,081 million,~~ Ch$5,310,136 million, Ch$5,291,615 million and Ch$~~5,291,615~~5,383,914 million, respectively. Contingent loans are considered in the calculation of risk weighted assets and capital requirements as well as for credit risk reserve requirements.
See Note 1 “General Information and Summary of Significant Accounting Policies” and Note 21 “Contingencies, Commitments and Responsibilities” to our consolidated financial statements included herein for a better understanding and analysis of the figures held off sheet balance.
We use the same credit policies in making commitments to extend credit as we do for granting loans. In the opinion of our management, our outstandingoff-balance sheet commitments do not represent an unusual credit risk.
Traditional financial instruments which meet the definition of a “derivative,” such as forwards in foreign currency, UF, interest rate futures currency and interest rate swaps, currency and interest rate options and others, are initially recognized on the balance sheet at their fair value. Fair value is obtained from market quotes, discounted cash flow models and option valuation models, as applicable. For further details of fair value, see Note 8 of our consolidated financial statements included herein.
In terms of outstanding exposure to credit risk, the true measure of risk from derivative transactions is themarked-to-market value of the contracts at a point in time (i.e., the cost to replace the contract at the current market rates should the counterparty default prior to the settlement). For most derivative transactions, the notional principal amount does not change hands; it is simply an amount that is used as a reference upon which to calculate payments.
F. TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS
In addition to the scheduled maturities of our contractual obligations which are included under “—Liquidity and Capital Resources—Sources of Liquidity” above, as of December 31, ~~2017,~~2018, we also had other commercial commitments which mainly consist of open and unused letters of credit, together with guarantees granted by us in Ch$, UF and foreign currencies (principally U.S. dollars). We expect most of these commitments to expire unused.
The following table includes both the accrued interest and the interest expense projected over time of each contractual obligation as of December 31, ~~2017.~~2018. For variable rate debt and interest rate swaps and other derivatives, where applicable, the interest rates upon which we based our contractual obligations going forward are based on the applicable forward curves. For any cross-currency swaps or other derivatives as applicable, the foreign currency exchange rate used was spot.

Contractual Obligations (*)

Less than 1
year

1-3 years

3-5 years

More than 5
years

Total

   Less than 1
year    1-3 years 3-5 years More than
5 years Total

(in millions of Ch$)

   (in millions of Ch$)
Time deposits and saving accounts

8,340,327

905,369

125,129

789,883

10,160,707

   9,716,591    798,613 75,261 727,527 11,317,992
Deposits and other demand liabilities

4,141,667

—

—

—

4,141,667

   4,486,195    —   —   —   4,486,195
Bank obligations

1,876,810

362,455

95,084

240,690

2,575,037

   2,456,553    352,214 96,886 115,027 3,020,680
Investments under repurchase agreements

420,920

—

—

—

420,920

   826,276    —   —   —   826,276
Issued debt instruments

986,169

1,533,594

855,735

4,224,850

7,600,348

   941,746    1,306,313 1,038,963 4,284,565 7,571,587
Other financial liabilities

(70,644
)
78,908

131,423

—

139,687

   14,162    17,492 13,742 17,050 62,447
Financial derivative contracts

194,152

(10,270
)
(56,607
)
(15,004
)
112,271

   104,073    (104,912 ) (38,679 ) (70,558 ) (110,076 )




Total contractual obligations

15,889,400

2,870,055

1,150,763

5,240,419

25,150,637

   18,545,596    2,369,719 1,186,174 5,073,610 27,175,100




(*)
~~(*)~~The variable rates projections are obtained from the Forward Rate Agreement (FRA) rates of the respective projection curves. The parities used to convert the amounts to Chilean pesos correspond to the accounting parities used in the referred date.
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. DIRECTORS AND SENIOR MANAGEMENT
We are managed by our CEO (Gerente General) under the direction of our board of directors, which, in accordance with the Company’sby-laws, consists of 11 directors and two alternates who are elected at our annual ordinary shareholders’ meetings. Pursuant to the provisions of our bylaws, members of the board of directors are generally elected for three-year terms. All of the members of the board of directors were elected on ~~April 11, 2016~~March 19, 2019 for a three-year period except for Mr. Vassimon, Mr. Samhan, Mr. Bucher, Mr. Pasquier and Mr. Fresco, who were initially appointed by our board of directors on November 15, 2016, September 27, 2016, February 23, 2017, May 30, 2017 and March, 28, 2018, respectively, and were confirmed as members of the board in the annual ordinary shareholders’ meeting held on March 27, 2017 except for Mr. Pasquier and Mr. Fresco. Mr. Pasquier was confirmed in the last annual ordinary shareholders’ meeting held on March 27, 2018. Mr. Fresco has not been confirmed and will hold office until the next annual ordinary shareholder´s meeting, at which the board of directors ~~will have to be~~was renewed in its entirely. Cumulative voting is permitted for the election of directors. The board of directors may appoint replacements to fill any vacancies that occur during periods between elections. Our principal executive officers are appointed by the board of directors and the CEO and hold their offices at the discretion of the board of directors and the CEO. Scheduled meetings of the board of directors are held monthly. Extraordinary meetings can be held when called by the ~~Chairman~~chairman of the board of directors, by one or more directors with the prior approval of the ~~Chairman~~chairman of the board of directors, or by five directors. None of the members of our board of directors has a contract or agreement which entitles any director to any benefits upon termination of employment with us.
Our current directors are as follows:

Directors
Position
Age
Jorge Andrés Saieh Guzmán
Chairman and director
46
47
Ricardo Villela Marino
Vice chairman and director
44
45
Jorge Selume Zaror
Director
66
67
Fernando Aguad Dagach
Director
58
59
Gustavo Arriagada Morales
Director
64
65
~~Eduardo Mazzilli de Vassimon~~Caio Ibrahim David
Director
59
51
~~Boris Buvinic Guerovich~~Milton Maluhy Filho
Director 42
Directors
~~Director~~
Position
58
~~Directors~~
Age
~~Position~~
~~Age~~
Andrés Bucher Cepeda
Director
54
55
Pedro Samhan Escandar
Director
67
68
Fernando Concha Ureta
Director
58
59
Bernard Pasquier
Director
64
~~José Luis Mardones Santander~~
65
~~Alternate director~~
67
Diego Fresco Gutiérrez
Alternate director 49
Jessica López Saffie
Alternate director
48
63
Jorge Andrés Saieh Guzmán became a director on August 25, 1998. On February 2, 2012, Mr. Saieh Guzmán became the chairman of our board of directors. Mr. Saieh Guzmán also serves as the chairman of the board of directors for Consorcio Periodístico de Chile S.A. Mr. Saieh Guzmán has also served as the vice chairman of the board of AFP Protección, as a member of the board of AFP Provida, as member of the board of the Chilean National Press Association and as a member of the board of ~~our~~a former affiliate of Corpbanca, Corpbanca Venezuela. Mr. Saieh Guzmán also serves similar positions on a variety of different boards. Mr. Saieh Guzmán received a B.A. in Business and Administration and graduated from the Universidad Gabriela Mistral. Mr. Saieh Guzmán holds a Masters in Economics and a Master in Business and Administration from the University of Chicago. Alvaro Saieh Bendeck is the father of Mr. Saieh Guzmán.
Ricardo Villela Marino became a director on April 11, 2016. Mr. Marino has served Itaú Unibanco Group as a Vice President of Itaú Unibanco since August ~~2010.~~2010 and as chairman of Itaú Unibanco’s Latam Strategic Council since April of 2018. He served as Executive Officer (September 2006 to August 2010), Senior Managing Director (August 2005 to September 2006), Managing Director (December 2004 to August 2005) at Itaú Unibanco. He has served as an Alternate Member of the Board of Directors of Itaúsa since April 2011. He has served as an Alternate Member of the Board of Directors of Duratex S.A., Elekeiroz S.A. and Itautec S.A. since April 2009. He was President of the Latin American Federation of Banks ~~(FELABAN)~~(FELABAN) (2008 to 2010). He has a B.A. degree in Mechanical Engineering from the Polytechnic School of USP in Brazil and a Master degree in Business Administration from MIT Sloan School of Management.
Jorge Selume Zaror became a director on May 23, 2001. Mr. Selume also serves as director of the board, among others, for Clínica Indisa, Andean Region — Laureate International, Universidad Andrés Bello, Universidad Las Americas, Instituto Profesional AIEP and Blanco y Negro. Prior to this, Mr. Selume was a director on the board of directors of Banco Osorno y La Unión, a director of the government budget office of Chile, chairman of our former affiliate Corpbanca Venezuela and the CEO of Corpbanca between 1996 and 2001. Mr. Selume received a B.A. in Business and Administration and graduated from the Universidad de Chile. Mr. Selume holds a Masters in Economics from the University of Chicago.
Fernando Aguad Dagach became a director on June 18, 1996. Mr. Aguad has previously held similar positions in a variety of institutions including Interbank Perú, Banco Osorno y La Unión and Canal de Televisión La Red. Mr. Aguad is an investor in financial institutions.
Gustavo Arriagada Morales became a director on September 28, 2010. He has held different senior positions since 1979 in the Chilean Production Development Corporation (Corporación para el Fomento de la Producción orCORFO), Banco de Talca, Chilean Copper Commission (Comisión Chilena del Cobre), Banco de Chile and Banco del Estado, among others. Mr. Arriagada also served in the Chilean Superintendence of Banks and Financial Institutions (Superintendencia de Bancos e Instituciones Financieras or SBIF) as director and as intendent between 1997 and 2005 and as superintendent between 2005 and 2010. He received a B.A. in Business and Administration and an Economics degree from the Universidad de Chile.
~~Eduardo Mazzilli de Vassimon~~ Milton Maluhy Filhobecame a director on ~~November 15, 2016.~~January 1, 2019. Previously, Mr. ~~Vassimon~~Maluhy was CEO of Itaú Corpbanca between April 1, 2016 and December 31, 2018. Mr. Maluhy joined Itaú Unibanco in 2002 and became a partner in 2010. Previously, he was CEO of Rede S.A. (former Redecar S.A.), a card-processing subsidiary, and Executive Director at Itaú Unibanco, responsible for the management of the credit card segment and retail store alliances. Previously, he worked at Itaú BBA, holding leadership positions in areas such as international, products, operations, treasury, and trading desk. Prior to joining the Bank, he worked at J.P. Morgan, Crédit Commercial de France (CCF Brazil) and Lloyds TSB. Mr. Maluhy holds a B.A. in Business Administration from Fundação Armando Álvares Penteado — FAAP.
Caio Ibrahim David became a director on January 1, 2019. Mr. David has held several positions within the Itaú Unibanco Group including ~~Vice President of~~Executive Officer at Itaú Unibanco Holding ~~(April 2015~~S.A. He is currently General Director of Wholesale Banking. Previously he served as CFO and CRO of the Conglomerate. He has also served as Director Vice President at Itaú Unibanco S.A. since May 2013 and was also Executive Officer. He has joined the Group in 1987 as a trainee and has worked in the Controllership, Market and Liquidity Risk Control and Treasury departments. Mr. David was Executive Officer at Banco Itaú BBA S.A. Mr. David has served as vice chairman of the Board of Directors (June 2010 to December ~~2016); Vice President of Itaú Unibanco since March 2013~~2012) and Member of the Board of Directors ~~(November 2004 to April 2015) and CEO (since December 2016) of Banco Itaú BBA S.A. He also served as Vice President of Banco Itaú BBA S.A. (November 2004~~(May 2010 to December ~~2008), and was responsible for the international, financial institutions, products, client desk and treasury departments. He has served as General Manager~~2012) of Itaú Unibanco (1980 to 1990). He served as a member of the Board of Directors at Investimentos Bemge S.A. since February 2013. He worked as Deputy Foreign Exchange Director (1990 to 1991) and as International Unit Director (1992 to 2003) of Banco BBA-CreditanstaltRedecard S.A. He has a B.A. degree in Engineering from Universidade Mackenzie and a Postgraduate degree in Economics and Finance from ~~the School of Economics of USP (1980) and in Business Administration from FGV (1980)~~Universidade de São Paulo (USP). He also ~~holds Master degrees~~has a Master’s degree in Controllership from ~~the~~Universidade de São Paulo ~~Business Administration School of FGV (1982)~~(USP) and M.B.A. from ~~École dês Hautes Études Commerciales (1982)~~New York University with specialization in ~~France.~~
Finance, Accounting and International Business.
~~Boris Buvinic Guerovich~~ became a director on April 11, 2016. Mr. Buvinic served as Country Manager of Banco Itaú Chile (2006-2016) and BankBoston Chile (2003-2006). Since 1990 he has had a leading role in launching the business of retail banking in Chile, mainly through Banco Santiago which is now Santander Chile, where he worked for 11 years, finally serving as Director of Marketing and Sales. He participated as a member of the board of the Association of Banks and Financial Institutions of Chile (~~Asociación de Bancos e Instituciones Financieras de Chile~~~~). Mr. Buvinic holds a degree in Commercial Engineering from Universidad Católica de Valparaíso, Chile. He participated in the program for CEO training at the Kellogg School of Management.~~
Andrés Bucher Cepeda became a director on February 23, 2017. Mr. Bucher has held numerous senior management positions in the Chilean financial industry in the past 28 years. He served as Banchile Corredores de Bolsa’s Chief Executive Officer from
November 2012 until May 2016. Mr. Bucher previously worked as the Investment Banking and Capital Markets Division Manager at Banco de Chile beginning in 2008. Before that, Mr. Bucher was Investment Banking head for Citigroup Chile, where he worked for more than 19 years. Mr. Bucher holds a degree in industrial civil engineering from the Pontificia Universidad Católica de Chile and an ~~MBA~~M.B.A. from The Wharton School at the University of ~~Pennsylvania~~.Pennsylvania.
Pedro Samhan Escandarbecame a director on September 27, 2016. Mr. Samhan was formerly a member of the Board of Citibank in Panama and Costa Rica. Before that, he was the CFO of Banco de Chile and was appointed as director of Banchile Trade Services Limited. Previously, Mr. Samhan was the CFO of Citigroup Chile for several years. He served as a member of the board of directors of Cruz Blanca Seguros de Vida from 1994 to 1997, AFP Habitat from 1996 to 2006 and Compañía Minera Las Luces from 1994 to 1996. Mr. Samhan was CFO of Citicorp for Caribbean and Central America from 1990 to 1993 and investment banking head of Citicorp Chile from 1988 to 1990. Mr. Samhan holds a degree in civil industrial engineering from Universidad de Chile.
Fernando Concha Ureta became a director on April 11, 2016. Mr. Concha is aco-founding partner at Falcom Capital. He has more than 30 years of experience in the financial industry in Chile and the region. While at Citigroup, he held several leading positions, including Banamex Corporate Director of Treasure Operations, CEO at Citibank Chile and CEO of the Andean Cluster and Central America, among others. In addition, he has also represented Citi as member in several boards and committees, such as Banco de Chile Board, among others. He holds a degree in Business from the Pontificia Universidad Católica de Chile.
Bernard Pasquierbecame a director on May 31, 2017. Mr. Pasquier has served as consultant and independent board director since 2008 and as a secretary general in Compagnie Monegasque de Banque in Monaco between 2004 and 2007. Mr. Pasquier was appointed by IFC on the Board of Directors of Grupo Mundial, Panama (2008-2013), Gorenje (Slovenia), Davivienda (Colombia ~~2011-2017)~~2011 to 2017), and Sogebank (Haïti). He was elected to Monaco Parliament in 2013. He has also served as a director of South Asia Department and as manager in the Africa Department at the IFC. He has also served as senior adviser in the office of the president of the World Bank, as a principal economist and country officer of Africa Region (1985 to 1990), and as an investment officer at the World Bank Group. Mr. Pasquier received a Master of Public Administration and a Major in Business and Economic Development from the Harvard University.
~~José Luis Mardones Santander~~ became a director on March 7, 2013 and alternate director on April 11, 2016. Mr. Mardones currently serves as partner and director of Mardones y Marshall Consultores, alternate independent director of Itaú Corpbanca and as director of Corporación CESCO (Centro de Estudios del Cobre y la Minería). Mr. Mardones previously served as chairman of the board of directors of Banco del Estado de Chile, chairman of Empresa Portuaria Valparaíso, director of Metro Regional de Valparaíso (Merval), Empresa Portuaria San Vicente, Instituto de Estudios Bancarios and of certain affiliates of Enami and Colbún. He received a civil engineering degree from the Universidad de Chile as well as a Masters in Law and Diplomacy and an International Studies Ph.D. from Tufts University, The Fletcher School of Law and Diplomacy.
Diego Fresco Gutiérrez became an alternate director on March 28, 2018. Mr. Fresco is currently a member of the Audit Committee of Itaú Unibanco Holding S.A. He previously served as a partner at PwC —– São Paulo (2000 to June 2013) in the Capital Markets and Accounting Advisory Services area and prior to that held several positions at PwC in Uruguay (1998 to 2000 and 1990 to 1997) and in the United States (1997 to 1998). He has a ~~Bachelor’s degree~~B.A. in Accounting from Universidad de la República Oriental del Uruguay in 1994. He is a Certified Public Accountant registered in the State of Virginia (United States) since 2002 (Registration 27,245) and a Contador registered with the Regional Council of Accountancy of the State of São Paulo. He is a member of the Commission of Governance in Financial Institutions of the Brazilian Institute of Corporate Governance (IBGC) since 2013.
Jessica López Saffie became an alternate director on March 19, 2019. Currently, Ms. López is the executive chairperson of the National Association of Healthcare Services Companies (Asociación Nacional de Empresas de Servicios Sanitarios, ANDESS AG). She has more than 35 years of executive and management experience in financial institutions in Chile and specializes in design and strategic execution, risk management, internal audit, and team management. Ms. López previously served as chief executive officer at Banco del Estado de Chile and chairperson of the board of directors of Banco Estado Microempresas. Prior to that, she was also vice chair of the board of directors, member of the board of directors, executive committee and audit committee and chair of the ethics committee and the operational risk committee at Banco del Estado de Chile. She received a B.A. in Business and Administration and an Economics degree from Universidad de Chile.
Our current Executive Officers are as follows:

~~Executive Officer~~
~~Position~~
~~Age~~
~~Milton Maluhy Filho~~
~~Chief~~ Executive Officer
Position Age
Manuel Olivares Rossetti
41
Chief Executive Officer 53
Gabriel Amado de Moura
Chief Financial Officer
42
43
Christian Tauber Domínguez
Corporate Director —
Wholesale Banking
46
47
Julián Acuña Moreno
Corporate Director —
Retail Banking
52
53
Pedro Silva Yrarrázaval
Corporate Director —
Treasury
57
58
~~Rogério Carvalho Braga~~Luciana Hildebrandi Marchione
Corporate Director —
Marketing & Products
62
46
Mauricio Baeza Letelier
Chief Risk Officer
55
56
Luis Antônio Rodrigues
Corporate Director —
IT
53
54
~~Eduardo Meynet Biancardi~~Jorge Novis
Corporate Director — Operations
46
41
Cristián Toro Cañas
General Counsel
47
48
Marcela Leonor Jiménez Pardo
Corporate Director — Human Resources
42
43
Emerson Bastian Vergara
Chief Audit ~~Officer~~*
Officer*
39
40
Sven Riehl
Chief Compliance ~~Officer~~*
Officer*
49
50
Joaquín Rojas Walbaum
General Manager — New York Branch
38
39
Alvaro De Alvarenga Freire Pimentel
Chief Executive Officer — Itaú Corpbanca Colombia
47
48

*
*Mr. Emerson Bastian reports to the audit committee. Mr. Riehl coordinates with senior management through the Chief Risk Officer and has direct communication with the audit committee and the board of directors.
Manuel Olivares Rossetti became Chief Executive Officer on January 1, 2019. He is also currently the Chairman of the board of ~~directors.~~
~~Milton Maluhy~~ ~~became~~directors of Itaú Corpbanca Colombia. Mr. Olivares was most recently the ~~CEO on April 1, 2016. Mr. Maluhy joined Itaú Unibanco in 2002~~Chief Executive Officer and ~~became a partner in 2010. Previously,~~Country Head of Banco Bilbao Vizcaya Argentaria (BBVA), Chile for the last six years, after holding various positions with that bank. Until July 2018, he was ~~CEO of Rede S.A. (former Redecar S.A.), a card processing subsidiary, and Executive Director at Itaú Unibanco, responsible for the management~~also Chairman of the ~~credit card segment~~board of directors Forum Servicios Financieros S.A. Mr. Olivares worked for 12 years in different positions at Citibank in both the Santiago and ~~retail store alliances. Previously,~~New York branches. Mr. Olivares is currently Vice Chairman of INACAP Technical Training Center and until December 2018 he ~~worked at Itaú BBA, holding leadership positions in areas such as international, products, operations, treasury, and trading desk. Prior to joining~~chaired the ~~bank, he worked at J.P. Morgan, Crédit Commercial~~Productivity Commission of the Confederación de ~~France (CCF Brazil) and Lloyds TSB.~~la Producción y del Comercio (CPC). Mr. ~~Maluhy holds~~Olivares received a B.A. in Economics from the Universidad de Chile and attended the General Management Program (GMP) at Harvard Business ~~Administration from Fundação Armando Álvares Penteado — FAAP.~~
School.
Gabriel Amado de Mourabecame CFO of Itaú Corpbanca on April 1, 2016. Mr. Moura joined Itaú Unibanco in 2000 and became an associate partner in 2010. He has more than 2223 years of experience in asset management, risk management, finance and M&A. Mr. Moura held the position of Chief Investment Officer for Itaú’s pension funds, endowments and insurance businesses. He was also Chief Risk Officer for Wealth Management as well as member of the board of directors of different companies in Brazil and abroad. Prior to joining the ~~bank,~~Bank, he worked at BBVA Asset Management and Itaú Bankers Trust. Mr. Moura holds a M.B.A. from the Wharton School at the University of Pennsylvania.
Christian Tauber Domínguezbecame corporate director of Wholesale Banking in October 2016. Previously, he served as Corporate Banking director in BBVA. He joined Banco Itaú Chile in October 2007 as the Corporate Banking manager, and from 2011 to 2016 he served as the Corporate Banking manager of Itaú Chile. In 2016 Mr. Tauber took office as the Corporate Manager of Corporate Banking. Mr. Tauber received a B.A. in Business and Economics from the Pontificia Universidad Católica de Chile.
Julián Acuña Morenobecame corporate director of Retail Banking in September 2016. Mr. Acuña has vast experience in both national and international banking, having worked as Commercial Division Manager in Chile and in Colombia in Banco Santander-Chile and in Banco Santander Colombia, respectively. Mr. Acuña holds an Accountant Auditor degree from the Universidad Diego Portales, Chile.
Pedro Silva Yrarrázavalbecame corporate director of Treasury on April 1, 2016. Between October 2006 and March 2016, Mr. Silva held the same position at Corpbanca. Mr. Silva previously served as CEO of our subsidiary Corpbanca Administradora General de Fondos S.A. (Asset Management). Mr. Silva received a B.A. in Business and Administration from the Universidad de Chile and also a M.B.A. from the University of Chicago.
~~Rogério Carvalho Braga~~ Luciana Hildebrandi Marchionebecame corporate director of Marketing & Products on ~~April~~January 1, ~~2016. During his career~~2019. She joined Itaú Unibanco in ~~the~~2005, serving as Superintendent of Commercial Planning Itaú ~~group, he led various business areas such as Premium Bonds, Individuals, Payroll Loans, Marketing, Channels, Personal Banking Products, Vehicle Financing,~~Uniclass, and Commercial ~~Branches. Before joining~~Superintendent Itaú ~~Unibanco, Mr. Braga worked for six years in AIG (American International Group) in New York~~Uniclass Digital. In 2017, she became Vice President of Product, Franchise and ~~Lisbon, and for 11 years with the Moreira Sales group, in charge of the food industry sector. Mr. Braga~~Digital at Itaú Corpbanca Colombia. Mrs. Hildebrandi received a ~~law degree~~B.A. in Business and Marketing from ~~the Pontificia Universidade Católica de São Paulo~~ESPM in Brazil and an M.B.A. in Commercial Management from ~~Pepperdine University.~~
the Fundação Getulio Vargas of Brazil.
Mauricio Baeza Letelierbecame Chief Risk Officer in September 2016. With almost 30 years of experience in the banking industry, Mr. Baeza Letelier has held diverse executive positions in risk management areas of local banking institutions. During the last five years he was the Manager of Corporate Risk of Banco de Chile, while leading the Risk Committee of the Bank and Financial institution Association of Chile (Asociación de Bancos e Instituciones Financieras de Chile). Mr. Baeza received an undergraduate degree in Civil Engineering from the Pontificia Universidad Católica de Chile.

¹
ITCB: Please specify subject matter of the degree, if possible.
Luis Antônio Rodriguesbecame Corporate Director of IT in October 2017 after the split of the IT & Operations division from which he was responsible for since April 1, 2016 until September 2017. Mr. Rodrigues has been a director of Itaú Unibanco since 2004, a partner since 2010 and an executive director since 2011. He initiated his career in the Itaú group 32 years ago, and participated on the technology side of every merger and acquisition of the group (Banco Francês e Brasileiro, Banerj, Bemge, Banestado and BankBoston), as well as having a key role in the system integration of Itaú and Unibanco.
~~Eduardo Meynet Biancardi~~ Jorge Novisbecame Corporate Director of Operations in ~~October 2017. Previously he has been responsible~~April 2018. Mr. Novis joined Itaú Corpbanca in May 2017 as Head of ~~the wholesale business development, of the transformation~~Strategic Planning and ~~quality, and also the transformation~~Quality Service. He previously worked at ~~a regional level at the BBVA Group. More recently he was responsible~~Itaú Unibanco for ~~systems, technology, operations, IT risk, processes, real estate and services of the BBVA group in Chile.~~approximately five years. Mr. ~~Meynet~~Novis received a ~~B.A. in Business and Administration~~Civil Engineer degree from ~~the Pontificia Universidad Católica de Chile and also a~~Universidade Federal da Bahia, an M.B.A. from ~~the Kellogg~~Harvard Business School ~~Management.~~
and a Master of Science in Finance from Fundação Getulio Vargas.
Cristián Toro Cañasbecame General Counsel in June 2016. Mr. Toro worked for more than 10 years in Citibank Chile, acting as general counsel since 2004. In 1999 he worked inat Shearman & Sterling in New York. In 2008 he joined Lan Airlines as legal vice-president. After the merger of Lan and Tam, he continued to work as legal vice-president and as the secretary of the board of directors of Latam Airlines Group. Mr. Toro received a law degree from the Pontificia Universidad de Católica de Chile and an MCJ law degree from the New York University School of Law.
Marcela Leonor Jiménez Pardobecame Corporate Director of Human Resources in April 2016. Between July 2012 and March 2016 she held the same position at Corpbanca. Previously, she served in the Global Banking Consulting Group at Banco de Chile from 2008 to 2012. Mrs. Jiménez received an undergraduate degree in Philology from the Pontificia Universidad Católica de Chile and a postgraduate degree in Human Resources Management from Universidad Adolfo Ibáñez.
Emerson Bastian Vergara became Chief Audit Executive in April 2017. Previously, Mr. Bastian was a partner in Deloitte Chile´s Governance, Regulatory and Risk Strategies practice. Mr. Bastian received an undergraduate degree in Accounting from Universidad de Chile and a Master degree in Business Administration from Universidad Adolfo Ibáñez.
Sven Riehl became Chief Compliance Officer in August ~~2017and~~2017 and is currently the Head of allNon-Financial Risks at Itaú Corpbanca. From April 1, 2016 onwards, Mr. Riehl has also held the position of Head of Operational Risk, Internal Controls & Regulatory Affairs. Previously, he served as Head of International Compliance, Operational Risk and Internal Controls at Itaú Unibanco in São Paulo. Mr. Riehl holds a banking diploma (Germany, 1989) and is Master in Finance from ICADE University (Spain, 2001).
Joaquín Rojas Walbaum became General Manager of Itaú Corpbanca’s New York Branch in October 2017. Previously he was Treasury Director at the New York Branch since September 2009 and beforehand worked in the investment division at MetLife Chile and credit division at MetLife Investments Latin America. Mr. Rojas has more than 14 years of experience. He holds an undergraduate degree in Economics from Universidad de Chile and a Master of Business Administration from Columbia University.
Alvaro De Alvarenga Freire Pimentelbecame CEO of Itaú Corpbanca Colombia on January 6, 2017. Previously, Mr. Pimentel held different positions during his 20 years with the group in Corporate Banking and the General Operation and Technology areas. He is a partner of Itaú Unibanco. Mr. Pimentel received a degree in Economics from the Universidad de Campinas and an Executive ~~MBA~~M.B.A. in Finance from the Insper, both in Brazil.

²
ITCB: Please specify academic institution.
B. COMPENSATION
Consistent with Chilean law, we do not disclose to our shareholders, or otherwise make public, information regarding the individual compensation of our officers. However, we publicly disclose the fees paid to each of our directors and members of the board committees. For the year ended December 31, ~~2017,~~2018, we paid ~~fees~~the following to ~~each of our directors in the amount of~~each: director UF100 per month, vice-chairman UF450 per month and chairman UF600 per ~~month for the chairman. Additionally, we paid~~month. Also, our shareholders agreed to continue to pay a monthly fee of UF150 for each member of a board committee and UF250 for the chairman of each such ~~committees. We also paid~~committee. Finally, our ordinary shareholders’ meeting approved additional ~~fees to~~compensation for the directors ~~who participate~~and external advisors participating in ~~certain committees, as follows:~~the following committees:
a)(a) Credit Committee: UF200 per month;
b)(b) Assets and Liabilities Committee: UF140 per month;
(c) Audit Committee: UF50 per month for each member and UF150 per month for its chairman;
(d) Corporate Governance Committee: UF50 per month;
(e) Anti-Money Laundering and Anti-Terrorism Finance Prevention Committee: UF50 per month;
(f) Compliance Committee: UF50 per month; and
~~c) Other Committees:~~(g) Management and Talent Committee: UF50 per month.
No amounts were set aside or accrued by us to provide pension, retirement or similar benefits for our directors and executive officers. In the year ended December 31, ~~2017,~~2018, we paid our middle management, senior management and directors an aggregate of Ch$~~21,505~~23,384 million. Chilean law does not require us to have a compensation committee.
At our ordinary shareholders’ meeting held on March ~~27, 2018,~~19, 2019, our shareholders approved to pay each director UF100 per month, the vice-chairman UF450 per month and the chairman UF600 per month. Also, our shareholders agreed to continue to pay a monthly fee of UF150 for each member of a board committee and UF250 for the ~~chairman of each such committees.~~chairman. Finally, our ordinary shareholders’ meeting approved an additional compensation for the directors and external advisors participating in the following committees:
a) ~~Credit Committee: UF200 per month;~~
~~b) Assets and Liabilities Committee: UF140 per month;~~
c) Audit Committee: UF50 per month for each member and UF150 per month for its chairman;
b) Other committees: UF50 for attending meetings of each such committee.
~~d) Corporate Governance Committee: UF50 per month;~~
~~e) Anti-Money Laundering and Anti-Terrorism Finance Prevention Committee: UF50 per month;~~
~~f) Compliance Committee: UF50 per month; and~~
~~g) Management and Talent Committee: UF50 per month.~~
C. BOARD PRACTICES
The period during which the directors have served in their office is shown in the table under Section A of this Item 6. The date of expiration of the current term of office is shown in the table below:

Director
Date of Expiration of Term
Jorge Andrés Saieh Guzmán
~~April 2019~~
March 2022
Ricardo Villela Marino
~~April 2019~~
March 2022
Jorge Selume Zaror
~~April 2019~~
March 2022
Fernando Aguad Dagach
~~April 2019~~
March 2022
Gustavo Arriagada Morales
~~April 2019~~
March 2022
~~Eduardo Mazzilli de Vassimon~~Caio Ibrahim David
~~April 2019~~
March 2022
~~Boris Buvinic Guerovich~~Milton Maluhy Filho
~~April 2019~~
March 2022
Andrés Bucher Cepeda
~~April 2019~~
March 2022
Pedro Samhan Escandar
~~April 2019~~
March 2022
Fernando Concha Ureta
~~April 2019~~
March 2022
Bernard Pasquier
~~April 2019~~
~~José Luis Mardones Santander~~
March 2022
~~April 2019~~
Diego Fresco Gutiérrez
March 2022
Jessica López Saffie
~~April 2019~~
March 2022
Pursuant to the provisions of our bylaws, the members of the board are generally renewed every three years, based on length of service and according to the date and order of their respective appointments. In the Annual Ordinary Shareholders’ Meeting held on March ~~11, 2016,~~19, 2019 the board of directors ~~of former Corpbanca~~ was renewed in its ~~entirety and after~~entirety.
Consequently, the ~~Itaú -Corpbanca Merger five of them~~first eleven individuals listed above were ~~confirmed and the remaining eight were newly appointed at the Extraordinary Shareholders’ Meeting held on April 11, 2016. Since those appointments, five of the members of~~elected to the board of directors ~~have resigned~~with Diego Fresco Gutiérrez and ~~been replaced by Mr. Vassimon, Mr. Samhan, Mr. Bucher, Mr. Pasquier and Mr. Fresco. Mr. Vassimon, Mr. Samhan and Mr. Bucher were confirmed~~Jessica López Saffie elected as directors in the subsequent annual ordinary shareholders’ meeting held on March 27, 2017. Mr. Pasquier was confirmed as director in the annual ordinary shareholders’ meeting held on March 27, 2018. Mr. Fresco will hold office until the next annual ordinary shareholders’ meeting, at which the board of directors will have to be renewed in its entirety.alternate directors.
BOARD COMMITTEES
Audit Committee
Our board of directors maintains an audit committee which is currently comprised of five members, including two directors, one alternate director and twonon-director members. The current members of the audit committee are Messrs. Andrés Bucher Cepeda, who chairs it, Gustavo Arriagada Morales, Diego Fresco Gutiérrez, Juan Echeverría González and Antonio de Lima Neto.
A description of the experience and qualifications for Messrs. Andrés Bucher Cepeda, Gustavo Arriagada Morales, and Diego Fresco Gutiérrez, each of whom is a director of our Company, is included in “Item 6. Directors, Senior Management and Employees—A. Directors and Senior Management.” Below we include a summary of the experience and ~~qualification~~qualifications for Mr. Juan Echeverría González and Mr. Antonio de Lima Neto, who arenon-director members of the Audit Committee.
Juan Echeverría Gonzálezcurrently serves as Corporate Chief Compliance Officer at CorpGroup. He was previously a partner in charge of Deloitte’s audits of Corpbanca, Banco Osorno y la Unión, Banco Bilbao Vizcaya Argentaria, Chile, Banco del Desarrollo, Banco Internacional, Financiera Condell, Banco Corpbanca Venezuela, and of several services provided to such financial institutions from 1993 to 2012. Mr. Echeverría is currently a director and a member of the audit committee of Itaú Corpbanca Colombia, Consorcio Periodístico de Chile (COPESA), Grupo de Radios DIAL S.A., CorpGroup Activos Inmobiliarios S.A., Centro Cultural CorpGroup SpA, and an advisor to the board of directors and audit committee of Compañía Minera San Gerónimo. He has participated in several local and international seminars regarding corporate governance, restructurings and business acquisitions. Mr. Echeverría received a B.A. in Accounting from Universidad de Chile and received two Master degrees from Universidad Adolfo Ibáñez in Business Law and Tax Law. He also holds two Diplomas in Tax Law from Universidad Adolfo Ibáñez.
Antonio de Lima Neto has served as President (August 2009 to October 2013) at Banco Fibra S.A. He has worked as President (December 2006 to April 2009); Vice President of Retail and Distribution (July 2005 to December 2006); Vice President of International Business and wholesale (November 2004 to July 2005); Commercial Director (September 2001 to November 2004); Executive Superintendent of the Commercial Board (July 2000 to September 2001); Tocantins State Superintendent (May 1999 to May 2000) and Regional Superintendent of Belo Horizonte (January 1997 to May 1999) at Banco do Brasil S.A. He has also served as Member of the Board of Directors (2007 to 2009) at Brasilprev Seguros e Previdência S.A.; Member of the Board of Directors (2006 to 2009) at FEBRABAN Brazilian Federation of Banks; Member of the Board of Directors (2004 to 2005) at BB Seguridade e Participações S.A; Member of the Board of Directors (2003 to 2005) at Brasilsaúde Companhia de Seguros; Member of the Board of Directors (2001 to 2009) at Alliance Insurance Company of Brazil; Member of the Board of Directors (2000 to 2007) at BB Securities Limited Pension Fund. He ~~is pursuing~~holds a Master’s degree in Economics ~~at FGV since January 2014. He has~~from Fundação Getulio Vargas (2017); a Course for Board Members from
the Brazilian Institute of Corporate Governance (2014); a Postgraduate degree in Marketing fromPUC-Rio (2001); Training for Executive ~~MBA~~M.B.A. from Fundação Dom Cabral (1997)~~. He has~~; and a ~~Bachelor’s degree~~B.A. in Economics from Universidade Federal de Pernambuco (UFPE), 1996.
The local regulator for the banking industry (SBIF) recommends that at least one of the members of the audit committee be experienced with respect to the accounting procedures and financial aspects of banking operations. Moreover, the members of the audit committee are appointed by the board of directors and must be independent according to the criteria set forth by the board of directors, and they cannot accept any payment or other compensatory fee from the Company, other than in their role and responsibility as members of the board of directors, of the audit committee or of other established Committees. Members of the audit committee receive a monthly remuneration.
The audit committee has one charter that establishes its composition, objectives, roles, responsibilities and extension of its activities. The SBIF requires the audit committee to meet at least every four months and to provide an annual written report to the board of directors informing it of its activities. This report must also be presented to the annual shareholders’ meeting. According to their charter, the audit committee meetings take place at least twice a month.
The main objectives of the audit committee are to oversee the effectiveness of the internal controls established by management, as well as to oversee compliance with laws and regulations. Other specific responsibilities of the audit committee include:

·propose to the directors’ committee the firm of external auditors and the rating agencies to be engaged;

·review the reports, content and procedures applied by the rating agencies;

·approve the annual internal audit plan and its modifications;

·approve the annual budget, oversee the activities of and evaluate the performance of internal audit, who reports directly to the audit committee;

·receive and review reports issued by internal auditors;

·review with management and the external auditors the annual and interim financial statements and report the results to the board of directors;

·review the reports issued by regulators;

·be informed about relevant internal frauds or about misconduct cases related to employees; and

·report to the board of directors changes in accounting policies and its effects.
Directors’ Committee
Our board maintains a directors’ committee which is currently comprised of three members, all of which are considered under Chilean law as independent directors of our board of directors. Also, a fourth director participates as a guest member. The current members of the directors committee are Messrs. Gustavo Arriagada Morales, who chairs it, Fernando Concha Ureta and Bernard Pasquier, as office-holders, and Pedro Samhan as permanent guest.
A description of the experience and qualifications for Messrs. Gustavo Arriagada Morales, Fernando Concha Ureta, Pedro Samhan and Bernard Pasquier, each of whom is a director of the Company is included in “Item 6. Directors, Senior Management and Employees—A. Directors and Senior Management.”
The directors’ committee has bylaws that establish their composition, organization, objectives, duties, responsibilities and extension of its activities. The SBIF requires the directors committee to meet at least every four months and to provide an annual written report to the board of directors informing it of its activities. The report must also be presented to the annual shareholders’ meeting. According to its charter, the directors committee meets once per month.
The directors committee’s responsibilities are, among others:

·reviewing the reports of the internal and external auditors, the balance sheet and any other financial statements presented by the administration to the shareholders, and tosign-off on it prior to its presentation to the shareholders for approval;

·recommending external auditors and rating agencies to the board of directors;

·reviewing operations with related parties and reporting to the board of directors;
·
reviewing the compensation plans of executive officers and principal officers;
·
examining the systems of remuneration and compensation plans for managers, senior executives and employees of the company;

·preparing an annual report about its activities, including its main recommendations to shareholders; and

·other duties required by our bylaws, a shareholders meeting and our board of directors.
OTHER COMMITTEES
Corporate Governance Committee
The corporate governance committee was established by the board of directors as an advisory body of it that aims to ensure the existence and development of better corporate governance practices for financial institutions. For that purpose, it is in charge of evaluating practices and policies that are currently in execution, making proposals to the board of directors of improvements, adjustments or reforms and pursuing for the proper implementation and applications of said practices and policies of corporate governance. The committee performs its duties with respect to the ~~bank,~~Bank, its affiliates and related entities abroad.
The committee is composed of six directors and onenon-director member. This committee is empowered to engage external consultants. This committee is currently comprised by Mr. Andrés Bucher Cepeda, who chairs it, and Messrs. Ricardo Villela Marino, ~~Eduardo Mazzilli de Vassimon, Boris Buvinic Guerovich,~~Caio Ibrahim David, Bernard Pasquier, ~~José Luis Mardones Santander~~Jessica López Saffie and Alejandro Ferreiro Yazigi ~~(non-director~~(non-director member).
The committee is regulated by its bylaws, by applicable legal and regulatory rules and by the principles established by the Organization for EconomicCo-operation and Development (OECD) as well as those defined by the Basel Committee on Banking Supervision on good corporate governance matters for financial institutions.
Anti-Money Laundering and Anti-Terrorism Finance Prevention Committee
This committee is in charge of preventing money laundering and terrorism financing. Its main purposes include planning and coordinating activities to comply with related policies and procedures, staying informed about the work carried out by the Compliance Officer and making decisions on any improvements to control measures proposed by the Compliance Officer. This committee is comprised of two directors, the CEO, the ~~Chief~~ Legal ~~Officer,~~Counsel, the Chief Risk Officer, ~~one Area Manager~~the Chief of Retail Banking, the Chief of Wholesale Banking and the Compliance Officer. This committee has the authority to request attendance from any executives or associates that it deems necessary. The committee has regular monthly meetings and holds extraordinary sessions when considered appropriate by any of its members.
Compliance Committee
The purpose of this committee is to monitor compliance with our codes of conduct and other complementary rules, establish and develop procedures necessary for compliance with these codes, interpret, administer and supervise compliance with these rules and resolve any conflicts that may arise. This committee is comprised of ~~two directors,~~one director, the CEO, the ~~Chief~~ Legal ~~Officer,~~Counsel, the Chief of Human Resources and the ~~Compliance~~Chief Risk Officer.
Assets and Liabilities Committee
The main purpose of this committee is to monitor compliance with the financial guidelines established by our board of directors. In this regard, it approves and follows up on the financial strategies that guide the ~~bank~~Bank regarding the composition of its assets and liabilities, income and expenditure flows and operations with financial instruments.
Credit Committee
The purpose of this committee is to (i) establish the limits and procedures of the credit policy of the ~~bank~~Bank and its subsidiaries and to establish approval exceptions for financial decisions exceeding certain thresholds and (ii) evaluate and resolve lending operations in general that are of competence of this committee.
Management and Talent Committee
The purpose of this committee is to determine an objective process to recommend the appointment of the senior management and perform an advisory role in relation with the administration of the senior management, including the right to makenon-binding recommendations to the board of directors relating to the compensation, the milestones to be achieved and the evaluation of the CEO and other senior officers. This committee is comprised of ~~four directors and the CEO.~~five directors.
D. EMPLOYEES
As of December 31, ~~2017,~~2018, on a consolidated basis, we had ~~9,492~~9,179 employees. At the same date, approximately ~~49.1%~~49.2% of our employees were unionized. All management positions are held bynon-unionized employees. We believe that we have good relationships with our employees and the unions to which some of our employees belong. Our employees are covered by collective bargaining agreements, which Itaú Corpbanca entered into onin 2017 for former Corpbanca’s unions and for former Banco Itaú Chile’s unions. Both agreements provide for improved benefits and have a term of three years.
The table below shows our employees by geographic area:

Year Ended December 31,

   Year Ended December 31,

2015

2016

2017

   2016    2017    2018
Chile

2,549

5,904

5,817

   5,904    5,817    5,653
Colombia

—

3,675

3,594

   3,675    3,594    3,445
Panama

—

52

50

   52    50    49
United States

—

28

31

   28    31    32






Total

2,549

9,659

9,492

   9,659    9,492    9,179






E. CONTROLLING SHAREHOLDER’S SHARE OWNERSHIP
As of ~~the date hereof,~~March 31, 2019, Itaú Unibanco is the sole controlling shareholder of Itaú Corpbanca with a total share of capital of ~~36.06%~~38.14% through Itaú Unibanco Holding S.A., ITB Holding Brasil Participações Limitada, CGB II SpA, CGB III SpA, SAGA II SpA and ~~CGB~~SAGA III SpA who beneficially own approximately 22.45%, 11.13% , 2.13%, 0.35%, 1.37% and ~~0.35%~~0.71% of our outstanding shares, respectively.
The following chart is an overview of our ownership structure as of ~~December~~March 31, ~~2017:~~2019:

* Excludes shares held in treasury and by our controlling shareholders.
Our directors and senior managers do not have different or preferential voting rights with respect to those shares they own.
We do not have any arrangements for issuing capital to our employees, including any arrangements that involve the issue or grant of options of our shares or securities.
~~ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS~~

ITEM 7. MAJOR
SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. MAJOR SHAREHOLDERS
Our only outstanding voting securities are our common shares. As of ~~April 2, 2018,~~March 31, 2019, we had 512,406,760,091 common shares outstanding.
The following table sets forth information with respect to the record and beneficial ownership of our capital stock as of ~~April 2, 2018:~~March 31, 2019:

Shareholders

Number of Shares

Percentage
of Total
Share
Capital

Number of Votes

Percentage of
Voting and
Dividend Rights

Itaú Unibanco

184,756,488,453

36.06%

184,756,488,453

36.06%

Itaú Unibanco Holding S.A.

115,039,610,411

22.45%

115,039,610,411

22.45%

ITB Holding Brasil Participações Limitada

57,008,875,206

11.13%

57,008,875,206

11.13%

CGB II SpA

10,908,002,836

2.13%

10,908,002,836

2.13%

CGB III SpA

1,800,000,000

0.35%

1,800,000,000

0.35%

Saieh Family

157,046,095,628

30.65%

157,046,095,628

30.65%

Corp. Group Banking S.A.

136,127,850,073

26.57%

136,127,850,073

26.57%

Cía. Inmob. y de Inversiones Saga SpA(1)

20,918,245,555

4.08%

20,918,245,555

4.08%

IFC

17,017,909,711

3.32%

17,017,909,711

3.32%

Others

153,586,266,299

29.97%

153,586,266,299

29.97%

Securities Brokerage

56,499,388,922

11.03%

56,499,388,922

11.03%

ADSs holders and Foreign investors

46,789,496,314

9.13%

46,789,496,314

9.13%

Asset Managers

16,638,194,660

3.25%

16,638,194,660

3.25%

Santo Domingo Group

9,817,092,180

1.92%

9,817,092,180

1.92%

Insurance Companies

5,454,304,549

1.06%

5,454,304,549

1.06%

AFPs (Administradoras de Fondos de Pensiones)

421,784,150

0.08%

421,784,150

0.08%

Other minority shareholders

17,966,005,524

3.50%

17,966,005,524

3.50%

Total

512,406,760,091

100.00%

512,406,760,091

100.00%

Shareholders
   Number of Shares    Percentage
of Total
Share
Capital Number of Votes    Percentage of
Voting and
Dividend Rights
Itaú Unibanco
   195,408,043,473    38.14 % 195,408,043,473    38.14 %
Itaú Unibanco Holding S.A.
   115,039,610,411    22.45 % 115,039,610,411    22.45 %
ITB Holding Brasil Participações Limitada
   57,008,875,206    11.13 % 57,008,875,206    11.13 %
CGB II SpA
   10,908,002,836    2.13 % 10,908,002,836    2.13 %
CGB III SpA

1,800,000,000

   0.35 % 1,800,000,000    0.35 %
Saga II SpA

7,000,000,000

   1.37 % 7,000,000,000    1.37 %
Shareholders
   Number of Shares    Percentage
of Total
Share
Capital Number of Votes    Percentage of
Voting and
Dividend Rights
Saga III SpA
   3,651,555,020    0.71 % 3,651,555,020    0.71 %
Saieh Family
   146,394,540,608    28.57 % 146,394,540,608    28.57 %
Corp. Group Banking S.A.
   136,127,850,073    26.57 % 136,127,850,073    26.57 %
Cía. Inmob. y de Inversiones Saga SpA(1)
   10,266,690,535    2.00 % 10,266,690,535    2.00 %
IFC
   17,017,909,711    3.32 % 17,017,909,711    3.32 %
Others
   153,586,266,299    29.97 % 153,586,266,299    29.97 %
Securities Brokerage
   56,476,665,178    11.02 % 56,476,665,178    11.02 %
ADSs holders and Foreign Inst. Investors
   44,953,944,517    8.77 % 44,953,944,517    8.77 %
Local Institutional Investors
   26,894,700,808    5.25 % 26,894,700,808    5.25 %
Other minority shareholders
   25,260,955,796    4.93 % 25,260,955,796    4.93 %
Total
   512,406,760,091    100.00 % 512,406,760,091    100.00 %






~~(1)~~                     ~~Includes 182,125,023~~
⁽¹⁾
Includes 508,725,981 shares owned by Cía. Inmob. y de Inversiones Saga SpA that are under custody.
As of ~~April 2, 2018,~~March 31, 2019, ADS holders (through the depositary) and foreign institutional investors held approximately ~~14.37%~~14.01% of our total common shares, represented by seven registered shareholders ~~(Deutsche~~(The Bank ~~Trust Company Americas - ADSs;~~of New York Mellon ADRs; Banco de Chile on behalf ofnon-resident third parties; Itaú Corpbanca on behalf of investors; Banco Santander on behalf of foreign investors; Banco Santander-HSBC Bank PLC London Client Account; ~~Banco Santander-HSBC Global Custody Clients S/C;~~ IFC and Sierra Nevada Investments Chile Dos Limitada). The remaining ~~85.63%~~86.0% of our total shares were held locally, in Chile, represented by ~~437,783,516,580shares~~440,617,813,683 shares held by local shareholders. All of our shareholders have identical voting rights.
Itaú Unibanco Holding S.A., ITB Holding Brasil Participações Limitada, CGB II SpA, CGB III SpA, Saga II SpA and ~~CGB~~Saga III SpA, accounted for approximately 22.45%, 11.13%, 2.13%, 0.35%, 1.37% and ~~0.35%~~0.71%, respectively, of our outstanding common shares as of ~~April 2, 2018.~~March 31, 2019. Itaú Unibanco Holding S.A., ITB Holding Brasil Participações Limitada, CGB II SpA, CGB III SpA, Saga II SpA and ~~CGB~~Saga III SpA are each controlled by Itaú Unibanco who is the sole controlling shareholder of Itaú Corpbanca.
Itaú Unibanco and CorpGroup have signed the Itaú CorpGroup Shareholders’ Agreement to determine aspects related to corporate governance, dividend policy (based on performance and capital metrics), transfer of shares, liquidity and other matters. For a
description of the Itaú CorpGroup Shareholders’ Agreement and the Transaction Agreement, see “Item 10. Additional Information—C. Material Contracts.”
B. RELATED PARTY TRANSACTIONS
GENERAL
In the ordinary course of our business, we engage in a variety of transactions with certain of our affiliates and related parties. The Chilean Corporations Act requires that our transactions with related parties be in our interest and also on anarm’s-length basis or on similar terms to those customarily prevailing in the market. We are required to compare the terms of any such transaction to those prevailing in the market at the date the transaction is to be entered into. In the event that the transaction is not within the ordinary course of business, prior to its effectiveness, the directors committee must prepare a report describing the conditions of the operation and present it to the board of directors for its express approval. Directors of companies that violate this provision are liable for the resulting losses. Under the Chilean General Banking Act, transactions between a bank and its affiliates are subject to certain additional restrictions.
Under the Chilean Corporations Act, a “related party transaction,” in the case of an open stock corporation, is any operation between such corporation and (i) one or more related persons under ~~article~~Article 100 of the Securities Market Act (see below), (ii) a director, manager, administrator, principal officer or liquidator of the corporation, by him/herself or on behalf of persons other than the corporation, or their respective spouses or blood or marriage relatives to the second degree, (iii) an entity of which any of the persons indicated in the previous numeral is the direct or indirect owner of ten percent or more of its capital or a director, manager or officer, (iv) a person or entity determined as such by theby-laws of the corporation or the board committee, and (v) an entity in which a director, manager, administrator, principal officer or liquidator of the corporation, has acted in any of those capacities during the immediately previous 18 months.
Article 100 of the Securities Market Act provides that the following persons are “related” to a company: (i) the other entities of the business conglomerate to which the company belongs, (ii) parents, subsidiaries and equity-method investors and investees of the company, (iii) all directors, managers, officers and liquidators of the company and their spouses or blood relatives to the second degree, or any entity controlled, directly or indirectly, by any of the referred individuals, (iv) any person that, by him/herself or with other persons under a joint action agreement, may appoint at least one member of the management of the company or control ten percent or more of the capital or voting capital of a stock company and (v) other entities or persons determined as such by the CMF.
A publicly-traded corporation may only enter into a related transaction when its aim is to contribute to the corporate general interests, its conditions are set at arm’s length and the corporation has followed the procedure indicated in the Chilean Corporations Act. The procedure to approve a related transaction can be summarized as follows: (i) the directors, managers, administrators, principal officers and liquidators involved in the potential transaction must give notice thereof to the board (these persons are obligated to disclose their interest in the transaction and their reasons to justify the convenience of the transaction for the corporation, both of which must be informed to the public), (ii) the absolute majority of the board, excluding any director involved in the transaction, must approve the transaction, (iii) the approval given by the board must be informed to the next shareholders’ meeting, (iv) if the directors involved in the transaction form the majority of the board, the transaction may only be approved by the unanimity of the remaining directors or bytwo-thirds of the issued voting shares in the corporation in a shareholders’ meeting, and (v) where the approval of the shareholders’ meeting is required, the board will request an independent appraiser to submit to the shareholders the conclusions regarding the conditions of the transaction.
These rules are not applicable tonon-material transactions in terms of amounts involved, transactions included in the ordinary course of business of the corporation, according to the policies approved by the board and transactions with another entity of which the corporation owns at least 95% of its shares or rights.
Non-compliance with these rules does not invalidate the transaction, but the persons involved will be obligated to transfer the benefit accrued thereby from the transaction to the corporation and will be held liable for the potential damages suffered by the corporation. These rules apply to all publicly-traded corporations and to their subsidiaries, regardless of their corporate type.
We believe that we have complied with the applicable requirements of the Chilean Corporations Act in all transactions with related parties and affirm that we will continue to comply with such requirements.
As of December 31, ~~2015,~~ 2016, 2017 and ~~2017,~~2018, loans to related parties totaled Ch$~~7,314~~233,672 million, Ch$~~233,672~~214,026 million and Ch$~~214,026~~263,338 million, respectively. See Note 32 to our consolidated financial statements for a more detailed accounting of transactions with related parties.
LOANS TO RELATED PARTIES
As of December 31, ~~2015,~~ 2016, 2017 and ~~2017,~~2018, loans to related parties were as ~~follows:~~follows (loans for 2018 refer to loans and accounts receivable from customers at amortized cost and for prior periods, loans refer to loans and accounts receivable from customers, net):

Operating
Companies

Investment
Companies

Individuals

As of December 31, 2017

(in millions of constant Ch$ as of December 31, 2017)

   Operating
Companies    Investment
Companies    Individuals
As of December 31, 2018
   (in millions of constant Ch$ as of December 31, 2018)
Loans and receivables to customers:


Commercial loans

113,202

79,715

3,730

   170,873    64,073    3,960
Mortgage Loans

—

—

19,273

   —      —      21,154
Consumer Loans

—

—

5,081

   —      —      5,961
Loans and receivables to customers - gross

113,202

79,715

28,084







Loans and receivables to customers—gross
   170,873    64,073    31,075
Provision for loan losses

(1,627
)
(5,252
)
(96
)
   (2,550 )    (70 )    (63 )






Loans and receivables to customers, net

111,575

74,463

27,988

   168,323    64,003    31,012






Operating
Companies

Investment
Companies

Individuals

As of December 31, 2016

(in millions of constant Ch$ as of December 31, 2016)

   Operating
Companies    Investment
Companies    Individuals
As of December 31, 2017
   (in millions of constant Ch$ as of December 31, 2017)
Loans and receivables to customers:


Commercial loans

117,362

93,170

3,070

   113,202    79,715    3,730
Mortgage Loans

—

—

19,568

   —      —      19,273
Consumer Loans

—

—

3,493

   —      —      5,081
Loans and receivables to customers - gross

117,362

93,170

26,131







Loans and receivables to customers—gross
   113,202    79,715    28,084
Provision for loan losses

(2,398
)
(396
)
(197
)
   (1,627 )    (5,252 )    (96 )






Loans and receivables to customers, net

114,964

92,774

25,934

   111,575    74,463    27,988






Operating
Companies

Investment
Companies

Individuals

As of December 31, 2015

(in millions of constant Ch$ as of December 31, 2015)

Loans and receivables to customers:

Commercial loans

40

—

831

Mortgage Loans

—

—

5,209

Consumer Loans

—

—

1,245

Loans and receivables to customers - gross

40

—

7,285

Provision for loan losses

—

—

(11
)
Loans and receivables to customers, net

40

—

7,274

   Operating
Companies    Investment
Companies    Individuals
As of December 31, 2016
   (in millions of constant Ch$ as of December 31, 2016)
Loans and receivables to customers:

Commercial loans
   117,362    93,170    3,070
Mortgage Loans
   —      —      19,568
Consumer Loans
   —      —      3,493






Loans and receivables to customers—gross
   117,362    93,170    26,131
Provision for loan losses
   (2,398 )    (396 )    (197 )






Loans and receivables to customers, net
   114,964    92,774    25,934






All loans to related parties were made in the ordinary course of business, were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons, and did not involve more than the normal risk of collectability or present other unfavorable features. During ~~2015,~~ 2016, 2017 and ~~2017,~~2018 and in accordance with IFRS, the total gross amounts of related party loans outstanding amounted to Ch$~~7,325~~236,663 million, Ch$~~236,663~~221,001 million and Ch$~~221,001~~266,021 million, respectively.
OTHER TRANSACTIONS WITH RELATED PARTIES
During ~~2015,~~ 2016, 2017 and ~~2017,~~2018, we had the following income (expenses) from services provided to (by) related parties:

2015

2016

2017

Company

Income
(expenses)

Income
(expenses)

Income
(expenses)

(in millions of nominal Ch$)

Redbanc S.A.

(888
)
(3,754
)
(3,355
)
Transbank S.A.

(5,572
)
(10,882
)
(14,586
)
Combanc S.A.

(164
)
(291
)
(378
)
Itaú Chile Cía. de Seguros de Vida S.A.

—

—

—

Seguros

(2,168
)
(21,775
)
6,871

Servicios de recaudación

(53
)
—

—

Arriendos

(15
)
—

—

Asesorías Cumelen S.A.

—

(450
)
—

Corp Research S.A.

—

(443
)
(453
)
Recuperadora de Créditos S.A.

(1,030
)
(540
)
—

Itaú Chile Inv. Serv. y Administración S.A.

(587
)
(422
)
(650
)
Compañía de Seguros Confuturo S. A.

—

(1,418
)
—

Instituto de Estudios Bancarios Guillermo Subercaseaux

—

(69
)
(143
)
Opina S.A.

—

(110
)
—

VIP Asesorías y Servicios Integrales Limitada

—

(185
)
(415
)
Everis Chile S.A.

—

—

(607
)
Itaú Unibanco S.A.

(6,610
)
—

—

CAI Gestión Inmobiliaria S.A.

—

(90
)
(115
)
Compañía de Seguros Corp Seguros S.A

—

(3,263
)
—

Universidad Andres Bello

—

(32
)
—

Promoservice S.A.

—

(1,431
)
(267
)
Comder Contraparte Central S.A

—

(697
)
(1,067
)
Sinacofi S.A.

—

(918
)
—

Operadora de Tarjeta de Crédito Nexus S.A.

—

(1,896
)
(3,836
)
Pulso Editorial S.A.

—

(521
)
(509
)
Inmobiliaria Edificio CorpGroup S.A.

—

(5,010
)
(4,725
)
Grupo de Radios Dial S.A.

—

(107
)
—

Hotel Corporation of Chile S.A.

—

(64
)
(265
)
Corp Imagen y diseños S.A.

—

(82
)
(196
)
Asesorías e Inversiones Rapelco Limitada S.A.

—

(37
)
—

CorpGroup Holding Inversiones Limitada

—

(394
)
(398
)
SMU S.A., Rendic Hnos. S.A.

—

(2,152
)
(2,221
)
Inversiones Corp Group Interhold Limitada

—

(2,172
)
(3,097
)
Bcycle Latam SPA

—

—

(552
)

(17,087
)
(59,205
)
(30,964
)
   2016    2017    2018
Company
   Income
(expenses)    Income
(expenses)    Income
(expenses)
   (in millions of nominal Ch$)
Redbanc S.A.
   (3,754 )    (3,355 )    (3,002 )
Transbank S.A.
   (10,882 )    (14,586 )    (15,469 )
Combanc S.A.
   (291 )    (378 )    (350 )
Itaú Chile Cía. de Seguros de Vida S.A.
   —      —      —
Seguros
   (21,775 )    6,871    (613 )
Servicios de recaudación
   —      —      —
Arriendos
   —      —      —
Asesorías Cumelen S.A.
   (450 )    —      —
   2016    2017    2018
Company
   Income
(expenses)    Income
(expenses)    Income
(expenses)
   (in millions of nominal Ch$)
Corp Research S.A.
   (443 )    (453 )    (463 )
Recuperadora de Créditos S.A.
   (540 )    —      —
Itaú Chile Inv. Serv. y Administración S.A.
   (422 )    (650 )    63
Compañía de Seguros Confuturo S. A.
   (1,418 )    —
Instituto de Estudios Bancarios Guillermo Subercaseaux
   (69 )    (143 )    (121 )
Opina S.A.
   (110 )    —      —
VIP Asesorías y Servicios Integrales Limitada
   (185 )    (415 )    (129 )
Everis Chile S.A.
   —      (607 )    (906 )
Itaú Unibanco S.A.
   —      —      —
CAI Gestión Inmobiliaria S.A.
   (90 )    (115 )    (103 )
Compañía de Seguros Corp Seguros S.A
   (3,263 )    —      —
Universidad Andres Bello
   (32 )    —      —
Promoservice S.A.
   (1,431 )    (267 )    —
Comder Contraparte Central S.A
   (697 )    (1,067 )    (902 )
Sinacofi S.A.
   (918 )    —      —
Operadora de Tarjeta de Crédito Nexus S.A.
   (1,896 )    (3,836 )    (2,909 )
Pulso Editorial S.A.
   (521 )    (509 )    (471 )
Inmobiliaria Edificio CorpGroup S.A.
   (5,010 )    (4,725 )    (4,693 )
Grupo de Radios Dial S.A.
   (107 )    —      —
Hotel Corporation of Chile S.A.
   (64 )    (265 )    (94 )
Corp Imagen y diseños S.A.
   (82 )    (196 )    (99 )
Asesorías e Inversiones Rapelco Limitada S.A.
   (37 )    —      —
CorpGroup Holding Inversiones Limitada
   (394 )    (398 )    (408 )
SMU S.A., Rendic Hnos. S.A.
   (2,152 )    (2,221 )    (2,262 )
Inversiones Corp Group Interhold Limitada
   (2,172 )    (3,097 )    (2,476 )
Bcycle Latam SPA
   —      (552 )    (4,048 )
Bolsa de Comercio de Santiago
   —      —      (204 )
Adexus S.A.
   —      —      (254 )






Total    (59,205 )    (30,964 )    (40,210 )
These transactions were carried out on terms normally prevailing in the market at the date of the transaction.
C. INTERESTS OF EXPERTS AND COUNSEL
Not applicable.
ITEM 8. FINANCIAL INFORMATION
A. CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION
See “Item 17. Financial Statements.”
LEGAL PROCEEDINGS
We are involved in collections proceedings initiated by us in the normal course of business and certain proceedings against us in the ordinary course of banking business as disclosed in Note 21 to our consolidated financial statements included herein.
On December 30, 2015, the SBIF issued ~~letter N°~~Letter No. 16,191 (or Letter 16,191) whereby we were informed that as a consequence of the appointment of the former member of our board of directors, Mr. Rafael Guilisasti Gana, as member of the board of directors of Norte Grande S.A., Sociedad de Inversiones Oro Blanco S.A. and Sociedad de Inversiones Pampa Calichera S.A., the SBIF had commenced a special review on the corporate group known as “Cascadas” in order to verify our compliance with credit limitations set forth in the Chilean General Banking Act. The SBIF concluded that all the companies of the Cascadas group are part of a “corporate organizational structure” to exercise control over SQM S.A., therefore, they should be considered a single debtor for the purposes of computing the above referenced credit limitations. As a consequence of the above, the SBIF concluded that Corpbanca violated the individual lending limits set forth in ~~article~~Article 84 N°No. 1 of the Chilean General Banking Act in relation to ~~article~~Article 85 of the same norm regarding the companies that constitute the Cascadas group. In light of the foregoing, the SBIF imposed three fines on Corpbanca of 10% of the excess of such credit limitations for a total amount of Ch$21,764,507,494 (US$30.65 million).
On January 8, 2016, the ~~bank~~Bank paid the full amount of the fines as a mandatory condition precedent to exercise its appeal rights. On January 18, 2016, the ~~bank~~Bank brought an action before the Santiago Court of Appeals seeking the annulment of the fines. Pursuant to a final ruling by the Court of Appeals of Santiago dated August 31, 2016, the fines imposed by the SBIF pursuant to letter No.16,191 were declared illegal. In accordance with Article 22 of the General Law on Banks, the favorable ruling obtained by Itaú Corpbanca is not subject to appeal.
On September 6, 2016, the SBIF filed a complaint ~~(recurso~~(Recurso de ~~queja)~~Queja) against the judges of the Court of Appeals of Santiago before the Supreme Court, which was dismissed by the Supreme Court on May 9, 2017.
On October 19, 2017, the SBIF ~~pressed charges~~filed a complaint against ~~Corpbanca (now~~ Itaú ~~Corpbanca)~~Corpbanca regarding the same alleged violations, giving rise to a new administrative ~~process.~~procedure. On November 14, 2017, Itaú Corpbanca filed a special constitutional rights action ~~(acció~~(Acción de ~~protección)~~Protección) before the Santiago Court of Appeals ~~which~~that was declared inadmissible. ~~Such a~~This ruling was confirmed by the Supreme Court. On November 22, 2017, Itaú Corpbanca filed a defense arguing that it acted in full compliance with applicable law. Pursuant to resolution No. 101, dated January 4, 2019, the SBIF partially accepted the defenses of Itaú Corpbanca, imposing a fine for one of the three charges originally formulated. The ~~administrative process is still pending.~~total amount of the fine imposed was Ch$5,985,328,978. In an extraordinary meeting on January 14, 2019, Itaú Corpbanca’s board of directors analyzed the grounds and consequences of resolution No. 101, including potential courses of action, and reaffirmed the conviction that Itaú Corpbanca has acted in compliance with applicable law. Notwithstanding the foregoing, Itaú Corpbanca decided not to file any appeals against the SBIF’s resolution.
OnIn December ~~20,~~ 2016, Helm LLC (“Helm”) initiated an arbitration proceeding before the ICC International Court of Arbitration (the ~~“Arbitration”~~“ICC”) against ~~respondents Itaú Corpbanca and~~ Corp Group Holding Inversiones Ltda. (“Corp Group”)~~, and nominal respondent Itaú Corpbanca Colombia (collectively with Corp Group~~ and Itaú Corpbanca (collectively, “Respondents”)~~, by filing a Request for Arbitration in the ICC’s International Court of Arbitration in New York.~~. Helm ~~LLC~~ alleged that ~~Corp Group and Itaú Corpbanca~~the Respondents had breached (i) the Amended and Restated Shareholders Agreement of HB Acquisition S.A.S., dated July 31, 2013, which governs Itaú Corpbanca’s subsidiary Itaú Corpbanca Colombia (formerly Banco Santander Colombia S.A.), and (ii) the Transaction Agreement, dated January 29, 2014, as amended and restated, which governs the merger between ~~shareholders~~Itaú Chile S.A. and Corpbanca, by which Itaú Corpbanca was formed, and the potential acquisition by Itaú Corpbanca of certain shares of Itaú Corpbanca Colombia ~~(the “SHA”). As relief,~~from Corp Group.
During the course of the proceedings, Helm ~~LLC is seeking, among other things, damages~~demanded that Itaú Corpbanca and Corp Group effect the acquisition of ~~$598 million, reflecting what it claims is the value to which it is entitled in return for~~ its shares of Itaú Corpbanca Colombia at a price in excess of the price agreed with Corp Group in the Transaction Agreement, which would have totaled approximately $850 million (with interest at 9% per year from January 29, 2014 onwards). On February 28, 2019, a three-member Tribunal of the ICC rejected Helm’s demand and ordered Helm to sell its shares of Itaú Corpbanca Colombia, which represent 19.44% of the equity in Itaú Corpbanca Colombia, to Respondents at approximately $299 million (including interest at LIBOR plus ~~interest. On~~2.7% per year from April 1, 2016 onwards). Itaú Corpbanca intends to purchase the shares from Helm. This price of $299 million implies a valuation multiple of 1.36 times the book value of Itaú Corpbanca Colombia as of December 31, 2018 and is consistent with the valuations of Itaú Corpbanca Colombia in Itaú Corpbanca’s financial statements. The acquisition, when completed, will result in an estimated impact of 0.82% on Itaú Corpbanca’s Common Equity Tier 1 capital, as if we were applying the new regulatory capital requirements on a fully loaded basis, under the Basel III standards (using exchange rates as of February ~~14, 2017, Respondents filed their answers~~28, 2019).
The purchase of shares of Itaú Corpbanca Colombia by Itaú Corpbanca will be subject to ~~Helm LLC’s Request for Arbitration, denying Helm LLC’s claims,~~regulatory approvals in Colombia, Chile and Brazil. We have also sought regulatory approval to purchase the shares held by Kresge Stock Holding Company Inc. (“Kresge”) in Itaú Corpbanca Colombia, which represent 1.38% of the capital stock of Itaú Corpbanca Colombia. When the purchase of shares is complete, Itaú Corpbanca and Corp Group intend to terminate the existing Shareholders Agreement. We can offer no assurances as to when the regulatory approvals, which are not perfunctory, will be received. The acquisition of thenon-controlling interest of Kresge and Itaú Corpbanca filed a counterclaim against Helm LLC for breaching the SHA. As relief under their counterclaim, Corp Group and Itaú Corpbanca are seeking, among other things, for Helm LLC’s rights under the SHAcorresponding obligation is to be ~~terminated. On April 19, 2017, Helm LLC filed a reply~~reflected in our consolidated financial statements once the approval process is completed. Consequently, there are no effects to ~~Corp Group and Itaú Corpbanca’s counterclaim. The Arbitration has continued pursuant to the applicable procedures and an evidentiary hearing is expected to take place~~be recognized in ~~July 2018. Itaú Corpbanca believes Helm LLC’s claim is without merit and intends to enforce its rights under the SHA and applicable law.~~our consolidated financial statements included in our Annual Report.
DIVIDEND POLICY
Under the Chilean Corporations Act, Chilean open stock companies, such as ours, are generally required to distribute at least 30% of their net income each year, unless otherwise agreed by the unanimous consent of our shareholders. In the event of any loss of capital or of the legal reserve, no dividends can be distributed so long as such loss is not recovered from earnings or otherwise. No dividends above the legal minimum can be distributed if doing so would result in the ~~bank~~Bank exceeding its indebtedness ratio or ~~its~~our lending limits.
On the other hand, the Itaú CorpGroup Shareholders’ Agreement provides for a dividend policy that targets, in the following order of priority: (i) first, complying with the Optimal Regulatory Capital for such fiscal year, as this term is defined therein, (ii) second, the payment of cash dividends aggregating at least US$370 million for each year and (iii) third, achieving a growth rate of the total assets of Itaú Corpbanca and Itaú Corpbanca Colombia above the Minimum Growth Rate (as this term is defined therein) and other reasonable objectives as determined by the board of Itaú Corpbanca. See “Item 10. Additional Information—C. Material Contracts — Itaú CorpGroup Shareholders’ Agreement.”
The Itaú CorpGroup Shareholders’ Agreement provides for the distribution of the 100% of the fiscal year’s net income, calculated as total net income for the period less an amount provisioned to comply with the Optimal Minimum Regulatory Capital, as this term is defined in the Itaú CorpGroup Shareholders’ Agreement. In accordance with the Itaú CorpGroup Shareholders’ Agreement, at our ordinary shareholders’ meeting held on March 27, ~~2017,~~2018, our shareholders approved a dividend payout ratio of ~~30%~~40% of ~~2016~~2017 net income, equivalent to a dividend yield of ~~0.02%~~0.76%. In ~~2017,~~2018, we paid an annual dividend of Ch$~~0.001205475/~~0.04484469/share.
~~Also in~~In accordance with the Itaú CorpGroup Shareholders’ Agreement, at our ordinary shareholders’ meeting held on March ~~27, 2018,~~19, 2019, our shareholders approved a dividend payout ratio of ~~40%~~30% of ~~2017~~2018 net income. As a result, in ~~2018,~~2019, we paid an annual dividend of Ch$~~0.04484469/~~0.100728627/share, equivalent to a dividend yield of ~~0.76%~~1.64%.
The actual amount of dividend payments will depend upon, among other factors, our then current level of earnings, capital and legal reserve requirements, as well as market conditions, and there can be no assurance as to the amount or timing of future dividends.
In the event that dividends are paid, holders of ADSs will be entitled to receive dividends to the same extent as the owners of common shares. Dividends received by holders of ADSs will, absent changes in Chilean exchange controls or other laws, be converted into U.S. dollars and distributed net of currency exchange expenses and fees of the depositary and will be subject to Chilean withholding tax, currently imposed at the rate of 35% (which may be subject to credits in certain cases). Owners of ADSs are not charged with any fees with respect to cash or stock dividends.
B. SIGNIFICANT CHANGES
There have been no significant changes since the date of our annual financial statements.
ITEM 9. OFFER AND LISTING DETAILS
Not applicable.
A. OFFER AND LISTING DETAILS
Not applicable.
~~PRICE HISTORY~~
The table below shows, for the periods indicated, high and low closing prices (in nominal Chilean pesos) of the common shares on the Santiago Stock Exchange and of our ADSs on the New York Stock Exchange.

Santiago Stock Exchange

New York Stock Exchange

Common Stock

ADSs

High

Low

High

Low

(Ch$ per share (1))

(US$ per ADS(2))

Annual Price History

2013

7.47

4.73

22.19

13.75

2014

7.79

5.92

21.14

15.82

2015

7.90

5.53

18.78

11.70

2016

6.16

5.20

14.43

10.87

2017

6.42

4.95

14.75

10.77

Quarterly Price History

2015 1st Quarter

7.68

6.60

18.54

15.82

2015 2nd Quarter

7.90

6.71

18.78

16.34

2015 3rd Quarter

7.00

6.07

16.48

12.91

2015 4th Quarter

6.37

5.53

14.09

11.70

2016 1st Quarter

6.13

5.20

13.75

10.87

2016 2nd Quarter

6.16

5.23

14.43

11.26

2016 3rd Quarter

5.97

5.46

13.80

12.32

2016 4th Quarter

5.99

5.37

13.81

11.97

2017 1st Quarter

6.12

5.06

13.68

11.65

2017 2nd Quarter

6.42

5.90

14.48

13.30

2017 3rd Quarter

6.39

5.62

14.75

13.43

2017 4th Quarter

6.10

4.95

14.44

10.77

2018 1st Quarter

6.17

5.60

15.53

13.44

Monthly Price History

September 2017

6.03

5.62

14.54

13.43

October 2017

6.10

5.85

14.44

13.60

November 2017

5.84

5.13

13.88

11.90

December 2017

5.65

4.95

13.60

10.77

January 2018

6.17

5.65

15.53

13.73

February 2018

6.11

5.68

15.35

14.15

March 2018

6.00

5.80

15.18

14.35

April 2018 (3)

5.80

5.80

14.62

14.62

~~Sources: Santiago Stock Exchange Official Quotation Bulletin; NYSE.~~
~~(1)~~                     ~~Pesos per share reflect nominal price at trade date.~~
~~(2)~~                     ~~Price per ADS in US$: one ADS represents 5,000 shares of common stock and 1,500 since March 2011.~~
~~(3)~~                     ~~The information for April 2018 is as of April 2, 2018.~~
B. PLAN OF DISTRIBUTION
Not applicable.
C. MARKETS
Our common shares are traded on the Santiago Stock Exchange and the Chilean Electronic Stock Exchange under the symbol “ITAUCORP.” Our ADSs have been listed since November 1, 2004 on the New York Stock Exchange under the symbol “ITCB.”
D. SELLING SHAREHOLDER
~~Not applicable.~~
~~E. DILUTION~~
Not applicable.
E. DILUTION
Not applicable.
F. EXPENSES OF THE ISSUE
Not applicable.
ITEM 10. ADDITIONAL INFORMATION
A. SHARE CAPITAL
Not applicable.
B. MEMORANDUM AND ARTICLES OF INCORPORATION
Set forth below is material information concerning our share capital and a brief summary of the significant provisions of ourby-laws and Chilean law. This description contains material information concerning the shares, but does not purport to be complete and is qualified in its entirety by reference to ourby-laws, the Chilean General Banking Act, the Chilean Corporations Act and the Chilean Securities Market Act each referred to below.
GENERAL
~~GENERAL~~
Shareholders rights in a Chilean bank that is also a special corporation (~~sociedad anó~~Sociedad Anónima ~~especial~~Especial) are subject to the regulations of open stock corporations (~~sociedades anó~~Sociedades Anónimas ~~abiertas~~ Abiertasor ~~public companies)~~“Public Companies”) are governed by the bank’sby-laws, which effectively serve the purpose of both the articles or certificate of incorporation and theby-laws of a company incorporated in the United States, by the Chilean General Banking Act and secondarily, to the extent not inconsistent with the latter, by the provisions of Chilean Corporations Act applicable to public companies except for certain provisions which are expressly excluded. Article 137 of the Chilean Corporations Act sets forth that all provisions of the Chilean Corporations Act take precedence over any contrary provision in a corporation’sby-laws. Both the Chilean Corporations Act and ourby-laws provide that legal actions by shareholders against us (or our officers or directors) to enforce their rights as shareholders or by one shareholder against another in their capacity as such, are to be brought in Chile in arbitration proceedings, notwithstanding the plaintiff’s right to submit the action to the ordinary courts of Chile.
The Chilean securities markets are principally regulated by the CMF under the Chilean Securities Market Act and the Chilean Corporations Act. In the case of banks, compliance with these laws is supervised by the SBIF. These two acts provide for disclosure requirements, restrictions on insider trading and price manipulation, and protection of minority investors. The Chilean Securities Market Act sets forth requirements relating to public offerings, stock exchanges, securities brokers and dealers, and outlines disclosure requirements for companies that issue publicly offered securities. The Chilean Corporations Act sets forth the rules and requirements for establishing public companies while eliminating government supervision of closed (closely-held) corporations. Public companies are those that voluntarily, or are legally required to, register their shares in the Securities Registry kept by the CMF.
BOARD OF DIRECTORS
Our board of directors has 11 regular members and two alternate members, elected by shareholders’ vote at ordinary shareholders’ meetings. The directors may be either shareholders ornon-shareholders of the Company. There is no age limit for directors.
A director remains in office for three years and may bere-elected indefinitely. If for any reason, the ordinary shareholders’ meeting in which the new appointments of directors are to be made is not held, the duties of those serving as such shall be extended until their replacements are designated, in which case, the board of directors shall convene a meeting at the earliest possible time in order to effect the appointments.
The directors are entitled to compensation for the performance of their duties. The amount of their compensation is determined annually at the ordinary shareholders’ meeting. In addition, payments in the form of wages, fees, travel accounts, expense accounts, dues as representatives of the board of directors and other cash payments, payments in kind or royalties of any sort whatsoever, may be paid to certain directors for the performance of specific duties or tasks in addition to their functions as directors imposed upon them specifically by the ordinary shareholders’ meeting. Any special compensation must be reported at the ordinary shareholders’ meeting, and for that purpose, a detailed and separate entry shall be made in our annual report to investors, which shall expressly indicate the complete name of each of the directors receiving special compensation.
Without prejudice to any other incapacity or incompatibility established by the Chilean Corporations Act, according to the Chilean General Banking Act, the following may not be directors: (i) those persons who have been sentenced or are being tried for crimes punishable with a principal or accessory penalty of temporary or permanent suspension from or incapacity to hold public
office, (ii) those persons who have been declared bankrupt and have not been rehabilitated, (iii) members of the Chilean Congress, (iv) directors or employees of any other financial institutions, brokers and security traders, together with its directors, officers, executives and managers; employees appointed by the President of Chile and employees or officers of (x) the State, (y) any public service, public institution, semi-public institution, autonomous entity or state-controlled company, or any such entity, a Public Entity, or (z) any enterprise, corporation or public or private entity in which the State or a Public Entity has a majority interest, has made capital contributions, or is represented or participating, provided that persons holding positions in teaching activities in any of the above entities may be directors, and (v) the bank’s employees, which shall not prevent a director from holding on a temporary basis and for a term not to exceed 90 days the position of manager. The CEO may not be elected as a director.
For purposes of the election of directors, each shareholder shall have the right to one vote per share for purposes of electing a single person, or to distribute his votes among candidates as he or she may deem convenient, and the persons obtaining the largest number of votes in the same and single process shall be awarded positions, until all positions have been filled. The elections of regular and alternate board members are carried out separately. For purposes of casting votes, the chairman and the secretary, together with any other persons that may have been previously designated by at the meeting to sign the minutes thereof, shall issue a certificate giving evidence of the oral votes of shareholders attending, following the order of the list of attendance being taken.
Each shareholder is entitled to cast his or her vote by means of a ballot signed by him or her, stating whether he or she signs for his own account or as a representative. This entitlement notwithstanding, in order to expedite the voting process, it can be ordered that the vote be taken alternatively or by oral vote or by means of ballots. At the time of polling, the chairman may instruct that the votes be read aloud, in order for those in attendance to count the number of votes issued and verify the outcome of the voting process.
Every election of directors, or any changes in the election of directors, shall be transcribed into a public deed before a notary public, published in a newspaper of Santiago and notified to the SBIF by means of the filing of a copy of the respective public deed. Likewise, the appointments of general manager, manager and deputy managers shall be communicated and transcribed into a public deed.
If a director ceases to be able to perform his or her duties, whether by reason of conflict of interest, limitation, legal incapacity, impossibility, resignation or any other legal cause, the vacancy is filled as follows: (i) the positions of regular director is filled by a member appointed by the board of directors on its first meeting after the vacancy occurs and such member appointed by the board of directors will remain in the position until the next ordinary shareholders’ meeting, where the appointment may be ratified, in which case, the replacement director will remain in his or her position until the expiration of the term of the director he or she replaced and act as full director; and (ii) while the vacancy has not been filled by the board of directors, an alternate director shall act as regular member.
The alternate directors may temporarily replace regular directors in case of their absence or temporary inability to attend a board meeting. Alternate board members are always entitled to attend and speak at board meetings. They are entitled to vote at such meetings only when a regular member is absent and such alternate member acts as the absent member’s replacement.
During the first meeting following the ordinary shareholders’ meeting, the board of directors elects, by an absolute majority and in separate and secret votes, from among its members, a chairman and a vice chairman. If no director obtains such majority, the election is repeated among those three directors who obtained the most votes, adding any blank votes to the person who obtained the greatest number of votes. In case of a tie, the vote is repeated and, if a tie were to occur again, there is a drawing. The chairman and the vice president may be reelected indefinitely.
The board of directors meets in ordinary sessions at least once a month, held onpre-set dates and times determined by the board. Extraordinary meetings are held whenever called by the chairman, whether at his own will or upon the request of one or more directors, so long as the chairman determines in advance that the meeting is justified, except if the request is made by the absolute majority of the directors in office, in which case the meeting shall be held without such prior determination. The extraordinary meetings may only address those matters specifically included in the agenda for the extraordinary meeting, except that, if the meeting is attended by all the directors in office, they may agree otherwise by a unanimous vote. Notifications of meetings of the board of directors shall be made by certified letter sent to the address of each director registered with the bank, at least five days in advance of the date on which the ordinary or extraordinary session should be held. Thefive-day period shall be calculated from the date on which the letter is placed in the mail.
The quorum for the board of directors’ meeting is majority of its members in office, this is six directors. Resolutions shall be adopted by the affirmative vote of the absolute majority of the attending directors. In the event of a tie, the person acting as the chairman of the meeting shall have a casting vote.
Directors having a vested interest in a negotiation, act, contract or transaction that is not related to the bank business, either as principal or as representative of another person, shall communicate such fact to the other directors. If the respective resolutions are approved by the board, it shall be in accordance with the prevailing company’s interest and fair market conditions and such director’s interest must be disclosed at the next ordinary shareholders’ meeting by the chairman of such board meeting.
The discussions and resolutions of the board of directors shall be recorded in a special book of minutes maintained by the secretary. The relevant minutes shall be signed by the directors that attended the relevant meeting. If a director determines that the minutes for a meeting are inaccurate or incomplete, he or she is entitled to record an objection before actually signing the minutes. The minutes shall be deemed approved as from the moment it is signed by all the directors that attended such meeting and all the resolutions adopted may be carried out upon the approval. However, by unanimous consent of the directors that attended the meeting, the resolutions adopted by the board may be carried out before the approval of the minutes, provided that the agreement is recorded in a written document signed by all the relevant directors. In the event of death, refusal or incapacity for any reason of any of the directors attending to sign the minutes, such circumstance shall be recorded at the end of the minutes stating the reason for the impediment.
The directors are personally liable for all of the acts they effect in the performance of their duties. Any director who wishes to disclaim responsibility for any act or resolution of the board of directors must record his or her opposition in the minutes, and the chairman must report such opposition at the following ordinary shareholders’ meeting.
The board will represent us in and out of court and, for the performance of the ~~bank’s~~Bank’s business, a circumstance that will not be necessary to prove before third parties, it will be empowered with all the authorities and powers of administration that the law or theby-laws do not set as exclusive to the ordinary shareholders’ meeting, without being necessary to grant any special power of attorney, even for those acts that the law requires to do so. This provision is notwithstanding the judicial representation of the ~~bank~~Bank that is part of the general manager’s authorities. The board may delegate part of its authority to the general manager, to the managers, deputy managers or attorneys of the ~~bank,~~Bank, a director, a commission of directors, and for specifically determined purposes, in other persons.
CAPITALIZATION
Under Chilean law, the shareholders of a bank, acting at an extraordinary shareholders’ meeting, have the power to authorize an increase in such company’s capital with the authorization of the SBIF. When an investor subscribes for issued shares, the shares are registered in such investor’s name, even if not paid for, and the investor is treated as a shareholder for all purposes except with regard to receipt of dividends and the return of capital; provided that the shareholders may, by amending theby-laws, also grant the right to receive dividends or distributions of capital. An investor becomes eligible to receive dividends and returns of capital once it has paid for the shares (if it has paid for only a portion of such shares, it is entitled to receive a correspondingpro-rata portion of the dividends declared and/or returns of capital with respect to such shares unless the company’sby-laws provide otherwise). If an investor does not pay for shares for which it has subscribed on or prior to the date agreed upon for payment, the board of directors is obligated to initiate legal action to recover outstanding amounts unless holders oftwo-thirds of the issued shares in an extraordinary shareholders meeting authorizes the board of directors to refrain from pursuing the collection, in which case the company’s capital will be reduced to the amount actually paid. Upon termination of the actions for collection, the board of directors shall propose to the shareholders meeting thewrite-off of thenon-paid amount and the reduction of the capital of the company to the amount effectively paid in. Authorized shares and issued shares which have not been subscribed and paid for within the period fixed for their payment (which cannot be longer than three years) are cancelled and are no longer available for issuance by the company, unless in case of an issuance of convertible bonds (in which case the unsubscribed portion of the capital increase shall remain in place for a number of shares sufficient to comply with the option) or when reserved for compensation plans for employees (in which case the maximum term for subscription and payment cannot be longer than five years).
Article 22 of Chilean Corporations Act states that the purchaser of shares of a company implicitly accepts itsby-laws and any agreements adopted at shareholders’ meetings.
OWNERSHIP RESTRICTIONS
Under Article 12 of the Chilean Securities Market Act and the Regulations of the SBIF, shareholders of Public Companies are required to report the following to the CMF and the Chilean stock exchanges:

·any direct or indirect acquisition or sale of shares that results in the holder’s acquiring or ceasing to own, directly or indirectly, 10% or more of a Public Company’s share capital; and

·any direct or indirect acquisition or sale of shares or options to buy or sell shares, in any amount, if made by a holder of 10% or more of a Public Company’s capital or if made by a director, liquidator, main officer, general manager or manager of such corporation.
The foregoing requirements also apply to the acquisition or sale of securities or agreements which price or return depends or is conditioned (all or in a significant part) on changes or movements in the price of such shares. Such report shall be made the day following the execution of the transaction.
In addition, majority shareholders must state in any such report whether their purpose is to acquire control of the company or if they are making a financial investment. Any beneficial owner of ADSs representing 10% or more of our share capital is subject to
these reporting requirements under Chilean law. The Chilean Securities Market Act also sets forth certain regulations on takeovers of corporations.
Under Article 54 of the Chilean Securities Market Act and the regulations of the CMF, persons or entities intending to acquire control, directly or indirectly, of a Public Company, regardless of the acquisition vehicle or procedure, and including acquisitions made through direct subscriptions or private transactions, are also required to inform the public of such acquisition at least ten business days before the date of perfection of the acts which allow to obtain control of the company, but in any case, as soon as negotiations regarding the change of control are formalized and/or as soon as reserved information and/or documents concerning the target are delivered to the potential acquirer through a filing with the CMF, the stock exchanges and the companies controlled by and that control the target and through a notice published in two Chilean newspapers, which notice must disclose, among other information, the person or entity purchasing or selling and the price and conditions of any negotiations.
Within the same term, a written communication to such effect must be sent to the target corporation, the controlling corporation, the corporations controlled by the target corporation, the CMF, and to the Chilean stock exchanges on which the securities are listed.
In addition to the foregoing, Article 54A of the Chilean Securities Market Act requires that within two business days of the completion of the transactions pursuant to which a person has acquired control of a Public Company, a notice shall be published in the same newspapers in which the notice referred to above was published and notices shall be sent to the same persons mentioned in the preceding paragraphs.
A beneficial owner of ADSs intending to acquire control of us is also subject to the foregoing reporting requirements.
The provisions of the aforementioned articles do not apply whenever the acquisition is being made through a tender or exchange offer.
Title XXV of the Chilean Securities Market Act on tender offers and the regulations of the CMF provide that the following transactions shall be carried out through a tender offer:

·an offer which allows a person to take control of a Public Company;

·an offer for all the outstanding shares of a Public Company upon acquiringtwo-thirds or more of its voting shares, in which case such controlling shareholder must offer to purchase the remaining shares from the investing shareholders in a tender offer, unless (i) the controlling shareholder has reachedtwo-thirds of the voting shares through a tender offer for all of the shares of the company or due to any of the situations exempted, or (ii) it reaches such percentage as a result of a reduction of the capital of the company by operation of law: such offer must be made at a price not lower than the price at which appraisal rights may be exercised, that is, book value if the shares of the company are not actively traded or, if the shares of the company are actively traded, the weighted average price at which the stock has been traded during the 60 stock exchange business days between the thirtieth and the ninetieth stock exchange business days immediately preceding the acquisition; and

·an offer for a controlling percentage of the shares of a listed operating company if such person intends to take control of the company (whether listed or not) controlling such operating company, to the extent that the operating company represents 75% or more of the consolidated net worth of the holding company.
Nevertheless, the following exceptions are applicable to all the cases described above (i) the shares are being sold by a controlling shareholder of such company at a price in cash which is not substantially higher than the market price and the shares of such company are actively traded on a stock exchange, or (ii) those shares are acquired (a) through a capital increase, (b) as a consequence of a merger, (c) by inheritance, or (d) through a forced sale.
Article 200 of the Chilean Securities Market Act prohibits any shareholder that has taken control of a Public Company to acquire, within the period of 12 months from the date of the transaction that permitted such shareholder to take control of the Public Company, a number of shares equal to or higher than 3% of the outstanding issued shares of the target without making a tender offer at a price per share not lower than the price paid at the time of the change of control transaction. However, if the acquisition is made on a stock exchange and on a pro rata basis, the controlling shareholder may purchase a higher percentage of shares, if so permitted by the regulations of the stock exchange.
Title XV of the Chilean Securities Market Act sets forth the basis to determine what constitutes control of a business group and a related party while Title XXV establishes a special procedure for acquiring control of a Public Company through a tender offer. The Chilean Securities Market Act defines control as the power of a person, or group of persons acting pursuant to a joint action agreement, to direct the majority of the votes in the shareholders meetings of the corporation, or to elect the majority of members of its board of directors, or to influence the management of the corporation significantly. Significant influence is deemed to exist in respect
of the person or group of persons acting together pursuant to a joint action agreement holding, directly or indirectly, at least 25% of the voting share capital, unless:

·another person or group of persons acting pursuant to a joint action agreement, directly or indirectly, control a stake equal to or higher than the percentage controlled by such person or group;

·the person or group does not control, directly or indirectly, more than 40% of the voting share capital and the percentage controlled is lower than the sum of the shares held by other shareholders holding more than 5% of the voting share capital; and

·in cases where the CMF has ruled otherwise, based on the distribution or atomization of the overall shareholding.
According to the Chilean Securities Market Act, a joint action agreement is an agreement among two or more parties which, directly or indirectly, own shares in a corporation at the same time and whereby they agree to participate with the same interest in the management of the corporation or in taking control of the same. The law presumes that such an agreement exists between:

·a principal and its agents;

·spouses and relatives up to certain level of kindred;

·entities within the same business group; and

·an entity and its controller or any of its members.
Likewise, the CMF may determine that a joint action agreement exists between two or more entities considering, among others, the number of companies in which they simultaneously participate and the frequency with which they vote identically in the election of directors, appointment of managers and other resolutions passed at shareholders’ meetings.
According to Article 96 of the Chilean Securities Market Act, a business group is a group of entities with such ties in their ownership, management or credit liabilities that it may be assumed that the economic and financial action of such members is directed by, or subordinated to, the joint interests of the group, or that there are common credit risks in the credits granted to, or securities issued by, them. According to the Chilean Securities Market Act, the following entities are part of the same business group:

·a company and its controlling person;

·all the companies with a common controlling person and the common controlling person; and

·all the entities that the CMF declare to be part of the business group due to one or more of the following reasons:
·
a substantial part of the assets of the company are involved in the business group, whether as investments in securities, equity rights, loans or guaranties;

·the company has a significant level of indebtedness and that the business group has a material participation as a lender or guarantor;

·when the controller is a group of entities, that the company is a member of a controlling person of the entities mentioned in the first two bullets above and there are grounds to include it in the business group based on the definitions above; and

·the company is controlled by one or more member of the controlling group of any of the entities of the business group, when such controller is composed of more than one person and there are grounds to include the company in the business group based on the definition above.
Article 36 of the Chilean General Banking Act states that as a matter of public policy, no person or company may acquire, directly or indirectly, shares that alone or jointly with the shares previously owned by it, represent more than 10% of the shares of a bank without the prior authorization of the SBIF, which may not be unreasonably withheld. The prohibition also applies to beneficial owners of ADSs. In the absence of such authorization, any person or group of persons acting in concert would not be permitted to exercise voting rights with respect to the shares or ADSs acquired. In determining whether or not to issue such an authorization, the SBIF considers a number of factors enumerated in the Chilean General Banking Act, including the financial stability of the purchasing party.
Article 35bis of the Chilean General Banking Act establishes that prior authorization of the SBIF is required for:

·the merger of two or more ~~banks;~~banks, where the absorbing bank becomes a bank of systemic importance, pursuant to a regulation that the CMF shall issue within 18 months from the date on which it replaces the SBIF;
·
the acquisition of all or a substantial portion (more than one third) of a bank’s assets and liabilities by another ~~bank;~~bank, where the acquiring bank becomes a bank of systemic importance, pursuant to a regulation that the CMF shall issue within 18 months from the date on which it replaces the SBIF;

·the control by the same person, or controlling group, of two or more ~~banks;~~banks, where the banks become banks of systemic importance, pursuant to a regulation that the CMF shall issue within 18 months from the date on which it replaces the SBIF; or

·a substantial increase in the share ownership by a controlling shareholder of a bank (understood as either acquiring a majority or two thirds of the bank’s shares)., where the controlled bank becomes a bank of systemic importance, pursuant to a regulation that the CMF shall issue within 18 months from the date on which it replaces the SBIF
Such prior authorization is required solely when the acquiring bank or the resulting group of banks would own a significant market share in loans (~~colocaciones~~Colocaciones), defined by the SBIF to be more than 15% of all loans in the Chilean banking system. The intended purchase, merger or expansion may be denied by the SBIF pursuant to a report from the Chilean Central Bank’s ~~Counsel.~~Council. Alternatively, a purchase, merger or expansion, when the acquiring bank or resulting group would have a market share in loans defined by the SBIF to be more than 20% of all loans in the Chilean banking system, may be conditioned on one or more of the following:

·that the bank or banks maintain an effective net equity higher than 8% and up to 14% of their risk weighted assets;
·
that the technical reserve established in Article 65 of the Chilean General Banking Act be applicable when deposits exceed one and a half times the resulting bank’s effective net equity (which is the sum of(x) paid-in capital and reserves, plus (y) subordinated bonds up to 50% of letter (x) above under certain terms, plus (z) certain effective risk voluntary reserves up to 1.25% of its risk weighted assets); or

·that the margin for interbank loans be diminished to 20% of resulting bank’s effective net equity.
If the acquiring bank or resulting group would have a market share in loans defined by the SBIF to be more than 15% but less than 20%, the authorization will be conditioned on the bank or banks maintaining an effective net equity not lower than 10% of their risk-weighted assets for the time set forth by the SBIF, which may not be less than one year. The calculation of risk-weighted assets is based on a five-category risk classification system applied to a bank’s assets that is based on the Basel Committee recommendations.
According to the Chilean General Banking Act a bank may not grant loans to related parties on more favorable terms than those generally offered tonon-related parties. Article 84 No. 2 of the Chilean General Banking Act and the Regulations of the SBIF create the presumption, among other cases, that natural persons who are holders of shares and who beneficially own more than 1% of the shares (or 5% in the case of bank’s shares actively traded) are related to the bank and imposes certain restrictions on the amounts and terms of loans made by banks to related parties. This presumption would also apply to beneficial owners of ADSs representing more than 1% of the shares, and accordingly the limitations of Article 84 No. 2 would be applicable to such beneficial owners. Finally, according to the Regulations of the SBIF, Chilean banks that issue ADSs are required to inform the SBIF if any person, directly or indirectly, acquires ADSs representing 5% or more of the total amount of shares of capital stock issued by such bank.
Article 16bis of the Chilean General Banking Act provides that the individuals or legal entities which, individually or with other people, directly control a bank and who individually own more than 10% of its shares shall send to the SBIF reliable information on their financial situation in the form and within the time set forth in Chapter1-3 of the regulations of the SBIF (Recopilación Actualizada de Normas). Also, controlling shareholders must submit information regarding their financial situation pursuant to Chapter1-17 of said regulations.
PREEMPTIVE RIGHTS AND INCREASES OF SHARE CAPITAL
The Chilean Corporations Act provides that whenever a Chilean company issues new shares for consideration, it must offer to its existing shareholders the right to purchase a sufficient number of shares to maintain their existing ownership percentages in the company. Pursuant to this requirement, preemptive rights in connection with any future issuance of shares will be offered by us to the depositary as the registered owner of the shares underlying the ADSs. However, the depositary will not be able to make such preemptive rights available to holders of ADSs unless a registration statement under the Securities Act is effective with respect to the underlying shares or an exemption from the registration requirements thereunder is available.
We intend to evaluate, at the time of any preemptive rights offering, the practicality under Chilean law and Central Bank of Chile regulations in effect at the time of making such rights available to our ADS holders, as well as the costs and potential liabilities associated with registration of such rights and the related common shares under the Securities Act, and the indirect benefits to us of thereby enabling the exercise by all or certain holders of ADSs of their preemptive rights and any other factors we consider appropriate at the time, and then to make a decision as to whether to file such registration statement. We cannot assure you that any registration statement would be filed. If we do not file a registration statement and no exemption from the registration requirements under the Securities Act is available, the depositary will attempt to sell such holders’ preemptive rights and distribute the proceeds thereof, after deduction of its expenses and fees, if a premium can be recognized over the cost of such sale. In the event that the depositary is not able, or determines that it is not feasible, to sell such rights at a premium over the cost of any such sale, all or certain holders of ADSs may receive no value for such rights. The inability of all or certain holders of ADSs to exercise preemptive rights in respect of common shares underlying such ADSs could result in such holders not maintaining their percentage ownership of the
common shares following such preemptive rights offering unless such holder made additional market purchases of ADSs or common shares.
Under Chilean law, preemptive rights are exercisable or freely transferable by shareholders during a period that cannot be less than 30 days following the grant of such rights. During such period (except for shares as to which preemptive rights have been waived), Chilean Public Companies are not permitted to offer any newly issued shares for sale to any third party. For an additional30-day period thereafter, a Chilean company is not permitted to offer any unsubscribed shares for sale to third parties on terms which are more favorable than those offered to its shareholders. Thereafter, unsubscribed shares may be offered through any Chilean stock exchange without any indication of price. Unsubscribed shares that are not sold on a Chilean stock exchange can be sold to third parties only on terms no more favorable for the purchaser than those offered to shareholders.
SHAREHOLDERS’ MEETINGS AND VOTING RIGHTS
An annual ordinary meeting of shareholders is held within the first four months of each year, generally in March and must be called by the board of directors. The annual ordinary meeting of shareholders is the corporate body that approves the annual financial statements, approves all dividends in accordance with the dividend policy proposed by the board of directors, elects the members of our board of directors and approves any other matter which does not require an extraordinary shareholders’ meeting. The last annual ordinary meeting of our shareholders was held on March ~~27, 2018.~~
19, 2019.
Extraordinary meetings may be called by our board of directors when deemed appropriate, and ordinary or extraordinary meetings must be called by our board of directors when requested by shareholders representing at least 10% of the issued voting shares or by the SBIF.
Notice to convene the annual ordinary meeting or an extraordinary meeting is given by means of written notice which must be published at least three different days in a newspaper of our corporate domicile (currently Santiago) designated by the shareholders at their annual meeting and if a shareholder fails to make such designation, the notice must be published in the Official Gazette pursuant to legal regulations. The first notice must be published not less than 15 days nor more than 20 days in advance of the scheduled meeting. Notice must also be mailed 15 days in advance to each shareholder and to the SBIF, CMF and the Santiago ~~Valparaiso~~ and Chilean Electronic ~~Stock Exchange.~~stock exchanges. Currently, we publish our official notices in the Diario Pulso.
The quorum for a shareholders’ meeting is established by the presence, in person or by proxy, of shareholders representing at least an absolute majority of the issued common shares; if a quorum is not present at the first meeting, the meeting can be reconvened (in accordance with the procedures described in the previous paragraph) and, upon the meeting being reconvened, shareholders present at the reconvened meeting are deemed to constitute a quorum regardless of the percentage of the shares represented. The shareholders’ meetings pass resolutions by the affirmative vote of an absolute majority of those voting shares present or represented at the meeting.
Only shareholders registered with us on the fifth business day prior to the date of a meeting are entitled to attend and vote their shares. A shareholder may appoint another individual (who need not be a shareholder) as his proxy to attend and vote on his behalf. Every shareholder entitled to attend and vote at a shareholders’ meeting has one vote for every share subscribed. Under ourby-laws, directors are elected by cumulative voting. Each shareholder has one vote per share and may cast all of his or her votes in favor of one nominee or may apportion is or her votes among any number of nominees.
The following matters can only be agreed upon at an extraordinary shareholders’ meeting:

·our dissolution;

·a merger, transformation, division or other change in our corporate form or the amendment of ourby-laws;

·the issuance of bonds or debentures convertible into shares;

·the conveyance of 50% or more of our assets or the submission of, or changes to any business plan that contemplates the sale of more than 50% of the assets of the company;
·
the conveyance of 50% or more of the assets of a subsidiary, if represent at least 20% of our total assets, and any transfer of shares of a subsidiary that implies the Company loses control of such subsidiary;

·granting of a security interest or a personal guarantee in each case to secure the obligations of third parties, unless (i) to secure or guarantee the obligations of a subsidiary, in which case the approval of the board of directors will suffice (although this restriction is not applicable to banks: (a) granting sureties, (b) becoming jointly and/or jointly and severally liable with clients or (c) issuing bank guarantees within their course of business) and (ii) in those cases exempted by the Chilean General Banking Act; and
·
other matters that require shareholder approval according to Chilean law or ourby-laws.
The matters referred to in the first five items listed above may only be approved at a meeting held before a notary public, who shall certify that the minutes are a true record of the events and resolutions of the meeting.
Theby-laws establish that resolutions are passed at shareholders’ meetings by the affirmative vote of an absolute majority of those shares present or represented at the meeting. However, under the Chilean Corporations Act, the vote of atwo-thirds majority of the outstanding voting shares is required to approve any of the following actions:

·a change in corporate form, merger orspin-off;

·an amendment to our term of existence or early dissolution;

·a change in corporate domicile;

·a decrease of corporate capital;

·the approval of capital contributions in kind and a valuation of the assets contributed;

·a modification of the authority reserved for the shareholders’ meetings or limitations on the powers of our board of directors;

·a reduction in the number of members of our board of directors;

·the conveyance of 50% or more of the corporate assets, regardless of whether it includes liabilities, or the submission of or change to any business plan that contemplates the conveyance of 50% or more of the corporate assets;

·the conveyance of 50% or more of the assets of a subsidiary, if those assets represent at least 20% of our total assets, and any transfer of shares of a subsidiary that implies the Company loses control of such subsidiary;

·the manner in which the corporation’s profits shall be distributed;

·the creation of security interests to secure third-party obligations in excess of 50% of the corporate assets, unless granted to a subsidiary or when exempted by the Chilean General Banking Act (although this restriction is not applicable to banks: (i) granting sureties, (ii) becoming jointly and/or jointly and severally liable with clients or (iii) issuing bank guarantees within their course of business);

·the acquisition of our own shares, when, and or the terms and conditions permitted by law;

·the cure of formal defects in the incorporation of the corporation or an amendment to itsby-laws related to any of the matters referred to in the preceding bullets;
·
to establish the right of the controller to force other shareholders to sell their shares in case the controller has surpassed 95% of the shares of the company as a result of a tender offer for 100% of its shares under certain circumstances;

·the approval of material related-party transactions according to Article 147 of the Chilean Corporations Act; or

·all other matters provided for in ourby-laws.
In general, Chilean law does not require a Chilean public company to provide the level and type of information that U.S. securities laws require a reporting company to provide to its shareholders in connection with a solicitation of proxies. However, shareholders are entitled to examine the books of the company within the15-day period before the ordinary annual meeting. Under Chilean law, a notice of a shareholders’ meeting listing matters to be addressed at the meeting must be mailed not fewer than 15 days prior to the date of such meeting, and, in cases of an ordinary annual meeting, shareholders must have available an annual report of the company’s activities which includes audited financial statements. In addition to these requirements, we regularly provide, and management currently intends to continue to provide, together with the notice of shareholders’ meeting, a proposal for the final annual dividend.
The Chilean Corporations Act provides that whenever shareholders representing 10% or more of the issued voting shares so request, a Chilean company’s annual report must include, in addition to the materials provided by the board of directors to shareholders, such shareholders’ comments and proposals in relation to the company’s affairs. Similarly, the Chilean Corporations Act provides that whenever the board of directors of a public company convenes an ordinary meeting of the shareholders and solicits proxies for that meeting, or distributes information supporting its decisions, or other similar material, it is obligated to include as an
annex to its said materials any pertinent comments and proposals that may have been made by shareholders owning 10% or more of the company’s voting shares who have requested that such comments and proposals be so included.
DIVIDEND, LIQUIDATION AND APPRAISAL RIGHTS
Under the Chilean Corporations Act, Chilean companies are generally required to distribute at least 30% of their earnings as dividends, unless there is unanimous consent to the contrary. In the event of any loss of capital or of the legal reserve, no dividends can be distributed so long as such loss is not recovered. Also, no dividends of a bank can be distributed if doing so would result in the bank exceeding certain capital ratios.
Dividends that are declared but not paid by the date set for payment at the time of declaration are adjusted from the date set for payment to the date such dividends are actually paid. The right to receive dividends lapses if it is not claimed within five years from the date the dividend is payable.
We may declare a dividend in cash or in shares. When a share dividend is declared above the legal minimum (which minimum must be paid in cash), our shareholders must be given the option to elect to receive cash. Our ADS holders may, in the absence of an effective registration statement under the Securities Act or an available exemption from the registration requirement thereunder, effectively be required to receive a dividend in cash.
In the event of our liquidation, the holders of fully paid shares would participate equally and ratably, in proportion to the number ofpaid-in shares held by them, in the assets available after payment of all creditors.
In accordance with the Chilean General Banking Act, our shareholders have no appraisal rights.
APPROVAL OF FINANCIAL STATEMENTS
Our board of directors is required to submit our audited financial statements to the shareholders annually for their approval at the ordinary shareholders meeting. The approval or rejection of such financial statements is entirely within our shareholders’ discretion. If our shareholders reject our financial statements, our board of directors must submit new financial statements not later than 60 days from the date of such rejection. If our shareholders reject our new financial statements, our entire board of directors is deemed removed from office and a new board of directors is elected at the same meeting. Directors who individually approved such rejected financial statements are disqualified forre-election for the ensuing period.
REGISTRATIONS AND TRANSFERS
Our common shares are registered by an administration agent named DCV Registros S.A. This entity is responsible for our shareholders’ registry. In the case of jointly owned common shares, anattorney-in-fact must be appointed to represent the joint owners in dealings with us.
C. MATERIAL CONTRACTS
The following is a brief summary of our material contracts currently in force. A copy of each of these contracts has been included as an exhibit hereto. See “Item 19. Exhibits.”
Transaction Agreement
This section describes the material terms of (i) the Transaction Agreement executed by former Corpbanca, CorpGroup Parent, Itaú Unibanco and former Itaú Chile on January 29, 2014, and amended on June 2, 2015 and on January 20, 2017; and (ii) the text of the Itaú CorpGroup Shareholders’ Agreement contemplated by the Transaction Agreement and executed by Itaú Unibanco Holding S.A., Inversiones Gasa Limitada, CorpGroup Holding Inversiones Limitada, CorpGroup Banking S.A., Compañía Inmobiliaria y de Inversiones Saga SpA and CorpGroup Interhold SpA on April 1, 2016.
The rights and obligations of the parties to the Transaction Agreement and the Itaú CorpGroup Shareholders’ Agreement are governed by the express terms and conditions of such agreement and not by this summary or any other information contained in thisForm 20-F. The description in this section and elsewhere in thisForm 20-F is qualified in its entirety by reference to the complete text of the Transaction Agreement and the form of Itaú CorpGroup Shareholders’ Agreement, copies of which are attached as Exhibit 10.C.1 and are incorporated by reference herein. This summary does not purport to be complete and may not contain all of the information about the Transaction Agreement or the Itaú CorpGroup Shareholders’ Agreement. Itaú Corpbanca encourages you to read the Transaction Agreement and the Itaú CorpGroup Shareholders’ Agreement carefully and in their entirety.
Capitalized terms used but not defined herein shall have the same meaning as in the Transaction Agreement or the Itaú CorpGroup Shareholders’ Agreement, as applicable.
Explanatory Note Regarding the Transaction Agreement
The following summary is included to provide you with information regarding the terms of the Transaction Agreement. This section is not intended to provide you with any factual information about Itaú Corpbanca. Such information can be found elsewhere in this ~~Form 20-F~~Annual Report and in the public filings that Itaú Corpbanca makes with the SEC.
The representations, warranties and covenants made in the Transaction Agreement by former Itaú Chile and former Corpbanca were qualified and subject to important limitations agreed to by Itaú Chile and Corpbanca in connection with negotiating the terms of the Transaction Agreement. In particular, in your review of the representations and warranties contained in the Transaction Agreement and described in this summary, it is important to bear in mind that the representations and warranties were negotiated with the principal purpose of establishing the circumstances in which a party to the Transaction Agreement may have the right not to consummate the Merger if the representations and warranties of the other party proved to be untrue due to a change in circumstance or otherwise, and allocating risk between the parties to the Transaction Agreement, rather than establishing matters as facts. The representations and warranties are also subject to a contractual standard of materiality and in some cases were qualified by the matters contained in the disclosure schedules that the parties delivered in connection with the Transaction Agreement. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of the Transaction Agreement, which subsequent information may or may not be fully reflected in public disclosures by Itaú Unibanco or former Corpbanca. The representations and warranties and other provisions in the Transaction Agreement should not be read alone but instead together with the information provided elsewhere in thisForm 20-F and in the documents incorporated by reference hereto. We ~~may~~ refer to January 29, 2014, the date that the parties entered into the Transaction Agreement, as the signing date.
Overview
To help you better understand the Merger and the other transactions contemplated by the Transaction Agreement the charts below illustrate, in simplified form, the organizational structure of former Corpbanca and Itaú Chile in Chile and Colombia.
The Merger
The following transactions occurred prior to the Merger:

·The Saieh Family divested 5,208,344,218 shares it held in former Corpbanca which, collectively, amounted to 1.53% of the capital stock of Corpbanca. Such shares were divested to third parties other than the Saieh Family and Itaú Unibanco, and were intended to be transferred to minority shareholders of CorpGroup Parent.

·Itaú Chile increased its capital by US$652 million through the issuance of shares that were fully subscribed and paid for by Itaú Unibanco.
After these transactions occurred, Itaú Chile merged with and into Corpbanca, with Corpbanca as surviving entity under the name of “Itaú Corpbanca.” The Merger resulted in the issuance of 172,048,565,857 shares of Corpbanca (representing 33.58% of the shares of Itaú Corpbanca) to Itaú Unibanco. The Saieh Family retained 33.13% of the capital stock of Itaú Corpbanca and the remaining 33.29% of the capital stock was held by public shareholders. After the Merger, Itaú Unibanco indirectly acquired an additional 2.13% and 0.35% interest in our share capital from the Saieh Family, on October 26, 2016 and on September 15, 2017, respectively, which resulted in an aggregate holding of 36.06% of the capital stock of Itaú Corpbanca.
Consummation of the Merger
In an extraordinary shareholders’ meeting held on June 26, 2015, our shareholders approved the Merger and the other Transactions contemplated in the Transaction Agreement. On September 4, 2015 the SBIF issued Resolution N°No. 409 approving the Merger. Pursuant to the agreements adopted and the approval by the SBIF, the Merger was consummated on April 1, 2016.
After the Merger, and according to the Transaction Agreement and its amendment on January 20, 2017, the following transactions will be implemented:

·Itaú Corpbanca Colombia shall purchase all of the assets and liabilities of Itaú BBA Colombia in accordance with the terms and conditions agreed by Itaú Corpbanca Colombia and Itaú BBA Colombia on November 1, 2016 (the “Itaú Colombian Asset Acquisition”). The Itaú Colombian Asset Acquisition was approved by the shareholders of Itaú Corpbanca Colombia and the CFS, and completed on June 16, 2017, as established in the agreement signed on June 1, 2017, between Itaú Corpbanca Colombia, as assignee, and Itaú BBA Colombia S.A. Corporación Financiera, as assignor. Pursuant to the Itaú Colombian Asset Acquisition transaction, Itaú Corpbanca Colombia acquired Itaú BBA Colombia S.A. Corporación Financiera assets and liabilities. In relation to this transaction, Itaú Corpbanca Colombia S.A. paid Ch$33,205 million to Itaú BBA Colombia S.A Corporación Financiera. This agreement also contemplated the rendering of certain services by Itaú Corpbanca Colombia in favor of Itaú BBA Colombia and the hiring of the senior management of Itaú BBA Colombia by Itaú Corpbanca Colombia.

·Itaú Corpbanca shall acquire of the shares of Banco Corpbanca Colombia S.A., now Itaú Corpbanca Colombia, held by CorpGroup (currently representing 12.36% of shares outstanding) no later than January 28, 2022, subject to receipt of the applicable regulatory approvals. The purchase price for the shares will be US$3.5367 per share plus (i) interest from (and including) August 4, 2015 until (but excluding) the payment date at an annual interest rate equal to Libor plus 2.7% minus (ii) the sum of (x) the aggregate amount of dividends paid by Itaú Corpbanca Colombia to CorpGroup since the date of the Transaction Agreement, plus (y) the accrued interest with respect to the amount of such dividends since the date of their payment until the payment date of the purchase price, at an annual interest rate equal to Libor plus 2.7%.
The foregoing transactions are collectively referred to as the Transactions.
Employee Matters
Following completion of the Merger, Itaú Corpbanca had the discretion to either (i) offer generally to officers and employees of Itaú Chile and its subsidiaries that have or will become employees of Itaú Corpbanca or its subsidiaries, or the Itaú Chile Continuing Employees, employee benefits under compensation and benefit plans on terms and conditions similar to those maintained by former Corpbanca and its subsidiaries and/or (ii) maintain for the benefit of Itaú Chile Continuing Employees, the compensation and benefit plans maintained by former Itaú Chile immediately before the Merger. For purposes of eligibility, participation, vesting and benefit accrual (except not for purposes of benefit accrual to the extent that such credit would result in a duplication of benefits) under former Corpbanca’s compensation and benefit plans, service with or credited by former Itaú Chile or any of its subsidiaries or any of their predecessors shall be treated as service with former Corpbanca.
Indemnification of Officers and Directors
From and after completion of the Merger, in the event of any threatened or actual claim, action, suit, proceeding or investigation, whether civil, criminal or administrative, in which any person who was a director or officer of former Corpbanca or former Itaú Chile or any of their subsidiaries, or the Indemnified Parties, is, or is threatened to be, made a party on the basis of the Transaction Agreement or the Transactions, Itaú Corpbanca has agreed to indemnify, defend and hold harmless, to the fullest extent permitted by applicable law, each such Indemnified Party against any liability, judgments, fines and amounts paid in settlement in connection with any such threatened or actual claim, action, suit, proceeding or investigation.
Registration of the Shares of Itaú Corpbanca Colombia S.A.
Itaú Corpbanca and CorpGroup will carry out commercially reasonable efforts, in accordance with the shareholders agreement of Itaú Corpbanca Colombia S.A., in order to cause Itaú Corpbanca Colombia to be registered as a public company in the National Registry of Securities and Issuers of the CFS and its shares to be listed in the Colombian Stock Market (the “CSM”). The registration process is subject to the approval of Itaú Corpbanca Colombia’s extraordinary shareholders’ meeting.
Itaú Corpbanca and CorpGroup, pursuant to the terms of the shareholders’ agreement dated July 1, 2013 entered into with Helm LLC and other shareholders of Itaú Corpbanca Colombia, requested to submit for the shareholders’ approval the registration of Itaú Corpbanca Colombia in the National Registry of Securities and Issuers of the CFS and the listing of its shares in the CSM. On February 1, 2017, in a meeting of shareholders of Itaú Corpbanca Colombia called for the decision of the above-mentioned matters, Helm LLC voted against such registration and listing and, therefore, those matters were rejected. Following this rejection, Itaú Corpbanca and CorpGroup filed a counterclaim in the Arbitration held in New York against Helm LLC for breaching the
shareholders’ agreement. See “Item 8. Financial Information—A. Consolidated Statements and other Financial Information—Legal Proceedings.”
Insurance Matters
Following completion of the Merger, Itaú Unibanco is required to cause Itaú Chile Compañía de Seguros de Vida S.A. to provide life insurance-related products to all the clients of Itaú Corpbanca that are permitted to obtain an offer from an insurance broker to acquire life insurance and to pay Corpbanca Corredores de Seguros, S.A. and Itaú Chile Corredora de Seguros Limitada brokerage and/or services fees in an aggregate annual amount equal to 47.7%, or the Applicable Premium Percentage of the aggregate revenues generated by them from the sales of such life-insurance related products for the relevant year, in consideration and exchange for the offer of such products to the clients of Itaú Corpbanca.
The Applicable Premium Percentage will be revised on a yearly basis as provided by the Transaction Agreement.
If Itaú Unibanco desires not to continue to cause Itaú Chile Compañía de Seguros de Vida S.A. to offer the life-insurance related products to the insurance clients of Itaú Corpbanca, Itaú Unibanco shall use its reasonable best efforts to, enter into an agreement with a third party and one or more Corpbanca Corredores de Seguros, S.A. and/or Itaú Chile Corredora de Seguros Limitada, whereby such third party will provide life-insurance related products to the insurance clients of Itaú Corpbanca and pay to Corpbanca Corredores de Seguros, S.A. and/or Itaú Chile Corredora de Seguros Limitada, as applicable, the related insurance brokerage fees on substantially the same terms described above. Until an agreement with such third party has been executed, Itaú Unibanco will continue to pay Itaú Corpbanca or Corpbanca Corredores de Seguros, S.A. and/or Itaú Chile Corredora de Seguros Limitada an amount equal to the average of the Insurance Brokerage Fees paid by Itaú Chile Compañía de Seguros de Vida S.A. in the12-month period prior to the date on which Itaú Chile Compañía de Seguros de Vida S.A. ceases to provide life-insurance related products to Itaú Corpbanca or Corpbanca Corredores de Seguros, S.A. and/or Itaú Chile Corredora de Seguros Limitada.
~~Certain Other Businesses~~
~~CorpGroup Parent and Itaú Unibanco agreed to discuss whether Itaú Corpbanca will continue to hold its ownership interest in SMU Corp.~~
Pursuant to the Transaction Agreement, Itaú Unibanco decided that Itaú Corpbanca shall divest all of its investment in SMU Corp. For these purposes, on February 23, 2016, Itaú Corpbanca’s board of directors agreed to sell the bank’s 51% stake in SMU Corp, in the following terms and conditions: (a) ~~Purchaser: SMU S.A. and/or any other company appointed by the latter; (b)~~ ~~Sale price: Ch$454.4 million; (c)~~ ~~Term: Any time after the SBIF’s authorization and once Itaú Unibanco has consented to the terms and conditions of the transaction.~~
On January 30, 2017, Itaú Corpbanca transferred all of its shares in SMU Corp., equivalent to 51% of the total shares of such entity, to Inversiones Monserrat S.A., the acquiring entity of the shares. SMU Corp. S.A. has therefore ceased to be a subsidiary of Itaú Corpbanca.
Itaú CorpGroup Shareholders’ Agreement
The following summary is included to provide you with information regarding the terms of the form of Itaú CorpGroup Shareholders’ Agreement executed by Itaú Unibanco Holding S.A. and CorpGroup on April 1, 2016. This section is not intended to provide you with any factual information about Itaú Corpbanca. Such information can be found elsewhere in the public filings that Itaú Corpbanca makes with the SEC.
Corporate Governance
Composition and size of the Board of Directors of Itaú Corpbanca and its subsidiaries.
Itaú Unibanco and CorpGroup Parent agreed that of the number of directors of each of the board of (i) Itaú Corpbanca and Itaú Corpbanca Colombia that they are entitled or able to appoint (including by causing Itaú Corpbanca to appoint) at any time (in addition to any independent directors required by applicable law) and (ii) the respective subsidiaries of Itaú Corpbanca and Itaú Corpbanca Colombia that they are entitled or able to appoint at any time (in addition to any independent directors required by applicable law), each of Itaú Unibanco and CorpGroup Parent shall be entitled to designate a number in proportion to its respective direct and indirect percentage ownership in Itaú Corpbanca, rounded to the nearest whole number; provided that Itaú Unibanco shall designate at least a majority of such directors of each board appointed by them and that at least one of such directors of each board is appointed by CorpGroup Parent.
The board of Itaú Corpbanca shall be comprised of 11 directors and two alternate directors (one selected by Itaú Unibanco and one selected by CorpGroup Parent). The board of Itaú Corpbanca Colombia shall be comprised of nine directors and the number of directors of the board of all other subsidiaries shall be specified by the board of Itaú Corpbanca.
Itaú Unibanco and CorpGroup Parent agreed to cause, (i) a designee of CorpGroup Parent to be the chairman of the board of Itaú Corpbanca as long as CorpGroup Parent holds at least 13% of the capital stock of Itaú Corpbanca, (ii) a designee of CorpGroup Parent to be the chairman of the board of Itaú Corpbanca Colombia as long as CorpGroup Parent holds at least 13% of the capital stock of Itaú Corpbanca and (iii) a designee of Itaú Unibanco to be the vice-chairman of Itaú Corpbanca and Itaú Corpbanca Colombia. The chairman of the board of Itaú Corpbanca shall not have a casting vote.
Itaú Unibanco and CorpGroup Parent shall cause the directors of the relevant board appointed by them to vote, to the extent permitted by applicable law, together as a single block on all matters in accordance with the recommendation of Itaú Unibanco (except in the cases subject to shareholder consent rights). To this end, in the event that (i) a director of Itaú Corpbanca, Itaú Corpbanca Colombia or any other subsidiary of Itaú Corpbanca designated by CorpGroup Parent or Itaú Unibanco does not vote with the other directors as a single block and (ii) as a consequence, the relevant board is unable to adopt a decision on such matter in accordance with the recommendation of Itaú Unibanco (except that (ii) will not be required if such director is a member of the Saieh Group, or fails to comply on more than two occasions and more than two matters in any calendar year), Itaú Unibanco or CorpGroup Parent (whomever designated such director), shall take all required action to have such director removed from the relevant board within 60 calendar days. Failure to take such action shall be considered to constitute a Material Breach by the shareholder who designated such director.
A majority of the directors will constitute quorum for all meetings of the relevant boards. However, if less than all of the directors appointed by Itaú Unibanco to such board are not present, a quorum will not exist without the consent of the majority of the directors appointed by Itaú Unibanco to such board. The vote of the majority of the directors attending a meeting will be required to pass a resolution of the relevant boards (except in the cases subject to shareholder consent rights).
Board Committees
Itaú Unibanco and CorpGroup Parent agreed to cause Itaú Corpbanca and Itaú Corpbanca Colombia to each create the following committees of the board of directors: Directors Committee, Audit Committee, Management and Talent Committee, Assets and Liabilities Management Committee and Credit Committee.
The Credit Committee shall (i) have binding power to establish the limits and procedures of the credit policy of Itaú Corpbanca and its subsidiaries and the power to establish approval exceptions for financial decisions exceeding certain thresholds (to be defined by the Credit Committee) and (ii) shall impose a binding framework with upper limits on credit exposures for which approval of Itaú Unibanco will be required. In connection with the latter, Itaú Unibanco shall respond to any such requests for approval within seven business days (the absence of explicit denial being considered as an approval).
The Credit Committee shall be comprised of five members (of which three shall be appointed by Itaú Unibanco and two by CorpGroup Parent), all of whom shall be local executives or directors of the relevant board, and be headed by a local executive officer or director recommended by the CEO of Itaú Corpbanca or its relevant subsidiary, as applicable.
Officers
The board of directors of Itaú Corpbanca shall appoint from time to time the CEO, the country heads and other senior management of Itaú Corpbanca and Itaú Corpbanca Colombia. Itaú Unibanco and CorpGroup Parent shall cause Itaú Corpbanca to cause its subsidiaries to appoint designees of the board of Itaú Corpbanca from time to time to the designated positions at such subsidiary. A Management and Talent Committee will determine an objective process to recommend designees to these positions based on internal promotion, international, merit-based standards and professional track record, and relevant industry and jurisdiction-specific experience, and will provide a list of selected candidates to the board of Itaú Corpbanca who will be ultimately responsible for their final appointment.
CorpGroup Parent may request the removal of the CEO of Itaú Corpbanca and of Itaú Corpbanca Colombia if during three consecutive years (excluding the year of the closing of the Merger) the ROE (return on equity) of the respective bank is at least 1% lower than the average ROE of the three largest privately-owned banks (measured by assets, and excluding Itaú Corpbanca and Itaú Corpbanca Colombia) of Chile or Colombia, as the case may be, during such three-year period.
Shareholder Consent Rights
Subject to certain exceptions set forth in the Itaú CorpGroup Shareholders’ Agreement, Itaú Unibanco and CorpGroup Parent agreed that Itaú Corpbanca shall not take, and shall not permit any subsidiary to take, any of the following transactions without the consent of (i) CorpGroup Parent, so long as CorpGroup Parent owns at least 13% of the capital stock of Itaú Corpbanca, and (ii) Itaú Unibanco:

·merge, reorganize or consolidate Itaú Corpbanca or any of its subsidiaries or enter into a joint venture or similar transaction in excess of materiality thresholds;
·
issue or sell any equity securities of Itaú Corpbanca or any of its subsidiaries, other than solely to the extent required to comply with immediate legal and regulatory requirements or to meet the Optimal Regulatory Capital;

·repurchase or otherwise retire or acquire any shares or other equity securities of Itaú Corpbanca or any of its subsidiaries;

·list or delist any shares or other equity securities of Itaú Corpbanca or any of its subsidiaries;

·enter into, modify or terminate a contract or transaction with a related party;

·effect any acquisition of the stock, equity interests, assets or business of any third-party or any disposition of assets of Itaú Corpbanca or any subsidiary or the capital stock or other equity interests of any subsidiary, in each case in excess of materiality thresholds;

·effect any liquidation, dissolutions, reorganizations through a voluntary bankruptcy or similar transactions;

·amend or repeal any provision of the organizational documents of Itaú Corpbanca or any of its subsidiaries;

·change the size or powers of the board of directors or any committee thereof;

·enter into any new line of business, that is not a Banking Business;

·create or dissolve one or more subsidiaries in excess of materiality thresholds; enter into agreements between Itaú Corpbanca or any of its subsidiaries, on the one hand, and any Governmental Authority, on the other hand;

·make any change in the external auditors of Itaú Corpbanca or any of its subsidiaries;
·
make any change to the dividend policy;

·enter into any agreement that limits or restricts the ability of Itaú Corpbanca or any of its subsidiaries to own, manage, operate, control, participate in, perform services for, or otherwise carry on or engage in any business or in any geographic area; enter into any contract to do any of the foregoing actions; and

·any other matter not set forth above that requires the approval of a supermajority of the shareholders of Itaú Corpbanca under Article 67 of the Chilean Corporations Act.
Transfer of Shares of Itaú Corpbanca
Itaú Unibanco and CorpGroup Parent have agreed not to directly or indirectly purchase or otherwise acquire shares of Itaú Corpbanca or any beneficial interest therein to the extent such acquisition would require Itaú Unibanco or CorpGroup Parent to launch a tender offer to acquire all shares of Itaú Corpbanca. Any transfer of shares of Itaú Corpbanca made by Itaú Unibanco and CorpGroup Parent shall be implemented through the Santiago Stock Exchange with afive-day prior notice to the other party.
So long as CorpGroup Parent and Itaú Unibanco collectively hold an aggregate direct or indirect participation in the voting shares of Itaú Corpbanca of at least 50% plus one share, CorpGroup Parent shall keep (and may not transfer) the direct or indirect ownership of a number of shares of Itaú Corpbanca representing the lesser of: (i) 16.42% of the shares of Itaú Corpbanca at the time of execution of the Itaú CorpGroup Shareholders’ Agreement (i.e. at the closing of the Transactions) or (ii) the minimum percentage of such shares that allows Itaú Unibanco and CorpGroup Parent to hold such aggregate direct or indirect participation in the voting shares of Itaú Corpbanca. Such number of shares will be pledged by CorpGroup Parent in favor of Itaú Unibanco.
Right of First Offer,Tag-Along and Drag-Along Rights
Right of first offer
Subject to the terms set forth on the Itaú CorpGroup Shareholders’ Agreement, Itaú Unibanco and CorpGroup Parent shall have a right of first offer with regard to potential transfers of shares of the Companies. If either Itaú Unibanco or CorpGroup Parent intend to transfer shares of the Companies, such party shall notify in writing to the other party of such intention, stating the number of shares, the price and other terms and conditions of the proposed transfer. The recipient party shall have the right to purchase all such shares for a price and under terms and conditions equal to those notified by the selling shareholder. If the recipient party elects not to purchase all the shares intended to be transferred, the selling shareholder shall be permitted for a period of six (6) months from the date the notice to purchase the shares was due to be received by the selling party, to transfer to a third party not less than the number of shares, at a price not less than and on terms and conditions not materially less favorable to the selling shareholder than those stated in the notice of such proposed transfer.
Tag-along
CorpGroup Parent will have the right totag-along on the sale of shares of Company One or of shares of Itaú Corpbanca owned by Company One by Itaú Unibanco and jointly sell to a third party with Itaú Unibanco in such sale. Pursuant to such right, in the event of a proposed transfer of shares of Company One or shares of Itaú Corpbanca by Itaú Unibanco, Itaú Unibanco shall deliver to CorpGroup Parent prompt written notice stating, to the extent applicable, (i) the name of the proposed transferee, (ii) the number of shares proposed to be transferred, (iii) the proposed purchase price and (iv) any other material terms and conditions of the proposed transfer.
The proposed transferee will not be obligated to purchase a number of shares exceeding that set forth in the notification of the proposed transfer. In the event such transferee elects to purchase less than all of the total shares sought to be transferred by CorpGroup Parent and Itaú Unibanco, CorpGroup Parent shall be entitled to transfer to the proposed transferee a number of shares equal to (i) the total number of shares originally proposed to be transferred by Company One and Itaú Unibanco multiplied by (ii) a fraction, (A) the numerator of which is the total number of shares of Itaú Corpbanca held by Company Two, and (B) the denominator of which is the total number of shares of Itaú Corpbanca held by the Companies.
Drag-along
In the event of a proposed sale of all of the issued and outstanding shares of Company One or shares of Itaú Corpbanca held by Itaú Unibanco to a third party and if at such time CorpGroup Parent owns less than 10% of the capital stock of Itaú Corpbanca, Itaú Unibanco may notify CorpGroup Parent in writing of such proposed sale stating (i) the name of the proposed transferee, (ii) the proposed purchase price (which shall be equal to at least the higher of fair value and market price), (iii) the obligation of the transferee to purchase all of CorpGroup Parent shares of Itaú Corpbanca, and (iv) any other material terms and conditions of the transfer.
Under these circumstances, CorpGroup Parent shall be obligated to sell all of its shares of Itaú Corpbanca, free and clear of liens at the same price and on other terms no less favorable than Itaú Unibanco.
Put of Company Shares
If and to the extent that CorpGroup Parent is prohibited from selling its shares of Itaú Corpbanca, CorpGroup Parent shall have the unconditional right, from time to time on one or more occasions, to sell to Itaú Unibanco, and Itaú Unibanco shall have the unconditional obligation to acquire from CorpGroup Parent, any number of shares of Company Two at a price per share equal to the market price as of the date on which CorpGroup Parent notifies Itaú Unibanco of CorpGroup Parent’s exercise of its unconditional right to sell if immediately following such sale CorpGroup Parent and Itaú Unibanco would continue to collectively hold an aggregate direct or indirect participation in the voting shares of Itaú Corpbanca of at least 50% plus one share.
At the time of payment of the purchase price of the shares of Company Two, Itaú Unibanco shall pay CorpGroup Parent, as an indemnity for not being able to benefit from the exemption on capital gains set forth in Article 107 of the Chilean Income Tax Law to which it would otherwise have been entitled to if it would have sold the underlying shares of Itaú Corpbanca in the Santiago Stock Exchange, a cash amount equal to (i) 50% of any taxes of CorpGroup Parent or its affiliates arising out of or in connection with such transfer that would not have arisen if it had sold the underlying shares of Itaú Corpbanca in the Santiago Stock Exchange and benefit from the abovementioned exemption on capital gains, and (ii) any taxes of CorpGroup Parent or its affiliates arising out of the application of such indemnity payment.
Change of Control of CorpGroup Parent
Under the Itaú CorpGroup Shareholders’ Agreement, CorpGroup Parent shall notify Itaú Unibanco prior to consummating a Change of Control of CorpGroup Parent and provide Itaú Unibanco a right of first offer to purchase a number shares of Company Two equal to the number required by Itaú Unibanco to hold an aggregate direct or indirect participation in the voting shares of Itaú Corpbanca of at least 50% plus one share at a price equal to the higher of the market price or fair value.
If Itaú Unibanco accepts the price proposed by CorpGroup Parent, CorpGroup Parent shall be obligated to cause Company Two to sell such number of Itaú Corpbanca’s shares to Itaú Unibanco at such price.
In the event that Itaú Unibanco does not accept the price proposed by CorpGroup Parent and as a result, an agreement is not reached, then CorpGroup Parent shall be permitted to proceed with such Change of Control and Itaú Unibanco shall be entitled to unilaterally terminate the Itaú CorpGroup Shareholders’ Agreement during a period of 60 days after receipt of notice from CorpGroup notifying of the consummation of such Change of Control.
For purposes of the Itaú CorpGroup Shareholders’ Agreement, Change of Control shall mean, with respect to CorpGroup Parent, the Saieh Group ceasing to own, directly and indirectly, in a single transaction or in a series of related transactions, at least 50% plus one additional share of the issued voting stock of CorpGroup Parent.
Right to Exchange Shares for Shares of Itaú Unibanco
In the event Itaú Unibanco issues or sells certain equity securities of Itaú Unibanco to any third-party as consideration for or in connection with a transaction or series of transactions involving the direct or indirect investment by Itaú Unibanco in such equity securities or assets of any other third party, Itaú Unibanco shall inform CorpGroup Parent of such issuance or sale and shall offer to CorpGroup Parent the right to exchange for the same type of equity securities of Itaú Unibanco. CorpGroup Parent shall be entitled to exchange any or all of its shares of Company Two (or shares of Itaú Corpbanca) for such equity securities of Itaú Unibanco at an exchange ratio that reflects the relative fair values of the relevant equity securities of Itaú Unibanco and the shares of Company Two or Itaú Corpbanca, as the case may be.

Notwithstanding the foregoing, if the issuance of any such equity securities to CorpGroup Parent would result in Itaú Unibanco Participações S.A. ceasing to hold more than 50% of Itaú Unibanco’s voting equity, then CorpGroup Parent shall have the right to exchange no more than an amount of equity securities of Itaú Unibanco the issuance of which would not result in Itaú Unibanco Participações S.A. ceasing to hold more than 50% of Itaú Unibanco’s voting equity.
Controlling Shareholder
Notwithstanding the other provisions of the Itaú CorpGroup Shareholders’ Agreement, Itaú Unibanco shall have no obligation to purchase shares of Itaú Corpbanca or Company Two, to the extent such purchase would, in and of itself, require Itaú Unibanco to make a tender offer for all of the outstanding shares of Itaú Corpbanca.
If Itaú Unibanco ceases to be the Controlling Shareholder (as defined in Article 97 of the Chilean Securities Market Act) of Itaú Corpbanca, prior to consummating any obligation pursuant to a provision of the Itaú CorpGroup Shareholders’ Agreement to purchase shares of Itaú Corpbanca or Company Two from CorpGroup Parent which would result in Itaú Unibanco being the Controlling Shareholder of Itaú Corpbanca, Itaú Unibanco shall commence a tender offer to purchase a number of shares of Itaú Corpbanca which would result in Itaú Unibanco being the Controlling Shareholder of Itaú Corpbanca for the purchase price provided in such applicable provision of the Itaú CorpGroup Shareholders’ Agreement and shall in any event satisfy its obligation (whether through the tender offer or a subsequent purchase thereafter) within 90 calendar days.
CorpGroup Parent Liquidity Put and Call Options
During a period of 18 months from the closing date of the Merger, CorpGroup Parent shall have the right to (i) sell to Itaú Unibanco, a number of shares of Company Two representing in the aggregate up to 6.6% of all of the outstanding shares of Itaú Corpbanca at a price equal to the market price as of the notice date of such put right; or (ii) cause Company Two to sell to Itaú Unibanco, through one of the mechanisms available on the Santiago Stock Exchange that only allows block sales, a number of shares of Itaú Corpbanca representing up to 6.6% of all of the outstanding shares of Itaú Corpbanca (in which event Itaú Unibanco will place an order to purchase such shares in the Santiago Stock Exchange at a price not less than such market price). If, as a result of the competitive bidding procedures of the Santiago Stock Exchange, the shares of Itaú Corpbanca sold by Company Two are unexpectedly sold over the Santiago Stock Exchange to a third party other than Itaú Unibanco or any of its affiliates at a higher price, then CorpGroup Parent shall no longer have the right to repurchase such shares of Itaú Corpbanca from Itaú Unibanco or one of its wholly-owned subsidiaries.
If the put right described above has been exercised, at any time and from time to time during the five-year period thereafter, CorpGroup Parent shall have the unconditional right either to (i) acquire from Itaú Unibanco a number of shares of Company Two up to the number of shares sold pursuant to the put right described above at the same price per share as was paid by Itaú Unibanco pursuant to such put right plus an annual interest rate at the ChileanÍndice de Cámara Promedio plus a spread that is not to exceed the lowest spread then being offered by Itaú Corpbanca tonon-governmental borrowers in Chile; or (ii) cause Itaú Unibanco to place an order on the Santiago Stock Exchange to sell to CorpGroup Parent and/or Company Two a number of shares of Itaú Corpbanca of up to the number of shares of Itaú Corpbanca sold to Itaú Unibanco pursuant to the put right described above at the same price per share as was paid by Itaú Unibanco pursuant to such put right plus an annual interest rate at the ChileanÍndice de Cámara Promedio plus a spread that is not to exceed the lowest spread then being offered by Itaú Corpbanca tonon-governmental borrowers in Chile. If, as a result of the competitive bidding procedures of the Santiago Stock Exchange, the shares of Itaú Corpbanca sold by Itaú Unibanco or one of its wholly-owned subsidiaries are sold over the Santiago Stock Exchange to a third party at a higher price, then CorpGroup Parent and/or Company Two shall not have the right to repurchase such shares of Itaú Corpbanca.
Call Option in Event of Material Breach
If either Itaú Unibanco or CorpGroup Parent commits a Material Breach of the Itaú CorpGroup Shareholders’ Agreement, or the Breaching Shareholder, thenon-Breaching Shareholder shall have the right to give written notice to the Breaching Shareholder describing such Material Breach and demanding that the Breaching Shareholder cure the Material Breach by fully performing its obligation.
If the Breaching Shareholder has not cured its Material Breach within 50 calendar days after receipt of any such notice, thenon-Breaching Shareholder shall have the unconditional right to (i) require the Breaching Shareholder to sell all of its shares to thenon-Breaching Shareholder at a price per share equal to 80% of the market price as of the date of the notice exercising a call option and (ii) if thenon-Breaching Shareholder is CorpGroup Parent, to sell to Itaú Unibanco all of its shares at a price per share equal to 120% of the market price as of the date of the notice exercising a put option.
Notwithstanding the foregoing, if thenon-Breaching Shareholder is Itaú Unibanco, Itaú Unibanco may elect to purchase the maximum number of shares which would allow Itaú Unibanco to avoid making a public offer for all of the outstanding shares of Itaú Corpbanca.
Non-Competition;Non-Solicit
Non-Competition
Neither Itaú Unibanco nor CorpGroup Parent shall, directly or indirectly, own, invest, control, acquire, operate, manage, participate or engage in any Banking Business in Chile, Colombia and the Republic of Panama other than (i) through its investment in the Itaú Corpbanca and its subsidiaries and (ii) through anysociedad de apoyo al giro in which Itaú Corpbanca has an ownership interest.
For purposes of the Itaú CorpGroup Shareholders’ Agreement, Banking Business shall mean providing (i) consumer financial products and/or services, including secured and/or unsecured consumer lending, consumer mortgage products, consumer card products, retail banking products and/or services, and consumer leasing; and/or (ii) deposit-taking services including both consumer and commercial deposits, and payroll services; and/or (iii) credit and/or debit card transaction processing services (which transaction processing services, for the avoidance of doubt, include merchant acquiring); and/or (iv) commercial financial products and/or services, including bilateral and syndicated loans, trustee and depositary services; and/or (v) investment banking services; and/or (vi) financial advisory services related to the services described in clauses (i) through (v) above; and/or (vii) all businesses related or reasonably incidental thereto.
Notwithstanding the foregoing, the Itaú CorpGroup Shareholders’ Agreement permits the following activities: (i) providing consumer financing and other financial products or services offered from time to time by supermarkets and other nonbank retailers in the applicable jurisdiction; (ii) financing or providing asset management products and services; (iii) receiving from or providing to any third party a personal guaranty or a loan or engaging in other financial arrangements in connection with a transaction or transactions that does not otherwise constitute a Banking Business in Chile, Colombia or the Republic of Panama; (iv) making investments by or in employee retirement, pension or similar plans or funds or in companies that manage such plans or funds; (v) acquiring, owning, controlling or managing, in any third party that has any Banking Business in Chile, Colombia and the Republic of Panama pursuant to purchase, merger, consolidation or otherwise so long as (A) the Banking Business in Chile, Colombia or the Republic of Panama conducted by such third party or business constitutes not more than 10% of the revenues of such acquired third party or business and not more than 5% of the revenues of Itaú Corpbanca, in each case for the immediately preceding 12 months, and (B) after consummation of such acquisition, Itaú Corpbanca is offered the right to acquire such Banking Business for cash at the fair value thereof; (vi) acquiring, owning, controlling, managing, investing in any third party or business which would otherwise be prohibited under thenon-compete obligation, provided that action is undertaken to sell the competing portion of such business; (vii) acquiring, owning, controlling, managing, investing in any third party that has any Banking Business in Chile, Colombia and the Republic of Panama or engaging in a new business opportunity in the Banking Business in Chile, Colombia, Peru and Central America, if such transaction or opportunity was presented by Itaú Corpbanca to Itaú Unibanco, if CorpGroup Parent is the investing party, or by Itaú Corpbanca to CorpGroup Parent, if Itaú Unibanco is the investing party, and CorpGroup Parent or Itaú Unibanco, as the case maybe, withheld their consent to Itaú Corpbanca consummating such transaction; (viii) providing products or services pursuant to any unsolicited request from any client that operates in Chile, Colombia and the Republic of Panama which cannot be reasonably provided by Itaú Corpbanca or its subsidiaries or (ix) acquiring, owning, managing or investing in the MCC Entities (as defined in the Itaú CorpGroup Shareholders’ Agreement) or prohibit any activities currently conducted by the MCC Entities.
Non-Solicit
Neither Itaú Unibanco nor CorpGroup Parent shall, directly or indirectly, solicit for hire, hire or otherwise induce or attempt to induce any officer of Itaú Corpbanca or any of its subsidiaries to leave the employment of Itaú Corpbanca or any of its subsidiaries, or in any way interfere with the relationship between Itaú Corpbanca or any of its subsidiaries, on the one hand, and any officer thereof on the other hand.
Dividend Policy; Dividend Put and Call Options.
For a period of eight fiscal years starting from the closing of the Transaction, or the Dividend Period, Itaú Unibanco and CorpGroup Parent agreed to cause Itaú Corpbanca to adopt an annual business plan and budget expressly providing for the management of Itaú Corpbanca and its subsidiaries in a manner that has as its primary target, in the following order of priority: (i) first, complying with the Optimal Regulatory Capital for such fiscal year, (ii) second, the payment by Itaú Corpbanca of cash
dividends aggregating at least US$370 million for each year during the Dividend Period and (iii) third, achieving a growth rate of the total assets of Itaú Corpbanca and Itaú Corpbanca Colombia above the Minimum Growth Rate and other reasonable objectives as determined by the board of Itaú Corpbanca. Itaú Unibanco and CorpGroup Parent have agreed to cause the board of Itaú Corpbanca to cause management of Itaú Corpbanca and its subsidiaries to conduct their respective businesses in accordance with such annual business plan and budget.
If the amount of the dividends paid in cash by Itaú Corpbanca is less than US$370 million for any fiscal year during the Dividend Period, Itaú Unibanco and CorpGroup agreed to cause Itaú Corpbanca and its subsidiaries to maximize the use of Tier 2 capital, to the fullest extent permitted by applicable Law to increase its regulatory capital to the extent required to maintain Optimal Regulatory Capital requirements for such fiscal year.
Optimal Regulatory Capital means at any date, with respect to either Itaú Corpbanca or Itaú Corpbanca Colombia, as the case may be, (a) the higher of (i) 120% of the minimum regulatory Capital Ratio required by applicable law of the applicable country and (ii) the average regulatory Capital Ratio of the three largest privately-owned banks (excluding the Itaú Corpbanca and/or Itaú Corpbanca Colombia) (measured in terms of assets) in Chile or Colombia, as the case may be, in each case as of the last day of the most recent fiscal year multiplied by (b) the risk-weighted assets (including any risk-weighted assets of subsidiaries that are consolidated for purposes of calculating minimum regulatory Capital Ratio in such country) of the Itaú Corpbanca or Itaú Corpbanca Colombia, as the case may be, as of the date one year from the last day of the most recent fiscal year assuming that such risk-weighted assets grow during such year at a rate equal to the Minimum Growth Rate.
Minimum Growth Rate for any year shall mean the minimum growth rate of the total assets of Itaú Corpbanca and Itaú Corpbanca Colombia (determined in accordance with IFRS) for the applicable country (e.g., Chile or Colombia) determined in good faith by the board of directors of Itaú Corpbanca (but in no event exceeding Forecasted System Growth in such country for such year) reasonably necessary to maintain the market share of Itaú Corpbanca and Itaú Corpbanca Colombia (each measured in terms of assets in their respective countries) as of the last day of the immediately preceding year.
Itaú Corpbanca shall pay an annual dividend equal to 100% of the annual cash distributable earnings, net of any reserves required to maintain Optimal Regulatory Capital, before March 31 of each Fiscal Year. If the portion of such dividend to be received by CorpGroup Parent is less than US$120 million in any fiscal year of the Dividend Period, CorpGroup Parent shall have the right, from and after the date that such dividend is declared to (i) sell to Itaú Unibanco, at a price per share equal to the market price as of the date of the notification to exercise this put right, a number of shares of Company Two equal to (A) US$120 million minus the portion of the annual dividend declared by Itaú Corpbanca to be received by CorpGroup Parent, divided by (B) the market price of the shares of Itaú Corpbanca as of the date of the notification to exercise this put right; or (ii) cause Company Two to sell to Itaú Unibanco, a number of shares of Itaú Corpbanca equal to (A) US$120 million minus the annual dividend declared by Itaú Corpbanca and to be received by CorpGroup Parent, divided by (B) the market price of such shares as of the date of the notification to exercise this put right. If, as a result of the competitive bidding procedures of the Santiago Stock Exchange, the shares of Itaú Corpbanca sold by Company Two are unexpectedly sold over the Santiago Stock Exchange to a third party at a higher price, then CorpGroup Parent shall no longer have the right to repurchase such shares of Itaú Corpbanca from Itaú Unibanco or one of its wholly-owned subsidiaries.
If the put right described above has been exercised, during the five-year period thereafter, CorpGroup Parent shall have the right either to (i) acquire from Itaú Unibanco, a number of shares of Company Two up to the number of shares sold pursuant to such put right at the same price per share as was paid by Itaú Unibanco plus an annual interest rate at the ChileanÍndice de Cámara Promedio plus a spread that is not to exceed the lowest spread then being offered by Itaú Corpbanca tonon-governmental borrowers in Chile; or (ii) cause Itaú Unibanco to place an order on the Santiago Stock Exchange to sell to CorpGroup Parent and/or Company Two a number of shares of Itaú Corpbanca up to the number of shares sold to Itaú Unibanco pursuant to such put right at the same price per share as was paid by Itaú Unibanco plus an annual interest rate at the ChileanÍndice de Cámara Promedio plus a spread that is not to exceed the lowest spread then being offered by Itaú Corpbanca tonon-governmental borrowers in Chile. If, as a result of the competitive bidding procedures of the Santiago Stock Exchange, the shares of Itaú Corpbanca sold by Itaú Unibanco or one of its wholly-owned subsidiaries are sold over the Santiago Stock Exchange to a third party at a higher price, then CorpGroup Parent and/or Company Two shall not have the right to repurchase such shares of Itaú Corpbanca.
Use of Brands
Itaú Unibanco and CorpGroup Parent have agreed that for so long as Itaú Unibanco owns shares of Itaú Corpbanca, Itaú Corpbanca and its subsidiaries shall have a royalty-free, perpetual license to use the Itaú Brand, whether alone or in conjunction with other trademarks.
Preapproved Matters
CorpGroup Parent agreed to consent to and affirmatively vote its shares of Itaú Corpbanca at any shareholders’ meeting in favor of the approval of a transaction between the Itaú Corpbanca’s securities broker (~~corredora~~Corredora) subsidiary and MCC at such time as MCC is wholly owned by an Affiliate of Itaú Unibanco, transaction which may be structured as an acquisition of equity securities of MCC by Itaú Corpbanca (followed by a merger of such subsidiary and MCC).
Strategic Transactions
Pursuant to the terms of the Itaú CorpGroup Shareholders’ Agreement, CorpGroup Parent and Itaú Unibanco intend to use Itaú Corpbanca and its subsidiaries as their exclusive vehicle to pursue business opportunities in the Banking Business in Chile, Colombia, Peru and Central America. As a result, if either CorpGroup Parent or Itaú Unibanco, intends to pursue or develop any new business opportunities in the Banking Business in the abovementioned territories, either individually or with third parties, such party shall notify the other party and provide Itaú Corpbanca with the exclusive right to pursue such business opportunity prior to presenting it to or pursuing it individually or with third parties. If CorpGroup Parent or Itaú-Unibanco, as the case may be, does not agree to Itaú Corpbanca pursuing or continue to pursue or consummate such particular business opportunity within 30 days following receipt of such notice, the other party shall have the right to pursue and implement it unilaterally and not through Itaú Corpbanca.
If CorpGroup Parent agrees to Itaú Corpbanca pursuing a business opportunity that would require a capital increase and/or a change in the dividend policy of Itaú Corpbanca, Itaú Unibanco agreed to provide CorpGroup Parent with long-term financing in an amount reasonably necessary as to finance its subscription of its pro rata share in such capital increase. If, on the other hand, CorpGroup Parent agrees to allow Itaú Corpbanca to pursue and implement such business opportunity but decides not to participate in the capital increase in connection therewith, Itaú Unibanco will grant CorpGroup Parent a call option with respect to the number of shares that if purchased by CorpGroup Parent at such time would restore its direct and indirect ownership percentage of outstanding shares of Itaú Corpbanca to its ownership percentage of outstanding shares of Itaú Corpbanca immediately prior to such capital increase.
Itaú Unibanco’s Paraguay and Uruguay Operations
In respect of Itaú Unibanco’s Paraguay and Uruguay Operations, CorpGroup Parent and Itaú Unibanco agreed to (i) negotiate in good faith the inclusion of their respective businesses in Paraguay and Uruguay as part of the business owned and operated by Itaú Corpbanca, (ii) use their reasonable best efforts to agree on the valuation of such businesses in Paraguay and Uruguay and (iii) if CorpGroup Parent and Itaú Unibanco agree on the valuation of such businesses, to transfer to and operate such businesses by Itaú Corpbanca.
Systems Operations Services Agreement
We have entered into a Systems Operations Services Agreement with IBM, initially dated March 30, 2001, and covering a term from April 1, 2001 through April 15, 2006 which can be renegotiated periodically. The current extension became effective on April 16, 2008 until April 30, ~~2018.~~2019. Under this agreement, IBM provides outsourcing computer system operations services to us and we are obligated to pay fees amounting to UF ~~2,436.9~~2,421.4 per month.
Service Contracts
On July 6, 2001, we entered into a Services Agreement with our affiliate Inversiones CorpGroup Interhold Limitada pursuant to which CorpGroup provides us with professional and technical consulting services including preparation of financial statements, implementing financial and administrative procedures; preparing, analyzing, and providing legal advisory services; and analyzing economic, financial sectors and feasibility of investment plans; we pay fees of approximately UF6,250 per month. On January 27, 2014, we entered into an amendment to the agreement which took effect as of January 1, 2015. Pursuant to this amendment, the agreement was extended for a further10-year term beginning on January 1, 2015, subject to certain early termination provisions. Either party may extend the term of the agreement for five additional years. Provisions for the payment of expenses were also included in this amendment.
On April 10, 2008, we entered into a Services Agreement with our affiliate Inversiones CorpGroup Interhold Limitada, pursuant to which CorpGroup provides us with professional and technical consulting services in the finance, capital markets, real estate and operations areas; we pay fees of approximately UF 1,350 per month. On January 27, 2014, we entered into an amendment to the agreement which took effect as of January 1, 2015. Pursuant to the amendment, the agreement was extended for a further10-year term beginning on January 1, 2015, subject to certain early termination provisions. Either party may extend the term of the agreement for five additional years, subject to certain conditions. Provisions for the payment of expenses were also included in this amendment.
On March 27, 2012, we entered into a Services Agreement with Mr. Álvaro Saieh Bendeck and our affiliate CorpGroup Holding Inversiones Limitada, pursuant to which CorpGroup Holding Inversiones Limitada provides us with professional and technical consulting services in all matters related to strategic planning and definitions, new businesses, including acquisitions in Chile or abroad, and management controls; we pay fees of approximately UF 1,250 per month. On January 27, 2014, we entered into an amendment to the agreement which took effect as of January 1, 2015. Pursuant to the amendment, the agreement was extended for a further10-year term beginning on January 1, 2015, subject to certain early termination provisions. Either party may extend the term of the Service Contract for five additional years, provided that on such date the services continue to be rendered with the participation of Mr. Álvaro Saieh Bendeck. Provisions for the payment of expenses were also included in this amendment.
Software Consulting and Development Agreement
We have entered into a Software Consulting and Development Agreement, for the Integrated Banking System (IBS), dated as of October 4, 2001, with Datapro, Inc. The contract covers a five-year term for system maintenance and adjustments, which is automatically renewable at the end of the term. The contract includes an initial charge for development and user license of US$380,000.00 and a schedule of additional fees for services provided as well as a monthly maintenance fee.
Redbanc Agreement
We entered into an agreement dated as of April 1, 2001 to participate in the automated teller machine network operated by Redbanc S.A. Due to the Merger, on October 11, 2016, this agreement was amended and restated in order to (i) terminate the equivalent agreement entered into by former Banco Itaú Chile with Redbanc S.A. prior to the Merger and (ii) recognize and confirm the agreement entered into by former Corpbanca, which remains in full force and effect.
The agreement covers a three-year term which is automatically and successively renewed for equal three-year periods. The purpose of this agreement is to provide services to facilitate the performance of banking objectives. This includes the installation, operation, maintenance, and development of equipment, devices, systems, and services used for the management and operation of automated andnon-automated cash andpoint-of-sale machines and the related services. Redbanc shall invoice and charge us a different monthly fee for each of the services connected to the automated teller machine network.
D. EXCHANGE CONTROLS
The Central Bank of Chile is responsible for, among other things, monetary policies and exchange controls in Chile. Foreign investments must be registered with the Central Bank of Chile under theLey Orgánica Constitucional del Banco Central de Chile, or the Chilean Central Bank Act and theCompendio de Normas de Cambios Internacionales, or the Central Bank Foreign Exchange Regulations or the Compendium. The Chilean Central Bank Act is a constitutional law requiring a “special majority” vote of the Chilean Congress to be modified. Until January 1, 2016, foreign investments could be registered with theComité de Inversiones Extranjeras, or the Foreign Investment Committee under Decree Law No. 600 of 1974, as amended or DL 600, as an alternative to the registration with the Central Bank of Chile. The Tax Reform, however, repealed DL 600 as of January 1, 2016. As from 2016, the Foreign Investment Committee shall not be entitled to register new foreign investments. All foreign investments previously registered with the Foreign Investment Committee under DL 600, shall continue to be subject to the provisions of DL 600.
Pursuant to the Central Bank Foreign Exchange Regulations, investors are allowed to freely enter into any kind of foreign exchange transaction, the only restriction being that investors must inform the Central Bank of Chile about certain operations which they have conducted and must conduct certain operations through the Formal Exchange Market. The type of information related to equity investment that must be reported to the Central Bank of Chile bynon-Chilean residents include the occurrence of, among other things, any assignment, substitution, changes in organizational status, change in the form of the investment, or material changes to the terms of the agreement governing the foreign currency transaction. Transactions that are required to be conducted through the Formal Exchange Market include transactions involving foreign commercial bank loans or Chilean company issued bonds, deposits made in Chilean financial institutions by foreign depositors, and equity investments and contributions of capital by foreign investors. The Formal Exchange Market entities through which transactions are conducted will report such transactions to the Central Bank of Chile.
Pursuant to the provisions of Chapter XIV of the Compendium, it is not necessary to seek the Central Bank of Chile’s prior approval in order to establish an ADS facility. The Central Bank of Chile only requires that (i) any foreign investor acquiring shares to be converted into ADSs who has actually brought funds into Chile for that purpose shall bring those funds through the Formal Exchange Market, (ii) any foreign investor acquiring shares to be converted into ADSs informs the Central Bank of Chile of the investment in the terms and conditions described below, (iii) all remittances of funds from Chile to the foreign investor upon the sale of the shares underlying the ADSs or from dividends or other distributions made in connection therewith, shall be made through the Formal Exchange Market, and (iv) all remittances of funds to the foreign investor, whether or not from Chile, shall be informed to the Central Bank of Chile in the terms and conditions described below.
When the shares to be converted into ADSs have been acquired by the foreign investor with funds brought into Chile through the Formal Exchange Market, a registration form shall be filed with the Department of International Financial Operations of the Central Bank of Chile by the foreign investor acting through an entity of the Formal Exchange Market on or before the date on which the foreign currency is brought into Chile. However, if the funds were brought into Chile with a different purpose and subsequently were used to acquire shares to be converted into ADSs, the Department of International Financial Operations of the Central Bank of Chile then shall be informed of such investment by the Custodian within ten days following the end of each15-day period on which the Custodian has to deliver periodic reports to the Central Bank of Chile. If the funds were not brought into Chile, a registration form shall be filed with the Department of International Financial Operations of the Central Bank of Chile by the foreign investor itself or through an entity of the Formal Exchange Market within first 10 days of the month following the date on which the proceeds were used.
All payments in U.S. dollars in connection with the ADS facility made from Chile shall be made through the Formal Exchange Market. Pursuant to Chapter XIV of the Compendium no previous authorization from the Central Bank of Chile is required for the remittance of U.S. dollars obtained in the sale of the shares underlying ADSs or from dividends or other distributions made in connection therewith. The entity of the Formal Exchange Market participating in the transfer shall provide certain information to the Central Bank of Chile on the next banking business day. In the event there are payments made outside Chile, the foreign investor shall provide the relevant information to the Central Bank of Chile directly or through an entity of the Formal Exchange Market within the first 10 days of the month following the date on which the payment was made.
Under Chapter XIV of the Compendium payments and remittances of funds from Chile are governed by the rules in effect at the time the payment or remittance is made. Therefore, any change made to Chilean laws and regulations after the date hereof will affect foreign investors who have acquired ADSs or shares to be converted into ADSs. There can be no assurance that further Central Bank of Chile regulations or legislative changes to the current foreign exchange control regime in Chile will not restrict or prevent foreign investors to purchase and remit abroad U.S. dollars, nor can there be any assessment to the duration or impact of such restrictions, if imposed.
This situation is different from the one governing ADSs issued by Chilean companies prior to April 19, 2001. Prior to such date, ADSs representing shares of stock of Chilean corporations were subject to Chapter XXVI of the Compendium, which addressed the issuance of ADSs by Chilean companies and foreign investment contracts entered into among the issuer of the shares, the Central Bank of Chile and the depository pursuant to Article 47 of the Central Bank Act. Chapter XXVI of the Compendium and the corresponding foreign investment contracts granted foreign investors the vested right to acquire dollars with the proceeds obtained in the sale of the underlying shares of stock, or from dividends or other distributions made in connection therewith and remit them abroad. On April 19, 2001, the Central Bank of Chile eliminated Chapter XXVI of the Compendium and made the establishment of new ADS facilities subject to the provisions of Chapter XIV of the Compendium. All foreign investment contracts executed under the provisions of Chapter XXVI of the Compendium remain in full force and effect and are governed by the provisions in effect at the time of their execution.
The foregoing is a summary of the Central Bank of Chile’s regulations with respect to the issuance of ADSs representing common shares as in force and effect as of the date hereof. This summary does not purport to be complete and is qualified in its entirety by reference to the provisions of Chapter XIV of the Compendium, a copy of which is available from Corpbanca upon request.
There can be no assurance that further Central Bank of Chile regulations or legislative changes to the current foreign exchange control regime in Chile will not restrict or prevent foreign investors from purchasing or remitting U.S. dollars, or that further restrictions applicable to foreign investors which affect their ability to remit the capital, dividends or other benefits in connection with the shares of stock will not be imposed by the Central Bank of Chile in the future, nor can there be any assessment to the duration or impact of such restrictions, if imposed.
E. TAXATION
CHILEAN TAX CONSIDERATIONS
The following discussion is based on material Chilean income tax laws presently in force, including Ruling No. 324 of January 29, 1990 of the Chilean Internal Revenue Service and other applicable regulations and rulings. The discussion summarizes the material Chilean income tax consequences of an investment in the ADSs or common shares received in exchange for ADSs by an individual who is not domiciled in or a resident of Chile, or a legal entity that is not organized under the laws of Chile and does not have a permanent establishment located in Chile, which we refer to as a foreign holder. For purposes of Chilean law, an individual holder is a resident of Chile if he or she has resided in Chile for more than six months in one calendar year or for a total of more than six months, whether consecutive or not, in two consecutive tax years. An individual holder is domiciled in Chile if he or she resides in Chile with the purpose of staying in Chile (such purpose to be evidenced by circumstances such as the acceptance of employment within Chile or the relocation of his or her family to Chile). On August 21, 2018, a bill was submitted to the Chilean National Congress aimed at reforming the tax legislation. The bill proposes to modify the definition of “resident,” considering a person a “resident” of Chile if a person remains in the country for a period or periods of time exceeding 183 days in any twelve-month period. This discussion is not intended as tax advice to any particular investor, which can be rendered only in light of that investor’s particular tax situation.

Under Chilean law, provisions contained in statutes such as tax rates applicable to foreign holders, the computation of taxable income for Chilean purposes and the manner in which Chilean taxes are imposed and collected may be amended only by another statute. In addition, the Chilean tax authorities issue rulings and regulations of either general or specific application interpreting the provisions of Chilean tax law. Absent a retroactive law, Chilean taxes may not be assessed retroactively against taxpayers who act in good faith relying on such rulings and regulations, but Chilean tax authorities may change said rulings and regulations prospectively. There is no general income tax treaty in force between Chile and the United States (although a treaty has been signed, it has not yet been ratified by United States’ Congress and therefore is not yet effective).
CASH DIVIDENDS AND OTHER DISTRIBUTIONS
Cash dividends paid by us with respect to the ADSs or common shares held by a foreign holder will be subject to a 35% Chilean withholding tax, which is withheld and paid over to the Chilean tax authorities by us. We refer to this as the Chilean withholding tax. A credit against the Chilean withholding tax is available based on the level of corporate income tax, or first category tax, actually paid by us on the taxable income to which the dividend is imputed; however, this credit does not reduce the Chilean withholding tax on aone-for-one basis because it also increases the base on which the Chilean withholding tax is imposed.
From January 1, 2017, the first category tax may be credited partially (65%). Nevertheless, the foreign holder shall be entitled to a full first category tax credit, regardless of the tax regime chosen by the company, if such holder is established or domiciled in, or is a resident of, a country with which Chile ~~has~~maintains a double taxation treaty in force or, until December 31, 2021, if Chile has signed a double taxation treaty with such country, even if not in ~~force.~~
force, and the holder duly credits his tax residency according to Resolución No. 11, issued by the Chilean Internal Revenue Service on January 30, 2019. However, if the new tax reform bill which was presented to the Congress by the Government on August, 2018 passes, the first category tax would be fully credited to any foreign investor, regardless of his establishment or domicile.
In addition, distribution of book income in excess of retained taxable income is subject to the Chilean withholding tax, but such distribution is not eligible for the credit. In case such withholding is determined to be excessive at the end of the year, foreign holders will have rights to file for the reimbursement of the excess withholding. Under Chilean income tax law, for purposes of determining the level of the first category tax that has been paid by us, dividends generally are assumed to have been paid out of our oldest retained taxable profits. The first category tax rate iswas 24% in 2016, is 25.5% in 2017, and 27% in ~~2018.~~2018 onwards. The foregoing tax consequences apply to cash dividends paid by us. Dividend distributions made in property (other than common shares) will be subject to the same Chilean tax rules as cash dividends.
As indicated above, a bill was submitted to the Chilean National Congress on August 21, 2018 aimed at reforming the tax legislation. Among other matters, this bill provides for a general regime under which the corporate tax would apply as a general rule with a 27% rate, which would be fully creditable against the withholding tax or Global Complimentary Tax. To date, such bill is still under discussion by the Chilean National Congress.
CAPITAL GAINS
Gains realized on the sale, exchange or other disposition by a foreign holder of ADSs (or ADRs evidencing ADSs) will not be subject to Chilean taxation, provided that such disposition occurs outside Chile (confirmed by the Chilean IRS in ruling No. 1,307 of 2013). The deposit and withdrawal of common shares in exchange for ADSs will not be subject to any Chilean taxes.
Gains recognized on a sale or exchange of common shares received in exchange for ADSs (as distinguished from sales or exchanges of ADSs representing such common shares) by a foreign holder until December 31, 2016 will be subject to both the first category tax and the Chilean withholding tax (the former being creditable against the latter) if (1) the foreign holder has held such common shares for less than one year since exchanging ADSs for the common shares, (2) the foreign holder acquired and disposed of the common shares in the ordinary course of its business or as a regular trader of stock, or (3) the sale is made to a company in which the foreign holder holds an interest (10% or more of the shares in the case of Public Companies). A 35% withholding tax is imposed on the amount of the gains obtained on the sale or exchange of common shares received in exchange for ADSs, less a Chilean credit tax. In all other cases, gain on the disposition of common shares will be subject only to the first category tax levied as a sole tax. However, in these latter cases, if it is impossible to determine the taxable capital gain, a 5% withholding will be imposed on the total amount to be remitted abroad without any deductions as a provisional payment of the total tax due.
From January 1, 2017 onwards, any gain obtained on the sale or exchange of common shares received in exchange for ADSs by a foreign holder will be subject to the Chilean withholding tax with a rate of 35%, which must be withheld by the purchaser. However, if it is impossible to determine the taxable capital gain, a 10% withholding will be imposed on the total amount to be remitted abroad without any deductions as a provisional payment of the total tax due.
The tax basis of common shares received in exchange for ADSs will be the acquisition value of such shares duly adjusted for local inflation. The valuation procedure set forth in the deposit agreement, which values common shares that are being exchanged at the highest price at which they trade on the Santiago Stock Exchange on the date of the exchange, generally will determine the acquisition value for this purpose. Consequently, the conversion of ADSs into common shares and sale of such common shares for the value established under the deposit agreement will not generate a capital gain subject to taxation in Chile, to the extent that the sale price is equal to the acquisition value at the time of redemption as discussed above. In the event the sale price exceeds the acquisition value of such shares determined, as explained above, such capital gain will be subject to first category tax (in the event the sale took place on or before December 31, 2016), and to the Chilean withholding, tax as discussed above.
Under the bill submitted to the Chilean National Congress on August 21, 2018 referred to above, capital gains obtained by individuals could be subject to a 20% single tax, or to Complementary Global Tax in case of taxpayers resident or domiciled in Chile.
The distribution and exercise of preemptive rights relating to the common shares will not be subject to Chilean taxation. Amounts received in exchange for the assignment of preemptive rights relating to the shares will be subject to both the first category tax and the Chilean withholding tax (the former being creditable against the latter to the extent described above).
Exempt capital gains - Article 107 of the Chilean Income Tax Law
According to Article 107 of the Chilean Income Tax Law, the sale and disposition of shares of Chilean public corporations which are significantly traded on a Chilean stock exchange is not levied by any Chilean tax on capital gains, if the sale or disposition was made:

·on a local stock exchange authorized by the CMF or in a tender offer process according to Title XXV of the Chilean Securities Market Act, so long as the shares (1) were purchased on a public stock exchange or in a tender offer process pursuant to Title XXV of the Chilean Securities Market Act, (2) are newly issued shares issued in a capital increase or incorporation of the corporation, (3) were acquired as a result of the exchange of convertible securities, or (4) were a contribution or redemption of securities in accordance with Article 109 of the Chilean Income Tax Law. In this case, gains exempted from Chilean taxes shall be calculated using the criteria set forth in the Chilean Income Tax Law; or

·within 90 days after the shares would have ceased to be significantly traded on the stock exchange. In such case, the gains exempted from Chilean taxes on capital gains will be up to the average price per share of the last 90 days in which the shares were significantly traded on the stock exchange. Any gains above the average price will be taxable capital gains.
For purpose of the bullets above, shares are considered to be significantly traded on a Chilean stock exchange when they (1) are registered in the securities registry, (2) are registered in a Chilean Stock ~~Exchange;~~Exchange and (3) have an adjusted presence equal to or above 25% or have a “Market ~~Maker”~~Maker,” according to the CMF Ruling No. 327 dated January 17, 2012. Currently, our shares are considered to be significantly traded on a Chilean stock exchange.
OTHER CHILEAN TAXES
No Chilean inheritance, gift, or succession taxes apply to the transfer or disposition of the ADSs by a foreign holder but such taxes generally will apply to the transfer at death or by a gift of common shares by a foreign holder. No Chilean stamp, issue, registration or similar taxes or duties apply to foreign holders of ADSs or common shares.
WITHHOLDING TAX CERTIFICATES
Upon request, we will provide to foreign holders appropriate documentation evidencing the payment of the Chilean withholding tax.
U.S. FEDERAL INCOME TAX CONSIDERATIONS
This section is a summary of certain U.S. federal income tax consequences applicable to the acquisition, ownership and disposition by a U.S. holder (as defined below) of ADSs or common shares. This summary applies to you only if you are a U.S. holder and you hold your ADSs or common shares as capital assets (generally, property held for investment) for U.S. federal income tax purposes. This summary is not a comprehensive description of all of the tax consequences that may be relevant to a decision to purchase, hold or dispose of our ADSs or common shares.
This section does not apply to you if you are a U.S. holder subject to special rules, including for example:

·a dealer in securities;

·a trader in securities that elects to use amark-to-market method of accounting for securities holdings;

·a regulated investment company;

·a real estate investment trust;

a·tax-exempt ~~a tax-exempt~~ organization;

·a bank or other financial institution;

·a life insurance company;

·a partnership (or other entity or arrangement treated as a partnership for U.S. federal income tax purposes) or a partner, member or owner therein;

·a person liable for alternative minimum tax;

·a person that actually or constructively owns 10% or more of the bank’s ~~shares;~~shares by vote or value;

·a person that holds ADSs or common shares as part of a straddle, a hedging, conversion or constructive sale transaction; or

·a person whose functional currency is not the U.S. dollar.
This section is based on the Internal Revenue Code of 1986, as amended, or the Code, its legislative history, existing and proposed U.S. Treasury Regulations, published rulings, and court decisions, all as of the date of this Annual Report. These laws are
subject to change, possibly on a retroactive basis, and subject to differing interpretations. This summary does not address any U.S. state or local ornon-U.S. tax considerations or any U.S. federal estate, gift or alternative minimum tax considerations. On February 4, 2010, a comprehensive income tax treaty between the United States and Chile was signed, however such treaty has not yet been ratified by each country and therefore is not yet effective. It is unclear at this time when such treaty will be ratified by both countries. You should consult your tax advisor regarding the ongoing status of this treaty and, if ratified, the impact such treaty would have on the consequences described in this Annual Report.
As used herein, the term “U.S. holder” means a beneficial owner of ADSs or common shares who is, for U.S. federal income tax purposes, any of the following:

·an individual who is a citizen or resident of the United States,

·a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof, or the District of Columbia,

·an estate whose income is subject to U.S. federal income tax regardless of its source, or

·a trust if such trust validly elects to be treated as a United States person (as defined under the Code) for U.S. federal income tax purposes or if (1) a court within the United States is able to exercise primary supervision over its administration, and (2) one or more United States persons have the authority to control all of the substantial decisions of such trust.
If a partnership (or other entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds the ADSs or common shares, the U.S. federal income tax treatment of a partner, member or owner of such entity or arrangement will generally depend on the status of the partner, member or owner and the tax treatment of such entity. A partner, member or owner in an entity holding the ADSs or common shares should consult its tax advisor with regard to the U.S. federal income tax treatment of its investment in the ADSs or common shares.
Prospective investors should consult their tax advisors as to the particular tax considerations applicable to them relating to the acquisition, ownership and disposition of our ADSs or common shares, including the applicability of U.S. federal, state and local tax laws andnon-U.S. tax ~~laws~~laws..
OWNERSHIP OF ADSs
In general
The discussion below assumes that the representations contained in the deposit agreement are true and that the obligations in the relevant deposit agreement and any related agreement will be performed in accordance with the terms set forth therein. For U.S. federal income tax purposes, if you are a holder of ADSs, you generally will be treated as the owner of our common shares represented by such ADSs. Accordingly, deposits or withdrawals of common shares for ADSs will not be subject to U.S. federal income tax. The U.S. Treasury Department has expressed concern that depositaries for depositary receipts, or other intermediaries between the holders of shares of an issuer and the issuer, may be taking actions that are inconsistent with the claiming of U.S. foreign tax credits by U.S. holders of such receipts or shares. These actions would also be inconsistent with claiming the reduced rate for “qualified dividend income” described below. Accordingly, the analysis regarding the availability of a U.S. foreign tax credit for Chilean withholding taxes and sourcing rules described below and availability of the reduced rate for qualified dividend income could be affected by future actions that may be taken by the U.S. Treasury Department.
Taxation of distributions
Subject to the PFIC rules discussed below, if you are a U.S. holder, the gross amount of any distribution of cash or property (including the net amount of Chilean taxes withheld, if any, on the distribution, after taking into account the credit for first category tax, as discussed above under “—Chilean Tax Considerations—Cash Dividends and Other Distributions”), paid by the bank out of its current or accumulated earnings and profits (as determined for U.S. federal income tax purposes) will be includable in gross income as ordinary dividend income. You must include the net amount of Chilean tax withheld, if any, from such distribution in gross income even though you do not in fact receive it. The dividend is taxable to you when you, in the case of common shares, or the depositary, in the case of ADSs, receive the dividend, actually or constructively. Distributions in excess of current and accumulated earnings and profits, as determined for U.S. federal income tax purposes, will be treated as anon-taxable return of capital to the extent of your basis in the ADSs or common shares and thereafter as either long-term or short-term capital gain, depending on whether you have held our ADSs or common shares for more than one year at the time of the distribution. The bank does not currently maintain, and does not intend to maintain, calculations of our earnings and profits in accordance with U.S. federal income tax principles. Consequently, a U.S. holder should treat the entire amount of any distribution received as a dividend. As used below, the term “dividend” means a distribution that constitutes a dividend for U.S. federal income tax purposes.
If you are anon-corporate U.S. holder, dividends paid to you may constitute qualified dividend income and be taxable to you at a reduced rate provided that (1) certain holding period requirements are met, (2) the ADSs or common shares are considered to be readily tradable on an “established securities market” in the United States, and (3) the bank is not a PFIC. Under U.S. Internal Revenue Service, or IRS, authority, ADSs are considered for purposes of clause (2) above to be readily tradable on an established securities market in the United States because they are listed on the NYSE. Based on existing guidance, it is not entirely clear whether dividends received with respect to the common shares will be treated as qualified dividend income because the common shares are not themselves listed on a U.S. exchange. Moreover, as discussed below, under “—Passive Foreign Investment Company rules,” we believe that we will not be treated as a PFIC for U.S. federal income tax purposes with respect to our ~~2017~~2018 and current taxable year, and based on our current expectations regarding the value and nature of our assets, the sources and nature of our income, relevant market and shareholder data and our current business plans, we do not anticipate becoming a PFIC in the future. However, there can be no assurance in this regard because the PFIC determination is made annually and is based on the portion of our assets (including goodwill) and income that is characterized as passive under the PFIC rules and our continued qualification for an exception to the PFIC rules for certain foreign banks. You should consult your tax advisor regarding the availability of the reduced rate for dividends paid with respect to our ADSs or common shares. Dividends paid by us generally will not be eligible for the dividends-received deduction available to certain U.S. corporations.
The amount of the dividend distribution that you must include in your income as a U.S. holder will be the U.S. dollar value of the Chilean peso payments made, determined at the spot Chilean peso/U.S. dollar rate on the date the dividend distribution is actually or constructively received by you or the depositary, regardless of whether the payment is in fact converted into U.S. dollars at that time. If the dividend is converted to U.S. dollars on the date of receipt, a U.S. holder generally will not recognize a foreign currency gain or loss. However, if the U.S. holder converts the Chilean pesos into U.S. dollars on a later date, the U.S. holder must include in income any gain or loss resulting from any exchange rate fluctuations. The gain or loss will be equal to the difference between (1) the U.S. dollar value of the amount included in income when the dividend was received, and (2) the amount received on the conversion of the Chilean pesos into U.S. dollars. Generally, any gain or loss resulting from currency exchange fluctuations during the period from the date you include the dividend payment in income to the date you convert the payment into U.S. dollars will be treated as ordinary income or loss and will not be eligible for the reduced tax rate applicable to qualified dividend income. The gain or loss generally will be income or loss from sources within the United States for foreign tax credit limitation purposes. U.S. holders should consult their own tax advisors regarding the tax consequences to them if the bank pays dividends in Chilean pesos or any othernon-U.S. currency. The amount of any distribution of property other than cash will be the fair market value of such property on the date of distribution.
Subject to certain limitations (including minimum holding period requirements), the net amount of Chilean income tax withheld and paid over to the Chilean taxing authorities (after taking into account the credit for first category tax, when available) will generally be creditable or deductible against your U.S. federal income tax liability. However, if the amount of Chilean withholding tax initially withheld from a dividend is determined under applicable Chilean law to be excessive (as described above under “—Chilean Tax Considerations—Cash Dividends and Other Distributions”), the excess tax may not be creditable. Special rules apply in determining the foreign tax credit limitation with respect to dividends received by individuals that are subject to the reduced tax rate for qualified dividends. Dividends will be treated as income from sources outside the United States and will generally be categorized as “passive category income” for most U.S. holders for U.S. foreign tax credit purposes. A U.S. holder that does not elect to claim a credit for any foreign income taxes paid during the taxable year may instead claim a deduction in respect of such foreign income taxes, provided that the U.S. holder elects to deduct (rather than credit) all foreign income taxes paid or accrued during the taxable year. This discussion does not address special rules that apply to U.S. holders who, for purposes of determining the amount of the foreign tax credit, take foreign income taxes into account when accrued. The rules governing foreign tax credits are complex and a U.S. holder should consult its own tax advisor regarding the availability of foreign tax credits under its particular circumstances.
Taxation of dispositions
Subject to the PFIC rules discussed below, if you are a U.S. holder and you sell, exchange or otherwise dispose of your ADSs or common shares in a taxable disposition, you will recognize capital gain or loss for U.S. federal income tax purposes equal to the difference between the U.S. dollar value of the amount that you realize and your tax basis, determined in U.S. dollars, in your ADSs or common shares. Any such gain or loss will be long-term capital gain or loss if your ADSs or common shares have been held for more than one year. Certainnon-corporate U.S. holders (including individuals) may be eligible for preferential rates of U.S. federal income tax in respect of long-term capital gains. The deductibility of capital losses is subject to limitations.
If you are a U.S. holder of our ADSs or common shares, the initial tax basis of your ADSs or common shares will be the U.S. dollar purchase price or, if purchased in Chilean pesos, the U.S. dollar value of the Chilean peso-denominated purchase price determined on the date of purchase. If the common shares are treated as being traded on an “established securities market,” a cash basis U.S. holder, or, if it elects, an accrual basis U.S. holder, will determine the U.S. dollar value of the cost of such common shares by translating the amount paid at the spot rate of exchange on the settlement date of the purchase. If you convert U.S. dollars to Chilean pesos and immediately use the currency to purchase common shares, such conversion generally will not result in taxable gain or loss to you.
The amount realized generally will be equal to the amount of cash or the fair market value of any other property received. With respect to the sale, exchange or other taxable disposition of our common shares, if the payment received is in Chilean pesos, the
amount realized generally will be the U.S. dollar value of the payment received determined on (1) the date of receipt of payment in the case of a cash basis U.S. holder, and (2) the date of disposition in the case of an accrual basis U.S. holder. If our common shares are treated as being traded on an “established securities market,” a cash basis U.S. holder, or, if it elects, an accrual basis U.S. holder, will determine the U.S. dollar value of the amount realized by translating the amount received at the spot rate of exchange on the settlement date of the sale.
If a Chilean income tax is withheld on the sale, exchange or other taxable disposition of our ADSs or common shares, the amount realized by a U.S. holder will include the gross amount of the proceeds of that sale, exchange or other taxable disposition before deduction of the Chilean income tax. Capital gain or loss, if any, realized by a U.S. holder on the sale, exchange or other taxable disposition of ADSs or common shares generally will be treated as U.S. source gain or loss for U.S. foreign tax credit purposes. Consequently, in the case of a gain from the disposition of a common share that is subject to Chilean income tax, the U.S. holder may not be able to benefit from the foreign tax credit for that Chilean income tax (i.e., because the gain from the disposition would be U.S. source), unless the U.S. holder can apply the credit against U.S. federal income tax payable on other income from foreign sources. Alternatively, the U.S. holder may take a deduction for the Chilean income tax, provided that the U.S. holder elects to deduct all foreign taxes paid or accrued during the taxable year. The rules governing foreign tax credits are complex and a U.S. holder should consult its own tax advisor regarding the availability of foreign tax credits under its particular circumstances.
Passive Foreign Investment Company rules
Based upon our present regulatory status under Chilean law, current estimates, expectations and projections of the value and classification of our assets and the sources and nature of our income, we believe that the bank’s ADSs and common shares should not be treated as stock of a PFIC for U.S. federal income tax purposes for ~~2017,~~2018, our current taxable year or in the foreseeable future, but this conclusion is a factual determination that is made annually and there can be no assurance that we will not be considered a PFIC for the current taxable year or any subsequent taxable year. Our actual PFIC status for our current taxable year ending December 31, ~~2018~~2019 will not be determinable until after the close of such taxable year and, accordingly, there is no guarantee that we will not be a PFIC for ~~2018.~~2019.
In general, if you are a U.S. holder, the bank will be a PFIC with respect to you if for any taxable year in which you held the bank’s ADSs or common shares:

·at least 75% of the bank’s gross income for the taxable year is “passive income;” or

·at least 50% of the value, determined on the basis of a quarterly average, of the bank’s assets is attributable to assets that produce or are held for the production of passive income.
Passive income for this purpose generally includes dividends, interest, royalties, rents, annuities and gains from assets that produce passive income. We will be treated as owning our proportionate share of the assets and earnings and our proportionate share of the income of any other corporation in which we own, directly or indirectly, at least 25% by value of the stock of another corporation. If we are a PFIC for any year during which you hold our ADSs or common shares, you will generally be required to treat our ADSs or common shares as stock in a PFIC for all succeeding years during which you hold our ADSs or common shares, even if the ~~bank~~banks does not otherwise meet the PFIC tests for any such succeeding year.
We are unable to determine with certainty that we are not a PFIC because the application of the PFIC rules to banks is unclear under present U.S. federal income tax law. Banks generally derive a substantial part of their income from assets that are interest bearing or that otherwise could be considered passive under the PFIC rules. The IRS has issued a notice and has proposed regulations, which together describe what is referred to as the “active bank exception.” For purposes of the PFIC test, the active bank exception excludes from passive income any income derived in the active conduct of a banking business by a qualifying foreign bank. The IRS notice and proposed regulations each have different requirements for qualifying as a foreign bank and for determining the banking income that may be excluded from passive income under the active bank exception. Moreover, the proposed regulations have been outstanding since 1994 and will not be effective unless finalized.
We Nevertheless, we believe that we should qualify as an active bank under the requirements of both the notice and the proposed regulations, assuming that the proposed regulations are finalized in their current form. Accordingly, based on our present regulatory status under Chilean law, the present nature of our activities and the present composition of our assets and sources of income, we do not believe we were a PFIC for the taxable year ending December 31, 2017 (the latest period for which the determination can be made) and we also do not expect to be a PFIC for the current taxable year or for any future taxable years.
In addition, because a PFIC determination is a factual determination that must be made following the close of each taxable year and is based on, among other things, the market value of our assets and shares, and because the proposed regulations (although proposed to be retroactive in application) are not currently in force, our PFIC status may change and there can be no assurance that we will not be considered a PFIC for the current taxable year or any subsequent taxable year. If the bank is treated as a PFIC for any year in which you hold ADSs or common shares, and you are a U.S. holder that did not make amark-to-market election, as described below, you will be subject to special rules with respect to:

·any gain you realize on the sale, exchange or other taxable disposition (including certain pledges) of your ADSs or common shares; and

·any “excess distribution” that the bank makes to you (generally, any distributions to you during a single taxable year that are greater than 125% of the average annual distributions received by you in respect of the ADSs or common shares during the three preceding taxable years or, if shorter, your holding period for the ADSs or common shares).
Under these rules:

·the gain or excess distribution will be allocated ratably over your holding period for the ADSs or common shares;

·the amount allocated to the taxable year in which you realized the gain or excess distribution will be taxed as ordinary income;

·the amount allocated to each prior year, with certain exceptions, will be taxed at the highest tax rate in effect for that year; and

·the interest charge generally applicable to underpayments of tax will be imposed in respect of the tax attributable to each such year.
The tax liability for amounts allocated to years prior to the year of disposition or “excess distribution” cannot be offset by any net operating losses for such years, and gains (but not losses) realized on the sale of the ADSs or common shares cannot be treated as capital, even if you hold the ADSs or ordinary shares as capital assets. If we were a PFIC, certain subsidiaries and other entities in which we have a direct or indirect interest may also be PFICs, or Lower-tier PFICs. Under attribution rules, U.S. holders would be deemed to own their proportionate shares of Lower-tier PFICs and would be subject to U.S. federal income tax according to the rules described above on (1) certain distributions by a Lower-tier PFIC and (2) certain dispositions of shares of a Lower-tier PFIC, in each case as if the U.S. holder held such shares directly, even though such U.S. holder had not received the proceeds of those distributions or dispositions.
Alternatively, a U.S. holder of “marketable stock” (as defined below) may make amark-to-market election. If you make this election, you will not be subject to the PFIC rules described above. Instead, in general, you will include as ordinary income each year the excess, if any, of the fair market value of your ADSs or common shares at the end of the taxable year over your adjusted basis in your ADSs or common shares. These amounts of ordinary income will not be eligible for the reduced tax rates applicable to qualified dividend income or long-term capital gains. You will also be allowed to take an ordinary loss in respect of both (1) the excess, if any, of the adjusted basis of your ADSs or common shares over their fair market value at the end of the taxable year and (2) any loss realized on the actual sale or disposition of the ADSs or common shares, but in each case only to the extent of the net amount of previously included income as a result of themark-to-market election. Any loss on an actual sale of your ADSs or common shares would be a capital loss to the extent it exceeds any previously includedmark-to-market income not offset by previous ordinary deductions. Your basis in the ADSs or common shares will be adjusted to reflect any such income or loss amounts.
The~~The~~ mark-to-market election is available only for “marketable stock,” which is stock that is regularly traded in other thande minimis quantities on at least 15 days during each calendar quarter on a qualified exchange, including the NYSE, or other market, as defined in applicable regulations. The ADSs are listed on the NYSE, and we expect, although no assurance can be given, that they will be regularly traded on the NYSE. It is unclear whether the common shares will be treated as “marketable stock” for purpose of themark-to-market rules. In addition, themark-to-market election generally would not be effective for any Lower-tier PFICs. You are urged to consult your own tax advisors regarding the U.S. federal income tax consequences that would arise if we are treated as a PFIC while you hold ADSs or common shares.
Notwithstanding any election you make with regard to the ADSs or common shares, dividends that you receive from us will not constitute qualified dividend income to you, and therefore are not eligible for the reduced tax rate described above, if the bank is a PFIC either in the taxable year of the distribution or any preceding taxable year during which you held our ADSs or common shares. Instead, you must include the gross amount of any such dividend paid by us out of the bank’s accumulated earnings and profits (as determined for U.S. federal income tax purposes) in your gross income, and these amounts will be subject to tax at rates applicable to ordinary income.
If you directly (and, in some cases, indirectly) own ADSs or common shares that are treated as PFIC shares with respect to you during a taxable year, you will be required to file an annual report for such taxable year.
In addition, if we are a PFIC, we do not intend to prepare or provide you with the information necessary to make a “qualified electing fund” election, which, like themark-to-market election, is a means by which U.S. taxpayers may elect out of the tax treatment that generally applies to PFICs.
YOU ARE URGED TO CONSULT YOUR TAX ADVISOR REGARDING THE APPLICATION OF THE PFIC RULES TO YOUR INVESTMENT IN ADSS OR COMMON SHARES, INCLUDING THE AVAILABILITY AND ADVISABILITY OF MAKING AN ELECTION TO AVOID THE ADVERSE TAX CONSEQUENCES OF THE PFIC RULES SHOULD WE BE CONSIDERED A PFIC FOR ANY TAXABLE YEAR.
Possible Foreign Account Tax Compliance Act Withholding
Pursuant to Sections 1471 through 1474 of the Code and U.S. Treasury Regulations promulgated thereunder, commonly referred to as FATCA, a 30% withholding tax may, in the future, be imposed on all or some of the payments on the ADSs or our common stock to holders andnon-U.S. financial institutions receiving payments on behalf of holders that, in each case, fail to comply with information reporting, certification and related requirements. Under current guidance, the amount to be withheld is not defined, and it is not yet clear whether or to what extent payments on the ADSs or shares of our common stock may be subject to this withholding tax. This withholding tax, if it applies, could apply to any payment made with respect to the ADSs or our common stock. Moreover, withholding may be imposed at any point in a chain of payments if anon-U.S. payee fails to comply with U.S. information reporting, certification and related requirements. Accordingly, ADSs or shares of our common stock held through anon-compliant institution may be subject to withholding even if the holder otherwise would not be subject to withholding. You should consult your tax advisor regarding potential U.S. federal withholding taxes imposed under FATCA.
If FATCA withholding is required, the bank will not be required to pay any additional amounts with respect to any amounts withheld. Certain beneficial owners of ADSs or our common stock that are not foreign financial institutions generally will be entitled to refunds of any amounts withheld under FATCA, but this may entail significant administrative burden. U.S. holders are urged to consult their tax advisers regarding the application of FATCA to their ownership of the ADSs or our common stock.
Medicare tax
A 3.8% tax is imposed on the lesser of (1) modified adjusted gross income in excess of US$200,000 (US$250,000 for joint-filers), and (2) net investment income of certain individuals, trusts and estates. For these purposes, net investment income will generally include any dividends paid to you with respect to the ADSs or common shares and any gain realized on the sale, exchange or other taxable disposition of an ADS or common share.
Backup withholding tax and information reporting requirements
U.S. backup withholding tax and information reporting requirements generally apply to certain payments to certainnon-exempt holders of ADSs or common shares. Information reporting generally will apply to payments of dividends on, and to proceeds from the sale or redemption of, ADSs or common shares made within the United States, or by a U.S. payor or U.S. middleman, to a holder of ADSs or common shares, other than an exempt recipient. A payor will be required to withhold U.S. backup withholding tax from any payments of dividends on, or the proceeds from the sale or redemption of, ADSs or common shares within the United States, or by a U.S. payor or U.S. middleman, to a holder, other than an exempt recipient, if such holder fails to furnish its correct taxpayer identification number or otherwise fails to comply with, or establish an exemption from, such U.S. backup withholding tax requirements.
Backup withholding is not an additional tax. Any U.S. backup withholding tax generally will be allowed as a credit against the holder’s U.S. federal income tax liability or, to the extent the withheld amount exceeds such liability, refunded upon the timely filing of a U.S. federal income tax return.
Information with respect to foreign financial assets
Certain U.S. investors are subject to reporting requirements in connection with the holding of certain foreign financial assets, including our ADSs or common shares that they own, either directly or through certain foreign financial institutions, but only if the aggregate value of all of such assets exceeds US$50,000. Such investors are subject to penalties if they are required to submit such information to the IRS and fail to do so. You should consult your tax advisor regarding the application of these new reporting requirements to your particular situation.
The above description is not intended to constitute a complete analysis of all tax consequences relating to the purchase, ownership or disposition of the ADSs or common shares. Investors deciding on whether or not to invest in ADSs or common shares should consult their own tax advisors concerning the tax consequences of their particular ~~situations~~.situations.
F. DIVIDENDS AND PAYING AGENTS
Not applicable.
G. STATEMENT BY EXPERTS
Not applicable.
H. DOCUMENTS ON DISPLAY
We are subject to the information requirements of the Exchange Act, except that as a foreign issuer, we are not subject to the proxy rules or the short-swing profit disclosure rules of the Exchange Act. In accordance with these statutory requirements, we file or furnish reports and other information with the SEC. Reports and other information filed or furnished by us with the SEC ~~may be inspected and copied at the public reference facilities maintained by the SEC at Room 1024, 100 F Street, N.E., Washington, D.C. 20549, and~~are available electronically at the SEC’s ~~regional offices at 233 Broadway, New York, New York 10279 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.~~website: https://www.sec.gov. Copies of such material may also be inspected at the offices of the New York Stock Exchange, 11 Wall Street, New York, New York 10005, on which our ADSs are listed. In addition, the SEC maintains a website that contains information filed electronically with the SEC, which can be accessed on the internet at http://www.sec.gov. The information contained on this website does not form part of this annual report onForm 20-F.
Additional documents concerning Corpbanca which are referred to in this annual report may be inspected at our offices at Rosario Norte 660, Las Condes, Santiago, Chile.
I. SUBSIDIARY INFORMATION
Not applicable.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT FINANCIAL RISK
A. DEFINITION AND PRINCIPLES OF FINANCIAL RISK MANAGEMENT
Following the consummation of the Merger, as part of the integration process of the merged banks, we amended our risk management policies and procedures in order to adopt Itaú Unibanco’s risk policies and procedures according to Basel III framework.
While there is no single definition of financial risk, the ~~bank~~Bank defines this risk as the possibility of an event having unexpected financial consequences on the institution. Although this definition involves a strong adversity component, it also involves an important opportunity component. Therefore, the purpose of financial risk management is not to eliminate this risk, but rather to limit its exposure to negative events in line with the risk appetite of the ~~bank’s~~Bank’s shareholders and the regulations that govern the institution. The main financial risks to which the ~~bank~~Bank is exposed are: Market Risk, Liquidity Risk and Counterparty Risk.
1.Market Risk
Market risk is the exposure to economic gains or losses caused by movements in prices and market variables. This risk stems from the activities of the Trading and Banking Books. The Trading Book includesnon-derivative financial instruments that have been classified as trading instruments and all derivative positions that have not been classified as hedging instruments, according to accounting standards. The Banking Book includes all positions in derivative andnon-derivative instruments that do not form part of the Trading Book. In the first case, it comes from activities intended to obtain short-term gains and from the intensive use of instruments recorded at fair value. In the second case, with a more long-term vision, it stems from commercial activities with products valued at amortized cost. The following section describes the main market risk factors to which the ~~bank~~Bank and its subsidiaries are exposed:
a) Foreign Exchange Risk
Foreign exchange risk is the exposure to adverse movements in the exchange rates of currencies other than the base currency for all balance sheet andoff-balance sheet positions.
·
The main sources of foreign exchange risk are:

·positions in foreign currency (FX) within the trading book;

·currency mismatches between assets and liabilities in the banking book;

·cash flow mismatches in different currencies; and

·structural positions produced from consolidating assets and liabilities from our foreign branches and subsidiaries denominated in currencies other than the Chilean peso. As a result, movements in exchange rates can generate volatility within the ~~bank’s~~Bank’s income statement and equity. This effect is known as “translation risk.”
b) Indexation Rate Risk
Indexation risk is the exposure to changes in indexed units (e.g. UF, UVR or others) linked to domestic or foreign currency in which any instruments, contracts or other transactions recorded in the statement of financial position may be denominated.
c) Interest Rate Risk
Interest rate risk is the exposure to movements in market interest rates. Changes in market interest rates can affect both the price of instruments recorded at fair value and the financial margin and other gains from the Banking Book such as fees. Fluctuations in interest rates also affect the ~~bank’s~~Bank’s economic value.
Interest rate risk can be represented by sensitivities to parallel and/ornon-parallel yield shifts with the effects reflected in the prices of instruments, the financial margin, equity and economic value.
d) Volatility Risk
In addition to the exposure related to the underlying asset, issuing options has other risks. These risks arise from thenon-linear relationship between the gain generated by the option and the price and level of the underlying factors, as well as exposure to changes in the price volatility of the underlying asset.
2.Funding Liquidity Risk
Funding liquidity risk is the exposure of the ~~bank~~Bank and its subsidiaries to events that affect their ability to meet, in a timely manner and at reasonable costs, cash payment obligations arising from maturities of time deposits that are not renewed, withdrawals from demand accounts, maturities or settlements of derivatives, liquidations of investments or any other payment obligation.
Financial institutions are exposed to funding liquidity risk that is intrinsic to the role of intermediary that they play in the economy. In general, in financial markets demand for medium or long-term financing is usually much greater than the supply of funds for those terms while short-term financing is in considerable supply. In this sense, the role of intermediary played by financial institutions, which assume the risk of satisfying the demand for medium and long-term financing by brokering short-term available funds, is essential for the economy to function properly.
Appropriately managing funding liquidity risk not only allows contractual obligations to be met in a timely manner, but also enables:

·The liquidation of positions, when it so decides, to occur without significant losses.

·The commercial and treasury activities of the ~~bank~~Bank and its subsidiaries to be financed at competitive rates.

·The ~~bank~~Bank to avoid fines or regulatory penalties for not complying with regulations.
3.Counterparty Risk
Counterparty risk is the risk of loss arising fromnon-compliance by a given counterparty, for whatever reason, in paying all or part of its obligations with the ~~bank~~Bank under contractually agreed-upon conditions. This risk also includes a given counterparty’s inability to comply with obligations to settle derivative operations with bilateral risk.
The ~~bank~~Bank diversifies credit risk by placing concentration limits on different groups. Exposure to credit risk is evaluated using an individual analysis of the payment capacity of debtors and potential debtors to meet their obligations on time and as agreed.
B. FINANCIAL RISK MANAGEMENT
The process of managing financial risks is an ongoing, interlinked process that begins by identifying the risks to which the institution is exposed. After that, the ~~bank~~Bank calculates the potential impact of that exposure on its profit or loss and limits it to a desired level. This involves actively monitoring risk and studying how it evolves over time. The risk management process can be subdivided into the following stages:
1)Identification of Financial Risks
The Financial Risk Division has a highly technical team that is constantly monitoring the activities of the ~~bank~~Bank and its subsidiaries to search for potential risks that have not been quantified and controlled. The ~~bank’s~~Bank’s Treasury Division serves as a first line of defense and plays an essential role in risk detection. Itaú Corpbanca’s structure facilitates this role of identifying risks by preserving the division’s independence and ensuring active participation from management in creating/modifying products. After a risk is identified, it is quantified to see the potential impact on value creation within the institution.
2)Quantification and Control of Financial Risk Exposure
Once a risk has been identified, the Financial Risk Division is responsible for mapping the risk using the appropriate quantification metrics. Our board of directors and senior management are aware of the methods used to measure exposure and are
responsible for setting the institution’s desired risk appetite levels (by business unit, associate, risk factor, area, etc.), always taking care to adhere to current regulations. The limit setting process is the instrument used to establish the equity available to each activity. Limit determination is, by design, a dynamic process that responds to the risk level considered acceptable by senior management.
The Financial Risk Division requests and proposes a system of quantitative and qualitative limits and warning levels that affect liquidity and market risk. This request must be authorized by the Assets and Liabilities Committee, or ALCO, and our board of directors. It also regularly measures risk incurred, develops valuation tools and models, performs periodic stress testing, measures the degree of concentration with interbank counterparties, drafts policy and procedure handbooks and monitors authorized limits and warning levels, which are reviewed at least once per year.
The limit structure requires the division to carry out a process that includes the following steps:

·Efficiently and comprehensively identify and outline the main types of financial risks incurred so that they are consistent with the running of the business and the defined strategy.

·Quantify and communicate to business areas the risk levels and profile that senior management considers acceptable in order to avoid incurring undesired risks.

·Give business areas flexibility to take on financial risks in an efficient and timely manner based on changes in market and business strategies, and always within the risk levels considered acceptable by the entity.
·
Enable business generators to take on a cautious yet sufficient level of risk in order to achieve budgeted results.

·Outline the range of products and underlying assets with which each treasury unit can operate, based on characteristics like the model, valuation systems and liquidity of the instruments involved, among other factors.
The metrics, by type of risk, used to quantify exposure or demonstrate that a risk has been materialized are detailed below:
a) Market Risk Metrics and Limits
Given the complexity and relevance of the portfolios managed by Itaú Corpbanca, diverse instruments have been chosen to control market risk based on the characteristics of the financial products in the Trading and Banking Books.
The following regulatory and internal metrics are used to monitor and control market risk:
Regulatory Risk Measurements for the Trading and Banking Books
The ~~bank~~Bank measures regulatory exposure using the standardized methodology provided by the Chilean Central Bank (ChapterIII-B-2.2 “Standards on Measuring and Controlling Market Risks in Banking Companies” of the Compendium of Financial Standards) and complemented by the SBIF (Chapter12-21 —Standards on Measuring and Controlling Market Risks), which is a risk measurement based on the standard methodology of the Basel Committee and is designed to quantify exposure to market risks for the Banking and Trading Books.
The regulatory measurement of market risk in the Trading Book allows the ~~bank~~Bank to estimate its potential losses from fluctuations standardized by the regulator. The regulatory limit is the sum of this risk (also known as Market Risk Exposure or MRE) and 10% of the credit risk weighted assets. This sum cannot be greater than the ~~bank’s~~Bank’s minimum capital requirement.
The ~~bank,~~Bank, on an individual level, must continuously observe those limits and report to the SBIF on a weekly basis its positions at risk and compliance with those limits (Regulatory Report SBIF C41—Weekly information on market risk using standardized methodology). It must also inform the SBIF each month on the consolidated positions at risk of subsidiaries and foreign subsidiaries (Regulatory Report SBIF C43—Consolidated information on market risk using standardized methodology).
The following table details regulatory limit consumption for market risk, specifically for the Trading Book as of December 31, ~~2015,~~ 2016, 2017 and ~~2017.~~
2018.
Trading Book

As of December 31,

Limit Consumption

2015

2016

2017

Market risk exposure (MRE)

71.8%

60.4%

71.3%

   As of December 31,
Limit Consumption
   2016 2017 2018
Market risk exposure (MRE)
   60.4 % 71.3 % 71.8 %
The regulatory risk measurement for the Banking Book (Regulatory Report SBIF C40—Cashflows related to interest rate and indexation risk in the Banking Book) is used to estimate the bank’s potential losses from standardized adverse movements in interest
and exchange rates. For regulatory reporting purposes, the Trading Book includes the interest rate risk of derivatives managed in the Banking Book.
The standardized regulatory report for the Banking Book (Regulatory Report SBIF C40) is used to estimate the bank’s potential economic losses from standardized adverse movements in interest rates defined by the SBIF. Currently, limits for short-term exposure (STE) to interest rate and indexation risk in the Banking Book must not exceed 35% of annual operating income (LTM moving period) and long-term limit consumption (LTE) must be less than 20% of the ~~bank’s~~Bank’s minimum capital requirement.
The following table details regulatory limit consumption for market risk, specifically for the Banking Book as of December 31, ~~2015,~~ 2016, 2017 and ~~2017:~~
2018:
Banking Book

As of December 31,

Limit Consumption

2015

2016

2017

Short-term exposure to interest rate risk (STE)

60.6%

51.8%

45.0%

Long-term exposure to interest rate risk (LTE)

13.8%

60.1%

43.2%

   As of December 31,
Limit Consumption
   2016 2017 2018
Short-term exposure to interest rate risk (STE)
   51.8 % 45.0 % 51.4 %
Long-term exposure to interest rate risk (LTE)
   60.1 % 43.2 % 50.3 %
Value at Risk (VaR) Calculation
Calculation of Historical Value at Risk(non-parametric): This measurement provides the maximum potential economic loss at a certain confidence level and a given time horizon. Historical VaR, as opposed to Statistical or Parametric VaR, is based on the observed distribution of past returns, does not need to make assumptions of probability distributions (frequently normal distribution) and, therefore, does not need a mean (assumed 0), standard deviation and correlations across returns (parameters). The ~~bank’s~~Bank’s uses a 99% confidence level and a time horizon of one day.
Calculation of volatility-adjusted Historical Value at Risk(non-parametric): This measurement is based on the above and the profit and loss (P&L) vector is adjusted according to whether it is facing a period of greater or less volatility.
Our board of directors defines limits on the Value at Risk (as of the end of the first half of 2016 it uses the volatility-adjusted Historical VaR method) that can be maintained, which is monitored on a daily basis. The measurement is also subjected to back testing to verify that the daily losses that effectively occurred do not exceed VaR more than once every 100 days. The result is monitored daily to confirm the validity of the assumptions, hypothesis and the adequacy of the parameters and risk factors used in the VaR calculation. The ~~bank~~Bank in turn calculates VaR for sub/portfolios and risk factors, which allows it to quickly detect pockets of risk. Since VaR does not consider stress scenarios, it is complemented by stress testing. Specifically, the ~~bank~~Bank uses metrics that take into account prospective, historical and standardized scenarios.
(i) Limitations of VaR Model
Although the VaR model is one of the models most frequently used by the local financial industry, like any model it has limitations that must be considered:

·It does not take into account the expected loss in the event that the portfolio return is above the confidence level defined in the VaR. In other words, in the ~~bank’s~~Bank’s case it does not reflect what happens in the 1% of the tail. This is mitigated with the stress measures detailed below.

·It does not consider intraday results, but only reflects the potential loss given current positions.

•
·It does not take into account potential changes in the dynamics of movements in market variables (i.e. potential changes in the matrix of variance and covariance).
(ii) Sensitivity Measurements
Sensitivity measurements are based on estimated scenarios for positions in the Trading and Banking Books.
Trading Book Positions by Risk Factor: The table below sets forth the Trading Book positions by risk factor as of December 31, ~~2015,~~ 2016, 2017 and ~~2017:~~2018:

Position

Risk Factor / Products

2015

2016

2017

MCh$

MCh$

MCh$

CLP rates

Derivatives

(77,875
)
(131,852
)
(738,006
)
Investments

3,733

344,390

263,964

CLF rates

Derivatives

175,245

319,785

694,368

Investments

2,678

72,668

171,330

COP rates

Derivatives

0

4,275

(223,400
)
Investments

0

381,848

384,244

UVR rates

Derivatives

0

0

0

Investments

0

164,828

0

USD rates

7,835

44,211

256,495

OM rates

52

(1,061
)
10

FX (exchange rate)

7,887

14,089

15,620

Inflation (CLF)

0

0

0

Optionality (Gamma, Vega)

1

6

120

   Position
Risk Factor / Products
   2016    2017    2018
   MCh$    MCh$    MCh$
CLP rates

Derivatives
   (131,852 )    (738,006 )    120,171
Investments
   344,390    263,964    (29 )






CLF rates

Derivatives
   319,785    694,368    (77,821 )
Investments
   72,668    171,330    0






COP rates

Derivatives
   4,275    (223,400 )    (25 )
Investments
   381,848    384,244    (6 )






UVR rates

Derivatives
   0    0    47
Investments
   164,828    0    (4 )






USD rates
   44,211    256,495    57,649






OM rates
   (1,061 )    10    (1,053 )






FX (exchange rate)
   14,089    15,620    2,403






Inflation (CLF)
   0    0    0






Optionality (Gamma, Vega)
   6    120    156






Trading Book positions by risk factor correspond to the fair and equivalent nominal value (exchange rate or “FX,” inflation and optionality) of the portfolios within the Trading Book. The Trading Book is made up of the financial assets presented in Notes 6 and 8, and financial liabilities presented in Note 8, all of them included in our consolidated financial statements. The currency position incorporates the amortized cost positions from the statement of financial position, excluding the positions related to the foreign investment with their respective hedges. The currency positions in the Trading Book have limits for each currency.
Banking Book by Risk Factor:
FX and Inflation Positions in Banking Book:
The following table sets forth the foreign currency and inflation positions in the Banking Book as of December 31, ~~2015,~~ 2016, 2017 and ~~2017:~~2018:

Year End
2015

Year End
2016

Year End
2017

CLF Position

448,256

1,118,526

877,152

FX Position

(52,231
)
(684,938
)
(889,075
)
   Year End
2016    Year End
2017    Year End
2018
CLF Position
   1,118,526    877,152    1,783,587
FX Position
   (684,938 )    (889,075 )    129,417
Positions in currencies other than Chilean pesos and exposure to indexation are classified by book and by their effect on the ~~bank’s~~Bank’s financial statements, reflecting the spot exposure to each risk factor. It is important to highlight the impact of structural exchange rate risk arising from the ~~bank’s~~Bank’s positions in currencies other than the Chilean peso related primarily to the consolidation of investments in subsidiaries or affiliates and the results and hedges of these investments. The process of managing structural exchange rate risk is dynamic and attempts to limit the impact of currency depreciation, thus optimizing the financial cost of hedges. The general policy for managing this risk is to finance them in the currency of the investment provided that the depth of the market so allows and the cost is justified by the expected depreciation.One-time hedges are also taken out when the bank considers that any currency may weaken beyond market expectations with respect to the Chilean peso. As of December 31, ~~2017,~~2018, greater ongoing exposure was concentrated in Colombian pesos (approximately US$~~1,019~~964 billion). The bank hedges part of these positions on a permanent basis using currency derivatives. The currency positions in the Banking Book have limits for each currency.
Structural Interest Rate Position in Banking Book (Interest Rate Gap):
Structural interest rate risk is measured using representation by risk factor of cash flows expressed at fair value, assigned at the repricing date and by currency. This methodology facilitates the detection of concentrations of interest rate risk over different time frames. All positions in and outside the statement of financial position must be ungrouped into cash flows and placed at the repricing / maturity point. For those accounts that do not have contractual maturities, an internal model is used to analyze and estimate their durations and sensitivities.
The following table shows the Banking Book positions for the most important currencies in which the ~~bank~~Bank does business as of December 31, ~~2015,~~ 2016, 2017 and ~~2017~~2018 (products valued at amortized cost andavailable-for-sale instruments and derivatives valued at fair value).
The exposures presented are the present values resulting from:

·Modeling contractual cash flows based on behaviors that affect market risk exposure (for example, prepayment and renewal, among others).

·Discounting cash flows from items accounted for on an accrual basis at a rate that represents the opportunity cost of the liability/asset.

·Discounting cash flows from items accounted for at market value at the market rate.

Year-End 2015

CLP Position

1 Month

1 - 3 Months

3 Months to 1
Year

1 to 3 Years

More than
3 Years

ASSETS

1,375,771

433,059

740,858

377,601

102,765

Cash

227,450

—

—

—

—

Repurchase agreements

58,296

—

—

—

—

Loans to customers, net

639,202

408,002

701,133

365,287

102,720

Financial assets available for sale

147,925

25,057

39,725

12,314

45

Financial assets held to maturity

—

—

—

—

—

PP&E and intangible assets

97,349

—

—

—

—

Other assets

205,549

—

—

—

—

LIABILITIES

(1,823,957
)
(518,933
)
(1,046,279
)
(278,441
)
(10,960
)
Checking accounts and demand deposits

(375,365
)
(47,417
)
(151,741
)
(110,807
)
(10,960
)
Savings accounts and time deposits

(658,190
)
(471,444
)
(892,462
)
(137,889
)
—

Debt issued

—

—

(2,077
)
(29,745
)
—

Repurchase agreements

(88,328
)
(72
)
—

—

—

Other liabilities

(178,329
)
—

—

—

—

Capital and reserves

(523,745
)
—

—

—

—

DERIVATIVES

313,295

157,511

414,040

(130,308
)
(92,492
)
Financial derivative instruments

313,295

157,511

414,040

(130,308
)
(92,492
)

Year-End 2015

CLF Position

1 Month

1 - 3 Months

3 Months to 1
Year

1 to 3 Years

More than 3 Years

ASSETS

340,027

265,914

957,214

627,247

2,133,207

Cash

—

—

—

—

—

Repurchase agreements

—

—

—

—

—

Loans to customers, net

248,695

217,467

874,598

546,211

2,133,207

Financial assets available for sale

81,786

48,447

82,616

81,036

—

Financial assets held to maturity

—

—

—

—

—

PP&E and intangible assets

—

—

—

—

—

Other assets

9,546

—

—

—

—

LIABILITIES

(214,234
)
(88,779
)
(609,756
)
(542,924
)
(1,756,897
)
Checking accounts and demand deposits

(371
)
—

—

—

—

Savings accounts and time deposits

(171,613
)
(80,000
)
(494,159
)
(171,808
)
(373,648
)
Debt issued

(4,173
)
(8,776
)
(59,318
)
(285,780
)
(1,331,970
)
Repurchase agreements

—

—

—

—

—

Other liabilities

(38,077
)
(3
)
(56,279
)
(85,336
)
(51,279
)
Capital and reserves

—

—

—

—

—

DERIVATIVES

88,477

(202,459
)
(189,140
)
(55,062
)
(304,577
)
Financial derivative instruments

88,477

(202,459
)
(189,140
)
(55,062
)
(304,577
)

Year-End 2015

FX Position

1 Month

1 - 3 Months

3 Months to 1
Year

1 to 3 Years

More than 3 Years

   Year-End 2016
CLP Position
   <1 Month 1 - 3
Months 3 Months to
1 Year 1 to 3
Years More than
3 Years
ASSETS

535,528

426,188

548,729

22,657

16,207

   3,501,743 870,776 2,160,430 1,290,116 543,713


Cash

143,224

—

—

—

—

   456,753 —     —   —   —
Repurchase agreements

—

—

—

—

—

   82,146 —   —   —   —
Loans to customers, net

335,312

426,188

548,729

22,657

16,207

   2,103,570 823,545 2,126,992 1,126,147 459,420
Financial assets available for sale

—

—

—

—

—

   320,536 47,233 33,438 163,969 84,293
Financial assets held to maturity

—

—

—

—

—

   —   —   —   —   —
PP&E and investments

—

—

—

—

—

PP&E and intangible assets
   214,411 —   —   —   —
Other assets

56,992

—

—

—

—

   324,327 —   —   —   —


LIABILITIES

(445,017
)
(499,406
)
(452,259
)
(30,098
)
(5,389
)
   (6,504,266 ) (1,196,757 ) (2,361,334 ) (227,588 ) (158,564 )


Checking accounts and demand deposits

(65,134
)
(10,675
)
(34,114
)
(24,691
)
(5,389
)
   (1,890,606 ) —   (58,425 ) —   —
Savings accounts and time deposits

(241,110
)
(159,131
)
(169,009
)
—

—

   (3,042,768 ) (1,190,542 ) (2,286,425 ) (157,934 ) (255 )
Debt issued

—

—

—

—

—

   (831 ) (4,710 ) (15,982 ) (69,654 ) (158,309 )
Repurchase agreements

—

—

—

—

—

Other liabilities

(138,773
)
(329,600
)
(249,136
)
(5,407
)
—

   (302,491 ) (1,505 ) (502 ) —   —
Capital and reserves

—

—

—

—

—

   (1,267,570 ) —   —   —   —


DERIVATIVES

(229,775
)
74,931

9,984

(630
)
(23,882
)
   (136,936 ) (204,005 ) 548,898 (117,704 ) 48,800


Financial derivative instruments

(229,775
)
74,931

9,934

(630
)
(23,382
)
   (136,936 ) (204,005 ) 548,898 (117,704 ) 48,800


   Year-End 2016
CLF Position    <1 Month 1 - 3 Months 3 Months to
1 Year 1 to 3 Years More than 3
Years
ASSETS
   460,596 467,103 2,112,730 1,828,020 3,977,336


Cash
   —   —   —   —   —
Repurchase agreements
   —   —   —   —   —
Loans to customers, net
   498,761 453,798 2,019,088 1,751,321 3,931,531
Financial assets available for sale
   3,792 13,305 93,642 76,699 45,805
PP&E and intangible assets
   —   —   —   —   —
Other assets
   (41,957 ) —   —   —   —


LIABILITIES
   (366,933 ) (158,745 ) (1,087,649 ) (892,317 ) (3,218,064 )


Other liabilities
   (86,149 ) —   (46,944 ) (66,944 ) (21,856 )
Capital and reserves
   —   —   —   —   —
   Year-End 2016
CLF Position    <1 Month 1 - 3 Months 3 Months to
1 Year 1 to 3 Years More than 3
Years
Debt issued
   (41,651 ) (12,178 ) (542,146 ) (649,782 ) (2,773,046 )
Checking accounts and demand deposits
   (17,596 ) —   —   —   —
Savings accounts and time deposits
   (221,537 ) (146,567 ) (498,559 ) (175,591 ) (423,162 )


DERIVATIVES
   (633,500 ) (290,901 ) (864,344 ) (448,301 ) 233,496


Financial derivative instruments
   (633,500 ) (290,901 ) (864,344 ) (448,301 ) 233,496


   Year-End 2016
COP and UVR Position    <1 Month 1-3 Months 3 Months to
1 Year 1 to 3 Years More than 3
Years
Assets
   2,777,361 610,840 667,891 761,052 690,494


Cash
   328,871 —   —   —   —
Repurchase agreements
   152,665 —   —   —   —
Loans to customers, net
   1,697,264 602,867 629,102 695,626 508,008
Financial assets available for sale
   44,235 7,973 38,789 65,426 182,486
Financial assets held to maturity
   107,541 —   —   —   —
PP&E and investments
   —   —   —   —   —
Other assets
   446,735 —   —   —   —


Liabilities
   (4,229,588 ) (581,868 ) (765,798 ) (461,681 ) (309,997 )


Checking accounts and demand deposits
   (1,759,415 ) —   —   —   —
Savings accounts and time deposits
   (930,983 ) (570,126 ) (631,854 ) (342,199 ) (101,967 )
   Year-End 2016
COP and UVR Position    <1 Month 1-3 Months 3 Months to
1 Year 1 to 3 Years More than 3
Years
Debt issued
   (24,653 ) (11,742 ) (133,944 ) (119,482 ) (208,030 )
Other liabilities
   (740,891 ) —   —   —   —
Capital and reserves
   (773,646 ) —   —   —   —


Derivatives
   (41,422 ) (24,828 ) 220,845 (8,233 ) (83,679 )


Financial derivative instruments
   (41,422 ) (24,828 ) 220,845 (8,233 ) (83,679 )


   Year-End 2016
FX Position    <1 Month 1 -3 Months 3 Months
to 1 Year 1 to 3
Years More than
3 Years
ASSETS
   979,846 774,212 1,123,227 31,486 34,326


Cash
   349,543 —   —   —   —
Repurchase agreements
   39,172 —   —   —   —
Loans to customers, net
   645,830 774,108 1,122,529 22,872 22,093
Financial assets available for sale
   287 104 698 8,614 12,233
Financial assets held to maturity
   —   —   —   —   —
PP&E and investments
   —   —   —   —   —
Other assets
   (54,986 ) —   —   —   —


LIABILITIES
   (1,880,468 ) (785,961 ) (1,179,179 ) (545,528 ) —


Checking accounts and demand deposits
   (317,104 ) —   (7,959 ) —   —
Savings accounts and time deposits
   (923,035 ) (264,542 ) (322,601 ) —   —
Debt issued
   (7,529 ) (125,397 ) (469,452 ) (540,348 ) —
Other liabilities
   (610,230 ) (396,022 ) (379,167 ) (5,180 ) —
Capital and reserves
   (22,570 ) —   —   —   —


DERIVATIVES
   329,880 264,544 461,844 543,063 (57,615 )


Financial derivative instruments
   329,880 264,544 461,844 543,063 (57,615 )


Year-End 2016

CLP Position

1 Month

1 - 3 Months

3 Months to 1
Year

1 to 3 Years

More than 3 Years

ASSETS

3,501,743

870,776

2,160,430

1,290,116

543,713

Cash

456,753

—

—

—

—

Repurchase agreements

82,146

—

—

—

—

Loans to customers, net

2,103,570

823,545

2,126,992

1,126,147

459,420

Financial assets available for sale

320,536

47,233

33,438

163,969

84,293

Financial assets held to maturity

—

—

—

—

—

PP&E and intangible assets

214,411

—

—

—

—

Other assets

324,327

—

—

—

—

LIABILITIES

(6,504,266
)
(1,196,757
)
(2,361,334
)
(227,588
)
(158,564
)
Checking accounts and demand deposits

(1,890,606
)
—

(58,425
)
—

—

Savings accounts and time deposits

(3,042,768
)
(1,190,542
)
(2,286,425
)
(157,934
)
(255
)
Debt issued

(831
)
(4,710
)
(15,982
)
(69,654
)
(158,309
)
Other liabilities

(302,491
)
(1,505
)
(502
)
—

—

Capital and reserves

(1,267,570
)
—

—

—

—

DERIVATIVES

(136,936
)
(204,005
)
548,898

(117,704
)
48,800

Financial derivative instruments

(136,936
)
(204,005
)
548,898

(117,704
)
48,800

   Year-End 2017
CLP Position
   <1 Month 1 - 3 Months 3 Months to 1
Year 1 to 3
Years More than
3 Years
ASSETS
   4,256,811 892,701 1,688,269 1,315,538 665,015
Cash
   387,847 —   —   —   —
Repurchase agreements
   5,956 —   —   —   —
Loans to customers, net
   2,162,363 859,897 1,614,115 1,080,663 427,787
Financial assets available for sale
   67,735 32,804 74,154 234,876 237,228
Financial assets held to maturity
   —   —   —   —   —
PP&E and intangible assets
   703,689 —   —   —   —
Other assets
   929,221 —   —   —   —


LIABILITIES
   (6,418,945 ) (1,147,277 ) (3,162,828 ) (1,204,043 ) (221,117 )


Checking accounts and demand deposits
   (577,488 ) (83,941 ) (484,133 ) (901,810 ) (114 )
Savings accounts and time deposits
   (2,229,619 ) (989,646 ) (2,633,395 ) 194,706 —
Debt issued
   (831 ) (7,952 ) (45,081 ) (107,528 ) (221,002 )
Other liabilities
   (374,333 ) (30,483 ) —   —   —
Capital and reserves
   (3,207,101 ) (30,483 ) —   —   —
Repos
   (29,573 ) (4,773 ) (219 ) —   —


DERIVATIVES
   819,878 456,293 268,834 (324,113 ) (152,389 )


Financial derivative instruments
   819,878 456,293 268,834 (324,113 ) (152,389 )


Year-End 2016

   Year-End 2017
CLF Position

1 Month

1 - 3
Months

3 Months to
1
Year

1 to 3
Years

More than 3
Years

   <1 Month 1 - 3 Months 3 Months to 1
Year 1 to 3
Years More than
3 Years
ASSETS

460,596

467,103

2,112,730

1,828,020

3,977,336

   480,999 510,095 2,008,605 2,172,278 3,891,622


Cash

—

—

—

—

—

   —   —   —   —   —
Repurchase agreements

—

—

—

—

—

   —   —   —   —   —
Loans to customers, net

498,761

453,798

2,019,088

1,751,321

3,931,531

   520,449 422,096 1,786,914 1,767,416 3,804,979
Financial assets available for sale

3,792

13,305

93,642

76,699

45,805

   22,633 87,999 221,691 404,862 86,643
PP&E and intangible assets

—

—

—

—

—

   —   —   —   —   —
Other assets

(41,957
)
—

—

—

—

   —   —   —   —   —


LIABILITIES

(366,933
)
(158,745
)
(1,087,649
)
(892,317
)
(3,218,064
)
   (352,331 ) (255,086 ) (423,122 ) (968,507 ) (3,748,085 )


Other liabilities

(86,149
)
—

(46,944
)
(66,944
)
(21,856
)
   (15,778 ) —   —   —   —
Capital and reserves

—

—

—

—

—

   (98,353 ) (244,699 ) (123,995 ) (41,967 ) (421,726 )
Debt issued

(41,651
)
(12,178
)
(542,146
)
(649,782
)
(2,773,046
)
   (48,724 ) (10,387 ) (262,792 ) (878,854 ) (3,319,434 )
Checking accounts and demand deposits

(17,596
)
—

—

—

—

   (189,476 ) —   (36,335 ) (47,686 ) (6,925 )
Savings accounts and time deposits

(221,537
)
(146,567
)
(498,559
)
(175,591
)
(423,162
)
   —   —   —   —   —


DERIVATIVES

(633,500
)
(290,901
)
(864,344
)
(448,301
)
233,496

   (1,209,472 ) (508,032 ) (817,140 ) (226,061 ) 321,390


Financial derivative instruments

(633,500
)
(290,901
)
(864,344
)
(448,301
)
233,496

   (1,209,472 ) (508,032 ) (817,140 ) (226,061 ) 321,390


   Year-End 2017
COP and UVR Position
   <1 Month 1-3 Months 3 Months to 1
Year 1 to 3
Years More than
3 Years
Assets
   1,995,875 579,940 774,648 1,014,375 593,650


Cash
   165,848 —   —   —   —
Repurchase agreements
   21,263 —   —   —   —
Loans to customers, net
   1,237,941 522,042 633,470 619,269 531,424
Financial assets available for sale
   3,885 —   141,177 395,107 62,225
Financial assets held to maturity
   25,145 57,898 —   —   —
PP&E and investments
   —   —   —   —   —
Other assets
   541,794 —   —   —   —
Liabilities
   (3,184,891 ) (628,485 ) (686,080 ) (484,123 ) (303,754 )


Checking accounts and demand deposits
   (1,490,776 ) —   —   —   —
Savings accounts and time deposits
   (350,584 ) (578,115 ) (635,840 ) (376,758 ) (140,162 )

Year-End 2016

COP and UVR Position

1 Month

1 -3 Months

3 Months to 1
Year

1 to 3 Years

More than 3 Years

Assets

2,777,361

610,840

667,891

761,052

690,494

Cash

328,871

—

—

—

—

Repurchase agreements

152,665

—

—

—

—

Loans to customers, net

1,697,264

602,867

629,102

695,626

508,008

Financial assets available for sale

44,235

7,973

38,789

65,426

182,486

Financial assets held to maturity

107,541

—

—

—

—

PP&E and investments

—

—

—

—

—

Other assets

446,735

—

—

—

—

Liabilities

(4,229,588
)
(581,868
)
(765,798
)
(461,681
)
(309,997
)
Checking accounts and demand deposits

(1,759,415
)
—

—

—

—

Savings accounts and time deposits

(930,983
)
(570,126
)
(631,854
)
(342,199
)
(101,967
)
Debt issued

(24,653
)
(11,742
)
(133,944
)
(119,482
)
(208,030
)
Other liabilities

(740,891
)
—

—

—

—

Capital and reserves

(773,646
)
—

—

—

—

Derivatives

(41,422
)
(24,828
)
220,845

(8,233
)
(83,679
)
Financial derivative instruments

(41,422
)
(24,828
)
220,845

(8,233
)
(83,679
)
   Year-End 2017
COP and UVR Position
   <1 Month 1 -3 Months 3 Months to 1
Year 1 to 3 Years More than 3
Years
Debt issued
   —   (50,370 ) (50,240 ) (107,365 ) (163,593 )
Other liabilities
   (669,363 ) —   —   —   —
Capital and reserves
   (674,168 ) —   —   —   —


Derivatives
   (233,772 ) 62,977 (330,530 ) 374,478 (95,155 )


Financial derivative instruments
   (233,772 ) 62,977 (330,530 ) 374,478 (95,155 )


Year-End 2016

   Year-End 2017
FX Position

1 Month

1 -3 Months

3 Months to 1
Year

1 to 3 Years

More than 3 Years

   <1 Month 1-3 Months 3 Months to 1
Year 1 to 3 Years More than 3
Years
ASSETS

979,846

774,212

1,123,227

31,486

34,326

   702,900 263,710 547,829 33,257 11,851


Cash

349,543

—

—

—

—

   392,669 —   —   —   —
Repurchase agreements

39,172

—

—

—

—

   —   —   —   —   —
Loans to customers, net

645,830

774,108

1,122,529

22,872

22,093

   132,850 263,597 547,358 20,963 10,761
Financial assets available for sale

287

104

698

8,614

12,233

   173 79 439 12,283 1,078
Financial assets held to maturity

—

—

—

—

—

   —   —   —   —   —
PP&E and investments

—

—

—

—

—

   —   —   —   —   —
Other assets

(54,986
)
—

—

—

—

   177,207 34 31 12 12


LIABILITIES

(1,880,468
)
(785,961
)
(1,179,179
)
(545,528
)
—

   (1,861,588 ) (318,197 ) (539,389 ) (450,818 ) —


Checking accounts and demand deposits

(317,104
)
—

(7,959
)
—

—

   (388,722 ) —   —   —   —
Savings accounts and time deposits

(923,035
)
(264,542
)
(322,601
)
—

—

   (837,274 ) (202,181 ) (526,101 ) (2,215 ) —
Debt issued

(7,529
)
(125,397
)
(469,452
)
(540,348
)
—

   (452,157 ) (116,016 ) (13,288 ) (448,603 ) —
Other liabilities

(610,230
)
(396,022
)
(379,167
)
(5,180
)
—

   (116,183 ) —   —   —   —
Capital and reserves

(22,570
)
—

—

—

—

   (66,994 ) —   —   —   —


DERIVATIVES

329,880

264,544

461,844

543,063

(57,615
)
   879,996 (47,020 ) 70,834 361,999 6,409


Financial derivative instruments

329,880

264,544

461,844

543,063

(57,615
)
   879,996 (47,020 ) 70,834 361,999 6,409


   Year-End 2018
CLP Position
   <1 Month 1 - 3 Months 3 Months to 1
Year 1 to 3 Years More than 3
Years
ASSETS
   3,519,009 1,000,478 1,753,132 1,800,011 1,181,157


Cash
   222,836 —   —   —   —
Repurchase agreements
   76,610 —   —   —   —
Loans to customers, net
   1,873,406 939,865 1,727,959 1,345,348 952,614
Financial assets available for sale
   122,284 60,613 25,173 454,663 228,542
Financial assets held to maturity
   —   —   —   —   —
PP&E and intangible assets
   709,488 —   —   —   —
Other assets
   514,384 —   —   —   —


LIABILITIES
   (8,733,561 ) (1,463,211 ) (2,101,205 ) (560,099 ) (330,000 )


Checking accounts and demand deposits
   (2,071,099 ) —   —   —   —
Savings accounts and time deposits
   (2,700,406 ) (1,453,468 ) (2,090,629 ) (407,126 ) —
Debt issued
   (832 ) (9,743 ) (10,575 ) (152,973 ) (330,000 )
Other liabilities
   (349,465 ) —   —   —   —
Capital and reserves
   (3,328,337 ) —   —   —   —


Repos
   (283,422 ) —   —   —   —


DERIVATIVES
   (209,799 ) 1,521,695 394,300 209,804 65,913


Financial derivative instruments
   (209,799 ) 1,521,695 394,300 209,804 65,913


Year-End 2017

CLP Position

1 Month

1 - 3 Months

3 Months to 1
Year

1 to 3 Years

More than 3 Years

ASSETS

4,256,811

892,701

1,688,269

1,315,538

665,015

Cash

387,847

—

—

—

—

Repurchase agreements

5,956

—

—

—

—

Loans to customers, net

2,162,363

859,897

1,614,115

1,080,663

427,787

Financial assets available for sale

67,735

32,804

74,154

234,876

237,228

Financial assets held to maturity

—

—

—

—

—

PP&E and intangible assets

703,689

—

—

—

—

Other assets

929,221

—

—

—

—

LIABILITIES

(6,418,945
)
(1,147,277
)
(3,162,828
)
(1,204,043
)
(221,117
)
Checking accounts and demand deposits

(577,488
)
(83,941
)
(484,133
)
(901,810
)
(114
)
Savings accounts and time deposits

(2,229,619
)
(989,646
)
(2,633,395
)
(194,706
)
—

Debt issued

(831
)
(7,952
)
(45,081
)
(107,528
)
(221,002
)
Other liabilities

(374,333
)
(30,483
)
—

—

—

Capital and reserves

(3,207,101
)
(30,483
)
—

—

—

Repos

(29,573
)
(4,773
)
(219
)
—

—

DERIVATIVES

819,878

456,293

268,834

(324,113
)
(152,389
)
Financial derivative instruments

819,878

456,293

268,834

(324,113
)
(152,389
)

Year-End 2017

   Year-End 2018
CLF Position

1 Month

1 - 3
Months

3 Months to
1
Year

1 to 3
Years

More than 3
Years

   <1 Month 1 - 3 Months 3 Months to
1 Year 1 to 3 Years More than 3
Years
ASSETS
   466,115 447,398 1,329,598 1,845,604 6,182,033


Cash
   —   —   —   —   —
Repurchase agreements
   —   —   —   —   ��
Loans to customers, net
   452,555 441,731 1,309,397 1,293,838 6,059,288
Financial assets available for sale
   5,773 5,667 20,201 551,765 122,745
Financial assets held to maturity
   —   —   —   —   —
PP&E and intangible assets
   —   —   —   —   —
Other assets
   7,787 —   —   —   —


LIABILITIES
   (214,266 ) (181,744 ) (190,917 ) (1,072,879 ) (5,201,884 )


Checking accounts and demand
deposits
   —   —   —   —   —
Savings accounts and time deposits
   (34,503 ) (173,824 ) (55,268 ) —   (625,916 )
Debt issued
   (46,657 ) (7,920 ) (135,649 ) (1,072,879 ) (4,575,968 )
Other liabilities
   (133,106 ) —   —   —   —
Capital and reserves
   —   —   —   —   —
Repos
   —   —   —   —   —


DERIVATIVES
   (366,332 ) (1,221,035 ) (469,699 ) (330,428 ) 762,022


Financial derivative instruments
   (366,332 ) (1,221,035 ) (469,699 ) (330,428 ) 762,022


   Year-End 2018
COP and UVR Position
   <1 Month 1 - 3 Months 3 Months to
1 Year 1 to 3 Years More than 3
Years
ASSETS

480,999

510,095

2,008,605

2,172,278

3,891,622

   1,907,247 661,084 1,229,626 1,015,315 849,150
Cash

—

—

—

—

—

   176,062 —   —   —   —
Repurchase agreements

—

—

—

—

—

   10,864 —   —   —   —
Loans to customers, net

520,449

422,096

1,786,914

1,767,416

3,804,979

   1,083,664 582,098 714,268 724,255 713,988
Financial assets available for sale

22,633

87,999

221,691

404,862

86,643

   —   15,338 515,216 290,669 133,015
Financial assets held to maturity
   2 63,648 142 391 2,147
PP&E and intangible assets

—

—

—

—

—

   —   —   —   —   —
Other assets

—

—

—

—

—

   636,655 —   —   —   —


LIABILITIES

(352,331
)
(255,086
)
(423,122
)
(968,507
)
(3,748,085
)
   (3,742,035 ) (397,056 ) (681,848 ) (399,100 ) (317,788 )


Checking accounts and demand deposits
   (1,505,615 ) —   —   —   —
Savings accounts and time deposits
   (438,977 ) (390,936 ) (623,200 ) (288,729 ) (116,165 )
Debt issued
   (65,209 ) (6,120 ) (58,545 ) (110,184 ) (200,206 )
Other liabilities

(15,778
)
—

—

—

—

   (991,270 ) —   (103 ) (187 ) (1,417 )
Capital and reserves

(98,353
)
(244,699
)
(123,995
)
(41,967
)
(421,726
)
   (740,964 ) —   —   —   —
Debt issued

(48,724
)
(10,387
)
(262,792
)
(878,854
)
(3,319,434
)
Repos
   —   —   —   —   —


DERIVATIVES
   (102,723 ) (119,945 ) (125,485 ) 137,443 (35,028 )


Financial derivative instruments
   (102,723 ) (119,945 ) (125,485 ) 137,443 (35,028 )


   Year-End 2018
FX Position
   <1 Month 1 - 3 Months 3 Months to
1 Year 1 to 3 Years More than 3
Years
ASSETS
   1,502,805 632,091 1,202,832 126,122 102,349


Cash
   339,679 —   —   —   —
Repurchase agreements
   —   —   —   —   —
Loans to customers, net
   790,001 631,796 1,167,302 115,097 73,616
Financial assets available for sale
   288 295 35,530 11,025 28,733
Financial assets held to maturity
   —   —   —   —   —
PP&E and intangible assets
   —   —   —   —   —
Other assets
   372,838 —   —   —   —


LIABILITIES
   (1,329,014 ) (643,544 ) (1,750,440 ) (173,922 ) —


Checking accounts and demand deposits

(189,476
)
—

(36,335
)
(47,686
)
(6,925
)
   (255,343 ) —   —   —   —
Savings accounts and time deposits

—

—

—

—

—

   (724,941 ) (271,892 ) (577,917 ) —   —
DERIVATIVES

(1,209,472
)
(508,032
)
(817,140
)
(226,061
)
321,390

Financial derivative instruments

(1,209,472
)
(508,032
)
(817,140
)
(226,061
)
321,390

Year-End 2017

COP and UVR Position

1 Month

1 -3 Months

3 Months to 1
Year

1 to 3 Years

More than 3 Years

Assets

1,995,875

579,940

774,648

1,014,375

593,650

Cash

165,848

—

—

—

—

Repurchase agreements

21,263

—

—

—

—

Loans to customers, net

1,237,941

522,042

633,470

619,269

531,424

Financial assets available for sale

3,885

—

141,177

395,107

62,225

Financial assets held to maturity

25,145

57,898

—

—

—

PP&E and investments

—

—

—

—

—

Other assets

541,794

—

—

—

—

Liabilities

(3,184,891
)
(628,485
)
(686,080
)
(484,123
)
(303,754
)
Checking accounts and demand deposits

(1,490,776
)
—

—

—

—

Savings accounts and time deposits

(350,584
)
(578,115
)
(635,840
)
(376,758
)
(140,162
)
Debt issued

—

(50,370
)
(50,240
)
(107,365
)
(163,593
)
Other liabilities

(669,363
)
—

—

—

—

Capital and reserves

(674,168
)
—

—

—

—

Derivatives

(233,772
)
62,977

(330,530
)
374,478

(95,155
)
Financial derivative instruments

(233,772
)
62,977

(330,530
)
374,478

(95,155
)

Year-End 2017

FX Position

1 Month

1 -3 Months

3 Months to 1
Year

1 to 3 Years

More than 3 Years

ASSETS

702,900

263,710

547,829

33,257

11,851

Cash

392,669

—

—

—

—

Repurchase agreements

—

—

—

—

—

Loans to customers, net

132,850

263,597

547,358

20,963

10,761

Financial assets available for sale

173

79

439

12,283

1,078

Financial assets held to maturity

—

—

—

—

—

PP&E and investments

—

—

—

—

—

Other assets

177,207

34

31

12

12

LIABILITIES

(1,861,588
)
(318,197
)
(539,389
)
(450,818
)
—

Checking accounts and demand deposits

(388,722
)
—

—

—

—

Savings accounts and time deposits

(837,274
)
(202,181
)
(526,101
)
(2,215
)
—

Debt issued

(452,157
)
(116,016
)
(13,288
)
(448,603
)
—

Other liabilities

(116,183
)
—

—

—

—

Capital and reserves

(66,994
)
—

—

—

—

DERIVATIVES

879,996

(47,020
)
70,834

361,999

6,409

Financial derivative instruments

879,996

(47,020
)
70,834

361,999

6,409

Debt issued
   —   (131,356 ) (533,810 ) —   —
Other liabilities
   (300,129 ) (240,296 ) (638,713 ) (173,922 ) —
Capital and reserves
   (41,766 ) —   —   —   —
Repos
   (6,835 ) —   —   —   —


DERIVATIVES
   (50,293 ) 263,381 452,557 (38,395 ) (8,123 )


Financial derivative instruments
   (50,293 ) 263,381 452,557 (38,395 ) (8,123 )


The following table summarizes the aforementioned exposures:

2015
Exposure

2016
Exposure

2017
Exposure

MCh$

MCh$

MCh$

CLP

13,530

(1,942,677
)
(2,267,374
)
CLF

448,256

1,118,526

877,152

COP-UVR

—

(778,611
)
(550,847
)
FX

(52,231
)
93,673

(338,228
)
   2016    2017    2018
   Exposure    Exposure    Exposure
   MCh$    MCh$    MCh$
CLP
   (1,942,677 )    (2,267,374 )    (1,952,375 )
CLF
   1,118,526    877,152    1,783,587
COP-UVR
   (778,611 )    (550,847 )    (121,146 )
FX
   93,673    (338,228 )    288,406






(iii) Sensitivity Analysis for Financial Risks
The Bank uses stress testing as a sensitivity analysis tool in order to control financial risk. This measurement is performed separately for each class of financial instruments.
Sensitivity is estimated using the DV01 indicator, which is a measure of sensitivity of the portfolio results considering an increase of one basis point (0.01%) of the zero coupon interest rate of the financial risk factor for different maturities in annualized terms.
The following table presents an estimate of the likely, but reasonable impact of the fluctuations in interest rates, exchange rates and implicit volatilities (market factors) that would have an impact the based on a scenario of each class of financial instrument.
The estimated economic impact derived from the scenarios of changes in market factors presents effects in profit and loss for trading instruments and instruments measured at amortized cost, as well as impacts in other comprehensive income relating the available for sale, cash flow hedges and foreign investments portfolios.
The scenarios presented below correspond to the probable worst-case scenarios chosen from a set of scenarios agreed upon based on the opinions of specialists in economics, financial risk and traders. In order to estimate the economic impact, sensitivities (DV01) and scenario related changes must be multiplied for each market factor.
Scenarios are presented separately for Chile and Colombia.
Interest Rate Scenarios — Chile (basis points — 0.01%):

Scenarios for impact on financial trading instruments

Scenarios for impact on Available-for-Sale Assets (AFS)

Scenarios for impact on instruments measured at
amortized cost

Term

Overnight
CLP

Gov’t
CLP

Overnight
CLF

Gov’t
CLF

Curve
USD

Curves
MX

Term

Overnight
CLP

Gov’t
CLP

Overnight
CLF

Gov’t
CLF

Curve
USD

Curves
MX

Term

Overnight
CLP

Overnight
CLF

Curve
USD

1D

(35
)
48

116

314

122

(122
)
1D

(35
)
48

(116
)
314

122

122

1D

—

—

—

3M

(35
)
48

116

314

122

(122
)
3M

(35
)
48

(116
)
314

122

122

1M

35

116

122

6M

(35
)
48

116

314

122

(122
)
6M

(35
)
48

(116
)
314

122

122

3M

35

116

122

9M

(39
)
49

97

202

99

(99
)
9M

(39
)
49

(97
)
202

99

99

6M

35

116

122

1Y

(43
)
49

77

79

75

(75
)
1Y

(43
)
49

(77
)
79

75

75

9M

39

97

99

2Y

(40
)
39

59

75

49

(49
)
2Y

(40
)
39

(59
)
75

49

49

1Y

43

77

75

3Y

(46
)
41

57

67

58

(58
)
3Y

(46
)
41

(57
)
67

58

58

4Y

(56
)
42

55

59

67

(67
)
4Y

(56
)
42

(55
)
59

67

67

5Y

(66
)
43

54

51

75

(75
)
5Y

(66
)
43

(54
)
51

75

75

7Y

(63
)
56

58

57

82

(82
)
7Y

(63
)
56

(58
)
57

82

82

10Y

(59
)
74

65

67

93

(93
)
10Y

(59
)
74

(65
)
67

93

93

20Y

(59
)
75

70

58

93

(93
)
20Y

(59
)
75

(70
)
58

93

93

Scenarios for impact on financial trading instruments Scenarios for impact on Available-for-Sale Assets (AFS) Scenarios for impact on instruments measured
at amortized cost
Term
Overnight
CLP Gov’t
CLP Overnight
CLF Gov’t
CLF Curve
USD Curves
MX Term Overnight
CLP Gov’t
CLP Overnight
CLF Gov’t
CLF Curve
USD Curves
MX Term Overnight
CLP Overnight
CLF Curve
USD
1D (35 ) 52 139 140 (101 ) 101 1D 35 52 (139 ) 140 101 101 1D —   —   —
3M (35 ) 52 139 140 (101 ) 101 3M 35 52 (139 ) 140 101 101 1M 35 139 101
6M (35 ) 52 139 140 (101 ) 101 6M 35 52 (139 ) 140 101 101 3M 35 139 101
9M (35 ) 57 111 116 (86 ) 86 9M 35 57 (111 ) 116 86 86 6M 35 139 101
1Y (35 ) 62 81 89 (70 ) 70 1Y 35 62 (81 ) 89 70 70 9M 35 111 86
2Y (46 ) 52 86 56 (64 ) 64 2Y 46 52 (86 ) 56 64 64 1Y 35 81 70
3Y (47 ) 48 83 60 (65 ) 65 3Y 47 48 (83 ) 60 65 65
4Y (48 ) 43 79 64 (66 ) 66 4Y 48 43 (79 ) 64 66 66
5Y (48 ) 39 75 68 (67 ) 67 5Y 48 39 (75 ) 68 67 67
7Y �� (45 ) 43 67 68 (65 ) 65 7Y 45 43 (67 ) 68 65 65
10Y (39 ) 50 55 68 (63 ) 63 10Y 39 50 (55 ) 68 63 63
20Y (39 ) 50 42 48 (63 ) 63 20Y 39 50 (42 ) 48 63 63
Exchange Rate Scenarios — Chile:

Exchange Rate

Scenario for
impact on financial
trading instruments

Scenario for
impact on AFS

Scenario for impact
on Amortized Cost Book

USD-CLP

8.1%

(8.1)%

(8.1)%

USD-COP

8.0%

8.0%

8.0%

Exchange Rate
   Scenarios for impact
on financial trading
instruments Scenarios for impact
on Available-for-Sale
Assets (AFS) Scenarios for impact on
instruments measured at
amortized cost
USD-CLP
   -7,2 % -7,2 % -7,2 %
USD-COP
   7,2 % 7,2 % -7,2 %
Interest Rate Scenarios — Colombia (basis points — 0.01%):

Scenarios for impact on financial trading instruments

Scenarios for impact on Available-for- Sale Assets
(AFS)

Scenarios for impact on instruments measured at
amortized cost

Term

Gov’t
COP

Swap
IBR

Curve
USD

Term

Gov’t
COP

Swap
IBR

Curve
USD

Term

Curves
MX

Swap
IBR

Curve
USD

1 D

91

59

(15
)
1D

91

59

(15
)
1D

59

14

3 M

91

37

(18
)
3M

91

37

(18
)
1M

122

35

13

6 M

91

48

(8
)
6M

91

48

(8
)
3M

122

37

11

9 M

91

54

(16
)
9M

91

54

(16
)
6M

122

48

26

1 Y

91

60

(24
)
1Y

91

60

(24
)
9M

99

54

22

2 Y

77

43

(33
)
2Y

77

43

(33
)
1Y

75

60

19

3 Y

67

36

(44
)
3Y

67

36

(44
)

4 Y

62

39

(49
)
4Y

62

39

(49
)

5 Y

67

43

(54
)
5Y

67

43

(54
)

7 Y

75

40

(60
)
7Y

75

40

(60
)

10 Y

85

36

(69
)
10Y

85

36

(69
)

20 Y

41

23

(99
)
20Y

41

23

(99
)

Scenarios for impact on financial trading instruments Scenarios for impact onAvailable-for-Sale
Assets (AFS) Scenarios for impact on
measured at amortized
instruments cost
Term Gov’t COP Swap IBR Curve USD Term Gov’t COP Swap
IBR Curve
USD Term Swap
IBR Curve
USD
1D (18 ) 44 (1 ) 1D (18 ) 44 (1 ) 1D 44 28
3M (13 ) 31 (2 ) 3M (13 ) 31 (2 ) 1M 31 29
6M (8 ) 37 (6 ) 6M (8 ) 37 (6 ) 3M 31 32
9M (3 ) 40 (9 ) 9M (3 ) 40 (9 ) 6M 37 40
1Y 2 43 (12 ) 1Y 2 43 (12 ) 9M 40 35
2Y 22 48 (19 ) 2Y 22 48 (19 ) 1Y 43 31
3Y 42 46 (22 ) 3Y 42 46 (22 )
4Y 53 55 (24 ) 4Y 53 55 (24 )
5Y 54 63 (26 ) 5Y 54 63 (26 )
7Y 56 58 (26 ) 7Y 56 58 (26 )
10Y 58 50 (27 ) 10Y 58 50 (27 )
20Y 49 23 (29 ) 20Y 49 23 (29 )
Exchange Rate Scenarios — ~~Colombia:~~Colombia:

Exchange
Rate

Scenario for impact on financial
trading instruments

Scenario for impact on AFS

Scenario for impact
on Amortized Cost Book

USD-COP

(8.4)%

8.4%

8.4%

Exchange Rate
   Scenario for impact on
financial trading
instruments Scenario for impact
on AFS Scenario for impact on
Amortized Cost Book
USD-COP
   (4.7 )% (4.7 )% (4.7 )%
The consolidated effects in profit or loss of the scenarios are presented below:

·The following table presents the impact on profit and loss (P&L) for the years ended December 31, 2018, 2017 ~~2016~~ and ~~2015~~2016 derived from the aforementioned scenarios applied to our financial trading instruments as ofyear-end:

Potential Impact on P&L

2015

2016

2017

   2016    2017    2018

MCh$

MCh$

MCh$

   MCh$    MCh$    MCh$
CLP Rate Risk

(1,865
)
(2,812
)
(849
)
   (2,812 )    (849 )    (5,019 )
Derivatives

(1,823
)
(2,604
)
(847
)
   (2,604 )    (847 )    (5,018 )
Investments

(42
)
(208

(2
)
   (208 )    (2 )    (1 )







CLF Rate Risk

(2,662
)
(8,069
)
(7,839
)
   (8,069 )    (7,839 )    (5,942 )
Derivatives

(2,635
)
(8,069
)
(7,839
)
   (8,069 )    (7,839 )    (5,942 )
Investments

(27
)
—

—

   —      —      —







COP Rate Risk

—

(11,622
)
(14,895
)
   (11,622 )    (14,895 )    (29,182 )
Derivatives

—

(10,439
)
(9,909
)
   (10,439 )    (9,909 )    (29,094 )
Investments

—

(1,183
)
(4,986
)
   (1,183 )    (4,986 )    (88 )







UVR Rate Risk

—

(404
)
—

   (404 )    —      (375 )
Derivatives

—

—

—

   —      —      (364 )
Investments

—

(404
)
—

   (404 )    —      (11 )







USD Rate Risk

(778
)
(2,658
)
(2,001
)
   (2,658 )    (2,001 )    (2,810 )
Other Currencies Rate Risk

(2
)
(9
)
(50
)
   (9 )    (50 )    (42 )






Total Rate Risk

(5,307
)
(25,574
)
(25,633
)
   (25,574 )    (25,633 )    (43,370 )






Foreign Exchange Risk

(131
)
(1,921
)
(755
)
   (1,921 )    (755 )    150
Options Risk(1)

—

(87
)
66

   (87 )    66    156






Total Impact

(5,438
)
(27,582
)
(26,322
)
   (27,582 )    (26,322 )    (43,064 )






⁽¹⁾
~~(1)~~Option Risk includes the (Vega) and Gamma volatility risks.
·The following table presents the consolidated impact on the net interest income derived from the aforementioned scenarios on the financial instruments measured at amortized cost for the periods ended December 31, 2018, 2017 ~~2016~~ and ~~2015:~~2016:

Potential impact on instruments measured at amortized
cost

2015

2016

2017

MCh$

MCh%

MCh$

Impact of Interbank Rate Risk

(4,673
)
(7,096
)
(9,432
)
Potential impact on instruments measured at amortized cost
   2016    2017    2018
   MCh$    MCh$    MCh%
Impact of Interbank Rate Risk
   (7,096 )    (9,432 )    (12,359 )
The impact on the Banking Book does not necessarily mean a gain/loss but it does mean smaller/larger net income from the generation of funds (net funding income, which is the net interest from the financial instruments measured at amortized cost portfolio) for the next 12 months.

·Changes in market factors derived from the aforementioned scenarios also generate an impact on equity accounts as a result of the potential change inavailable-for-sale instruments portfolio and the cash flow and net foreign investment hedges portfolios, which are presented in the following table:
~~As of December 31, 2015:~~

Potential Impact on Equity

Interest Rate

DV01 (+1 bp)

Impact of Change in Interest Rate

USD

MUS$

MCh$

CLP

(9,665
)
(1
)
(242
)
CLF

(30,919
)
(2
)
(1,725
)
USD

—

—

—

Other

—

—

—

Total Rate Impact

(40,584
)
(3
)
(1,967
)
Foreign Exchange

Impact of Change in Prices

MUS$

MCh$

USD

—

—

Other

—

—

Total Impact on Exchange Rate

—

—

Total Impact

(3
)
(1,967
)
As of December 31, 2016:

Potential Impact on Equity

   Potential Impact on Equity
Interest Rate

DV01 (+1 bp)

Impact of Change in Interest Rate

   DV01 (+1 bp)    Impact of Change in Interest Rate

US$

MUS$

MCh$

   US$    MUS$    MCh$
CLP

(293,337
)
(14.00
)
(9,211
)
   (293,337 )    (14.00 )    (9,211 )
CLF

41,167

(15.00
)
(10,029
)
   41,167    (15.00 )    (10,029 )
COP

(152,241
)
(8.00
)
(5,588
)
   (152,241 )    (8.00 )    (5,588 )
UVR

—

—

—

   —      —      —
USD

(77,927
)
(3.00
)
(2,094
)
   (77,927 )    (3.00 )    (2,094 )
Other

(159
)
—

(7
)
   (159 )    —      (7 )







Total Rate Impact

(482,497
)
(40
)
(26,929
)
   (482,497 )    (40 )    (26,929 )






Exchange Rate

Impact of Change in Prices

MUS$

MCh$

USD

(1
)
(269
)
COP

(150
)
(100,390
)
Total Impact on Exchange Rate

(151
)
(100,659
)
Total Impact

(191
)
(127,589
)
Exchange Rate
   Impact of Change in Prices
   MUS$    MCh$
USD
   (1 )    (269 )
COP
   (150 )    (100,390 )




Total Impact on Exchange Rate
   (151 )    (100,659 )




Total Impact
   (191 )    (127,589 )




As of December 31, 2017:

Potential Impact on Equity

   Potential Impact on Equity
Interest Rate

DV01 (+1 bp)

Impact of Change in Interest Rate

   DV01 (+1 bp)    Impact of Change in Interest Rate

US$

MUS$

MCh$

   US$    MUS$    MCh$
CLP

(386,979
)
(37.01
)
(22,745
)
   (386,979 )    (37.01 )    (22,745 )
CLF

(245,812
)
(47.62
)
(29,261
)
   (245,812 )    (47.62 )    (29,261 )
COP

(225,321
)
(17.50
)
(10,766
)
   (225,321 )    (17.50 )    (10,766 )
UVR

—

—

—

   —      —      —
USD

(48,791
)
(2.77
)
(1,700
)
   (48,791 )    (2.77 )    (1,700 )
Other

—

—

—

   —      —      —







Total Rate Impact

(906,903
)
(105
)
(64,473
)
   (906,903 )    (105 )    (64,473 )






Exchange Rate

Impact of Change in Prices

   Impact of Change in Prices

MUS$

MCh$

   MUS$    MCh$
USD

(8
)
(4,875
)
   (8 )    (4,875 )
COP

(9
)
(5,621
)
   (9 )    (5,621 )
Total Impact on Exchange Rate

(17
)
(10,497
)
Total Impact

(122
)
(74,969
)




Exchange Rate
   Impact of Change in Prices
   MUS$    MCh$
Total Impact on Exchange Rate
   (17 )    (10,497 )




Total Impact
   (122 )    (74,969 )
As of December 31, 2018:

   Potential Impact on Equity
Interest Rate
   DV01 (+1 bp)    Impact of Change in Interest Rate
   US$    MUS$    MCh$
CLP
   (254,636 )    (11.73 )    (8,180 )
CLF
   (177,471 )    (26.29 )    (18,328 )
COP
   (189,242 )    (5.74 )    (3,988 )
UVR
   (29,763 )    (0.55 )    (380 )
USD
   (33,769 )    (2.44 )    (1,701 )
Other
   —      —      —






Total Rate Impact
   (684,880 )    (46.75 )    (32,577 )






Exchange Rate
   Impact of Change in Prices
   MUS$    MCh$
USD
   (3.77 )    (2,624 )
COP
   (3.72 )    (2,594 )




Total Impact on Exchange Rate
   (7.49 )    (5,218 )




Total Impact
   (54.24 )    (37,795 )
The ~~bank~~Bank uses accounting hedges to efficiently manage accounting asymmetries present in financial risk exposure. The use of accounting hedges is dependent on limits defined by our board of directors, definitions from the ALCO and our hedging policy. The ALM Division is responsible for designing and implementing strategies and the Financial Risk Management Division for measuring and monitoring the effectiveness of hedges, generating effectiveness indicators that are continuously monitored.
For further details on accounting hedge strategies, see Note 8 of our consolidated financial statements.
b) Liquidity Risk Metrics and Limits
Liquidity risk measurements are focused mainly on quantifying whether the institution has sufficient resources to meet its ~~intraday and interday~~ obligations under both normal and stressed conditions. ~~They also include~~The Bank monitors its liquidity position every day, determining the future flows of its outlays and revenues. In addition, stress tests are performed at the close of each quarter, for which a ~~framework~~variety of ~~indicators~~scenarios encompassing both normal market conditions and stress scenario conditions. The liquidity policy and procedures are subject to ~~forecast~~review and approval by the ~~occurrence~~Bank’s board of directors. Periodic reports are generated by the Financial Risk Department, providing a breakdown of the liquidity ~~stress scenarios~~position of the Bank and ~~clarity as~~its subsidiaries, including any exceptions and the corrective measures adopted, which are regularly submitted to the ~~steps to follow once the risk has occurred.~~
assets and liabilities committee (ALCO) for review.
The following regulatory and internal metrics are used to monitor and control liquidity risk.
(i) Regulatory Measurement of Liquidity Risk
Adjusted liquidity gap: SBIF Chapter12-20 (“Management and Measurement of Liquidity Position”) establishes that, with prior authorization from the regulator, cash outflows to retail counterparties may be assigned a different maturity than their contractual maturity based on their statistical behavior. Adjusted mismatches (local consolidated) are restricted to a maximum of:

·30-day      ~~30-day~~ mismatches in consolidated and foreign currency: 100% of ~~Core Capital.~~core capital.

·90-day      ~~90-day~~ mismatches in consolidated currency: 200% of ~~Core Capital.~~core capital.
The ~~bank,~~Bank, on a local consolidated level, must continuously observe those limits and periodically report to the SBIF its positions at risk and compliance with those limits.
The following table sets forth the use of the liquidity regulatory limit as of December 31, ~~2015,~~ 2016, 2017 and ~~2017:~~2018:

As of December 31,

2015

2016

2017

%

%

%

Regulatory Liquidity Indicator

At 30 days

(2
)
4

18

At 30 days in foreign currency

6

12

25

At 90 days

15

16

11

   As of December 31,
   2016    2017    2018
   %    %    %
Regulatory Liquidity Indicator

At 30 days
   4    18    33
At 30 days in foreign currency
   12    25    12
At 90 days
   16    11    20
Note: Negative percentage ~~(-2%)~~ means that cash inflows exceed cash outflows at that maturity.
(ii) Regulatory Measurement of Contractual Liquidity Gap
In accordance with SBIF Chapter12-20, all cash flows in and outside the statement of financial position are analyzed provided that they contribute cash flows at their contractual maturity point.
Balances of the ~~bank’s~~Bank’s consolidated undiscounted contractual cash flows from financial assets and liabilities as of December 31, ~~2015,~~ 2016, 2017 and ~~2017,~~2018, are detailed as follows:

December 31, 2015

1 Month

1 - 3 Months

3 Months to
1 Year

1 to 3 Years

More than
3 Years

Total

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

Assets

1,684,312

634,369

1,862,438

1,106,943

5,370,043

10,658,103

Cash

556,223

—

—

—

—

556,223

Financial instruments recorded at market value

465,982

—

—

—

—

465,982

Loans to other domestic banks without lines of credit

49,779

8,927

38,282

2,825

2,825

102,638

Lines of credit granted to other domestic banks

—

—

—

—

—

—

Commercial loans without lines of credit

548,585

550,736

1,193,941

616,189

2,936,302

5,845,752

Commercial lines of credit and overdrafts

8,671

2,306

38,713

22

22

49,734

Consumer loans without lines of credit

13,780

27,094

113,379

221,144

317,221

692,619

Consumer lines of credit and overdrafts

(9,524
)
9,338

295,542

3,001

3,001

301,357

Residential mortgage loans

10,773

21,390

98,262

257,087

2,053,706

2,441,217

Financial instruments recorded based on issuer’s flow

89

17,682

34,274

11,504

14,079

77,628

Other transactions or commitments without lines of credit

61,262

—

77,054

—

—

138,316

Other lines of credit granted

—

—

—

—

—

—

Derivative instruments

(21,308
)
(3,104
)
(27,009
)
(4,829
)
42,887

(13,363
)
Liabilities

(2,140,218
)
(875,303
)
(2,297,841
)
(1,191,284
)
(3,520,612
)
(10,025,260
)
Checking accounts and other demand deposits

(1,013,102
)
—

—

—

—

(1,013,102
)
Term savings accounts - unconditional withdrawal

—

—

—

—

—

—

Term savings accounts - deferred withdrawal

—

—

—

—

—

—

Obligations with Chilean Central Bank without lines of credit

—

—

—

—

—

—

Lines of credit secured from Chilean Central Bank

—

—

—

—

—

—

Obligations with other domestic banks without lines of credit

(2
)
(2
)
(99
)
(753
)
(9,210
)
(10,066
)
Lines of credit secured from other domestic banks

(21
)
—

—

—

—

(21
)
Savings accounts and time deposits

(943,680
)
(821,386
)
(1,660,957
)
(362,949
)
(976,198
)
(4,765,172
)
Foreign loans without lines of credit

(2,992
)
(22,259
)
(550,776
)
(83,019
)
(87,778
)
(746,824
)
Lines of credit from foreign banks

—

—

—

—

—

—

Letter of credit obligations

(1,748
)
—

(4,916
)
(9,009
)
(21,783
)
(37,456
)
Bonds payable

(3,806
)
(952
)
(51,699
)
(290,792
)
(1,907,377
)
(2,254,626
)
Other obligations or payment commitments without lines of credit

(174,867
)
(30,704
)
(29,394
)
(444,762
)
(518,266
)
(1,197,993
)
Other lines of credit secured

—

—

—

—

—

—

Net band

(455,906
)
(240,934
)
(435,403
)
(84,341
)
1,849,431

632,843

December 31, 2016

1 Month

1 - 3 Months

3 Months to
1 Year

1 to 3 Years

More than
3 Years

Total

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

Assets

4,437,895

2,112,587

4,778,259

5,251,810

17,824,808

34,405,359

Cash

1,119,862

—

—

—

—

1,119,862

Financial instruments recorded at market value

1,004,424

359,123

118,864

494,925

1,159,907

3,137,243

Loans to other domestic banks without lines of credit

167,076

4,092

—

—

—

171,167

Lines of credit granted to other domestic banks

—

—

—

—

—

—

Commercial loans without lines of credit

1,969,379

1,525,530

3,364,118

2,816,389

9,368,578

19,043,975

Commercial lines of credit and overdrafts

(276,662
)
2,781

58,006

45

45

(215,785
)
Consumer loans without lines of credit

62,325

131,324

525,925

1,038,327

1,744,874

3,502,775

Consumer lines of credit and overdrafts

94,515

4,484

325,597

3,248

3,248

431,093

Residential mortgage loans

37,140

66,144

283,201

739,403

5,314,672

6,440,560

Financial instruments recorded based on issuer’s flow

30,967

470

75,868

—

—

107,305

Other transactions or commitments without lines of credit

238,207

6,092

16,098

112,494

117,408

490,299

Other lines of credit granted

—

—

—

—

—

—

Derivative instruments

(9,338
)
12,547

10,582

46,999

116,076

176,865

Liabilities

(8,454,693
)
(2,799,978
)
(5,214,372
)
(2,960,247
)
(8,655,131
)
(28,084,422
)
Checking accounts and other demand deposits

(4,318,821
)
—

—

—

—

(4,318,821
)
Term savings accounts - unconditional withdrawal

(2,901
)
—

—

—

—

(2,901
)
Term savings accounts - deferred withdrawal

(39,644
)
—

—

—

—

(39,644
)
Obligations with Chilean Central Bank without lines of credit

(376,629
)
—

—

—

—

(376,629
)
Lines of credit secured from Chilean Central Bank

—

—

—

—

—

—

Obligations with other domestic banks without lines of credit

—

—

—

—

—

—

Lines of credit secured from other domestic banks

—

—

—

—

—

—

Savings accounts and time deposits

(3,091,375
)
(2,474,208
)
(3,500,821
)
(1,139,025
)
(1,938,961
)
(12,144,391
)
Foreign loans without lines of credit

(245,352
)
(281,556
)
(1,017,915
)
(109,668
)
(328,524
)
(1,983,014
)
Lines of credit from foreign banks

—

—

—

—

—

—

Letter of credit obligations

(4,099
)
(809
)
(12,048
)
(26,473
)
(79,972
)
(123,402
)
Bonds payable

(40,256
)
(32,952
)
(632,208
)
(1,638,082
)
(6,217,523
)
(8,561,021
)
Other obligations or payment commitments without lines of credit

(335,616
)
(10,453
)
(51,380
)
(46,999
)
(90,151
)
(534,599
)
Other lines of credit secured

—

—

—

—

—

—

Net band

(4,016,798
)
(687,391
)
(436,113
)
2,291,563

9,169,677

6,320,937

December 31, 2017

1 Month

1 - 3 Months

3 Months to
1 Year

1 to 3 Years

More than
3 Years

Total

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

Assets

4,224,229

1,661,207

4,537,928

4,605,864

11,719,090

26,748,318

Cash

964,030

—

—

—

—

964,030

Financial instruments recorded at market value

1,031,730

1,214

15,746

15,448

19,973

1,084,111

Loans to other domestic banks without lines of credit

23,723

—

—

93,955

—

117,678

Lines of credit granted to other domestic banks

—

—

—

—

—

—

Commercial loans without lines of credit

1,746,846

1,401,225

3,153,075

2,656,850

6,132,404

15,090,400

Commercial lines of credit and overdrafts

(325,031
)
10,376

94,146

49

—

(220,459
)
Consumer loans without lines of credit

141,002

148,208

560,896

1,053,399

728,777

2,632,282

Consumer lines of credit and overdrafts

36,763

21,558

411,528

4,092

—

473,941

Residential mortgage loans

34,318

65,946

291,594

769,201

4,766,325

5,927,384

Financial instruments recorded based on issuer’s flow

18,891

250

66,361

—

—

85,502

Other transactions or commitments without lines of credit

703,120

—

—

2,599

—

705,720

Other lines of credit granted

—

—

—

—

—

—

Derivative instruments

(151,164
)
12,431

(55,419
)
10,270

71,611

(112,271
)
Liabilities

(8,239,221
)
(2,164,508
)
(5,649,539
)
(2,859,784
)
(6,349,855
)
(25,262,908
)
Checking accounts and other demand deposits

(4,141,667
)
—

—

—

—

(4,141,667
)
Term savings accounts - unconditional withdrawal

(2,708
)
—

—

—

—

(2,708
)
Term savings accounts - deferred withdrawal

(25,702
)
—

—

—

—

(25,702
)
Obligations with Chilean Central Bank without lines of credit

(397,707
)
—

—

—

—

(397,707
)
Lines of credit secured from Chilean Central Bank

—

—

—

—

—

—

Obligations with other domestic banks without lines of credit

—

—

—

—

—

—

Lines of credit secured from other domestic banks

—

—

—

—

—

—

Savings accounts and time deposits

(1,910,317
)
(1,938,606
)
(4,462,994
)
(905,369
)
(915,012
)
(10,132,297
)
Foreign loans without lines of credit

(460,289
)
(147,694
)
(871,120
)
(362,455
)
(335,773
)
(2,177,330
)
Lines of credit from foreign banks

—

—

—

—

—

—

Letter of credit obligations

(3,120
)
(582
)
(9,448
)
(21,623
)
(41,055
)
(75,828
)
Bonds payable

(599,615
)
(78,780
)
(294,624
)
(1,511,971
)
(5,039,530
)
(7,524,520
)
Other obligations or payment commitments without lines of credit

(698,096
)
1,154

(11,353
)
(58,367
)
(18,485
)
(785,148
)
Other lines of credit secured

—

—

—

—

—

—

Net band

(4,014,992
)
(503,301
)
(1,111,611
)
1,746,079

5,369,235

1,485,410

   December 31, 2016
   <1 Month 1 - 3 Months 3 Months to
1 Year 1 to 3 Years More than
3 Years Total
   MCh$ MCh$ MCh$ MCh$ MCh$ MCh$
Assets
   4,437,895 2,112,587 4,778,259 5,251,810 17,824,808 34,405,359


Cash
   1,119,862 —   —   —   —   1,119,862
Financial instruments recorded at market value
   1,004,424 359,123 118,864 494,925 1,159,907 3,137,243
Loans to other domestic banks without lines of credit
   167,076 4,092 —   —   —   171,167
Lines of credit granted to other domestic banks
   —   —   —   —   —   —
Commercial loans without lines of credit
   1,969,379 1,525,530 3,364,118 2,816,389 9,368,578 19,043,975
Commercial lines of credit and overdrafts
   (276,662 ) 2,781 58,006 45 45 (215,785 )
Consumer loans without lines of credit
   62,325 131,324 525,925 1,038,327 1,744,874 3,502,775
Consumer lines of credit and overdrafts
   94,515 4,484 325,597 3,248 3,248 431,093
Residential mortgage loans
   37,140 66,144 283,201 739,403 5,314,672 6,440,560
Financial instruments recorded based on issuer’s flow
   30,967 470 75,868 —   —   107,305
Other transactions or commitments without lines of credit
   238,207 6,092 16,098 112,494 117,408 490,299
Other lines of credit granted
   —   —   —   —   —   —
Derivative instruments
   (9,338 ) 12,547 10,582 46,999 116,076 176,865


Liabilities
   (8,454,693 ) (2,799,978 ) (5,214,372 ) (2,960,247 ) (8,655,131 ) (28,084,422 )


Checking accounts and other demand deposits
   (4,318,821 ) —   —   —   —   (4,318,821 )
Term savings accounts - unconditional withdrawal
   (2,901 ) —   —   —   —   (2,901 )
Term savings accounts - deferred withdrawal
   (39,644 ) —   —   —   —   (39,644 )
Obligations with Chilean Central Bank without lines of credit
   (376,629 ) —   —   —   —   (376,629 )
   December 31, 2016
   <1 Month 1 - 3 Months 3 Months to
1 Year 1 to 3 Years More than
3 Years Total
   MCh$ MCh$ MCh$ MCh$ MCh$ MCh$
Lines of credit secured from Chilean Central Bank
   —   —   —   —   —   —
Obligations with other domestic banks without lines of credit
   —   —   —   —   —   —
Lines of credit secured from other domestic banks
   —   —   —   —   —   —
Savings accounts and time deposits
   (3,091,375 ) (2,474,208 ) (3,500,821 ) (1,139,025 ) (1,938,961 ) (12,144,391 )
Foreign loans without lines of credit
   (245,352 ) (281,556 ) (1,017,915 ) (109,668 ) (328,524 ) (1,983,014 )
Lines of credit from foreign banks
   —   —   —   —   —   —
Letter of credit obligations
   (4,099 ) (809 ) (12,048 ) (26,473 ) (79,972 ) (123,402 )
Bonds payable
   (40,256 ) (32,952 ) (632,208 ) (1,638,082 ) (6,217,523 ) (8,561,021 )
Other obligations or payment commitments without lines of credit
   (335,616 ) (10,453 ) (51,380 ) (46,999 ) (90,151 ) (534,599 )
Other lines of credit secured
   —   —   —   —   —   —


Net band
   (4,016,798 ) (687,391 ) (436,113 ) 2,291,563 9,169,677 6,320,937


   December 31, 2017
   <1 Month 1 - 3 Months 3 Months to
1 Year 1 to 3 Years More than
3 Years Total
   MCh$ MCh$ MCh$ MCh$ MCh$ MCh$
Assets
   4,224,229 1,661,207 4,537,928 4,605,864 11,719,090 26,748,318


Cash
   964,030 —   —   —   —   964,030
Financial instruments recorded at market value
   1,031,730 1,214 15,746 15,448 19,973 1,084,111
Loans to other domestic banks without lines of credit
   23,723 —   —   93,955 —   117,678
Lines of credit granted to other domestic banks
   —   —   —   —   —   —
Commercial loans without lines of credit
   1,746,846 1,401,225 3,153,075 2,656,850 6,132,404 15,090,400
Commercial lines of credit and overdrafts
   (325,031 ) 10,376 94,146 49 —   (220,459 )
Consumer loans without lines of credit
   141,002 148,208 560,896 1,053,399 728,777 2,632,282
Consumer lines of credit and overdrafts
   36,763 21,558 411,528 4,092 —   473,941
Residential mortgage loans
   34,318 65,946 291,594 769,201 4,766,325 5,927,384
Financial instruments recorded based on issuer’s flow
   18,891 250 66,361 —   —   85,502
Other transactions or commitments without lines of credit
   703,120 —   —   2,599 —   705,720
Other lines of credit granted
   —   —   —   —   —   —
Derivative instruments
   (151,164 ) 12,431 (55,419 ) 10,270 71,611 (112,271 )
Liabilities
   (8,239,221 ) (2,164,508 ) (5,649,539 ) (2,859,784 ) (6,349,855 ) (25,262,908 )


   December 31, 2017
   <1 Month 1 - 3 Months 3 Months to
1 Year 1 to 3 Years More than
3 Years Total
   MCh$ MCh$ MCh$ MCh$ MCh$ MCh$
Checking accounts and other demand deposits
   (4,141,667 ) —   —   —   —   (4,141,667 )
Term savings accounts - unconditional withdrawal
   (2,708 ) —   —   —   —   (2,708 )
Term savings accounts - deferred withdrawal
   (25,702 ) —   —   —   —   (25,702 )
Obligations with Chilean Central Bank without lines of credit
   (397,707 ) —   —   —   —   (397,707 )
Lines of credit secured from Chilean Central Bank
   —   —   —   —   —   —
Obligations with other domestic banks without lines of credit
   —   —   —   —   —   —
Lines of credit secured from other domestic banks
   —   —   —   —   —   —
Savings accounts and time deposits
   (1,910,317 ) (1,938,606 ) (4,462,994 ) (905,369 ) (915,012 ) (10,132,297 )
Foreign loans without lines of credit
   (460,289 ) (147,694 ) (871,120 ) (362,455 ) (335,773 ) (2,177,330 )
Lines of credit from foreign banks
   —   —   —   —   —   —
Letter of credit obligations
   (3,120 ) (582 ) (9,448 ) (21,623 ) (41,055 ) (75,828 )
Bonds payable
   (599,615 ) (78,780 ) (294,624 ) (1,511,971 ) (5,039,530 ) (7,524,520 )
Other obligations or payment commitments without lines of credit
   (698,096 ) 1,154 (11,353 ) (58,367 ) (18,485 ) (785,148 )
Other lines of credit secured
   —   —   —   —   —   —
Net band
   (4,014,992 ) (503,301 ) (1,111,611 ) 1,746,079 5,369,235 1,485,410
   December 31, 2018
   <1 Month 1 - 3 Months 3 Months to
1 Year 1 to 3 Years More than
3 Years Total
   MCh$ MCh$ MCh$ MCh$ MCh$ MCh$
Assets
   8,514,257 2,011,569 4,198,963 4,769,911 11,995,097 31,489,797


Cash
   824,917 —   —   —   —   824,917
Financial instruments at fair value through profit or loss
   2,482,559 53,064 48,895 21,194 21,448 2,627,161
Interbank loans at amortized cost without lines of credit
   101,070 —   —   —   —   101,070
Lines of credit granted to other domestic banks
   —   —   —   —   —   —
Loans and accounts receivable from customers at amortized cost:

Commercial loans without lines of credit
   1,938,742 1,692,639 3,091,234 2,794,506 6,114,028 15,631,149
Commercial lines of credit and overdrafts
   353,608 —   —   —   —   353,608
Consumer loans without lines of credit
   238,599 144,822 530,210 1,042,725 764,555 2,720,910
   December 31, 2018
   <1 Month 1 - 3 Months 3 Months to
1 Year 1 to 3 Years More than
3 Years Total
   MCh$ MCh$ MCh$ MCh$ MCh$ MCh$
Consumer lines of credit and overdrafts
   1,631,979 —   —   —   —   1,631,979
Residential mortgage loans
   34,982 71,301 307,770 805,994 4,981,583 6,201,630
Financial instruments at fair value through other comprehensive income
   138,948 42,419 180,970 432 4,245 367,015
Other transactions or commitments without lines of credit
   920,134 —   —   147 —   920,281
Other lines of credit granted
   —   —   —   —   —   —
Derivative instruments
   (151,281 ) 7,324 39,884 104,912 109,237 110,076


Liabilities
   (10,384,693 ) (2,757,797 ) (5,299,033 ) (2,474,632 ) (6,369,021 ) (27,285,177 )


Checking accounts and other demand deposits
   (4,182,632 ) —   —   —   —   (4,182,632 )
Term savings accounts—unconditional withdrawal
   (2,415 ) —   —   —   —   (2,415 )
Term savings accounts—deferred withdrawal
   (5,028 ) —   —   —   —   (5,028 )
Obligations with Chilean Central Bank without lines of credit
   (290,257 ) —   —   —   —   (290,257 )
Lines of credit secured from Chilean Central Bank
   —   —   —   —   —   —
Obligations with other domestic banks without lines of credit
   (5,863 ) —   —   —   —   (5,863 )
Lines of credit secured from other domestic banks
   —   —   —   —   —   —
Savings accounts and time deposits
   (4,238,085 ) (2,315,021 ) (3,163,485 ) (798,613 ) (802,788 ) (11,317,992 )
Foreign loans without lines of credit
   (662,358 ) (404,470 ) (1,389,725 ) (352,214 ) (211,913 ) (3,020,680 )
Lines of credit from foreign banks
   (3,026 ) —   —   —   —   (3,026
Letter of credit obligations
   (2,482 ) (443 ) (8,211 ) (17,492 ) (30,792 ) (59,420 )
Bonds payable
   (166,271 ) (37,862 ) (737,613 ) (1,306,313 ) (5,323,528 ) (7,571,587 )
Other obligations or payment commitments without
lines of credit
   (826,276 ) —   —   —   —   (826,276 )
Other lines of credit secured
   —   —   —   —   —   —


Net band
   (1,870,437 ) (746,228 ) (1,100,070 ) 2,295,279 5,626,076 4,204,620


The preceding tables present undiscounted cash flows from the ~~bank’s~~Bank’s assets (Notes 5 — 11 of our consolidated financial statements) and liabilities (Notes 16 — 18 of our consolidated financial statements) on the basis of maturity estimation models. The ~~bank’s~~Bank’s expected cash flows could vary as a function of changes in the variables that are used to estimate asset and liability maturities.
The grouping corresponds to regulatory categories that bring together financial items with similar characteristics from the perspective of liquidity risk. These categories are modeled separately and reported in cash flows.
(iii) Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR)
In line with international risk management practices, the ~~bank~~Bank uses the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) to manage liquidity risk.
The LCR aims to measure the sufficiency of high-quality assets to face a30-day funding stress scenario. At a minimum, the ~~bank~~Bank must survive until the 30th30th day of the stress scenario with funding from liquid assets in its portfolio because, as described in the standard, managers and/or supervisors would have been able to establish timely corrective measures. The indicator also recognizes differentiated behavior for wholesale versus retail counterparties, which in the ~~bank’s~~Bank’s case represent ~~72%~~59% and ~~28%~~41%, respectively, for the30-day band. On the other hand, the NSFR focuses on maintaining sufficient stable funding to meet (long-term) stable funding needs. We calculate LCR and NSFR using the methodologies defined by the SBIF and the Brazilian Central Bank (BACEN). Both regulators set a limit for LCR, while only the BACEN establishes a limit for NSFR. The methodology used to estimate LCR and NSFR consists of liquidity ratios proposed by the “Basel III Committee on Banking Supervision” (“BIS III”) that were adopted by the SBIF and the BACEN.
Starting in April 2019, Chilean banks will begin reporting their local LCR figures with a minimum level set by SBIF at 60%. This minimum will gradually rise to 100% by 2023. As of December 31, 2018, the Bank’s LCR was 118%. The BACEN limit for NSFR is set at 85% and as of December 31, 2018, the Bank’s NSFR was higher than 85%.
(iv) Deposits / Loans
Structurally, the ~~bank’s~~Bank’s liquidity can be quantified based on the level of assets and liabilities in its balance sheet. In particular, the following table shows the ratio of deposits / loans in Itaú Corpbanca’s balance sheet. Deposits refer to the carrying amount of funds (demand and time deposits) that customers deposit in the ~~bank,~~Bank, while loans are credits that the ~~bank~~Bank grants. This is a measurement of the reciprocity between the ~~bank’s~~Bank’s commercial activity and the stability of its funding.

Dec 2015

Dec 2016

Dec 2017

   Dec 2016 Dec 2017 Dec 2018
Year-End

73.5%

78.4%

71.9%

   78.4 % 71.9 % 69.2 %
Minimum

73.2%

71.0%

70.2%

   71.0 % 70.2 % 68.5 %
Maximum

79.9%

81.5%

78.4%

   81.5 % 78.4 % 72.7 %
Average

76.5%

77.5%

72.3%

   77.5 % 72.3 % 70.6 %
~~Note1:~~Note 1: loans are reported net of provisions
~~Note2: comparative basis for 2015 is only Itaú Chile~~
(v) Liquidity Warning Levels
Warning levels seek to provide evidence or signs of potential adverse liquidity events. The most relevant warning levels include: counterparty and maturity concentration, currency concentration, product concentration, reserve management, evolution of funding rates and diversification of Liquid Assets.
(vi) Analysis of Pledged and Unpledged Assets
The following presents an analysis of the ~~bank’s~~Bank’s pledged and uncommitted assets that will be available to generate additional funding as fixed-income instruments. For this, pledged assets are.

·Assets that have been committed or received in guarantee.

·Assets that an entity considers that it are restricted from using.
The following table sets forth our available assets and investments adjusted for the delivery or receipt of guarantees as of December 31, ~~2015,~~ 2016, 2017 and ~~2017:~~2018:

Amount

Guarantees
Furnished

Guarantees
Received

Cash

MCh$

MCh$

MCh$

MCh$

   Amount    Guarantees
Furnished    Guarantees
Received    Cash

(i)

(ii)

(iii)

(i-ii+iii)


MCh$
(i)

MCh$
(ii)

MCh$
(iii)
   MCh$
(i-ii+iii)
Year


2015

579,597

43,727

10,293

546,163

2016

1,980,930

423,655

383,424

1,940,699

   1,980,930    423,655    383,424    1,940,699
2017

999,044

(356,881
)
172,881

1,528,806

   1,712,806    356,881    172,881    1,528,806
2018
   2,347,920    955,979    85,709    1,477,650
(vii) Counterparty Risk
Exposure to derivative counterparty risk is measured by recognizing the different contracts maintained with the ~~bank’s~~Bank’s customers, including contracts without mitigating clauses, contracts with netting, contracts with Credit Support Annex (CSA) and with clearing houses, which receive a differentiated treatment.
The following table details the netting of these transactions:

12/31/2015

12/31/2016

12/31/2017

12/31/2016 12/31/2017 12/31/2018

Gross
amount
assets

Gross amount
liabilities

Net amounts

Gross
amount
assets

Gross
amount
liabilities

Net amounts

Gross
amount
assets

Gross
amount
liabilities

Net amounts

Gross
amount
assets Gross
amount
liabilities Net amounts Gross
amount
assets Gross
amount
liabilities Net amounts Gross
amount
assets Gross
amount
liabilities Net amounts

(a)

(b)

(c) = (a) + (b)

(a)

(b)

(c) = (a) + (b)

(a)

(b)

(c) = (a) + (b)

(a) (b) (c) = (a) + (b) (a) (b) (c) = (a) + (b) (a) (b) (c) = (a) + (b)

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$
Derivatives with netting agreement

—

—

—

776.613

(885.158
)
(108.545
)
127,293

(96,942
)
30,351

776,613 (885,158 ) (108,545 ) 127,293 (96,942 ) 30,351 148,410 (154,578 ) (6,168 )
Derivatives without netting agreement

227.984

(253.183
)
(25.199
)
326.156

(22.176
)
303.980

1,121,482

(998,212
)
123,270

326,156 (22,176 ) 303,980 1,121,482 (998,212 ) 123,270 1,220,547 (958,228 ) 262,319

Total Derivatives

227.984

(253.183
)
(25.199
)
1.102.769

(907.334
)
195.435

1,248,775

(1,095,154
)
153,621

1,102,769 (907,334 ) 195,435 1,248,775 (1,095,154 ) 153,621 1,368,957 (1,112,806 ) 256,151

Net guarantees delivered in compensation houses(*)

724

—

724

56.818

—

56.818

78,097

—

78,097

—   56,818 56,818 —   78,097 78,097 —   23,145 23,145
Net guarantees delivered in bilateral agreements(**)

—

—

—

167.148

(49.776
)
117.372

88,520

(79,589
)
8,931

Net guarantees delivered in bilateral agreements (*)
(49,776 ) 167,148 117,372 (79,589 ) 88,520 8,931 (85,789 ) 90,098 4,308

Net guarantees

724

—

724

223.966

(49.776
)
174.190

166,617

(79,589
)
87,028

(49,776 ) 223,966 174,190 (79,589 ) 166,617 87,028 (85,789 ) 113,243 27,453

Derivatives net of guarantees

227.984

(252.459
)
(24.475
)
1.052.993

(683.368
)
369.625

1,169,186

(928,537
)
240,649

1,052,993 (683,368 ) 369,625 1,169,186 (928,537 ) 240,649 1,283,168 (999,563 ) 283,604

(*)
~~(*)~~             Clearing Houses: centralized counterparties that play the counterparty role for all participants
~~(**)          Bilateral agreements: contractual agreements between both parties for delivery of guarantees under certain conditions~~
(**)
Bilateral agreements: contractual agreements between both parties for delivery of guarantees under certain conditions
Market values of derivatives that are reported in accounting do not reflect counterparty risk management using guarantees as they do not reveal the true exposures with the counterparties. The guarantees delivered (received) must be added (subtracted) from the market value in order to correctly reflect these exposures.
It is important to highlight that counterparty risk management is framed within the ~~bank’s~~Bank’s corporate credit policies.
3) Monitoring and Governance of Financial Risks
Our board of directors is the body in charge of the ~~bank’s~~Bank’s management. Its duties include defining the institution’s strategic guidelines and supervising its risk management structure.
Risk management policies are established with the objective of identifying and analyzing the risks faced by the ~~bank,~~Bank, setting adequate limits and controls and monitoring risks and compliance with limits. Risk management policies and structures are reviewed
regularly so that they reflect changes in the ~~bank’s~~Bank’s activities. The ~~bank,~~Bank, through its standards and procedures, aims to develop an appropriate control environment in which all employees understand their roles and responsibilities.
The Audit Committee supervises the way in which the ~~bank~~Bank monitors and manages risk and compliance with the ~~bank’s~~Bank’s risk management policies and procedures and checks that the risk management framework is appropriate for the risks faced by the ~~bank.~~Bank. This committee is assisted by the Internal Audit Department in its supervisory role. Internal Audit performs reviews of risk management controls and procedures, whose results are reported to the Audit Committee.
In accordance with the ~~bank’s~~Bank’s governance outlook, the Financial Risk Department is responsible for identifying, quantifying, analyzing, controlling and monitoring financial risk at the ~~bank.~~Bank. The Credit Risk Division is responsible for managing credit risk for the Corporate Banking, Treasury, Companies and Retail divisions. The Financial Risk Department is part of the Planning and Control Division. The other departments within this division include Accounting, Management Control, Planning and Development, Capital Management and Investor Relations. The main objective of this corporate division is to provide accurate, timely and high-quality information to support decision making by internal and external stakeholders.
The Corporate Treasury Division is charged with managing financial risk in the ~~bank’s~~Bank’s Trading and Banking Books. In the Banking Book, this consists of managing inflation, interest rate and liquidity risk in the bank’s balance sheet in order to maximize returns in compliance with corporate policies and current laws and regulations. The Trading Book refers to the portfolio of financial instruments acquired to obtain short-term gains from increases in fair value arising from changes in the values of underlying variables. This book is responsible for managing currency risk for the entire balance sheet. Management of the ~~bank’s~~Bank’s funding structure is an important component of managing liquidity and interest rate risk within the Banking Book or balance sheet.
The Financial Risk Department is independent from the business areas and is responsible for controlling and measuring the ~~bank’s~~Bank’s financial risks (market and liquidity risk) as well as supplying, along with the Treasury Division, the ALCO with the metrics and limits for those risks, which are established in the respective policies.
The ~~bank’s~~Bank’s financial risk management efforts are framed within the Financial Risk Policy, which is comprised of the Liquidity Management Policy, the Market Risk Management Policy and the Valuation Policy.
a) Financial Risk Management Principles

·Risk is monitored and controlled by parties independent from those managing risk, thus correctly aligning incentives.

·Management efforts should be flexible, within the framework permitted by policies, rules and current regulations.

·Senior management establishes the guidelines for risk appetite and is informed periodically on risk levels assumed, contingencies and instances when limits are exceeded.
b) Financial Risk Management Committees
In order to guarantee the flexibility of management efforts and communication of risk levels to senior management, the following network of committees has been established:

•
·Daily Committees: Meets daily to review financial conditions and the latest market movements. This committee reviews the relevance of positions on a daily basis in order to detect in advance any scenarios that could negatively impact returns and liquidity. It also monitors the performance of strategies used for each of the portfolios.

•
·Proprietary Trading and Market Making Committees: Meets weekly to analyze strategies for managing investment portfolio or directional positions. This committee reviews local and global economic conditions and projections in order to analyze the potential benefits and risks of the strategies executed and evaluate new strategies.

•
·ALM Committees: This committee meets biweekly to analyze management of structural interest rate and indexation risk in the banking book.

•
·Liquidity and Market Committee: This committee meets biweekly to analyze management of funding liquidity risk.
•
Treasury Committee: This committee meets monthly to analyze matters related to treasury activity and establish agreements and strategies on related matters, always in line with current ALCO policies and guidelines.

·~~Treasury Committee: This committee meets monthly to analyze matters related to treasury activity and establish agreements and strategies on related matters, always in line with current ALCO policies and guidelines.~~
•
Assets-Liabilities Committee (ALCO): This committee meets monthly to analyze economic and financial conditions and inform senior management of market and liquidity risk levels assumed by presenting indexes of market and funding liquidity risk, limit consumption and results of stress tests.

•
·~~Assets-Liabilities Committee (ALCO)~~: This committee meets monthly to analyze economic and financial conditions and inform senior management of market and liquidity risk levels assumed by presenting indexes of market and funding liquidity risk, limit consumption and results of stress tests.
·Board of Directors: Our board of directors is informed each quarter of the market and funding liquidity risk levels assumed by presenting established risk indexes, limit consumption and results of stress tests.

ITEM 12.
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
~~ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES~~
AMERICAN DEPOSITARY SHARES
Fees and Expenses
Effective as of ~~May 7, 2012, Deutsche~~June 4, 2018, The Bank ~~Trust Company Americas~~of New York Mellon serves as the depositary for our ADSs. Holders of the ADSs are required to pay the fees set forth in the table below to the depositary, and the depositary may refuse to provide any service for which a fee is assessed until the applicable fee has been paid. The depositary may decide, in its sole discretion, to seek payment by either billing holders or by deducting the fee from one or more cash dividends or other cash distributions.

Depositary service
Fee payable by ADS holders
Issuance and delivery of ADSs, including in connection with share distributions, stock splits or other distributions (except when converted to cash); exercise rights; cancellation or withdrawal of ADSs, including cash distributions in connection with a cancellation or withdrawal.
US$5.00 (or less) per 100
ADSs (or fraction thereof)
Any distribution of cash proceeds to ADS registered holders, including cash dividends or sale of rights and other entitlements not made pursuant to a cancellation or withdrawal.

US$~~2.00~~0.05 (or less) per ~~100~~ ADS
(or fraction thereof)
Operation and maintenance costs.
US$~~2.00~~0.05 (or less) per ~~100~~ ADS
(or fraction thereof)
Direct and indirect payments by the depositary
Transfer and registration of shares on our share register to or from the name of the Depositary or its agent when you deposit or withdraw shares
—
Cable, telex and facsimile transmissions and electronic transmissions (when expressly provided in the deposit agreement).
—
Any fees, charges and expenses incurred in connection with the conversion of foreign currency, compliance with exchange control regulations and other regulatory requirements.
—
Taxes and other governmental charges the depositary or the custodian have to pay on any ADS or share underlying an ADS, for example, stock transfer taxes, stamp duty, or withholding taxes.
—
Any fees and expenses incurred by the depositary in connection with the delivery of deposited securities, including any fees of a central depositary for securities in the local market, where applicable.
—
Any other fees, charges costs or expenses incurred by the depositary or its agents for servicing the deposited securities.
—
Any other charges and expenses of the depositary under the deposit agreement will be paid by Itaú Corpbanca upon agreement between the depositary and Itaú Corpbanca. All fees and charges may, at any time and from time to time, be changed by agreement between the depositary and the Company but, in the case of fees and charges payable by ADS holders and beneficial owners, only in the manner contemplated by ~~article~~Article 20 of the ADS.
The depositary reimburses Itaú Corpbanca for certain expenses incurred by Itaú Corpbanca that are related to the ADS facility upon such terms and conditions as Itaú Corpbanca and the depositary have agreed and may hereinafter agree from time to time. The depositary may make available to Itaú Corpbanca a set amount or a portion of the depositary fees charged in respect of the ADS facility or otherwise upon such terms and conditions as Itaú Corpbanca and the depositary may agree from time to time.
PART II

ITEM 13.
~~ITEM 13.~~ DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
There have been no defaults, dividend arrearages or delinquencies in any payments for the year ended December 31, ~~2017.~~2018.

ITEM 14.
~~ITEM 14.~~ MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
There have been no material modifications to the rights of security holders for the year ended December 31, ~~2017.~~2018.

ITEM 15.
CONTROLS AND PROCEDURES
~~ITEM 15. CONTROLS AND PROCEDURES~~
DISCLOSURE CONTROLS AND PROCEDURES
As of December 31, ~~2017,~~2018, we carried out an evaluation, under the supervision and with the participation of our management, including our CEO, and our CFO, of the effectiveness of our “disclosure controls and procedures” (as defined inRules 13a-15(e) and15d-15(e) under the Exchange Act) as required by paragraph (b) of Rules13a-15 and15d-15 under the Exchange Act.
A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Therefore, our management does not expect that the controls will prevent all errors and all fraud.
Based upon the evaluation performed, our CEO and CFO have concluded that as of December 31, ~~2017,~~2018, our disclosure controls and procedures were effective to provide reasonable assurance that material information relating to us and our consolidated subsidiaries is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our principal executive officers and principal financial officers, to allow timely decisions regarding required disclosure.
MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules13a-15(f) and15d-15(f) under the Exchange Act. Our internal control was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes, in accordance with IFRS, and includes those policies and procedures that:

·pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the ~~bank;~~Bank;

·provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS, and that our receipts and expenditures are being made only in accordance with authorizations of the ~~bank’s~~Bank’s management and directors; and

·provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our ~~consolidated~~ financial statements.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that a decline in the level of compliance with policies or procedures may occur.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, ~~2017.~~2018. In making this assessment, our management used the criteria set forth in “Internal Control—Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on its evaluation and those criteria, our management has concluded that our internal control over financial reporting was effective as of December 31, ~~2017.~~
2018.
The effectiveness of our Company’s internal control over financial reporting as of December 31, ~~2017~~2018 has been audited by PricewaterhouseCoopers Consultores Auditores SpA, an independent registered public accounting firm.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
In connection with the evaluation required by Rule13a-15(d) under the Exchange Act, our management, including our CEO and CFO, concluded that the changes that occurred during the year ended December 31, ~~2017~~2018 have not materially affected, and are not reasonably likely to materially affect, our internal control over financial reporting.
REPORT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The report of PricewaterhouseCoopers Consultores Auditores SpA, our independent registered public accounting firm, dated April ~~6, 2018,~~24, 2019, on the effectiveness of our internal control over financial reporting as of December 31, ~~2017~~2018 is presented on pages ~~F-3~~F-1 and ~~F-4~~F-2 of this Annual Report.

~~ITEM 16. RESERVED~~ITEM 16.
RESERVED

ITEM 16A.
AUDIT COMMITTEE FINANCIAL EXPERT
~~ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT~~
~~We believe~~Our board of directors has determined that ~~each of the members of our audit committee qualifies~~Diego Fresco Gutiérrez and Juan Echeverría González qualify as an “audit committee financial ~~expert”~~experts” within the meaning of this Item 16A, in that: (i) each has an understanding of IFRS and financial statements; (ii) the ability to assess the general application of such principles in connection with the accounting for estimates, accruals and reserves; (iii) significant experience auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the financial statements and experience supervising persons engaged in such activities; (iv) an understanding of internal control over financial accounting and reporting; and (v) an understanding of the functions of an audit committee.
~~The names of the members of our audit committee are included in “Item 6. Directors, Senior Management~~Both Diego Fresco Gutiérrez and ~~Employees—C. Board Practices.” All the members of this committee~~Juan Echeverría González meet the independence requirements set forth inRule 10A-3(b)(1) under the Exchange Act.

ITEM 16B.
~~ITEM 16B.~~ ETHICS
We have adopted a code of ethics, as defined in Item 16B ofForm 20-F under the Exchange Act. Our code of ethics applies to our CEO, CFO, principal accounting officer and persons performing similar functions, as well as to our directors and other employees without exception. A copy of our code of ethics, as amended, along with our Code of Conduct in the Securities Market, is attached as an exhibit to this ~~annual report.~~Annual Report.
Our code of ethics is available on our website, at www.itau.cl under the heading “Sobre Itaú Corpbanca—Políticas, Manuales y Códigos.”
No waivers have been granted to the code of ethics since its adoption that applies to the persons indicated above.

ITEM 16C.
~~ITEM 16C.~~ PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table sets forth the fees billed to us by our independent auditors during the fiscal years ended December 31, ~~2016~~2017 and ~~2017~~2018 following the accounting form:

Year Ended December 31

2016

2017

(in millions of constant Ch$)

Principal accountant fees and services

Audit fees

1,862

1,966

Audit-related fees

208

425

Tax fees

—

—

All other fees

—

—

Total

2,070

2,391

   Year Ended December 31
   2017    2018
   (in millions of constant Ch$)
Principal accountant fees and services

Audit fees
   1,966    1,565
Audit-related fees
   425    97
Tax fees
   —      —
All other fees
   —      —




Total
   2,391    1,662




Audit fees in the above table are the aggregate fees billed by PwC for ~~2016~~2017 and ~~2017,~~2018, in connection with the audit of our consolidated financial statements and services that are normally provided by PwC in connection with statutory and regulatory filings or engagements.
Audit-related fees in the above table are the aggregate fees billed by PwC for ~~2016~~2017 and ~~2017,~~2018, for assurance services required by regulators on internal control and certain accounting requirements, agreed upon procedures on quarterly disclosures to investors, and procedures in connection with implementation of accounting standards, as well as the issuance of consents in connection with filings.
PRE-APPROVAL POLICIES AND PROCEDURES
Our audit committee approves all audit, audit-related services, tax services and other services provided by PwC. Any services provided by PwC that are not specifically included within the scope of the audit must bepre-approved by the audit committee prior to any engagement.
~~ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES~~

ITEM 16D.
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Itaú Corpbanca’s audit committee meets the requirements of Exchange ActRule 10A-3. However, Itaú Corpbanca is subject to the general exemption contained in Exchange ActRule 10A-3, which provides an exemption from NYSE’s listing standards relating to audit committees for foreign companies like Itaú Corpbanca.

ITEM 16E.
~~ITEM 16E.~~ PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
The following table sets out certain information concerning purchases of our shares registered under Section 12 of the Exchange Act by us or any affiliated purchaser during fiscal year ~~2017:~~2018:

Period (*)

(a) Total number of
shares purchased

(b) Average
price paid
per share
(in Ch$)

(c) Total number of
shares purchased as
part of publicly
announced plans or
programs

(d) Maximum
number of shares
that may yet be
purchased under the
plan or programs

January 2017

—

—

—

—

February 2017

—

—

—

—

March 2017

—

—

—

—

April 2017

—

—

—

—

May 2017

—

—

—

—

June 2017

—

—

—

—

July 2017

—

—

—

—

August 2017

—

—

—

—

September 2017

1,800,000,000

7.62

—

—

October 2017

—

—

—

—

November 2017

—

—

—

—

December 2017

—

—

—

—

Total

1,800,000,000

—

—

—

Period (*)
   (a) Total number
of shares
purchased    (b) Average
price paid
per share
(in Ch$)    (c) Total number of
shares purchased
as part of publicly
announced plans or programs    (d) Maximum
number of shares
that may yet be
purchased under
the plan or
programs
January 2018
   —      —      —      —
February 2018
   —      —      —      —
March 2018
   —      —      —      —
April 2018
   —      —      —      —
May 2018
   —      —      —      —
June 2018
   —      —      —      —
July 2018
   —      —      —      —
August 2018
   —      —      —      —
September 2018
   —      —      —      —
October 2018
   10,651,555,020    6.167    —      —
November 2018
   —      —      —      —
December 2018
   —      —      —      —








Total
   10,651,555,020    —      —      —








(*)
~~(*)~~Itaú Corpbanca and our affiliates did not purchase any of our shares registered under Section 12 of the Exchange Act.
ITEM 16F.
~~ITEM 16F.~~ CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
Not applicable.

ITEM 16G.
~~ITEM 16G.~~ CORPORATE GOVERNANCE
Pursuant to Section 303A.11 of the Listed Company Manual of the New York Stock Exchange, “foreign private issuers” are required to provide a summary of the significant ways in which their corporate governance practices differ from those corporate governance standards required of U.S. companies by the New York Stock Exchange. As a Chilean bank, our corporate governance standards are governed by ourby-laws, the Chilean General Banking Act, the Chilean Securities Market Act, the Chilean Corporations Act and the Regulations of the SBIF. The following chart notes these differences:

NYSE Corporate Governance Standards
Chilean Corporate Governance Standards
Listed companies must have a majority of independent directors and independence test.
Publicly traded companies (sociedades anónimas abiertas) must designate at least one independent director and a directors committee, if they have a market capitalization equal to or greater than the equivalent of 1,500,000unidades de fomento, and at least 12.5% of its issued shares with voting rights are held by shareholders who individually control or own less than 10% of such shares. Under Chilean law, directors elected by a group or class of shareholders have the same duties to the company and to the shareholders as do the remaining directors, and all transactions with the company in which a director has an interest, either personally (which includes the director’s spouse and certain relatives) or as a representative of a third party, requires a report from the directors committee and the prior approval by the board of directors and must be entered into the interest of the Company and on market terms and conditions. Such transactions must be reviewed by the directors committee and disclosed at the subsequent shareholders’ meeting.
~~NYSE Corporate Governance Standards~~
~~Chilean Corporate Governance Standards~~
Non-management directors must meet at regularly scheduled executive sessions without management.
Chilean law establishes that our executive officers may not serve as directors and therefore, all of our directors arenon-management. Our board of directors meets regularly on a monthly basis.
Listed companies must have a nominating/corporate governance committee composed entirely of independent directors. The committee must have a written charter addressing the committee’s purpose and responsibilities, which must include (i) identifying, and selecting or recommending, qualified individuals to serve as board members, (ii) developing and recommending corporate governance guidelines; and (iii)��overseeing the evaluation of the board and management.
Under Chilean law, we are not required to have, and do not have, a nominating/corporate governance committee. Under Chilean law, the only committees that are required are the audit committee, the directors committee, the anti-money laundering committee and the anti-terrorism finance committee.
NYSE Corporate Governance Standards
Chilean Corporate Governance Standards
Listed companies must have a compensation committee composed entirely of independent directors. The committee must have a written charter addressing an annual performance evaluation of the committee and addressing the committee’s purpose and responsibilities, which must include (i) determining and approving the CEO’s compensation level based on an evaluation of the CEO’s performance in light of relevant corporate goals and objectives, (ii) making recommendations with respect tonon-CEO executive officer compensation and (iii) producing a committee report on executive officer compensation.
Under Chilean law we are not required to have a compensation committee. Our board of directors establishes the compensation of our CEO and does a performance evaluation. The Directors Committee examines the compensation program of executive officers.
Shareholders must have the opportunity to vote on all equity-compensation plans and material revisions thereto, subject to limited exemptions.
Our compensation policies do not provide for equity compensation plans.
Listed companies must adopt and disclose corporate governance guidelines. The guidelines must address (i) director qualification standards, (ii) director responsibilities, (iii) director access to management, (iv) director compensation, (v) director orientation and continuing education, (vi) management succession, and (vii) annual performance evaluation of the board.
We follow corporate governance guidelines established by Chilean laws and by the Regulations of the SBIF which include, among others (i) active participation of directors in our main committees, (ii) the requirement that all employees sign and be knowledgeable of our code of ethics, (iii) a separation of functions — our commercial unit is separated from the back office and risk segments and main credit decisions are taken in committee, (iv) monthly review by the audit committee of internal audit reports and (v) the appointment of an officer who oversees compliance with the code of ethics.
Listed companies must adopt and disclose a code of business conduct and ethics for directors, officers and employees, and promptly disclose waivers thereof for directors or executive officers.
We have a code of business and ethics conduct which drives business and ethical conduct of our CEO, CFO and each employee. This code must be signed by each of our employees and is published in our intranet; it is included as an exhibit in this Annual Report.
~~NYSE Corporate Governance Standards~~
~~Chilean Corporate Governance Standards~~
Listed companies must have an audit committee that meets the requirements of Exchange ActRule 10A-3 or be exempt therefrom. If the company has an audit committee, each member must meet Exchange ActRule 10A-3(b)(1) independence requirements or be exempt therefrom. In particular, Exchange ActRule 10A-3(b)(1) requires that each member of the audit committee be a member of the board of directors of the issuer, and must otherwise be independent.
Under Chilean law, all Chilean banks must establish an audit committee composed of two or more members, two of whom must be directors appointed by the board of directors. The SBIF recommends that at least one of the members of the audit committee, who must also be a member of the board of directors, be experienced with respect to the accounting procedures and financial aspects of banking operations. The members of the audit committee appointed by the board of directors must be independent according to the criteria set by the board of directors. In furtherance of the independence of the audit committee, the board of directors has determined that audit committee members should not, for the last three years, have held positions as our principal executive officers, have performed professional services for us, have commercial commitments with us or with any of our affiliates or related persons or have relations with other entities related to us from which they have received material payments. Moreover, they may not accept any payment or other compensatory fee from us, other than in their capacity as members of the audit committee or of other committees. All the members of the audit committee receive a monthly remuneration.
ITEM
16H. MINE SAFETY DISCLOSURE
Not applicable.
~~ITEM 16H. MINE SAFETY DISCLOSURE~~PART III

~~Not applicable.~~
~~PART III~~
ITEM 17.
FINANCIAL STATEMENTS
Not applicable.

ITEM 18.
FINANCIAL STATEMENTS
See the following items starting atpage F-3:
(a) Report of independent registered public accounting firm;
(b) Consolidated statements of financial position as of ~~2017~~2018 and ~~2016;~~
2017;
(c) Consolidated statements of income for the years ended December 31, ~~2017~~2018 and ~~2016;~~
2017;
(d) Consolidated statements of other comprehensive income for the years ended December 31, ~~2017~~2018 and ~~2016;~~
2017;
(e) Consolidated statements of changes in Equity for the years ended December 31, ~~2017~~2018 and ~~2016;~~
2017;
(f) Consolidated statements of cash flows for the years ended December 31, ~~2017~~2018 and ~~2016;~~2017; and
(g) Notes to the consolidated financial statements.

ITEM 19.
EXHIBITS
The following exhibits are filed as part of this Annual Report:

Exhibit ~~1.1++++~~1.1
Articles of Incorporation andBy-laws (~~estatutos sociales~~Estatutos Sociales) of Itaú Corpbanca, including amendments thereto (English language translation) (filed as an exhibit to our annual report on Form20-F (FileNo. 001-32305) for the year ended December 31, 2016 and incorporated herein by reference).
Exhibit 2.(a).1**.1
Form of Amended and Restated Deposit Agreement, dated as of May ~~7, 2012,~~30, 2018, by and among Itaú Corpbanca, ~~Deutsche~~The Bank ~~Trust Company Americas,~~of New York Mellon, as depositary, and the registered holders and beneficial owners from time to time of American Depositary Shares evidenced by American Depositary Receipts issued thereunder, including a form of American Depositary ~~Receipt.~~Receipt (filed as an exhibit to our registration statement onForm F-6 (FileNo. 333-225409) filed on June 4, 2018, and incorporated herein by reference).
Exhibit 2.(a).2*.2
Form of Itaú Corpbanca Share Certificate (English language translation) (filed as an exhibit to our annual report onForm 20-F (FileNo. 001-32305) filed on September 24, 2004, and incorporated herein by reference).
Exhibit 2.(b).1****.1
Indenture dated January 15, 2013, between Itaú Corpbanca and Deutsche Bank Trust Company Americas, as Trustee, related to Itaú Corpbanca’s 3.125% Senior Notes due ~~2018.~~2018 (filed as an exhibit to our annual report onForm 20-F (FileNo. 001-32305) for the year ended December 31, 2012 and incorporated herein by reference).
Exhibit 2.(b).2****.2
First Supplemental Indenture dated January 15, 2013, between Itaú Corpbanca and Deutsche Bank Trust Company Americas, as Trustee, related to Itaú Corpbanca’s 3.125% Senior Notes due ~~2018.~~2018 (filed as an exhibit to our annual report onForm 20-F (FileNo. 001-32305) for the year ended December 31, 2012 and incorporated herein by reference).
Exhibit 2.(b).3****.3
Form of Global Note due 2018 (included in Exhibit 2.(b).1) (filed as an exhibit to our annual report onForm 20-F (FileNo. 001-32305) for the year ended December 31, 2012 and incorporated herein by reference).
Exhibit ~~3.1++++~~3.1
Amendment dated January 10, 2017 to the Data Processing Master Agreement entered into by and between Itaú Corpbanca Colombia and Produban Servicios Informáticos Generales S.L. (English language translation) (filed as an exhibit to our annual report on Form20-F (FileNo. 001-32305) for the year ended December 31, 2016 and incorporated herein by reference).
Exhibit ~~3.2++++~~3.2
Amendment dated January 25, 2017 to the Software License Agreement entered into by and between Itaú Corpbanca Colombia and Ingeniería de Software Bancario S.L. (English language translation) (filed as an exhibit to our annual report on Form20-F (FileNo. 001-32305) for the year ended December 31, 2016 and incorporated herein by reference).
Exhibit 4.(a).1*.1
Systems Operations Services Agreement, dated as of March 30, 2001, between IBM de Chile S.A.C. and Itaú Corpbanca (English language translation) (filed as an exhibit to our annual report onForm 20-F (FileNo. 001-32305) filed on September 24, 2004, and incorporated herein by reference).
Exhibit 4.(a).2(i)+
Service Contract, dated as of July 6, 2001, between Inversiones CorpGroup Interhold Limitada and Itaú Corpbanca, as amended (English language translation) (filed as an exhibit to our annual report onForm 20-F (FileNo. 001-32305) for the year ended December 31, 2013 and incorporated herein by reference).

Exhibit 4.(a).2.(i)(a)~~++++~~
Amendment, dated as of January 27, 2014, to the Service Contract dated as of July 6, 2001, between Inversiones CorpGroup Interhold Limitada and Itaú Corpbanca (English language translation) (filed as an exhibit to our annual report on Form20-F (FileNo. 001-32305) for the year ended December 31, 2016 and incorporated herein by reference).
Exhibit 4.(a).2(ii)+
Service Contract, dated as of April 10, 2008, between Inversiones CorpGroup Interhold Limitada and Itaú Corpbanca, as amended (English language translation) (filed as an exhibit to our annual report onForm 20-F (FileNo. 001-32305) for the year ended December 31, 2013, and incorporated herein by reference).
Exhibit 4.(a).2.(ii)(a)~~++++~~
Amendment, dated as of January 27, 2014, to the Service Contract, dated as of April 10, 2008, between Inversiones CorpGroup Interhold Limitada and Itaú Corpbanca, as amended (English language translation) (filed as an exhibit to our annual report on Form20-F (FileNo. 001-32305) for the year ended December 31, 2016 and incorporated herein by reference).
Exhibit 4.(a).2(iii)+
Service Contract, dated as of March 27, 2012, between CorpGroup Holding Inversiones Limitada, Alvaro Saieh Bendeck and Itaú Corpbanca, as amended (English language translation) (filed as an exhibit to our annual report onForm 20-F (FileNo. 001-32305) for the year ended December 31, 2013, and incorporated herein by reference).
Exhibit 4.(a).2(iii)(a)++
Amendment, dated as of January 27, 2014 of the Service Contract, dated as of March 27, 2012, between CorpGroup Holding Inversiones Limitada, Alvaro Saieh Bendeck and Itaú Corpbanca, as amended (English language translation) (filed as an exhibit to our annual report onForm 20-F (FileNo. 001-32305) for the year ended December 31, 2015 and incorporated herein by reference).
Exhibit 4.(a)~~.3.1++++~~.3.1
Amendment to the Agreement to Participate in the Automated Teller Machine Network Operated by Redbanc S.A., dated as of October 11, 2016, among Redbanc S.A. and Itaú Corpbanca (English language translation) (filed as an exhibit to our annual report on Form20-F (FileNo. 001-32305) for the year ended December 31, 2016 and incorporated herein by reference).
Exhibit 4.(a).4.1***.4.1
Sublease Automatic Teller Machine Contract, dated as of November 26, 2008 (the “Sublease ATM Contract”), entered into by and between SMU S.A., Rendic Hermanos S.A., Supermercados Bryc S.A. and Distribuidora Super Diez S.A. and Itaú Corpbanca (English language translation) (filed as an exhibit to our annual report onForm 20-F (FileNo. 001-32305) for the year ended December 31, 2008 and incorporated herein by reference).
Exhibit 4.(a)~~.4.2++++~~.4.2
Amendment to the Sublease ATM Contract, dated as of June 4, 2014, entered into by and between SMU S.A., Rendic Hermanos S.A., Supermercados Bryc S.A. and Distribuidora Super Diez S.A. and Itaú Corpbanca (English language translation) (filed as an exhibit to our annual report onForm 20-F (FileNo. 001-32305) for the year ended December 31, 2016 and incorporated herein by reference).
Exhibit 4.(a)~~.5++++~~.5
Amended and Restated Credit Agreement, dated as of April 10, 2017, by and among Itaú Corpbanca, as borrower, Wells Fargo Bank, N.A., as administrative agent and BNP Paribas Securities Corp, Mizuho Bank, Ltd. Standard Chartered Bank and Wells Fargo Securities, LLC, as joint lead arrangers and ~~bookrunners.~~bookrunners (filed as an exhibit to our annual report onForm 20-F (FileNo. 001-32305) for the year ended December 31, 2016 and incorporated herein by reference).
Exhibit 4.(a).6(i)+
Transaction Agreement dated as of January 29, 2014, entered into by and between Itaú Corpbanca, Inversiones CorpGroup Interhold Limitada, Inversiones Gasa Limitada, Itaú Unibanco and Itaú ~~Chile.~~Chile (filed as an exhibit to our annual report onForm 20-F (FileNo. 001-32305) for the year ended December 31, 2013, and incorporated herein by reference).
Exhibit 4.(a).6(ii)++
Amendment to the Transaction Agreement, dated as of June 2, 2015, entered into by and between Itaú Corpbanca, Inversiones CorpGroup Interhold Limitada, Inversiones Gasa Limitada, Itaú Unibanco and Itaú ~~Chile.~~Chile (filed as an exhibit to our annual report on Form 20-F (FileNo. 001-32305) for the year ended December 31, 2015 and incorporated herein by reference).
Exhibit 4.(a).6(iii)~~+++~~
Amended and Restated Transaction Agreement, dated as of January 20, 2017, entered into by and between Itaú Corpbanca, Inversiones CorpGroup Interhold Limitada, Inversiones Gasa Limitada, Itaú Unibanco and Itaú ~~Chile.~~Chile (filed as an exhibit to our Amendment No. 5 to Schedule13-D Form SC 13 D/A (FileNo. 0001193125-17-022064) on January 27, 2017, and incorporated herein by reference).
Exhibit 4.(b)~~.1++~~.1
Lease agreement, dated as of July 27, 2015, entered into by and between Itaú Corpbanca as tenant and Compañía de Seguros Corpseguros S.A. as ~~landlord.~~landlord (filed as an exhibit to our annual report onForm 20-F (FileNo. 001-32305) for the year ended December 31, 2015 and incorporated herein by reference).
Exhibit 4.(b)~~.2++~~.2
Lease agreement, dated as of July 27, 2015, entered into by and between Itaú Corpbanca as tenant and Compañía de Seguros CorpVida S.A. as ~~landlord.~~landlord (filed as an exhibit to our annual report onForm 20-F (FileNo. 001-32305) for the year ended December 31, 2015 and incorporated herein by reference).
Exhibit 4.(b)~~.3++++~~.3
Lease Agreement, dated as of June 21, 2016, entered into by and between Itaú Corpbanca as tenant and Compañía de Seguros Confuturo S.A. as ~~landlord.~~landlord (filed as an exhibit to our annual report on Form20-F (FileNo. 001-32305) for the year ended December 31, 2016 and incorporated herein by reference).
Exhibit 4.(b)~~.4++++~~.4
Lease Agreement, dated as of June 21, 2016, entered into by and between Itaú Corpbanca as tenant and Compañía de Seguros Corpseguros S.A. as ~~landlord.~~landlord (filed as an exhibit to our annual report on Form20-F (FileNo. 001-32305) for the year ended December 31, 2016 and incorporated herein by reference).
Exhibit ~~8.1~~8.1*
List of subsidiaries of Itaú Corpbanca.
Exhibit ~~11.1++++~~11.1
Itaú Corpbanca’s Code of Ethics (General code of conduct. English language translation) (filed as an exhibit to our annual report on Form20-F (FileNo. 001-32305) for the year ended December 31, 2016 and incorporated herein by reference).
Exhibit ~~11.2++++~~11.2
Itaú Corpbanca’s Code of Conduct in the Securities Market (English language translation) (filed as an exhibit to our annual report on Form20-F (FileNo. 001-32305) for the year ended December 31, 2016 and incorporated herein by reference).
Exhibit ~~12.1~~12.1*
Certification of the CEO of Itaú Corpbanca required underRule 13a-14(a) ~~or Rule~~orRule 15d-14(a), pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
Exhibit ~~12.2~~12.2*
Certification of the CFO of Itaú Corpbanca required underRule 13a-14(a) ~~or Rule~~orRule 15d-14(a), pursuant to Section 302 of the Sarbanes Oxley Act of 2002.

Exhibit ~~13.1~~13.1*
Certification of the CEO of Itaú Corpbanca required underRule 13a-14(a) ~~or Rule~~orRule 15d-14(a), pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002.
Exhibit ~~13.2~~13.2*
Certification of the CFO of Itaú Corpbanca required underRule 13a-14(a) ~~or Rule~~orRule 15d-14(a), pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 101*****101.INS*
XBRL Instance ~~Document and related items.~~Document.
Exhibit 101.SCH*
XBRL Taxonomy Extension Schema Document.
Exhibit 101.CAL*
XBRL Taxonomy Extension Calculation Linkbase Document.
Exhibit 101.DEF*
XBRL Taxonomy Extension Definition Linkbase Document.
Exhibit 101.LAB*
XBRL Taxonomy Extension Labels Linkbase Document.
Exhibit101.PRE*
XBRL Taxonomy Extension Presentation Linkbase Document.

*                             ~~Filed as an exhibit to our Form 20-F (File No. 001-32305) filed on September 24, 2004, and incorporated herein by reference.~~
*
Filed herewith.
**                      ~~Filed as an exhibit to our registration statement on Form F-6 (File No. 001-32305) filed on April 30, 2012, and incorporated herein by reference.~~
~~***~~               ~~Filed as an exhibit to our annual report on Form 20-F (File No. 001-32305) for the year ended December 31, 2008 filed on June 30, 2009, and incorporated herein by reference.~~
~~****~~        ~~Filed as an exhibit to our annual report on Form 20-F (File No. 001-32305) for the year ended December 31, 2012 filed on May 15, 2013, and incorporated herein by reference.~~
~~*****~~ As permitted by Rule 405(a)(2)(ii) of Regulation S-T, the registrant’s XBRL (eXtensible Business Reporting Language) information will be furnished in an amendment to this Form 20-F that will be filed no more than 30 days after the date hereof. In accordance with Rule 406T(b)(2) of Regulation S-T, such XBRL information will be furnished and not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Act, will be deemed not filed for purposes of Section 18 of the Exchange Act, and otherwise will not be subject to liability under those sections.
+                             ~~Filed as an exhibit to our annual report on Form 20-F (File No. 001-32305) for the year ended December 31, 2013 filed on May 15, 2014, and incorporated herein by reference.~~
++                      ~~Filed as an exhibit to our annual report on Form 20-F (File No. 001-32305) for the year ended December 31, 2015 filed on March 31, 2016, and incorporated herein by reference.~~
~~+++~~               ~~Filed as an exhibit to our Amendment No. 5 to Schedule 13-D Form SC 13 D/A (File No. 0001193125-17-022064) on January 27, 2017, and incorporated herein by reference.~~
~~++++~~        ~~Filed as an exhibit to our annual report on Form 20-F (File No. 001-32305) for the year ended December 31, 2016 filed on April 13, 2017, and incorporated herein by reference.~~
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing onForm 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

~~ITAÚ CORPBANCA~~
ITAÚ CORPBANCA
/s/ ~~Milton Maluhy~~Manuel Olivares
Name:
~~Name:~~
~~Milton Maluhy~~
Manuel Olivares
Title:
~~Title:~~
Chief Executive Officer
/s/ Gabriel Moura
Name:
~~Name:~~
Gabriel Moura
Title:
~~Title:~~
Chief Financial Officer
Date: April ~~10, 2018~~29, 2019

~~Table of Contents~~
Itaú Corpbanca and subsidiaries

~~Table of Contents~~
~~Index to the~~ Consolidated Financial Statements as of December 31, 2018 and 2017
and for the years ended December 31, 2018, 2017 and 2016.
Content

~~Page~~
Report of independent registered public accounting firm
F-3
Consolidated Statements of Financial Position ~~as of December 31, 2017 and 2016~~
F-5
Consolidated Statements of Income ~~for the years ended December 31, 2017, 2016 and 2015~~
F-6
Consolidated Statements of Other Comprehensive ~~income for the years ended December 31, 2017, 2016 and 2015~~Income
F-7
Consolidated Statements of Changes in Equity ~~for the years ended December 31, 2017 and 2016~~
F-8
Consolidated Statements of Cash Flows ~~for the years ended December 31, 2017, 2016 and 2015~~
F-9
Notes to the Consolidated Financial Statements
F-11

~~Ch$~~
=
$ = Amounts expressed in Chilean pesos.
MCh$
=
Amounts expressed in millions of Chilean pesos.
US$
=
Amounts expressed in US dollars.
ThUS$
=
Amounts expressed in thousands of US dollars.
~~COP$~~
MUS$
=
Amounts expressed in millions of US dollars.
COP$ = Amounts expressed in Colombian pesos.
MCOP$
=
Amounts expressed in millions of Colombian pesos.
UF ~~or CLF~~
=
Amounts expressed in ~~unidades~~Unidades de ~~fomento~~Fomento
(a Chilean inflation-indexed, peso-denominated monetary unit that is set daily based on changes in the Chilean Consumer Price Index).

~~Itaú Corpbanca and Subsidiaries – Consolidated Financial Statements– December 31, 2017~~
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-2
F-2

~~Table of Contents~~
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Santiago, April 24, 2019
To the Board of Directors and Shareholders of Itaú ~~CorpBanca~~
Corpbanca
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated statements of financial position of Itaú ~~CorpBanca~~Corpbanca and its subsidiaries (“the Company”) as of December 31, ~~2017~~2018 and ~~2016,~~2017, and the related consolidated statements of income, other comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, ~~2017,~~2018, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, ~~2017,~~2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, ~~2017~~2018 and ~~2016,~~2017, and the results of ~~their~~its operations and ~~their~~its cash flows for each of the three years in the period ended December 31, ~~2017~~2018 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, ~~2017,~~2018, based on criteria established inInternal Control - Integrated Framework (2013) issued by the COSO.
Change in Accounting Principle
As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for financial instruments in 2018.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in ~~the accompanying~~ Management’s ~~Annual~~ Report on Internal Control over Financial Reporting appearing under Item ~~15 of this annual report.~~15. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ~~(“PCAOB”)~~(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

F-3

~~Table of Contents~~

Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-3
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers Consultores Auditores SpA
Santiago, April ~~6, 2018~~
24, 2019
We have served as the Company’s auditor since 2006.

Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-4
F-4

~~Table of Contents~~
Itaú Corpbanca and ~~Subsidiaries~~subsidiaries
Consolidated Statements of Financial Position
~~As of December 31, 2017 and 2016~~
(In millions of Chilean pesos - MCh$)

12/31/2017

12/31/2016

Note

MCh$

MCh$

ASSETS

Cash and deposits in banks

5a)

964,030

1,487,137

Cash in the process of collection

5b)

157,017

145,769

Trading portfolio financial assets

6

415,061

632,557

Investments under agreements to resell

7a)

28,524

170,242

Derivative financial instruments

8a.1)

1,248,775

1,102,769

Loans and receivables from banks, net

9

70,077

150,568

Loans and receivables from customers, net

10

19,764,078

20,444,648

Financial investments available-for-sale

11

2,663,478

2,074,077

Held to maturity investments

11

202,030

226,433

Intangible assets

12

1,562,654

1,614,475

Property, plant and equipment, net

13

130,579

121,043

Current income taxes

14

238,452

164,296

Deferred income taxes

14

140,685

110,765

Other assets

15a)

429,025

427,394

Non-current assets held for sale

15b)

18,308

37,164

TOTAL ASSETS

28,032,773

28,909,337

LIABILITIES

Current accounts and demand deposits

16a)

4,141,667

4,453,191

Transaction in the course of payment

5b)

109,496

67,413

Obligations under repurchase agreements

7b)

420,920

373,879

Time deposits and saving accounts

16b)

10,065,243

11,581,710

Derivative financial instruments

8a.2)

1,095,154

907,334

Borrowings from financial institutions

17

2,196,130

2,179,870

Debt issued

18

5,950,038

5,460,253

Other financial obligations

18

17,066

25,563

Current income tax provision

14

624

1,886

Deferred income taxes

14

26,354

57,636

Provisions

19

117,889

100,048

Other liabilities

20a)

463,435

269,810

Liabilities directly associated with non-current assets held for sale

20b)

—

7,032

TOTAL LIABILITIES

24,604,016

25,485,625

EQUITY

Attributable to equity holders of the Bank:

Capital

22

1,862,826

1,862,826

Reserves

22

1,290,131

1,294,108

Accumulated other comprehensive income

22

(4,735
)
15,552

Retained earnings:

63,255

12,257

Retained earnings from prior periods

22

12,668

(1,121
)
Net income for the period

22

67,821

14,407

Less: Accrual for mandatory dividends

19/22

(17,234
)
(1,029
)

3,211,477

3,184,743

Non-controlling interest

22

217,280

238,969

TOTAL EQUITY

3,428,757

3,423,712

TOTAL LIABILITIES AND EQUITY

28,032,773

28,909,337

      As of December 31,
   Notes    2018 2017
      MCh$ MCh$
ASSETS

Cash and deposits in banks
   5a)    987,680 964,030
Cash items in process of collection
   5b)    318,658 157,017
Financial instruments at fair value through profit or loss
   6    96,943 —
Financial instruments at fair value through other comprehensive income
   11    2,657,154 —
Interbank loans at amortized cost
   9    341,244 —
Loans and accounts receivable from customers at amortized cost
   10    20,714,370 —
Financial instruments at amortized cost
   11    198,923 —
Investments under resale agreements
   7    109,467 28,524
Financial derivative contracts
   8    1,368,957 1,248,775
Interbank loans, net
   9    —   70,077
Trading investments
   6    —   415,061
Loans and accounts receivable from customers, net
   10    —   19,764,078
Available for sale investments
   11    —   2,663,478
Held to maturity investments
   11    —   202,030
Intangible assets
   12    1,570,964 1,562,654
Property, plant, and equipment
   13    95,564 130,579
Current taxes
   14    123,129 238,452
Deferred taxes
   14    178,686 140,685
Other assets
   15a)    501,797 429,025
Othernon-current assets held for sale
   15b)    59,802 18,308


TOTAL ASSETS
      29,323,338 28,032,773


LIABILITIES

Deposits and other demand liabilities
   16a)    4,300,475 4,141,667
Cash in process of being cleared
   5b)    247,165 109,496
Obligations under repurchase agreements
   7b)    1,015,614 420,920
Time deposits and other time liabilities
   16b)    10,121,111 10,065,243
Financial derivative contracts
   8    1,112,806 1,095,154
Interbank borrowings
   17    2,327,723 2,196,130
Debt instruments issued
   18    6,010,124 5,950,038
Other financial liabilities
   18    12,400 17,066
Current taxes
   14    1,191 624
Deferred taxes
   14    471 26,354
Provisions
   19    214,903 117,889
Other liabilities
   20a)    521,795 463,435
Liabilities directly associated withnon-current assets held for sale
   20b)    —   —


TOTAL LIABILITIES
      25,885,778 24,604,016


EQUITY

Attributable to equity holders of the Bank:

Capital
   22    1,862,826 1,862,826
Reserves
   22    1,290,131 1,290,131
Valuation accounts
   22    16,159 (4,735 )
Retained earnings:
      50,362 63,255
Retained earnings (accumulated losses) from prior years
   22    (69,355 ) 12,668
Net income for the year
   22    171,331 67,821
Less: Provision for mandatory dividends
   19, 22    (51,614 ) (17,234 )


Total equity attributable to equity holders of the Bank
   3,219,478 3,211,477
Non-controlling interest
   22    218,082 217,280


TOTAL EQUITY
      3,437,560 3,428,757


TOTAL LIABILITIES AND EQUITY
      29,323,338 28,032,773


The ~~explanatory~~accompanying notes are an integral part of these Consolidated Financial Statements.

Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-5
F-5

~~Table of Contents~~
Itaú Corpbanca and ~~Subsidiaries~~subsidiaries
Consolidated Statements of Income
~~For the years ended December 31, 2017, 2016 and 2015~~
(In millions of Chilean pesos - MCh$~~, except for earnings per share)~~)

12/31/2017

12/31/2016

12/31/2015

Notes

MCh$

MCh$

MCh$

Interest income

23a)

1,646,329

1,509,203

501,982

Interest expense

23b)

(863,347
)
(870,028
)
(278,692
)
Net interest income

782,982

639,175

223,290

Income from service fees

24a)

216,420

193,801

81,375

Expenses from service fees

24b)

(38,849
)
(43,005
)
(10,287
)
Net service fee income

177,571

150,796

71,088

Trading and investment income, net

25

8,268

112,952

(33,182
)
Foreign exchange gains (losses), net

26

46,165

(48,848
)
74,461

Other operating income

31a)

41,532

19,447

8,761

Trading and investment, foreign exchange gains and other operating income

95,965

83,551

50,040

Operating income before provision for loan losses

1,056,518

873,522

344,418

Provision for loan losses

27

(315,417
)
(245,990
)
(42,929
)
Total operating income, net of provision for loan losses, interest and fees

741,101

627,532

301,489

Personnel salaries expenses

28

(281,323
)
(245,665
)
(86,711
)
Administration expenses

29

(305,622
)
(235,204
)
(66,831
)
Depreciation and amortization

30a)

(81,845
)
(63,692
)
(9,785
)
Impairment

30b)

(27
)
(351
)
—

Other operating expenses

31b)

(62,330
)
(71,715
)
(15,133
)
Total operating expenses

(731,147
)
(616,627
)
(178,460
)
Total net operating income before income taxes

9,954

10,905

123,029

Income taxes

14

52,871

3,568

(17,263
)
Income from continuing operations

62,825

14,473

105,766

Income (loss) from discontinued operations

(504
)
—

NET INCOME FOR THE PERIOD

62,825

13,969

105,766

Attributable to:

Equity holders of the Bank

67,821

14,407

105,757

Non controlling interest

22 i)

(4,996
)
(438
)
9

Ch$

Ch$

Ch$

Earnings per share attributable to equity holders of the Bank

Basic earnings per share

22d)

0.132

0.035

0.919

Diluted earning per share

22d)

0.132

0.035

0.919

Earnings per share from continuing operations attributable to equity holders of the Bank

Basic earnings per share

22d)

0.132

0.035

0.919

Diluted earning per share

22d)

0.132

0.035

0.919

      For the years ended December 31,
   Notes    2018 2017 2016
      MCh$ MCh$ MCh$
Interest income
   23a)    1,739,317 1,646,329 1,509,203
Interest expense
   23b)    (851,654 ) (863,347 ) (870,028 )
Net interest income
      887,663 782,982 639,175
Fee and commission income
   24a)    237,956 216,420 193,801
Fee and commission expense
   24b)    (51,827 ) (38,849 ) (43,005 )
Net fee and commission income
      186,129 177,571 150,796
Net income from financial operations
   25    172,755 8,268 112,952
Net foreign exchange gain (loss)
   26    (17,965 ) 46,165 (48,848 )
Other operating income
   31a)    26,656 41,532 19,447
Net operating profit before provision for loan losses
      1,255,238 1,056,518 873,522
Provision for loan losses
   27    (279,798 ) (315,417 ) (245,990 )
NET OPERATING PROFIT
      975,440 741,101 627,532
Personnel salaries and expenses
   28    (294,747 ) (281,323 ) (245,665 )
Administrative expenses
   29    (291,736 ) (305,622 ) (235,204 )
Depreciation and amortization
   30a)    (86,817 ) (81,845 ) (63,692 )
Impairment
   30a)    (28 ) (27 ) (351 )
Other operating expenses
   31b)    (68,199 ) (62,330 ) (71,715 )
Total operating expenses
      (741,527 ) (731,147 ) (616,627 )
Operating income before income taxes
      233,913 9,954 10,905
Income taxes
   14    (67,059 ) 52,871 3,568
Consolidated income from continuing operations
      166,854 62,825 14,473
Loss from discontinued operations
      —   —   (504 )
TOTAL CONSOLIDATED INCOME FOR THE YEAR
      166,854 62,825 13,969


Attributable to:

Equity holders of the Bank
      171,331 67,821 14,407
Non-controlling interest
   22c)    (4,477 ) (4,996 ) (438 )
Earnings per share attributable to equity holders of the Bank
(in Chilean pesos)

Basic earnings per share
   22a)    0.334 0.132 0.035
Diluted earnings per share
   22a)    0.334 0.132 0.035
The ~~explanatory~~accompanying notes are an integral part of these Consolidated Financial Statements.

Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-6
F-6

~~Table of Contents~~
Itaú Corpbanca and ~~Subsidiaries~~subsidiaries
Consolidated Statements of Other Comprehensive Income
~~For the years ended December 31, 2017, 2016 and 2015~~
(In millions of Chilean pesos - MCh$)

12/31/2017

12/31/2016

12/31/2015

Notes

MCh$

MCh$

MCh$

Net income for the period

22j)

62,825

13,969

105,766

Other Comprehensive Income

Items that may be reclassified subsequently to profit or loss:

Financial instruments available-for-sale

22j)

9,966

15,418

664

Exchange differences on translation

22j)

(78,302
)
(7,101
)
—

Gain (loss) from hedge of net investment in foreign operation

22j)

49,197

13,458

—

Gain (loss) from cash flow hedge

22j)

(127
)
(5,603
)
—

Other comprehensive income (loss) before income taxes

(19,266
)
16,172

664

Income tax relating to financial instruments available-for-sale

22j)

(3,333
)
(4,025
)
(218
)
Income tax relating to hedge of net investment in foreign operations

22j)

(14,211
)
(2,685
)
—

Income tax relating to cash flow hedge

22j)

44

1,345

—

Income taxes

(17,500
)
(5,365
)
(218
)
Total other comprenhensive income that may be reclassified to profit in subsequent periods

(36,766
)
10,807

446

Items that will not be reclassified subsequently to profit or loss:

Remeasurement of defined benefit obligation

22j)

(208
)
(3,920
)
—

Income tax relating to defined benefit obligation

22j)

(6
)
1,090

—

Total items that will not be reclassified subsequently to profit or loss

(214
)
(2,830
)
—

Total other comprehensive income (loss)

(36,980
)
7,977

446

Comprehensive income (loss) for the period

25,845

21,946

106,212

Attributable to:

Equity Holders of the bank

22j)

47,534

30,903

106,203

Non Controlling interest

22j)

(21,689
)
(8,957
)
9

For the years ended December 31,
Notes 2018 2017 2016
MCh$ MCh$ MCh$
CONSOLIDATED INCOME FOR THE YEAR
22d) 166,854 62,825 13,969
OTHER COMPREHENSIVE INCOME (LOSS) WHICH MAY BE

RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS:

Financial instruments at FVTOCI
22d) (959 ) —   —
Available for sale investments
—   9,966 15,418
Exchange differences on investment in Colombia and New York branch
22d) 48,610 (78,302 ) (7,101 )
Gain (loss) from hedge of net investments in foreign operations
22d) (36,533 ) 49,197 13,458
Gain (loss) from cash flow hedge
22d) 11,289 (127 ) (5,603 )
Other comprehensive income (loss) before income taxes
22,407 (19,266 ) 16,172
Income taxes related to financial instruments at FVTOCI
(2,172 ) — —
Income taxes related to available for sale investments
22d) — (3,333 ) (4,025 )
Income taxes related to hedge of net investment in foreign operations
22d) 10,565 (14,211 ) (2,685 )
Income taxes related to cash flow hedge
22d) (1,669 ) 44 1,345
Income taxes on other comprehensive income (loss)
6,724 (17,500 ) (5,365 )
Other comprehensive income (loss) which may be reclassified
29,131 (36,766 ) 10,807
subsequently to profit or loss, net of income taxes

OTHER COMPREHENSIVE INCOME (LOSS) WHICH MAY NOT BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS:

Defined benefits obligations
22d) (754 ) (208 ) (3,920 )
Income taxes related to defined benefits obligations
22d) (44 ) (6 ) 1,090
Other comprehensive loss which may not be reclassified subsequently to profit or loss, net of income taxes
(798 ) (214 ) (2,830 )
TOTAL OTHER COMPREHENSIVE INCOME (LOSS) FOR THE YEAR
28,333 (36,980 ) 7,977
CONSOLIDATED COMPREHENSIVE INCOME FOR THE YEAR
195,187 25,845 21,946
Attributable to:

Equity holders of the Bank
22d) 191,228 47,534 30,903
Non-controlling interest
22d) 3,959 (21,689 ) (8,957 )
The ~~explanatory~~accompanying notes are an integral part of these Consolidated Financial Statements.

Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-7
F-7

~~Table of Contents~~
Itaú Corpbanca and ~~Subsidiaries~~subsidiaries
Consolidated Statements of Changes in Equity
~~For the years ended December 31, 2017 and 2016~~
(In millions of Chilean ~~pesos-MCh$-except for number of shares)~~pesos - MCh$)

Reserves

Retained earnings

Number of
shares
Banco Itaú

Exchange
ratio

Number of
shares
(Restated)

Reserves
from

Other non-
earnings

Valuation

Retained
earnings from
previous

Net income

Accrual for
mandatory

Total attributale
to equity
holders of the

Non
controlling

(i)

(ii); (a)

(i)*(ii)

Capital

earnings

reserves

accounts

periods

for the period

dividends

bank

interest

Total equity

Unit

Unit

Millions

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

Equity as of January 1, 2016

1,433,690

115,040

344,569

398,843

(2,133
)
(944
)
103,215

—

(52,168
)
791,382

59

791,441

Increase or decrease of capital and reserves

710,477

80,240

57,009

392,813

52,168

—

(52,168
)
—

—

392,813

—

392,813

Dividends Paid

—

—

—

—

—

—

(52,168
)
—

52,168

—

—

—

Merger with Corpbanca

Elimination of legal capital Banco Itau Chile

—

(737,382
)
—

737,382

—

—

—

—

—

—

—

Legal capital Corpbanca before business combination

—

781,559

—

(781,559
)
—

—

—

—

—

—

—

Increase of capital in Coprbanca

—

401,424

—

(401,424
)
—

—

—

—

—

—

—

Fair Value Corpbanca and subsidiaries

340,358

679,843

—

1,290,831

—

—

—

—

1,970,674

247,867

2,218,541

Accrual for mandatory dividends

—

—

—

—

—

—

—

(1,029
)
(1,029
)
—

(1,029
)
Comprehensive income for the period

—

—

—

—

16,496

—

14,407

—

30,903

(8,957
)
21,946

Equity as of December 31, 2016

512,407

1,862,826

451,011

843,097

15,552

(1,121
)
14,407

(1,029
)
3,184,743

238,969

3,423,712

Distribution of prior year’s net income

—

14,407

(14,407
)

Equity as of January 1, 2017

512,407

1,862,826

451,011

843,097

15,552

13,286

—

(1,029
)
3,184,743

238,969

3,423,712

Dividends Paid

—

—

—

—

—

(618
)
—

1,029

411

—

411

Other movements

(3,977
)

(3,977
)
—

(3,977
)
Accrual for mandatory dividends

—

—

—

—

—

—

—

(17,234
)
(17,234
)
—

(17,234
)
Comprehensive income for the period

—

—

—

—

(20,287
)
—

67,821

—

47,534

(21,689
)
25,845

Equity as of December 31, 2017

512,407

1,862,826

451,011

839,120

(4,735
)
12,668

67,821

(17,234
)
3,211,477

217,280

3,428,757

Number
of
shares Capital Reserves Retained earnings Total
attributable
to equity
holders of
the Bank Non-controlling
interest Total
equity
Reserves
from
earnings Other
non-earnings
reserves Valuation
accounts Retained
earnings
from
prior
years Income
for the
year Provision
for
mandatory
dividends
Millions MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$
Equity as of January 1, 2016
115,040 344,569 398,843 (2,133 ) (944 ) 103,215 —   (52,168 ) 791,382 59 791,441

Increase or decrease of capital and reserves
57,009 392,813 52,168 —   —   (52,168 ) —   —   392,813 —   392,813
Dividens paid
—   —   —   —   —   (52,168 ) —   52,168 —   —   —
Merger with Corpbanca

Elimination of legal capital Banco Itaú Chile
—   (737,382 ) —   737,382 —   —   —   —   —   —   —
Legal capital Corpbanca before business combination
—   781,559 —   (781,559 ) —   —   —   —   —   —   —
Increase of capital in Corpbanca
—   401,424 —   (401,424 ) —   —   —   —   —   —   —
Fair value Corpbanca and subsidiaries
340,358 679,843 —   1,290,831 —   —   —   —   1,970,674 247,867 2,218,541
Provision for mandatory dividends
—   —   —   —   —   —   —   (1,029 ) (1,029 ) —   (1,029 )
Comprehensive income (loss) for the year
—   —   —   —   16,496 —   14,407 —   30,903 (8,957 ) 21,946

Equity as of December 31, 2016
512,407 1,862,826 451,011 843,097 15,552 (1,121 ) 14,407 (1,029 ) 3,184,743 238,969 3,423,712

Distribution of income from previous year
—   —   —   —   —   14,407 (14,407 ) —   —   —   —

Equity as of January 1, 2017
512,407 1,862,826 451,011 843,097 15,552 13,286 —   (1,029 ) 3,184,743 238,969 3,423,712

Dividends paid
—   —   —   —   —   (618 ) —   1,029 411 —   411
Other movements
—   —   —   (3,977 ) —   —   —   —   (3,977 ) —   (3,977 )
Provision for mandatory dividends
—   —   —   —   —   —   —   (17,234 ) (17,234 ) —   (17,234 )
Comprehensive income (loss) for the year
—   —   —   —   (20,287 ) —   67,821 —   47,534 (21,689 ) 25,845

Equity as of December 31, 2017
512,407 1,862,826 451,011 839,120 (4,735 ) 12,668 67,821 (17,234 ) 3,211,477 217,280 3,428,757

Distribution of income from previous year
—   —   —   —   —   67,821 (67,821 ) —   —   —   —

Equity as of January 1, 2018
512,407 1,862,826 451,011 839,120 (4,735 ) 80,489 —   (17,234 ) 3,211,477 217,280 3,428,757

Changes due to initial application of IFRS 9
—   —   —   —   997 (126,865 ) —   —   (125,868 ) (3,157 ) (129,025 )

Equity as of January 1, 2018 - Restated
512,407 1,862,826 451,011 839,120 (3,738 ) (46,376 ) —   (17,234 ) 3,085,609 214,123 3,299,732

Distribution of prior year’s net income
—   —   —   —   —   (22,979 ) —   17,234 (5,745 ) —   (5,745 )
Provision for mandatory dividends
—   —   —   —   —   —   —   (51,614 ) (51,614 ) —   (51,614 )
Comprehensive income for the year
—   —   —   —   19,897 —   171,331 —   191,228 3,959 195,187

Equity as of December 31, 2018
512,407 1,862,826 451,011 839,120 16,159 (69,355 ) 171,331 (51,614 ) 3,219,478 218,082 3,437,560

The ~~explanatory~~accompanying notes are an integral part of these Consolidated Financial Statements.

Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-8
~~(a)~~Due the business combination (reverse acquisition under IFRS 3), made in April 1, 2016, the legal capital of the legal acquirer must be reflected retroactively and, therefore, this adjustment reflects the elimination for presentation purposes of the legal capital of Banco Itaú Chile.
F-8

~~Table of Contents~~
Itaú Corpbanca and ~~Subsidiaries~~subsidiaries
Consolidated Statements of Cash Flows
~~For the years ended December 31, 2017, 2016 and 2015~~
(In millions of Chilean pesos - MCh$)

12/31/2017

12/31/2016

12/31/2015

Notes

MCh$

MCh$

MCh$

CASH FLOWS FROM OPERATING ACTIVITIES:

Profit for the period before taxes

9,954

10,905

123,029

Charges (credits) to income that do not represent cash flows:

Depreciation and amortization

30

81,845

63,692

9,785

Credit risk provisions

27

346,980

269,261

51,234

Provisions and write-offs for assets received in lieu of payment

31b)

14,472

9,463

409

Other provision for contingencies

31b)

586

8,952

81

Impairment

30

27

351

—

Adjustment to market value of investments and derivatives

34,863

24,415

8,559

Net interest income

23

(782,982
)
(639,175
)
(223,290
)
Net service fee income

24

(177,571
)
(150,796
)
(71,088
)
Net foreign exchange gains (losses)

26

(46,165
)
48,848

(74,461
)
Other charges (credits) that do not represent cash flows

(4,133
)
16,328

(10,606
)
Subtotal

(522,124
)
(337,756
)
(186,348
)
Loans to customers and banks

393,967

701,084

(581,027
)
Receivables from repurchase agreements and securities borrowing

5c) i

(10,784
)
45,113

54,797

Payables from repurchase agreements and securities lending

5c) i

47,041

(428,466
)
—

Trading securities

5c) ii

207,263

(165,957
)
23,760

Financial assets available for sale

5c) ii

(933,263
)
555,051

(143,394
)
Financial assets held to maturity

5c) ii

24,392

(60,038
)
—

Other assets and liabilities

319,624

(2,053
)
76,524

Cash from recovery of fine by SBIF

21,765

—

—

Time deposits and Savings accounts

(1,521,753
)
(642,318
)
(19,030
)
Current accounts and other demand deposits

(312,332
)
(787,998
)
93,642

Foreign borrowings obtained

5c) iii

3,911,800

3,570,163

259,148

Repayment of foreign borrowings

5c) iii

(3,839,035
)
(3,953,640
)
(226,567
)
Interest paid

(875,702
)
(835,043
)
(222,672
)
Interest received

1,661,537

1,420,179

469,519

Net fee

177,660

150,935

71,088

Received (payments) taxes

(136,184
)
(201,884
)
(54,657
)
Repayment of other borrowings

5c) iv

(8,497
)
(8,330
)
(38,624
)
Proceeds from sale of assets received in lieu of payment

3,762

2,060

2,136

Net cash flows used in operating activities

(1,390,863
)
(978,898
)
(421,705
)
CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property, plant and equipment and intangible assets

12-13

(87,155
)
(105,157
)
(16,481
)
Cash and cash equivalents from CorpBanca integration

—

1,694,231

—

Net cash flows provided by (used in) investing activities

(87,155
)
1,589,074

(16,481
)
CASH FLOWS FROM FINANCING ACTIVITIES:

Debt instruments issued

1,076,452

810,270

445,789

Redemption of debt issued

(726,232
)
(276,131
)
(6,124
)
Capital increase

22

—

392,813

—

Dividends paid

22c)

(618
)
(52,168
)
(26,448
)
Net cash flows provided by financing activities

349,602

874,784

413,217

Effect of changes in exchange rates

86,761

6,176

—

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

(1,041,655
)
1,491,136

(24,969
)
Cash and cash equivalents at beginning of period

2,116,744

625,608

650,577

Cash and cash equivalents at end of period

5

1,075,089

2,116,744

625,608

Net increase (decrease) in cash and cash equivalents

(1,041,655
)
1,491,136

(24,969
)

Balance

Cash Flows

Other changes different of cash

Balance

December 31,
2016

Received

Payments

Acquisition

Interest

Currency
movement

Changes in
fair value

As of December
31, 2017

Item

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

Debt instruments issued

Letters of credits

86,210

(21,520
)
—

3,248

—

—

67,938

Bonds and Subordinated bonds

5,374,043

1,076,452

(704,712
)
—

279,636

(143,319
)
—

5,882,100

Total

5,460,253

1,076,452

(726,232
)
—

282,884

(143,319
)
—

5,950,038

Dividends paid

(618
)

Capital increase

—

—

—

—

—

—

—

Subtotal Cash Flows from Financing Activities

1,076,452

(726,850
)

Total Cash Flows from Financing Activities (net)

349,602

      For the years ended December 31,
   Notes    2018 2017 2016
      MCh$ MCh$ MCh$
CASH FLOWS FROM OPERATING ACTIVITIES:

Operating income before income taxes
      233,913 9,954 10,905
Debits (credits) to income that do not represent cash flows

Depreciation and amortization
   30    86,817 81,845 63,692
Provisions for loans and accounts receivable from customers and interbank loans
   27    328,266 346,980 269,261
Provisions and write-offs for assets received in lieu of payment
   31b)    16,132 14,472 9,463
Provisions for contingencies
   31b)    1,998 586 8,952
Impairment
   30    28 27 351
Net gain on sale of loans and accounts receivable from customers
   25    (1,602 ) (15,121 ) (18,863 )
Income received from FVTPL / Trading and derivative activities
      (74,071 ) 63,625 51,276
Income received from sale of FVTOCI / Available for sale
   25    (13,765 ) (13,641 ) (7,998 )
Net interest income
   23    (887,663 ) (782,982 ) (639,175 )
Fee and commission income
   24    (237,956 ) (216,420 ) (193,801 )
Fee and commission expense
   24    51,827 38,849 43,005
Net foreign exchange gain (loss)
   26    17,965 (46,165 ) 48,848
Net gain on sale of property, plant and equipment
   31    (5,212 ) (13,020 ) 34
Other charges (credits) that do not represent cash flows
      20,684 8,887 16,294


Subtotal
      (462,639 ) (522,124 ) (337,756 )


Loans and accounts receivable from customers and interbank loans
      (1,610,676 ) 393,967 701,084
Investments under resale agreements
   5c) i    (80,943 ) (10,784 ) 45,113
Obligations under repurchase agreements
   5c) i    594,694 47,041 (428,466 )
Financial instruments at FVTPL / Trading investments
   5c) ii    326,131 207,263 (165,957 )
Financial instruments at FVTOCI / Available for sale investments
   5c) ii    166,753 (933,263 ) 555,051
Financial instruments at amortized cost / Held to maturity investments
   5c) ii    3,120 24,392 (60,038 )
Other assets and liabilities
      (99,717 ) 319,624 (2,053 )
Penalty fee recover
      —   21,765 —
Time deposits and other time liabilities
      430,141 (1,521,753 ) (642,318 )
Deposits and other demand liabilities
      159,296 (312,332 ) (787,998 )
Foreign borrowings obtained
   5c) iii    2,741,786 3,911,800 3,570,163
Repayment of foreign borrowings
   5c) iii    (2,636,867 ) (3,839,035 ) (3,953,640 )
Interest paid
      (873,121 ) (875,702 ) (835,043 )
Interest received
      1,951,250 1,661,537 1,420,179
Net fee and commission income
      186,258 177,660 150,935
Taxes paid
      (105,683 ) (136,184 ) (201,884 )
Repayment of other borrowings
   5c) iv    (4,666 ) (8,497 ) (8,330 )
Proceeds from sale of assets received in lieu of payment
      10,638 3,762 2,060


Net cash flows provided by (used in) operating activities
      695,755 (1,390,863 ) (978,898 )


CASH FLOWS FROM INVESTMENT ACTIVITIES:

Purchase of property, plant and equipment and intangible assets
   12-13    (82,952 ) (87,155 ) (105,157 )
Sales of property, plant and equipment
      41,078 —   —
Cash and cash equivalents from CorpBanca integration
      —   —   1,694,231


Net cash flows provided by (used in) investing activities
      (41,874 ) (87,155 ) 1,589,074


CASH FLOWS FROM FINANCING ACTIVITIES:

Debt instruments issued
      484,754 1,076,452 810,270
Redemption of debt issued
      (911,047 ) (726,232 ) (276,131 )
Capital increase
   22    —   —   392,813
Dividends paid
   22c)    (22,979 ) (618 ) (52,168 )


Net cash flows provided by financing activities
      (449,272 ) 349,602 874,784


Effect of changes in exchange rates
      83,354 86,761 6,176


NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
      287,963 (1,041,655 ) 1,491,136


Cash and cash equivalents at the beginning of the year
      1,075,089 2,116,744 625,608
Cash and cash equivalents at end of the year
   5    1,363,052 1,075,089 2,116,744


Net increase (decrease) in cash and cash equivalents
      287,963 (1,041,655 ) 1,491,136


Cash flows Changes other than cash
Item As of
December 31,
2017 Received Paid Changes other
than cash Acquisition Interest and
readjustment Currency
exchange
effects Fair value
changes As of
December 31,
2018
MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$
Debt instruments issued

Mortgage finance bonds
67,938 —   (17,438 ) —   —   2,963 —   —   53,463
Bonds (senior and subordinated)
5,882,100 484,754 (893,609 ) —   —   319,289 164,127 —   5,956,661

Totals
5,950,038 484,754 (911,047 ) —   —   322,252 164,127 —   6,010,124

Dividends paid
—   —   (22,979 ) —   —   —   —   —   —
Capital increase
—   —   —   —   —   —   —   —   —

Subtotal cash flows from financing activities
—   484,754 (934,026 ) —   —   —   —   —   —

Total cash flows from financing activities (net)
—   (449,272 ) —   —   —   —   —   —   —

The ~~explanatory~~accompanying notes are an integral part of these Consolidated Financial Statements.

Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-9
F-9

~~Table of Contents~~
~~INDEX~~Index

Page
Note 1
GENERAL INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
F-11
Note 2
~~ACCOUNTING CHANGES~~
ACCOUNTING CHANGES
~~F-42~~F-53
Note 3
~~RELEVANT EVENTS~~
SIGNIFICANT EVENTS
~~F-42~~F-57
Note 4
~~SEGMENT INFORMATION~~
REPORTING SEGMENTS
~~F-48~~F-59
Note 5
CASH AND CASH EQUIVALENTS
~~F-53~~F-62
Note 6
~~TRADING PORTFOLIO FINANCIAL ASSETS~~
FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS AND TRADING INVESTMENTS
~~F-55~~F-64
Note 7
~~INVESTMENT~~INVESTMENTS UNDER RESALE AGREEMENTS AND OBLIGATIONS UNDER REPURCHASE AGREEMENTS
~~F-56~~F-65
Note 8
FINANCIAL DERIVATIVE ~~FINANCIAL INSTRUMENT~~CONTRACTS AND HEDGE ACCOUNTING
~~F-58~~F-66
Note 9
~~LOANS AND RECEIVABLES FROM BANKS~~
INTERBANK LOANS
~~F-64~~F-77
Note 10
LOANS AND ~~RECEIVABLES~~ACCOUNTS RECEIVABLE FROM CUSTOMERS
~~F-65~~F-79
Note 11
~~INVESTMENT INSTRUMENTS~~
INVESTMENT INSTRUMENTS
~~F-69~~F-85
Note 12
~~INTANGIBLE ASSETS~~
INTANGIBLE ASSETS
~~F-72~~F-89
Note 13
PROPERTY, PLANT AND EQUIPMENT
~~F-74~~F-91
Note 14
~~INCOME TAXES~~
CURRENT TAXES AND DEFERRED TAXES
~~F-76~~F-93
Note 15
OTHER ASSETS AND ASSETSNON-CURRENT ASSETS HELD FOR SALE
~~F-80~~F-96
Note 16
~~CURRENT ACCOUNTS, DEMAND DEPOSITS, TIME~~ DEPOSITS AND ~~SAVINGS ACCOUNTS~~OTHER DEMAND LIABILITIES AND TIME DEPOSITS
~~F-81~~F-97
Note 17
~~BORROWINGS FROM FINANCIAL INSTITUTIONS~~
INTERBANK BORROWINGS
~~F-82~~F-98
Note 18
DEBT INSTRUMENTS ISSUED AND OTHER ~~OBLIGATIONS~~FINANCIAL LIABILITIES
~~F-84~~F-99
Note 19
~~PROVISIONS~~
PROVISIONS
~~F-88~~F-103
Note 20
OTHER LIABILITIES AND LIABILITIES DIRECTLY ASSOCIATED WITHNON-CURRENT ASSETS HELD FOR SALE
~~F-95~~F-109
Note 21
CONTINGENCIES, COMMITMENTS AND RESPONSIBILITIES
~~F-96~~F-110
Note 22
~~EQUITY~~
EQUITY
~~F-100~~F-115
Note 23
INTEREST INCOME AND INTEREST EXPENSE
~~F-108~~F-123
Note 24
~~FEES AND INCOME FROM SERVICES~~
FEE AND COMMISSION INCOME AND EXPENSE
~~F-109~~F-124
Note 25
~~NET TRADING AND INVESTMENT INCOME~~
NET INCOME (EXPENSE) FROM FINANCIAL OPERATIONS
~~F-110~~F-126
Note 26
NET FOREIGN EXCHANGE ~~INCOME (LOSSES)~~GAIN (LOSS)
~~F-111~~F-127
Note 27
~~PROVISION FOR LOAN LOSSES~~
PROVISIONS FOR IMPAIRMENT OF FINANCIAL ASSETS
~~F-112~~F-128
Note 28
PERSONNEL SALARIES AND EXPENSES
~~F-114~~F-130
Note 29
~~ADMINISTRATION EXPENSES~~
ADMINISTRATIVE EXPENSES
~~F-115~~F-131
Note 30
DEPRECIATION, AMORTIZATION, AND IMPAIRMENT
~~F-116~~F-132
Note 31
OTHER OPERATING INCOME AND EXPENSES
~~F-121~~F-137
Note 32
RELATED PARTY TRANSACTIONS
~~F-122~~F-139
Note 33
FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES ~~MEASURED AT FAIR VALUE~~
~~F-128~~F-143
Note 34
~~RISK MANAGEMENT~~
RISK MANAGEMENT
~~F-142~~F-158
Note 35
MATURITY OF ASSETS AND LIABILITIES
~~F-179~~F-183
Note 36
FOREIGN CURRENCY POSITION
~~F-181~~F-184
Note 37
~~SUBSEQUENT EVENTS~~
SUBSEQUENT EVENTS
~~F-182~~F-186
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-10
F-10

~~Table of Contents~~
~~Itaú Corpbanca and Subsidiaries~~
Notes to the Consolidated Financial Statements
As of ~~and for the years ended~~ December 31, 2018, 2017 ~~2016~~ and ~~2015.~~2016.
(In millions of Chilean pesos, except for the number of shares)
~~NOTE~~Note 1 ~~GENERAL INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES~~
~~1.1~~– General Information —and Summary of Significant Accounting Policies
General Information – Background of Itaú Corpbanca and ~~Subsidiaries~~subsidiaries
Itaú Corpbanca (the “Bank”) is a corporation incorporated under the laws of the Republic of Chile and regulated by the Superintendency of Banks and Financial Institutions (SBIF)~~. The~~ as a consequence of the merger of ~~Banco~~ Itaú Chile and Corpbanca (the latter is the legal successor)~~(1)~~ which was consummated on April 1, 2016, the date on which the Bank was renamed “Itaú Corpbanca”¹.
The current ownership structure is ~~as follows:~~38.14% owned by Itaú Unibanco, ~~(36.06%),~~28.57% owned by CorpGroup (Saieh Family) and ~~subsidiaries (30.65%) and non-controlling shareholders (33.29%).~~33.29% owned by minority shareholders. Itaú Unibanco is the ~~Bank’s~~sole controlling ~~shareholder. In~~shareholder of the merged bank. Within this context and ~~notwithstanding~~without limiting the ~~foregoing,~~above, Itaú Unibanco and CorpGroup ~~entered into~~have signed a ~~shareholder~~shareholders’ agreement ~~that regulates aspects such as~~relating to corporate governance, ~~protective rights, dividends, share transfers,~~dividend policy (based on performance and capital metrics), transfer of shares, liquidity, and other matters.
Itaú Corpbanca is headquartered in Chile and ~~it also~~ has operations in Colombia and Panama. In addition, itItaú Corpbanca has a branch in New York and ~~two representation~~representative offices ~~(in~~in Madrid and ~~Peru)(2)~~.Lima. The Bank has total consolidated assets for MCh$29,323,338 (MMUS$42,208) and total equity attributable to holders of ~~MCh$28,032,773 (MUS$45,620) and equity of MCh$3,428,757 (MUS$5,580). Itaú Corpbanca offers universal banking products targeted toward large and medium-sized companies and retail customers. The merged~~the Bank ~~is the fourth largest private bank in Chile, with a banking platform~~ for ~~future expansion throughout Latin America, specifically in Chile, Colombia and Peru.~~
MCh$3,219,478 (MMUS$4,634).
The legal ~~domicile~~address of Itaú Corpbanca is Rosario Norte N° 660, Las Condes, Santiago, Chile, and its web site is ~~www.itau.cl.~~
www.itau.cl
The Consolidated Financial Statements as of ~~Itaú Corpbanca for the period ended~~ December 31, ~~2017, have~~2018, were approved ~~for issuance~~ by the Board of Directors on April ~~6, 2018.~~24, 2019.
Significant Accounting Policies and Others

i)    ~~Itaú~~ ~~Corpbanca~~ ~~and Subsidiaries~~
~~Itaú Corpbanca must prepare consolidated financial statements that include its subsidiaries and its foreign branch, as well as investments in banking support subsidiaries, among others.~~
a)
Accounting period
The ~~Bank does business in the following local and foreign markets:~~
~~(1) The business combination was a “reverse acquisition” as established in IFRS 3, in which Banco Itaú Chile is the successor for accounting purposes and Corpbanca is the legal successor.~~
~~(2) None of the markets where Itaú Corpbanca and its subsidiaries operate have a hyperinflationary economy.~~
F-11

~~Table of Contents~~
~~1.2 Summary of significant accounting policies~~
a)~~Basis of preparation~~
Itaú Corpbanca is the result of the merger of Banco Itaú Chile with and into Corpbanca, which was consummated on April 1, 2016. For the purposes of financial reporting this operation was accounted for as a reverse acquisition based on the guidance in InternationalConsolidated Financial ~~Reporting Standards (“IFRS”) 3 “Business Combinations”. Accordingly, the financial statements of Itaú Corpbanca for periods prior to the acquisition date will reflect the historical financial information of Banco Itaú Chile (accounting acquirer).~~
~~For purposes of these financial statements we use certain terms and conventions. References to “US$”, “US dollars” and “dollars”~~Statements are to United States dollars, references to “Chilean pesos”, “pesos” or “Ch$” are to Chilean pesos, references to “Colombia pesos”, or “COP$” are to Colombian pesos and references to “UF” are to Unidades de Fomento. The UF is an inflation-indexed Chilean monetary unit with a value in Chilean pesos that changes daily to reflect changes in the official Consumer Price Index (“CPI”) of the Instituto Nacional de Estadísticas (the Chilean National Institute of Statistics) from the previous month.
F-12

~~Table of Contents~~
The UF is revalued in monthly cycles. Each day in the period beginning on the tenth day of the current month through the ninth day of the succeeding month, the nominal peso value of the UF is indexed up (or down in the event of deflation) in order to reflect a proportionate amount of the change in the Chilean Consumer Price Index (“CPI”) during the prior calendar month. As of December 31, 2017, 2016 and 2015, one UF equaled Ch$26,798.14, Ch$26,347.98 and Ch$25,629.09, respectively. The effect of any changes in the nominal peso value of our UF-denominated interest earning assets and interest bearing liabilities is reflected in our results of operations as an increase (or decrease, in the event of deflation) in interest income and expense, respectively.
~~For consolidation purposes, the statements of financial position of our New York Branch have been converted to Chilean pesos at the exchange rate of Ch$614.48 per US$1~~referred as of December 31, ~~2017 (Ch$669.81 per US$1 as of December 31, 2016~~2018 and Ch$710.08 per US$1 as of December 31, 2015), our Colombian subsidiaries have used the exchange rate of Ch$0.2058 per COP$1 as of December 31, 2017 (Ch$0.2231 per COP$1 as of December 31,2016 and Ch$0.2266 per COP$1 as of December 31, 2015), both in accordance with International Accounting Standard (“IAS”) 21, regarding the translation of a foreign operation whose functional currency is not the currency of a hyperinflationary economy.
~~The main accounting policies adopted in preparing these financial statements are described below.~~
b)~~Basis of consolidation~~
The consolidated financial statements incorporate the financial statements of Corpbanca and its subsidiaries, the New York Branch and the Colombian subsidiaries that participated in the consolidation as of December 31, 2017 and ~~2016, and for~~comprise the ~~three~~ years ended December 31, ~~2017, 2016 and 2015, include the necessary adjustments and reclassifications to the financial statements of the subsidiaries, our New York Branch and Colombian subsidiaries as of December 31,~~2018, 2017 and ~~2016, to bring their accounting policies and valuation criteria~~2016.
b)
Basis of preparation of the Consolidated Financial Statements
These Consolidated Financial Statements have been prepared in ~~conformity~~accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS-IASB”).
The Bank had a significant accounting change due to IFRS 9 adoption. Please see new accounting policies in letters k) and u) in this section and Note 2 “Accounting changes”.
~~All intragroup balances, transactions, income~~Notes to these Consolidated Financial Statements contain information additional to that disclosed in the Consolidated Statements of Financial Position, Consolidated Statements of Income, Consolidated Statements of Other Comprehensive Income, Consolidated Statements of Changes in Equity, and ~~expenses are eliminated in full on consolidation.~~Consolidated Statements of Cash Flows.

¹
The business combination was a “reverse acquisition” as established in IFRS 3, “Business Combinations”, in which Itaú Chile is the successor for accounting purposes and Corpbanca is the legal successor.
~~For consolidation purposes,~~
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-11
Note 1 – General Information and Summary of Significant Accounting Policies, continued
c)
Consolidation criteria
These Consolidated Financial Statements comprise the ~~financial statements~~preparation of the ~~New York Branch,~~Financial Statements of the ~~financial statements of Colombian subsidiaries whose functional currency are U.S. dollars~~Bank and ~~Colombian pesos, respectively, have been translated into Chilean pesos as described in Note 1 f) below.~~
~~Business combinations under common control are recorded using “pooling interest” method as a reference. In accordance with this method, assets and liabilities involved~~the controlled entities which participate in the ~~transaction are recorded~~consolidation as ~~having~~of December 31, 2018 and 2017 and for the ~~same book value they had in~~years ended December 31, 2018, 2017 and 2016, and include the ~~parent company, the with accounting~~necessary adjustments ~~made as needed~~and reclassifications to ~~homogenize~~standardize the accounting policies and valuation criteria applied by the Bank, in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS-IASB”).
Intercompany balances and any unrealized income or loss arising from intercompany transactions are eliminated upon consolidation during the preparation of the ~~entities involved.~~Consolidated Financial Statements.

(i)
Controlled entities
As a result, any difference between the assets and liabilities contributed to the consolidation and the consideration transferred is recorded directly in equity, as a charge or credit to “Other reserves”. The ~~group does not apply to retrospective registry of business combinations under common control.~~
c)~~Controlled Entities~~
~~Regardless~~Bank, regardless of the nature of its involvement inwith an entity (the investee), ~~Itaú Corpbanca will~~shall determine whether it is a parent by assessing whether it controls the investee.
The Bank controls an investee ~~based on whether~~when it is exposed, or has ~~exposure, or~~ rights, to variable returns from its involvement with the investee and has the ability to ~~use~~affect those returns through its power over the ~~investee to affect the amount of its returns.~~investee.
Itaú Corpbanca controls an investee when it has exposure, or rights, to variable returns from its involvement with the investee and has the ability to use its power over the investee to affect the amount of its returns.
~~Therefore,~~Thus, the Bank controls an investee if and only if it has all of the ~~following elements:~~following:
F-13

~~Table of Contents~~
a)   1) Power over the investee, ~~i.e.~~which is related to the existing rights that give it the Bank the current ability to direct the relevant activities, ~~of the investee (the activities~~these being those that significantly affect the investee’s ~~returns);~~returns;
b)   2) Exposure, or rights, to variable returns from its involvement with the investee; ~~and~~
c)   ~~The ability~~3) Ability to use its power over the investee to affect the amount of the ~~investor’s returns.~~
Bank’s returns;
When the Bank has less than ~~the~~a majority of the voting rights inover an investee, but ~~these~~such voting rights are sufficient to ~~give it~~have the ~~practical~~actual ability to ~~unilaterally~~ direct the ~~investee’s~~ relevant activities, then it will be concluded that the Bank ~~is determined to have control.~~ has control over the investee.
The Bank considers all relevant factors and circumstances ~~in evaluating whether~~when assessing if the voting rights are sufficient to obtain control, ~~including:~~these include:

·The ~~size of the Bank’s holding~~amount of voting rights ~~relative~~held by the Bank in relation to the ~~size~~amount and dispersion of ~~holdings of~~those held by other vote ~~holders;~~holders.

·Potential voting rights held by the ~~investor,~~Bank, other ~~vote~~voting holders or other ~~parties;~~parties.

·Rights that arise from other contractual ~~agreements;~~agreements.

·Any additional facts and circumstances that indicate that the ~~investor~~Bank has, or does not have, the current ability to direct the relevant activities ~~when~~at the time those decisions need to be made, including the patterns of voting behavior ~~patterns~~ in ~~prior shareholder~~previous shareholders meetings.
The Bank ~~reevaluates~~reassesses whether or not it has control inover an investee ~~if the~~when facts and circumstances indicate that there ~~have been~~are changes in one or more of the control elements ~~of control~~ listed above.

Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-12
~~All balances~~
Note 1 – General Information and ~~transactions among consolidated companies were eliminated upon consolidation.~~ Summary of Significant Accounting Policies, continued
The ~~consolidated~~ financial statements ~~include all~~of the controlled companies are consolidated by combining like items of assets, liabilities, equity, income, expenses and cash flows of the parent with those of its subsidiaries; offsetting (eliminate) the carrying amount of the parent’s investment in each subsidiary and the parent’s portion of equity of each subsidiary, and; by eliminating in full intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between entities. Therefore, the Consolidated Financial Statements refer to assets, liabilities, equity, income, expenses, and cash flows of the parent and its subsidiaries presented as if they were ~~one sole~~a single economic entity. ~~A controlling shareholder~~The Bank prepares ~~consolidated financial statements~~Consolidated Financial Statements using uniform accounting policies for ~~similar~~ transactions and other events ~~under equivalent~~that, being similar, have occurred in similar circumstances.
Non-controlling interest is also presented in the Consolidated Statement of Financial Position, within equity, separately from that of the equity holders of the Bank. Changes in a parent’s ownership interest in a subsidiary that do not result in a loss of control are equity transactions (i.e.. transactions with the owners in their role as such).
~~An entity shall attribute profit~~The Bank attributes income for the ~~period~~year and each component of other comprehensive income to ~~equity holders~~owners of the Bank and to thenon-controlling interests.
The ~~entity shall~~Bank also ~~attribute~~attributes total comprehensive income to the ~~equity holder~~owners of the Bank and to thenon-controlling interests even if this results in thenon-controlling interests having a deficit balance.
F-14

~~Table of Contents~~The following are the entities controlled by Itaú Corpbanca:

Ownership percentage
Market Country Functional
currency As of December 31,
2018 As of December 31,
2017
Direct Indirect Total Direct Indirect Total
% % % % % %
Itaú Corredores de Bolsa Limitada (ex - CorpBanca Corredores de Bolsa
S.A.) (1) (6) (12) (15)
National Chile $ 99.990 0.010 100.000 99.990 0.010 100.000
Itaú Administradora General de Fondos S.A. (ex - Itaú Chile Administradora General de Fondos S.A.) (1) (7) (14)
Chile $ 99.994 0.006 100.000 99.988 0.006 99.994
CorpBanca Administradora General de Fondos S.A. (1) (7)
Chile $ —   —   —   —   —   —
Itaú Corredores de Seguros S.A.(ex-Corpbanca Corredores de Seguros S.A) (1) (8) (13)
Chile $ 99.900 0.100 100.000 99.990 0.010 100.000
Itaú Chile Corredora de Seguro Ltda. (1) (8)
Chile $ —   —   —   99.900 0.100 100.000
Itaú Asesorías Financieras S.A. (2)
Chile $ 99.990 0.010 100.000 99.990 0.010 100.000
CorpLegal S.A. (2)
Chile $ 99.990 0.010 100.000 99.990 0.010 100.000
Recaudaciones y Cobranzas Limitada(Ex- Itaú Corpbanca Recaudaciones y Cobranzas S.A.) (2) (9)
Chile $ 99.999 0.001 100.000 99.999 0.001 100.000
Itaú Corpbanca New York Branch (2) (10)
Foreign USA US$ 100.000 —   100.000 100.000 —   100.000
Corpbanca Securities Inc (2) (11)
USA US$ —   —   —   —   —   —
Itaú Corpbanca Colombia S.A.(Ex-Banco CorpBanca Colombia S.A.) (3)
Colombia COP$ 66.279 —   66.279 66.279 —   66.279
Itaú Corredor de Seguro Colombia S.A.(Ex-Helm Corredor de Seguros S.A) (3)
Colombia COP$ 80.000 —   80.000 80.000 —   80.000
Itaú Securities Services Colombia S.A. Sociedad Fiduciaria(Ex-CorpBanca Investment Trust Colombia S.A.) (3)
Colombia COP$ 5.499 62.634 68.133 5.499 62.634 68.133
Itaú Comisionista de Bolsa Colombia S.A(Ex-Helm Comisionista de Bolsa S.A.) (3)
Colombia COP$ 2.219 64.807 67.026 2.219 64.807 67.026
Itaú Asset Management Colombia S.A. Sociedad Fiduciaria(Ex-Helm Fiduciaria S.A) (3)
Colombia COP$ —   66.266 66.266 —   66.266 66.266
Itaú (Panamá) S.A.(Ex-Helm Bank (Panamá) S.A.) (4)
Panama US$ —   66.279 66.279 —   66.279 66.279
Itaú Casa de Valores S.A(ex-Helm Casa de Valores (Panama) S.A.) (5)
Panama US$ —   66.279 66.279 —   66.279 66.279
~~The following table details the entities over which Itaú Corpbanca has the ability to exercise control~~
(1)
Companies regulated by the Chilean Financial Market Commission, hereinafter CMF (formerly Superintendency of Securities and Insurance – SVS)
(2)
Companies regulated by the Superintendency of Banks and Financial Institutions (SBIF) of Chile.
(3)
Companies regulated by the Colombian Financial Superintendency (SFC), which has entered into a supervision agreement with the SBIF.
(4)
Company regulated by the Superintendency of Banks of Panama.
(5)
Company regulated by the Superintendency of the Securities Market of Panama.
(6)
On January 1, 2017, the merger of Corpbanca Corredores de Bolsa S.A. and Itaú BBA Corredor de Bolsa Ltda. took place, by which the latter absorbed the first, and its new corporate name is Itaú Corpbanca Corredores de Bolsa S.A.
(7)
On December 29, 2017, the merger of Corpbanca Administradora General de Fondos S.A. and Itaú Chile Administradora General de Fondos, took place, by which the latter absorbed the first and its new corporate name is Itaú Administradora General de Fondos S.A.
(8)
On April 1, 2018, the merger of Corpbanca Corredores de Seguros S.A. and Itaú Chile Corredora de Seguros Limitada took place, by which the latter absorbed the first, and its new corporate name is Itaú Corpbanca Corredores de Seguros S.A.
(9)
On November 5, 2018, Itaú Corpbanca Recaudaciones y Cobranzas S.A. changed its legal name to Recaudaciones y Cobranzas Limitada.
(10)
Company regulated by the Office of the Comptroller of the Currency (OCC) and the Federal Reserve (FED).
(11)
On December 18, 2017, the dissolution of the branch located in New York was authorized.
(12)
On July 4, 2018, Itaú Asesorías Financieras S.A. acquired 2 shares of the company to minority shareholders, therefore Itaú Corpbanca and subsidiaries controls, directly and indirectly, 100% of the company’s shares.
(13)
On September 10, 2018, Itaú Corpbanca acquired 127,901 shares of the company to minority shareholders, therefore Itaú Corpbanca controls, directly and indirectly, 100% of the company´s shares.
(14)
On December 10, 2018, Itaú Corpbanca acquired 1 share from a minority investor, with what passes and directly controls 100% of the entity.
(15)
On August 1, 2018, the corporate name of Itaú Corpbanca Corredores de Bolsa S.A. was changed to Itaú Corredores de Bolsa Limitada.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-13
Note 1 – General Information and ~~therefore, the entities that it consolidates:~~Summary of Significant Accounting Policies, continued

Direct and Indirect Ownership

12/31/2017

12/31/2016

Functional

Direct

Indirect

Total

Direct

Indirect

Total

Country

Currency

%

%

%

%

%

%

Itaú Chile Corredora de Seguros Ltda. (3)

Chile

Ch$

99.900

—

99.900

99.900

—

99.900

Itaú Administradora General de Fondos S.A. (Ex Itaú Chile Administradora General de Fondos) (3) (10)

Chile

Ch$

99.988

0.001

99.989

99.990

—

99.990

Itaú BBA Corredor de Bolsa Ltda. (3) (8)

Chile

Ch$

—

—

—

99.980

—

99.980

Itaú Coprbanca Corredores de Bolsa (Ex CorpBanca Corredores de Bolsa S.A.) (3) (8)

Chile

Ch$

99.990

0.010

100.000

99.990

0.010

100.000

CorpBanca Administradora General de Fondos S.A. (3) (10)

Chile

Ch$

—

—

—

99.996

0.004

100.000

CorpBanca Corredores de Seguros S.A. (3)

Chile

Ch$

99.990

0.010

100.000

99.990

0.010

100.000

Itaú Asesorías Financieras S.A. (4)

Chile

Ch$

99.990

0.001

99.991

99.990

0.010

100.000

CorpLegal S.A. (4)

Chile

Ch$

99.990

0.001

99.991

99.990

0.010

100.000

Itaú Corpbanca Recaudaciones y Cobranzas S.A. (4) (11)

Chile

Ch$

99.999

0.000

99.999

99.990

0.010

100.000

Itaú Corpbanca New York Branch (4) (12)

U.S.

US$

100.000

—

100.000

100.000

—

100.000

Corpbanca Securities Inc (4)(9)

U.S.

US$

—

—

—

100.000

—

100.000

Itaú CorpBanca Colombia (Ex Banco CorpBanca Colombia S.A.) (5)

Colombia

COP$

66.279

—

66.279

66.279

—

66.279

Itaú Corredor de Seguros Colombia S.A. (Ex Helm Corredor de Seguros S.A) (5)

Colombia

COP$

80.000

—

80.000

80.000

—

80.000

Itau Seurities Services Colombia S.A. (Ex CorpBanca Investment Trust Colombia S.A.) (5)

Colombia

COP$

5.499

62.634

68.133

5.499

62.634

68.133

Itaú Comisionista de Bolsa Colombia S.A. (Helm Comisionista de Bolsa S.A.) (5)

Colombia

COP$

2.219

64.807

67.026

2.219

64.807

67.026

Itau Asset Management Colombia S.A. Sociedad Fiduciaria (Ex Helm Fiduciaria S.A) (5)

Colombia

COP$

—

66.266

66.266

—

66.266

66.266

Itaú (Panamá) (Ex Helm Bank (Panamá) S.A.) (6)

Panamá

US$

—

66.279

66.279

—

66.279

66.279

Itaú Casa de Valores S.A. (Ex Helm Casa de Valores (Panamá) S.A.) (7)

Panamá

US$

—

66.279

66.279

—

66.279

66.279

~~Associates~~
Associates are entities over which the Bank has the ability to exercise significant influence, but not control. Usually, this ability manifests itself through an ownership interest equal to or greater than 20% of the entity’s voting rights and is valued using the equity method.
~~Other factors considered in determining whether there is significant influence over an entity include representation on the board of directors and the existence of material transactions.~~
~~Fund Management~~
Certain subsidiaries of Itaú Corpbanca manage and administer assets held in mutual funds and other investment vehicles on behalf of investors. The financial statements of funds are not included in these consolidated financial statements except when the Bank controls the fund. The Bank did not consolidate any funds as of December 31, 2017 or December 31, 2016.
~~(3) Companies regulated by the Superintendency of Securities and Insurance (SVS) of Chile. On January 15, 2018, this regulator replaced its name with the Financial Market Commission (CMF) of Chile.~~
~~(4) Companies regulated by the Superintendency of Banks and Financial Institutions (SBIF) of Chile.~~
~~(5) Companies regulated by the Colombian Financial Superintendency (SFC), which has a supervision agreement with the SBIF.~~
~~(6) Company regulated by the Superintendency of Banks of Panama.~~
~~(7) Company regulated by the Superintendency of the Securities Market of Panama.~~
(8) On January 1, 2017, the merger of Corpbanca Corredores de Bolsa S.A. and Itaú BBA Corredor de Bolsa Ltda. took place, by which the latter absorbed the former. The new resulting company is the legal successor of Corpbanca Corredores de Bolsa S.A., and its new corporate name is Itaú Corpbanca Corredores de Bolsa S.A.
~~(9)~~ ~~On December 18, 2017, the dissolution of this entity located in New York was authorized.~~
(10) On December 29, 2017, the merger of Corpbanca Administradora General de Fondos S.A. and Itaú Chile Administradora General de Fondos, took place, by which the latter absorbed the former. The new resulting company is the legal successor of Itaú Chile Administradora General de Fondos S.A., and its new corporate name is Itaú Administradora General de Fondos S.A.
~~(11) On September 29, 2017, the corporate name was changed from Recaudaciones y Cobranzas S.A. to Itaú Corpbanca Recaudaciones y Cobranzas S.A.~~
~~(12) Company regulated by Office of the Comptroller of the Currency (OCC) y Federal Reserve (FED).~~
F-15

~~Table of Contents~~
~~Assets Managed, Trust Business and Other Related Businesses~~
(i)
Funds management, trust business and other related businesses
The Bank and its subsidiaries manage assets held in ~~common~~publicly offered investment funds and other investment ~~products~~vehicles on behalf of investors and receive market-rate compensation for ~~services provided. The resources managed~~providing this type of services. Managed funds belong to third parties and, therefore, are not included in the Consolidated Statement of Financial Position.
The Bank provides trust commissions and other fiduciary services that result in the participation or investment of assets by clients. Assets held in a fiduciary activity are not reported in the Consolidated Financial Statements, since they are not Bank assets and there is no control over them. Contingencies and commitments arising from this activity are disclosed in Note N°22 “Contingencies, Commitments, and Responsibilities”, letter c), related to Responsibilities recorded inoff-balance-sheet accounts.
In accordance ~~with~~to IFRS 10 “Consolidated Financial Statements,” for consolidation purposes, the role of the Bank and its subsidiaries with respect to the managed funds must be evaluated to determine whether it is acting as ~~agent(13)~~Agent or ~~principal.~~Principal. According to this standard, an Agent is a party primarily engaged in acting on behalf and for the benefit of another party or parties (the Principal or Principals) and, therefore, it does not control the investee when it exercises decision-making authority. This evaluation must take into account the following ~~elements:~~aspects:

·Scope of its decision-making authority over the investee.
·
Rights held by other ~~parties.~~parties
·             ~~Remuneration~~
The remuneration to which it is entitled to in accordance with the remuneration ~~agreement.~~agreements.
·
Decision-maker’s exposure to variability of returns from other interests that it holds in the investee.
The Bank does not control or consolidate any ~~trust businesses~~trusts or other entities related to this type of business. ~~Itaú Corpbanca and its subsidiaries manage~~
The Bank manages the funds on behalf of and for the benefit of investors, acting solely as an ~~agent.~~Agent. The assets managed by the Bank and its subsidiaries are owned by third parties. Under this category, and in accordance with the aforementioned standard, they do not control ~~these operations~~the assets when they exercise their decision-making authority. Therefore, as of December 31, ~~2017~~2018 and ~~2016,~~2017 they act as ~~agents~~Agent and ~~therefore,~~ none of these investment vehicles ~~are~~is consolidated.

d)
Non-controlling interest
d)Non-controlling~~Non-controlling interest~~
~~Non-controlling~~ interest represents the ~~equity~~portion of net income and net ~~income in a subsidiary~~assets which the Bank does not ~~attributable,~~own, either directly or ~~indirectly,~~indirectly. It is presented as “Attributable tonon-controlling interest” separately in the ~~equity holders~~Consolidated Statement of ~~the Bank. Non-controlling interest is disclosed as a separate line item within~~Income, and separately from shareholders’ equity in the Consolidated ~~Statements~~Statement of Financial ~~Position and as a separate disclosure within the Consolidated Statements of Income and Comprehensive Income.~~Position.

e)~~Business Combinations and Goodwill~~
e)
Business combination and goodwill
Business combinations are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Bank, liabilities incurred by the Bank to the former owners of the acquiree and the equity interests issued by the Bank in exchange for control of the acquiree. Acquisition costs incurred are expensed and included in administrative expenses.
When Itaú Corpbanca and its subsidiaries ~~acquire~~(the Group) acquires a business, ~~it recognizes~~evaluates the identifiable assets acquired and liabilities assumed ~~in accordance with IFRS.~~to determine proper classification and designation based on contractual conditions, economic circumstances, and other relevant conditions as of the acquisition date. This includes the separation of embedded derivatives ~~from~~in host ~~contracts.~~contracts by the acquiree.

Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-14
~~Any contingent consideration that must be transferred by the acquirer is recognized at its fair value at the acquisition date.~~
Note 1 – General Information and Summary of Significant Accounting Policies, continued

Goodwill, ~~is measured~~defined as the ~~excess of the sum of~~difference between the consideration transferred and the amount ~~of any~~ recognized for thenon-controlling interest in the ~~acquiree,~~net identifiable assets acquired and liabilities assumed, is measured initially at cost. If this consideration is less than the fair value of the ~~acquirer’s previously held equity interest in the acquiree (if any) over the fair value~~net assets of the ~~acquisition-date amounts~~acquired subsidiary, the difference is recognized directly in profit or loss as of the ~~identifiable net assets acquired.~~acquisition date.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill ~~amounts are established at~~acquired in a business combination is assigned, from the date of acquisition, ~~of the business and are subsequently measured at such amounts less accumulated impairment losses, if any.~~
~~For the purposes of impairment testing, goodwill is allocated~~ to each of the Group’s ~~cash-generating~~cash generating units ~~(or groups of cash-generating units if applicable)~~(CGU) that are expected to benefit from the ~~synergies~~combination, independently of whether other assets or liabilities of the ~~combination (see Note 30 “Depreciation, Amortization~~acquiree are assigned to those units.
When goodwill is allocated to a CGU and ~~Impairment”)~~
~~(13) According to IFRS 10,~~ an ~~agent~~operation within that unit is ~~a party primarily engaged to act on behalf of and for~~sold, the ~~benefit of another party or parties (the principal or principals) and, therefore, does not control the investee when it exercises decision-making authority.~~
F-16

~~Table of Contents~~
~~On disposal of the relevant cash-generating unit, the attributable amount of~~ goodwill associated with that operation is included in the ~~determination~~carrying amount of the ~~profit~~operation sold when determining the gain or loss on disposal. Goodwill that is derecognized under such circumstances is measured on the basis of the relative values of the operation disposed of and the retained portion of the CGU.

f)
f)Functional and presentation currency ~~and foreign currency~~
The Bank has ~~determined the Chilean Peso~~defined as its functional ~~currency~~ and ~~the~~ presentation currency ~~for its consolidated financial statements. The functional currency~~the Chilean peso, which is the currency of the primary economic environment in which the Bank ~~operates. Consequently,~~operates and the currency that influences its costs and revenue structure. Therefore, all balances and transactions denominated in currencies other than the Chilean ~~Pesos~~peso are ~~considered~~treated as ~~denominated~~“foreign currency”.
The Bank translates accounting records of its subsidiaries in ~~“foreign currencies.”~~New York and in Colombia into Chilean pesos from US dollars and Colombian pesos, respectively, in accordance with IAS 21“Effects of the Variations in the Exchange Rates of the Foreign Currency”. All amounts in the Consolidated Statements of Income, Consolidated Statements of Other Comprehensive Income and the Consolidated Statement of Financial Position are translated into Chilean pesos according to the exchange rate indicated in letter g) below. None of the markets in which Itaú Corpbanca and subsidiaries operate qualify as a hyperinflationary economy.

g)
Foreign currency
~~For~~Transactions in foreign currency are initially recorded by the ~~purposes~~Bank at the exchange rates of ~~presenting consolidated financial statements,~~their respective functional currencies at the date these transactions first meet the conditions for their recognition.
Monetary assets and liabilities ~~of the~~denominated in foreign ~~consolidated entities whose functional currencies~~currency are ~~other than the Chilean Peso are translated into the presentation currency as follows:~~
·    ~~Assets and liabilities are translated~~converted at the closing exchange rate of ~~each~~the functional currency in force at the closing date of the reporting period.
All differences arising from the settlement or conversion of monetary items are recorded in income, except for those that correspond to monetary items that are part of the hedge of a net investment in a foreign operation, for which the cumulative difference is recorded in equity and subsequently reclassified to profit and loss (on disposal). Tax effects attributable to the exchange differences on such monetary items are also recorded in Other Comprehensive Income.
·Non-monetary ~~Income, expenses and cash flows~~items in foreign currency, which are ~~translated at~~measured in terms of historical cost, are converted using the exchange rate on the date of the ~~transactions.~~transaction.Non-monetary items that are measured at their fair value in foreign currency are translated using the exchange rates on the date on which that fair value is measured. Gains or losses arising from the translation ofnon-monetary items measured at their fair value are recognized based on how the gains and losses arising from the change in fair value are recognized in Other Comprehensive Income or in Income, in accordance with IAS 21.
The Bank grants loans and receives deposits in amounts denominated in foreign currency, mainly in US dollars and Colombian pesos.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-15
Note 1 – General Information and Summary of Significant Accounting Policies, continued

The ~~resulting exchange differences~~balances of ~~translating into Chilean pesos~~ the ~~functional currency balances~~Financial Statements of the consolidated entities whose functional currency is different from the Chilean peso are converted to the presentation currency, according to the following:
Assets and liabilities, by using exchange rates as of the date of the Consolidated Financial Statements.
Income and expenses and cash flows, by using the exchange rates as of the date of each transaction.
Exchange differences arising from translating balances in functional currencies of the consolidated entities other than ~~the~~ Chilean ~~Peso,~~pesos into Chilean pesos, are recorded ~~and accumulated~~ as “Exchange ~~differences on translation” within~~differences” in Equity under the line item ~~“Accumulated other comprehensive income”~~“Valuation accounts”, until they meet the derecognition criteria for the Consolidated Statement of Financial Position, and is subsequently recorded in equity. On the disposal of those foreign subsidiaries, all of the exchange differences accumulated in equity with respect to those amounts attributable to the equity holders of the Bank are reclassified as income.profit or loss.
In preparing the consolidated financial statements, transactions in currencies other than the Bank’s functional currency are recognized at the rates prevailing on the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are translated at the closing exchange rates. Exchange differences in monetary items are recognized asThe net ~~income in the period in which they arise. The~~ amount of ~~net~~ foreign exchange gains and losses ~~within the statements of income~~ includes the recognition of the effects of ~~fluctuations~~changes in the exchange ~~rates on monetary~~rate over assets and liabilities denominated in foreign ~~currencies.~~
~~Exchange differences in monetary items are recognized in profit or loss for the period in which they arise except for~~currencies and gains and losses arising from exchange ~~differences on~~rate changes affecting current and future transactions (highly probable transactions) entered into ~~in order to hedge certain foreign currency risks.~~
by the Bank.
Assets and liabilities in foreign ~~currency~~currencies are shown at their equivalent amount in ~~Chilean~~ pesos, calculated using the exchange ~~rates~~rate of $694.73 per US$1 (US dollar) as of December 31, 2018 ($614.48 as of December 31, 2017 ~~of Ch$614.48 per US$1 for the U.S. dollar~~ and ~~Ch$0.2058 per COP$1 for the Colombian peso (Ch$669.81 per US$1 and Ch$0.2231 per COP$1~~$669.81 as of December 31, ~~2016~~2016) and ~~Ch$710.08 per US$1 and Ch$0.2266~~the exchange rate of $0.2139 per COP$1 (Colombian peso) as of December 31, ~~2015)~~2018 ($0.2058 as of December 31, 2017 and $0.2231 as of December 31, 2016). The financial statements of the New York branch, as well as the Colombian subsidiaries, have been translated using these exchange rates for consolidation purposes, in accordance with IAS 21, related to the valuation of investments abroad in countries with stable economy.

h)
Use of estimates and judgments
The ~~foreign exchange gains (losses) presented within~~preparation of the Consolidated Financial Statements requires Bank’s management to make estimates, judgments and assumptions that affect the application of ~~Income (see~~ the accounting policies and the reported balances of assets and liabilities, disclosures of contingencies with respect to assets and liabilities as of the date of the Consolidated Financial Statements, as well as income and expenses during the year. Actual results may differ from these estimates.
Estimates and relevant assumptions are regularly reviewed by Management in order to properly measure some assets, liabilities, income, and expenses. Accounting estimates changes due to reviews are recognized in the year in which the estimate is reviewed and in any future period affected.
In certain cases, International Financial Reporting Standards requires that assets and liabilities be recorded or disclosed at their fair values. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions (i.e. an exit price) regardless of whether that price is directly observable or estimated using another valuation technique. When market prices in active markets are available, they have been used as a basis for valuation. When market prices in active markets are not available, the Bank has estimated those values as values based on the best available information, including the use of modeling and other valuation techniques.
In particular, information on most significant areas of estimate due to uncertainties and critical judgments in the application of accounting policies that have the most important effect on the amounts recorded in the Consolidated Financial Statements are the following:
Useful lives of property, plant and equipment and intangible assets (Notes 12, 13, and 30).
Goodwill - Impairment test (Notes 12 and 30).
Allowances for loan losses (Notes 9, 10 and 27).
Fair value of financial assets and liabilities (Note 33).
Provisions (Note 19).
Contingencies and commitments (Note 21).
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-16
Note ~~26 “Net foreign exchange gains (losses)”)~~1 – General Information and Summary of Significant Accounting Policies, continued
Impairment losses of certain assets (Notes 12, 13, and 30).
Current taxes and deferred taxes (Note 14).
Perimeter of consolidation and control assessment for consolidation purposes (Note 1, letter c).
During the ~~years~~year ended December 31, 2017, 2016 and 2015 of MCh$46,165, MCh$ (48,848) and MCh$74,461, respectively, include the foreign currency exchanges gain/losses for exchange rate fluctuations over monetary foreign currency-denominated assets and liabilities, and the gains (losses) obtained from the Bank’s operations denominated in foreign currency.
F-17

~~Table of Contents~~
g)~~Relevant definitions and classification criteria~~
~~g.1) Classification of financial assets for measurement purposes~~
~~Financial assets are included for measurement purposes in one of the following categories:~~
·~~Financial assets at fair value through profit and loss~~: this category includes the financial assets held for trading that are acquired principally for the purpose of generating a profit in the short term from fluctuations in their prices. This category includes the trading portfolio financial assets and derivative financial instruments not designated and effective as hedging instruments.
·~~Available-for-sale financial assets~~: this category includes debt and equity securities not classified as “held-to-maturity investments,” “loans and accounts receivable from banks and customers” or “financial assets at fair value through profit or loss.”
·~~Held-to-maturity investments~~~~: this category includes debt instruments, with fixed maturity and with fixed or determinable payments, for which the Bank has both the intention and proven ability to hold to maturity.~~
·~~Loans and accounts receivable from banks and customers~~: this category includes financing granted to third parties, based on their nature, regardless of the type of borrower and the form of financing. Includes loans and accounts receivable from customers, interbank loans, and finance lease transactions in which the consolidated entities act as lessors.
· ~~Investments under agreements to resell~~~~: this category includes balances of financial instruments purchased under resale agreements.~~
~~g.2) Classification of financial assets for presentation purposes~~
~~Financial assets are classified by their nature into the following line items in the consolidated financial statements:~~
·~~Cash and deposits in banks~~~~: this item includes cash balances, checking accounts and on-demand deposits~~2018, there have been no significant changes compared with the ~~Central Bank of Chile and other domestic and foreign financial institutions.~~
·~~Cash in the process of collection~~~~: this item includes domestic transactions in the process of transfer through a domestic clearinghouse or international transactions that may be delayed in settlement due to time differences, etc.~~
·~~Trading portfolio financial assets~~~~: this item includes financial instruments due for trading purposes and investments in mutual funds that must be adjusted to their fair value in the same way as instruments acquired for trading.~~
·~~Derivative financial instruments~~: this item includes the positive fair value of derivative financial instruments including embedded derivatives separated from hybrid financial instruments. (See Note 8 “Derivatives Financial Instrument and Hedge Accounting”).
·~~Loans and receivables from banks~~~~: this item includes the balances of transactions with domestic and foreign banks, including the Central Bank of Chile,~~prior period, other than those ~~reflected~~indicated in ~~the preceding items.~~
·~~Loans and receivables from customers~~: this item includes loans that are non-derivative financial assets for which fixed or determined amounts are charged, that are not listed on an active market and that the Bank does not intend to sell immediately or in the short term. When the Bank is the lessor in a lease, and it substantially transfers the risks and benefits incidental to the leased asset, the transaction is presented as a loan.
·these Consolidated Financial ~~investments available-for-sale~~~~: this item includes debt and equity securities not classified in any of the other categories.~~
F-18

~~Table of Contents~~
·~~Held-to-maturity investments~~: this item includes debt instruments traded in an active market, with fixed maturity and with fixed or determinable payments, for which the Bank has both the intention and proven ability to hold to maturity.
·~~Investments under agreements to resell~~~~: this item includes balances of financial instruments purchased under resale agreements.~~
~~g.3) Classification of financial liabilities for measurement purposes~~
~~Financial liabilities are classified for measurement purposes into one of the following categories:~~
·~~Financial liabilities at fair value through profit or loss~~: this category includes financial liabilities issued to generate a short-term profit from fluctuations in their prices, and financial liabilities arising from definitive sales of financial assets purchased under resale agreements or borrowed (“short positions”)Statements (see Note 2).

i)
Operating segments
·~~Financial liabilities at amortized cost~~: this category includes financial liabilities, regardless of their type and maturity, not included in any of the aforementioned categories that arise from the borrowing activities of financial institutions, regardless of their form and maturity.
~~g.4) Classification of financial liabilities for presentation purposes~~
~~Financial liabilities are classified by their nature into the following line items in the consolidated financial statements:~~
·~~Current accounts and demand deposits~~: this item includes all on-demand obligations except for term savings accounts, which are not considered on-demand instruments in view of their special characteristics. Obligations for which payment may be required during the period are deemed to be on-demand obligations.
·~~Transaction in the course of payment~~~~: this item includes transactions in the process of transfer through a domestic clearing house or international transactions that may be delayed as to transfer due to time differences, etc.~~
·~~Obligations under repurchase agreements~~~~: this item includes the balance of sales of financial instruments under securities repurchase and loan agreements.~~
·~~Time deposits and savings accounts~~: this item shows the balance of deposit transactions in which a term at the end of which the parties have stipulated a term, at the end of which the transactions become callable. This item also includes saving accounts.
·~~Derivative financial instruments~~~~: this item includes financial derivative contracts either for trading or for hedging accounting purposes, as set forth in Note 8 “Derivatives Financial Instrument and Hedge Accounting.”~~
·~~Borrowings from financial institutions~~~~: this item includes obligations due to other domestic banks, foreign banks, or the Central~~The Bank ~~of Chile, that were not classified in any of the previous categories.~~
·~~Debt issued~~~~: this item encompasses obligations under letters of credit, subordinated bonds and senior bonds.~~
·~~Other financial obligations~~: this item includes credit obligations to persons distinct from other domestic banks, foreign banks, or the Central Bank of Chile, for financing purposes or operations in the regular course of business.
h)~~Operating segments~~
~~Itaú Corpbanca~~ provides financial information byfor each operating segment in conformity with IFRS 8“Operating Segments”
F-19

~~Table of Contents~~
~~Segments~~” in order to ~~make disclosures~~disclose information that ~~enable~~enables financial statement users to evaluate the nature and financial effects of the business activities in which the Bank engages and the economic environments in which it operates and to allow ~~user~~them to:

·Better understand the Bank’s ~~performance;~~performance.
·
Better evaluate ~~the Bank’s~~its future cash flow ~~projections;~~projections.
·
Form better opinions regarding the Bank as a whole.
To comply with IFRS 8, Itaú Corpbanca identifies operating segments ~~including the Bank’s operations in Chile~~(Chile and ~~Colombia, that~~Colombia) used by the Executive Committee ~~(Chief Operating Decision Market or “CODM” uses~~ to analyze and make decisions regarding ~~operations, finance~~operating, financing and investment ~~decisions,~~matters, based on the following elements:

(1)
i.    The nature of the products and services;
~~ii.   The type of class of customer for their products and services;~~
~~iii. The methods used to distribute their products or provide their services; and~~
~~iv. If applicable, the nature of the regulatory environment, for example, banking, insurance or public utilities.~~

(2)
The nature of the processes;
(3)
The type or class of customer for their products and services;
(4)
The methods used to distribute their products or provide their services; and
(5)
If applicable, the nature of the regulatory environment, for example, banking, insurance or public utilities.
The Executive Committee manages these segments ~~through the use~~using anin-house system of ~~its own~~ internal profitability ~~reporting system~~reports and reviews its segments ~~based~~ on the ~~operational management result~~basis of the operating results and uses ~~indicators of~~ efficiency, profitability and ~~others~~other indicators to evaluate performance and allocate resources. The Bank has also included geographic disclosures on its ~~resources. In addition, a geographical disclosure about the~~ operations ~~presented by the Bank~~ in ~~Colombia~~New York and ~~Chile is added.~~
Colombia.
More information on each segment is presented in Note 4 ~~“Segment Information.”~~Reporting Segments.

j)
Operations with repurchase and resale agreements
i)Transactions ~~involving repurchase~~with resale agreements ~~and securities lending~~
~~Pursuant to~~are entered into as a form of investment. Under these agreements, ~~to resell, the Bank purchases~~ financial instruments are sold, which are ~~recorded~~included as assets under ~~the heading~~ “Investments under ~~agreement~~resale agreement”, which are valued according to ~~resell,” and these instruments accrue interest under~~ the effective interest rate ~~method through the maturity date~~ of the ~~contract.~~agreement.
~~Investments~~There are also sales transactions with a repurchase agreement as a form of financing. In this regard, the investments that are sold subject to a repurchase obligation and that serve as ~~security~~collateral for the loan, are presented under the heading “Trading portfolio financial assets” or “Financial investments available-for-sale,” respectively. A repurchase obligation is classified as a liability and recorded as “Obligations under repurchase agreements” and accrues interest under the effective interest rate method through the maturity dateform part of the ~~contract.~~
j)~~Assets and liabilities measurement and classification criteria~~
~~j.1) The criteria for measuring the assets and liabilities presented in the statements of financial position are the following:~~
~~Measurement or valuation of assets and liabilities is the process of determining the amounts at which~~investment items of the financial statements are to be recognized and presented in the Statement of Financial Position and the Statement of Comprehensive Income. This involves selecting the particular basis or method of measurement.
~~Financial assets and liabilities are recorded initially at fair value which, unless there is evidence otherwise, is the transaction price. For~~“Financial instruments ~~not measured~~ at fair value through profit or loss” or “Financial instruments at fair value through profit or loss”. The obligation to repurchase the investment is classified in the liability as “repurchase agreements and ~~loss the amounts originally recognized also include transaction costs directly attributable to the acquisition or issue~~securities loans”, recognizing interest and adjustments accrued as of the ~~asset or liability.~~closing date.

Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
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Note 1 – General Information and Summary of Significant Accounting Policies, continued
k)
Classification and measurement of financial instruments – under IFRS 9 (first adoption)
Financial ~~liabilities are subsequently valued generally at amortized cost, except~~instruments must be classified and measured in accordance with IFRS 9 starting from January 1, 2018, which established guidance for the financial ~~liabilities designated as hedged items (or hedging instruments)~~reporting of financial assets and financial liabilities ~~held~~that will present relevant and useful information to users of financial statements for ~~trading, which are valued at fair value.~~their assessment of the amounts, timing and uncertainty of an entity’s future cash flows.

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~~Table of Contents~~
I.
Classification of financial instrument

i)
Classification of financial assets
~~The following measurement criteria are used for assets and liabilities recorded in the Statement of Financial Position:~~
·Financial assets ~~and liabilities measured at amortized cost:~~
~~The amortized cost of~~are classified into a measurement category based on both the Bank’s business model for managing the financial asset ~~or liability~~and the contractual cash flow characteristics of the financial asset.
Contractual cash flow assessment determine if the cash flows from the financial asset meet the SPPI (solely payment of principal and interest) criterion, i.e. whether the contractual terms of the financial asset give rise, on specific dates, to cash flows that are solely payments of principal and interest. Principal is the ~~amount~~fair value of the financial assets at initial recognition, and interest is the consideration for the time value of money, the credit risk associated with the principal outstanding, and also may include liquidity risk, administrative cost and profit margin.
For classification process the Bank perform the SPPI test, which assesses the contractual term to identify whether they meet SPPI criterion, the contract is a basic lending arrangement. The Bank applies judgment and considers relevant factors such as currency in which the financial asset is denominated, and period for which the interest rate is set.
Business model refers to how the Bank manages its financial assets in order to generate cash flows. The Bank determined its business model on initial application of IFRS 9 at the level that best reflects how it manages groups of financial assets to achieve its business objective.
The Bank’s business model represents how financial assets are managed to generate cash flows and does not depend on the Management’s intention regarding an individual instrument, but at a higher level of aggregated portfolio and is based on observable factors such as: risks that affect the performance of business model; how business managers are compensated; how the performance of business model is assessed and reported to Management.
In addition, the Banks’s business model is not assessed on aninstrument-by- instrument basis, but at a higher level of aggregated portfolio and is based on observable factors such as: performance of the financial assets, the risk that affect the performance, and the expected frequency, value and timing of sales, among others.
In accordance with IFRS 9 the business models are:
Held to collect business model (HTC) - financial assets that are held within a business model whose objective is to hold assets in order to collect contractual cash flows are managed to realize cash flows by collecting contractual payments over the life of the instrument, under this business model sales made when there is an increase in the credit risk, or to manage credit concentration risk are not inconsistent with a business model whose objective is to hold financial ~~liability~~assets to collect contractual cash flows.
Held to collect and sell (HTC&S) - financial assets under this business model achieve the objective by both collecting contractual cash flows and selling financial assets, then involve a greater frequency and value of sales than HTC business model.
Other business model - financial assets held in this business has the objective of realizing cash flows through the sale of the assets. The Bank makes decisions based on the assets’ fair values and manages the assets to realize those fair values.
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Note 1 – General Information and Summary of Significant Accounting Policies, continued
ii)
Reclassification
Reclassification of financial assets is required if, and only if, the objective of the Bank’s business model for managing those financial assets changes. Financial liabilities cannot be reclassified.
II.
Measurement of financial instruments
i)
Initial measurement
On initial recognition, financial assets and financial liabilities are measured at the transaction price, i.e. the fair value of the consideration given or received (IFRS 13). In the case of financial instruments not at fair value through profit or loss, transaction costs of financial assets and financial liabilities carried at fair value are expensed in profit or loss.
ii)
Subsequent measurement- financial assets
After initial recognition, ~~minus principal repayments, plus or minus~~ the ~~cumulative amortization using~~Bank shall measures a financial asset at:
(a)
Amortized cost
Financial assets that are held in a business model to collect the contractual cash flows and contain contractual terms that give rise on specific dates to cash flows that are SPPI, are measured at amortized cost.
The effective interest method ~~of any difference between~~is used in the ~~initial amount and the maturity amount, and minus any reduction (directly or through the use~~calculation of ~~an allowance account) for impairment or uncollectibility.~~
~~For~~ the amortized cost of a financial asset or a financial liability and in the allocation and recognition of the interest revenue or interest expense in profit or loss over the relevant period. The effective interest rate (EIR) is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial asset or financial liability to the gross carrying amount of a financial asset or to the amortized cost of a financial liability.
(b)
Fair value through other comprehensive income (FVOCI)
Financial assets that are debt instruments held in a business model that is achieved by both collecting contractual cash flows and selling, and that contain contractual terms that give rise on specific dates to cash flows that are SPPI, are measured at FVOCI. They are subsequently remeasured at fair value and changes therein (except for those relating to impairment, interest income and foreign currency exchange gains and losses) are recognized in other comprehensive income, until the assets are sold. Upon disposal, the cumulative gain and losses in OCI are recognized in the income statements.
(c)
Fair value through profit or loss (FVTPL)
Financial assets that do not contain contractual terms that give rise on specified dates to cash flows that are SPPI, or if the financial assets, or if the financial asset is not held in a business model that is either (i) a business model to collect the contractual cash flows or (ii) a business model that is achieved by both collecting contractual cash flows and selling.
Financial assets held for trading are recognized at fair value through profit or loss, likewise derivatives contracts for trading purposes.
For certain equity instruments, the Bank may make an irrevocable election to present subsequent changes in the fair value of the instrument in other comprehensive income, except for dividend income which is recognized in profit or loss. Gains or losses on derecognition of these equity instruments are not transferred to profit or loss.
iii)
Subsequent measurement- financial liabilities
After initial recognition, the Bank shall measure a financial liability at amortized cost, except for derivatives that are measured at fair value through profit or loss.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
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Note 1 – General Information and Summary of Significant Accounting Policies, continued
III.
Derecognition of financial assets and liabilities
Financial assets are derecognized when, and only when:
the contractual rights to the cash flows from the financial asset expire, or
the Bank transfers substantially all the risks and rewards of ownership of the financial asset, and therefore the Bank derecognizes the financial asset and recognize separately any rights and obligations created or retained in the transfer.
In some cases, the Bank enters into transactions for which it retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows in an arrangement that meets all the conditions required, i.e. the Bank only transfers collected amounts from original assets, selling or pledging original assets is prohibited, and the Bank has the obligation to remit cash flows collected without material delay.
When a financial asset is sold and the Bank simultaneously agrees to repurchase it (or an asset that is substantially the same) at a fixed price on a future date, the Bank continues to recognize the financial assets in their entirety in the statements of financial position because it retains substantially all of the risks and rewards of ownership. The cash consideration received is recognized as a financial asset and a financial liability is recognized for the obligation to pay the repurchase price.
Financial liabilities are derecognized when, and only when, they are extinguished, cancelled or expired.
IV.
Contingent loans
The Bank issues contingent loans (including letters of credit, foreign letters of credit and performance guarantee) and loan commitments.
Contingent loans and undrawn loan commitments are commitments under which, over the duration of the commitment, the Bank is required to provide a loan withpre-specified term to the customer.
The nominal contractual loan value, when the loan agreed to be provided is on market terms, is not recorded in the statements of financial position. The related expected credit losses allowances are disclosed in Note 19.
V.
Offsetting
Financial assets and financial liabilities are offset in the balance sheet only when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously. As of December 31, 2018, the Bank does not have balance offsetting of financial instruments.
l)
Classification and measurement of financial instruments – under IAS 39 (for years ended up to December 31, 2017)
I.
Definitions
A “financial instrument” is any contract that gives rise to a financial asset of one entity, and a financial liability or equity instrument of another entity.
An “equity instrument” is a legal transaction that evidences a residual interest in the assets of an entity deducting all of its liabilities.
A “financial derivative” is a financial instrument whose value changes in response to the changes in an underlying observable market variable (such as an interest rate, a foreign exchange rate, a financial instrument’s price, or a market index, including credit ratings), whose initial investment is very small compared with other financial instruments having a similar response to changes in market factors, and which is generally settled at a future date.
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Note 1 – General Information and Summary of Significant Accounting Policies, continued
“Hybrid financial instruments” are contracts that simultaneously include anon-derivative host contract together with a financial derivative, known as an embedded derivative, which is not separately transferable and has the effect that some of the cash flows of the hybrid contract vary in a way similar to a stand-alone derivative.
II.
Classification of financial assets for measurements purposes
Financial assets were classified into the following specified categories: trading investments at fair value through profit or loss (FVTPL), ‘held to maturity investments’, ‘available for sale investments (AFS)’ and ‘loans and accounts receivable from customers’. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. All regular purchases or sales of financial asset were recognized and derecognized on a trade basis.
Regular way purchases or sales of financial assets required delivery of the asset within the time frame established by regulation or convention in the marketplace.
Effective interest method
The effective interest method is a method of calculating the amortized cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
Income was recognized on an effective interest basis for loans and accounts receivables other than those financial assets classified as at fair value through profit or loss.
Trading investment
Financial assets were classified as FVTPL when the financial asset is either held for trading or they are designated as at fair value through profit or loss.
A financial asset was classified as held for trading if:
it has been acquired principally for the purpose of selling it in the near term; or
on initial recognition it is part of a portfolio of identified financial instruments that the Bank manages together and has a recent actual pattern of short-term profit-taking; or
it is a derivative that is not designated and effective as a hedging instrument.
A financial asset other than a financial ~~liability (or~~asset held for trading may be designated as FVTPL upon initial recognition if:
such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or
the financial asset forms part of a group of financial assets or financial ~~liabilities)~~liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Bank’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or
it forms part of ~~allocating~~a contract containing one or more embedded derivatives, and IAS 39 permits the entire combined contract to be designated as FVTPL.
Financial assets at FVTPL were stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any dividend or interest earned on the financial asset and was included in the ‘net income (expense) from financial operations’ line item.
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Note 1 – General Information and Summary of Significant Accounting Policies, continued
Held to maturity investments
Held-to-maturity investments werenon-derivative financial assets with fixed or determinable payments and fixed maturity dates that the Bank had the positive intent and ability to hold to maturity. Subsequent to initial recognition,held-to-maturity investments were measured at amortized cost using the effective interest method less any impairment.
Available for sale investments (AFS investments)
AFS investments werenon-derivatives that were either designated as AFS or were not classified as (a) loans and accounts receivable from customers,(b) held-to-maturity investments or (c) financial assets at fair value through profit or loss (trading investments).
Financial instruments held by the Bank that were traded in an active market were classified as AFS and were stated at fair value at the end of each reporting period. The Bank also had investments in financial instruments that were not traded in an active market but that were also classified as AFS investments and stated at fair value at the end of each reporting period (because the Bank considered that fair value can be reliably measured). Changes in the carrying amount of AFS monetary financial assets relating to changes in foreign currency rates, interest income calculated using the effective interest method and dividends on AFS equity investments were recognized in profit or loss.
Other changes in the carrying amount of available for sale investments were recognized in other comprehensive income and accumulated under the heading of “Valuation Adjustment”. When the investment was disposed of or it was determined to be impaired, the cumulative gain or loss previously accumulated in the investments revaluation reserve was reclassified to profit or loss.
Dividends on AFS equity instruments were recognized in profit or loss when the Bank’s right to receive the dividends was established.
The fair value of AFS monetary financial assets denominated in a foreign currency was determined in that foreign currency and translated as the described in f) above. The foreign exchange gains and losses that were recognized in profit or loss were determined based on the amortized cost of the monetary asset.
Loans and accounts receivable from customers
Loans and accounts receivable from customers werenon-derivative financial assets with fixed or determinable payments that were not quoted in an active market. Loans and accounts receivables from customers (including loans and accounts receivable from customers and interbank loans) were measured at amortized cost using the effective interest method, less any impairment.
Interest income was recognized by applying the effective interest rate, except for short-term receivables when the effect of discounting is immaterial.
III.
Classification of financial assets for presentation purposes
For presentation purposes, the financial assets were classified by their nature into the following line items in the Consolidated Financial Statements:
Cash and deposits in banks: this line included cash balances, checking accounts andon-demand deposits with the Central Bank of Chile and other domestic and foreign financial institutions. Amounts invested as overnight deposits are included in this item.
Cash items in process of collection: this item represented domestic transactions in the process of transfer through a central domestic clearinghouse or international transactions which may be delayed in settlement due to timing differences.
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Note 1 – General Information and Summary of Significant Accounting Policies, continued
Trading investments: this item included financial instruments held for trading and investments in mutual funds which must be adjusted to their fair value in the same way as instruments acquired for trading.
Investments under resale agreements: included balances of financial instruments purchased under resale agreement.
Interbank loans: this item included the balances of transactions with domestic and foreign banks, including the Central Bank of Chile, other than those reflected in certain other financial asset classifications listed above.
Loans and accounts receivables from customers: these loans werenon-derivative financial assets for which fixed or determined amounts are charged, that were not listed on an active market and which the Bank does not intend to sell immediately or in the short term. When the Bank was the lessor in a lease, and it substantially transferred the risks and rewards incidental to the leased asset, the transaction was presented in loans and accounts receivable from customers while the leased asset is derecognized in the Bank’s statements of financial position.
Investment instruments: were classified into two categories:held-to-maturity investments, andavailable-for-sale investments. Theheld-to-maturity investment classification included only those instruments for which the Bank had the ability and intent to hold to maturity. The remaining investments were treated as available for sale.
IV.
Classification of financial liabilities for measurement purposes
The Bank classified all financial liabilities as subsequently measured at amortized cost, except for:
Financial liabilities at FVTPL
As of December 31, 2017 the Bank did not maintain financial liabilities at FVTPL.
Other financial liabilities
Other financial liabilities (including interbank borrowings, issued debt instruments and other payables) were initially recorded at fair value and subsequently measured at amortized cost using the effective interest method.
V.
Classification of financial liabilities for presentation purposes
The financial liabilities were classified by their nature into the following line items in the consolidated statements of financial position:
Deposits and otheron- demand liabilities: this included allon-demand obligations except for term savings accounts, which were not consideredon-demand instruments in view of their special characteristics. Obligations whose payment may be required during the period were deemed to beon-demand obligations. Operations which became callable the day after the closing date were not treated ason-demand obligations.
Cash items in process of being cleared: this represented domestic transactions in the process of transfer through a central domestic clearing house or international transactions which may be delayed in settlement due to timing differences, etc.
Obligations under repurchase agreements: this included the balances of sales of financial instruments under securities repurchase and loan agreements. The Bank did not record in its own portfolio instruments acquired under repurchase agreements.
Time deposits and other time liabilities: this showed the balances of deposit transactions in which a term at the end of which they became callable has been stipulated.
Interbank borrowings: this included obligations due to other domestic banks, foreign banks, or the Central Bank of Chile, other than those reflected in certain other financial liability classifications listed above.
Issued debt instruments: there are three types of instruments issued by the Bank: Obligations under letters of credit, Subordinated bonds and Senior bonds placed in the local and foreign market.
Other financial liabilities: this item included credit obligations to persons other than domestic banks, foreign banks, or the Central Bank of Chile, for financing purposes or operations in the normal course of business.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
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Note 1 – General Information and Summary of Significant Accounting Policies, continued
VI.
Offsetting of financial instruments
Financial asset and liability balances were offset, i.e., reported in the Consolidated Statements of Financial Position at their net amount, only if there was a legally enforceable right to offset the recorded amounts and the Bank intended either to settle them on a net basis or to realize the asset and settle the liability simultaneously. As of December 31, 2017 the Bank did not have balance offsetting of financial instruments.
VII.
Derecognition of financial assets and liabilities
The accounting treatment of transfers of financial assets was determined by the extent and the manner in which the risks and rewards associated with the transferred assets are transferred to third parties:
i. If the Bank transferred substantially all the risks and rewards of ownership to third parties, as in the case of unconditional sales of financial assets, sales under repurchase agreements at fair value at the date of repurchase, sales of financial assets with a purchased call option or written put option deeply out of the money, utilization of assets in which the transferor did not retain subordinated debt nor grants any credit enhancement to the new holders, and other similar cases, the transferred financial asset was derecognized from the Consolidated Statements of
Financial Position and any rights or obligations retained or created in the transfer were simultaneously recorded.
ii. If the Bank retained substantially all the risks and rewards of ownership associated with the transferred financial asset, as in the case of sales of financial assets under repurchase agreements at a fixed price or at the sale price plus interest, securities lending agreements under which the borrower undertake to return the same or similar assets, and other similar cases, the transferred financial asset was not derecognized from the Consolidated Statements of Financial Position and continued to be measured by the same criteria as those used before the transfer.
However, the following items were recorded:
An associated financial liability for an amount equal to the consideration received; this liability was subsequently measured at amortized cost.
Both the income from the transferred (but not removed) financial asset as well as any expenses incurred due to the new financial liability.
iii. If the Bank neither transferred nor substantially retained all the risks and rewards of ownership associated with the transferred financial asset—as in the case of sales of financial assets with a purchased call option or written put option that was not deeply in or out of the money, securitization of assets in which the transferor retained a subordinated debt or other type of credit enhancement for a portion of the transferred asset, and other similar cases—the following distinction was made:
a. If the transferor did not retain control of the transferred financial asset: the asset was derecognized from the Consolidated Statements of Financial Position and any rights or obligations retained or created in the transfer were recognized.
b. If the transferor retained control of the transferred financial asset: it continued to be recognized in the Consolidated Statements of Financial Position for an amount equal to its exposure to changes in value and a financial liability associated with the transferred financial asset is recorded. The net carrying amount of the transferred asset and the associated liability was the amortized cost of the rights and obligations retained, if the transferred asset was measured at amortized cost, or the fair value of the rights and obligations retained, if the transferred asset was measured at fair value.
Accordingly, financial assets were only derecognized from the Consolidated Statements of Financial Position when the rights over the cash flows they generated have terminated or when all the inherent risks and rewards of ownership had been substantially transferred to third parties. Similarly, financial liabilities were only derecognized from the Consolidated Statements of Financial Position when the obligations specified in the contract were discharged or cancelled or the contract matured.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
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Note 1 – General Information and Summary of Significant Accounting Policies, continued
m)
Derivatives and hedging activities
The Bank has elected to continue applying the hedge accounting requirements of IAS 39 on adoption of IFRS 9.
The Bank has not provided comparative information for prior periods on the date of initial application of IFRS 9 for the new disclosures introduces by IFRS 9 as a consequential amendment to IFRS 7, as permitted by IFRS 7 paragraph 44z.
For presentation purposes, derivatives are presented in accordance with its positive or negative fair value as assets or liabilities, respectively, and include trading and hedging instruments separately (see Note 8).
Hedging transactions
The Bank has elected to continue applying the hedge accounting requirements in IAS 39 instead of the requirements of IFRS 9, thus the Bank uses financial derivatives for the following purposes:
i. to sell to customers who request these instruments in the management of their market and credit risks;
ii. to use these derivatives in the management of the risks of the Bank entities’ own positions and assets and liabilities (“hedging derivatives”), and
iii. to obtain profits from changes in the price of these derivatives (trading derivatives).
All financial derivatives that are not held for hedging purposes are accounted for as trading derivatives.
A derivative qualifies for hedge accounting if all the following conditions are met:
1. The derivative hedges one of the following three types of exposure:
a. Changes in the value of assets and liabilities due to fluctuations, among others, in the interest rate and/or exchange rate to which the position or balance to be hedged is subject (“fair value hedge”);
b. Changes in the estimated cash flows arising from financial assets and liabilities, and highly probable forecasted transactions (“cash flow hedge”);
c. The net investment in a foreign operation (“hedge of a net investment in a foreign operation”).
2. It is effective in offsetting exposure inherent in the hedged item or position throughout the expected term of the hedge, which means that:
a. At the date of arrangement the hedge is expected, under normal conditions, to be highly effective (“prospective effectiveness”).
b. There is sufficient evidence that the hedge was actually effective during the life of the hedged item or position (“retrospective effectiveness”).
3. There must be adequate documentation evidencing the specific designation of the financial derivative to hedge certain balances or transactions and how this effective hedge was expected to be achieved and measured, provided that this is consistent with the Bank’s management of own risks.
The changes in the value of financial instruments qualifying for hedge accounting are recorded as follows:
a. For fair value hedges, the gains or losses arising on both hedging instruments and the hedged items (attributable to the type of risk being hedged) are included as “Net income ~~or interest expense over~~(expense) from financial operations” in the ~~relevant period.~~Consolidated Statements of Income.
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Note 1 – General Information and Summary of Significant Accounting Policies, continued

·b. ~~Fair~~For fair value ~~measurements~~hedges of interest rate risk on a portfolio of financial instruments, gains or losses that arise in measuring hedging instruments within “Interest income and expense”, and other gains or losses due to changes in fair value of the underlying hedged item (attributable to the hedged risk) are recorded in the Consolidated Statements of Income under “Net income (expense) from financial operations”.
c. For cash flow hedges, the change in fair value of the hedging instrument is included as “Cash flow hedge” in “Other comprehensive income”.
d. The differences in valuation of the hedging instrument corresponding to the ineffective portion of the cash flow hedging transactions are recorded directly in the Consolidated Statements of Income under “Net income (expense) from financial operations”.
If a derivative designated as a hedging instrument no longer meets the conditions described above due to expiration, ineffectiveness or for any other reason, hedge accounting treatment is discontinued. When “fair value hedging” is discontinued, the fair value adjustments to the carrying amount of the hedged item arising from the hedged risk are amortized to gain or loss from that date, where applicable.
Sources of hedge ineffectiveness may arise from basis risk, including but not limited to the discount rates used for calculating the fair value of derivatives, hedges using instruments with anon-zero fair value, and notional and timing differences between the hedged items and hedging instruments.
When cash flow hedges are discontinued, any cumulative gain or loss of the hedging instrument recognized under “Other comprehensive income” (from the period when the hedge was effective) remains recorded in equity until the hedged transaction occurs, at which time it is recorded in the Consolidated Statements of Income, unless the transaction is no longer expected to occur, in which case any cumulative gain or loss is recorded immediately in the Consolidated Statements of Income.
n)
Fair value measurement
In general, financial assets and ~~liabilities:~~liabilities are initially recognized at fair value which, in the absence of evidence to the contrary, is deemed to be the transaction price. Financial instruments, other than those measured at fair value through profit or loss, are initially recognized at fair value plus transaction costs. Subsequently, and at the end of each reporting period, financial instruments are measured pursuant to the following criteria:
i. Valuation of financial instruments
Financial assets are measured according to their fair value, gross of any transaction costs that may be incurred in the course of a sale, except for loans and accounts receivable from customers.
“Fair ~~value~~value” is defined as the price that ~~will~~would be received ~~for the sale of~~to sell an asset or paid ~~for the~~to transfer of a liability in an orderly transaction onin the ~~main~~principal (or most advantageous) market ~~as of~~at the measurement date under current market conditions ~~(i.e..~~(i.e. an exit price), regardless of whether that price is directly observable or estimated using another valuation technique. When measuring fair value an entity shall take into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date.
Fair value is a market-based measurement, not an entity-specific measurement. For some assets and liabilities, observable market transactions or market information might be available. For other assets and liabilities, observable market transactions or market information might not be available. However, the objective of aThe fair value measurement ~~in both cases is~~assumes that the ~~same — to estimate the price at which an orderly~~ transaction to sell the asset or to transfer the liability ~~would take~~takes place ~~between~~either: (a) in the principal market ~~participants~~for the asset or liability, or (b) in the absence of a principal market, the most advantageous market for the asset or liability.
Even when there is no observable market to provide pricing information in connection with the sale of an asset or the transfer of a liability at the measurement date, ~~under current market conditions’ and at which~~ the fair value measurement shall assume that the transaction takes place, considered from the perspective of a potential market participant who ~~holds~~intends to maximize value associated with the ~~asset or liability could sell or transfer that~~ asset or liability.

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Note 1 – General Information and Summary of Significant Accounting Policies, continued
When ~~a price for an asset or liability is not directly observable,~~using valuation techniques, the Bank ~~will measure the fair value using another valuation technique that maximizes~~shall maximize the use of relevant observable inputs and ~~minimizes~~minimize the use of unobservable inputs. As fair value is a market-based measurement, it should be determined using the assumptions that market participants would use in pricing the asset or liability, including risk assumptions. As a result, the Bank’s intention to holdinputs as available. If an asset or ~~to settle or otherwise fulfill~~ a liability ~~is not relevant when measuring fair value.~~
Ameasured at fair value ~~measurement applies to~~has a ~~particular asset or liability. Thus, when measuring fair value,~~bid price and an ask price, the ~~Bank takes into account~~price within the ~~same characteristics of the asset or liability~~bid-ask spread that ~~market participants would consider in pricing that asset or liability on the measurement date.~~
~~To increase the consistency and comparability~~is most representative of fair value ~~measurements and related disclosures,~~in the ~~Bank uses and discloses~~circumstances shall be used to measure fair value regardless of where the input is categorized within the fair value hierarchy (i.e. Level 1, 2 or 3). IFRS 13 establishes a fair value hierarchy that categorizes into three levels the inputs to valuation techniques used to measure fair value.
The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets ~~and~~or liabilities (Level 1 inputs) and the lowest priority to unobservable inputs (Level 3 inputs). ~~Level 1 inputs~~
All derivatives are ~~quoted prices (unadjusted)~~recorded in ~~active markets for identical assets or liabilities that~~ the ~~entity can access~~Consolidated Statements of Financial Position at the measurement date. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for similar assets or liabilities, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability.
·~~Assets valued at cost:~~
~~Cost is defined as the cost of the transaction to acquire the asset, less any impairment losses that may exist.~~
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~~Table of Contents~~
~~j.2) Measurement of financial assets and financial liabilities~~
~~(i)~~~~Measurement of financial assets~~
~~(a)~~~~Financial assets at~~ fair value ~~through profit or loss~~
~~Financial assets~~previously described. This value is compared to the valuation as at fair value through profit and loss are initially measured at fair value. Transaction costs are recognized immediately in profit or loss. Subsequent to initial recognition financial assets at fair value through profit or loss are stated at fair value, with any gains or losses arising on remeasurement recognized in net income.
~~For “Trading portfolio financial assets,”~~the trade date. If the fair value is ~~based on market prices or valuation models prevailing on~~subsequently measured positive, this is recorded as an asset. If the ~~closing date of the financial statements. Gains or losses from changes in~~ fair value is subsequently measured negative, this is recorded as well as gains or losses from their trading are included in line item “Trading and investment income” within the statement of income. Accrued interest income and indexation adjustments are also included as “Trading and investment income.”
~~All purchases and sales of trading instruments to be delivered within the deadline period established by market regulations and conventions are recognized~~a liability. The fair value on the trade date ~~which~~ is ~~the date on which the commitment is made to purchase or sell the asset.~~
For “Derivative financial instruments” including foreign exchange forwards, interest rate futures, currency and interest rate swaps, interest rate options, and other derivative instruments, fair value is obtained from market quotes, discounted cash flow models and option valuation models, as appropriate. Derivatives contracts are presented on the statement of financial position as an asset when their fair value is positive and as a liability when the fair value is negativedeemed, in the ~~line item “Derivative financial instruments.”~~
~~Certain derivatives embedded in other financial instruments are treated as separate derivatives when their risk is not closely related~~absence of evidence to the ~~economic characteristics and risks of~~contrary, to be the ~~host contract and the host contract is not measured at fair value with changes in fair value recognized in net income.~~
~~On initial recognition, derivative contracts are designated by the Bank as a trading derivative or as a hedging instrument for hedge accounting purposes.~~
transaction price.
The changes in the fair value of ~~trading~~ derivatives from the trade date are recorded in ~~line item “Trading and investment income” within~~“Net income (expense) from financial operations” in the Consolidated Statements of Income.
If the derivative is designated as a hedging instrument in a hedge relationship, this may be: (1) a fair value hedge of assets or liabilities or unrecognized firm commitments; (2) a hedge of cash flows related to recognized assets or liabilities that are highly probable, or forecast transactions; or (3) hedge of a net investment in a foreign operation.
A hedging relationship qualifies for hedge accounting if, and only if, all of the following conditions are met: (a) at the inception of the hedge there is formal designation and documentation of the hedging relationship; (b) the hedge is expected to be highly effective; (c) the effectiveness of the hedge can be reliably measured and; (d) the hedge is assessed on an ongoing basis and determined to have been highly effective throughout the financial reporting periods for which the hedge was designated.
Transactions with derivatives that do not qualify for hedge accounting are recognized and presented as trading derivatives, even if they provide an effective economic hedge for managing risk positions.
For fair value hedge, the gain or loss arising from the hedged item, attributable to the effective portion of the hedged risk, should adjust the book value of the hedged item and also be recognized in the income statement. Gains or losses from measuringSpecifically, the fair value of ~~the hedged item and the hedging derivative instrument are recognized~~financial derivatives included in the ~~income statement.~~
portfolios of financial assets or liabilities held for trading is deemed to be their daily quoted price. If, for exceptional reasons, the ~~hedged item in~~quoted price cannot be determined on a given date, the fair value ~~hedge~~ is ~~a firm commitment,~~determined using similar methods to those used to measure over the ~~changes in~~counter (OTC) derivatives. The fair value of OTC derivatives is the sum of the future cash flows resulting from the instrument, discounted to present value at the date of valuation (“present value” or “theoretical close”) using valuation techniques commonly used by the financial markets: “net present value” (NPV) and option pricing models, among other methods. Also, within the fair value of ~~the firm commitment with respect to the hedged risk~~derivatives are ~~recognized as assets or liabilities~~included Credit Valuation Adjustment (CVA) and Debit Valuation Adjustment (DVA), all with the ~~corresponding gain~~
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~~or loss recognized in the income statement. The gains or losses from measuring~~objective that the fair value of each instrument includes the ~~hedging derivative instrument are also recorded in the income statement. When an asset or liability~~credit risk of its counterparty and Bank’s own risk. The Credit valuation adjustment (CVA) is ~~acquired or assumed~~a valuation adjustment to OTC derivatives as a result of the ~~fulfilling of~~risk associated with the ~~firm commitment, the initial carrying amount of the acquired asset or~~credit exposure assumed ~~liability~~by each counterparty. The CVA is ~~adjusted~~calculated taking into account potential exposure to ~~include the cumulative change~~each counterparty in ~~the fair value of the firm commitment attributable~~each future period. The debit valuation adjustment (DVA) is a valuation adjustment similar to the ~~hedged risk that was recognized~~CVA but, in ~~the statement of financial position.~~
~~For~~this case, it arises as a cash flow hedge, when a derivative instrument hedges exposure to variability in cash flows of recognized assets or liabilities, or highly probable forecasted transactions, the effective portion of the changes in fair value with regard to the risk hedged is recognized in other comprehensive income. Any ineffective portion is immediately recognized in the income statement. The accumulated gains or losses recognized in other comprehensive income are reclassified to the income statement in the same period or periods in which the hedged item affects the income statement.
~~When a derivative instrument hedges exposure to variability in the amount~~result of the Bank’s ~~interest~~own risk assumed by its counterparties in ~~the net assets~~OTC derivatives. As of ~~a foreign operation, the portion~~December 31, 2018, CVA and DVA amount to MCh$38,821 and MCh$340, respectively (MCh$53,398 and MCh$1,369 as of ~~the gain or loss on the hedging instrument that is determined to be an effective hedge is recognized in other comprehensive income~~December 31, 2017, respectively and ~~the ineffective portion is recognized in net income. The gain or loss on the hedging instrument relating to the effective portion~~MCh$51,997 and MCh$1,247 as of the hedge that has been recognized in other comprehensive income is reclassified from equity to the income statement, as a reclassification adjustment on the disposal or partial disposal of the foreign operation.December 31, 2016, respectively).
~~(b)~~~~Available-for-sale financial assets.~~
Instruments available for sale are initially recognized at fair value, including transaction costs. Subsequent to initial recognition, available for sale investments are measured at fair value. Gains or losses from changes in fair value are recognized in other comprehensive income within the line item for “Financial instruments available-for-sale.” When these investments are sold or impaired, the cumulative gains or losses previously incorporated into the financial investment available for sale reserve in equity are transferred to the income statement and reported under the line item for “Trading and investment income, Net.”
All purchases and sales of investment instruments to be delivered within the deadline period established by market regulations and conventions are recognized on the trade date, which is the date on which the commitment is made to purchase or sell the asset.
~~Investment instruments designated as hedging instruments are measured using the requirements established for hedge accounting.~~
~~(c)~~~~Held-to-maturity investments~~
Held-to-maturity investments are measured at amortized cost using the effective interest method. In the case of held-to-maturity investments, amortized cost furthermore includes any reductions for impairment losses.
~~(d)~~~~Loans and accounts receivables from banks and customers~~
~~Loans and accounts receivables are measured at amortized cost using the effective interest rate method, less any impairment if applicable.~~
~~(ii)~~~~Measurement of financial liabilities~~
In general, financial liabilities on the Bank´s Statement of Financial Position are measured at amortized cost, as defined above, except for those financial liabilities designated as hedged items (or hedging instruments) in hedging relationships that are measured at fair value.
~~j.3)~~ii. Valuation techniques
Financial instruments at fair value, determined on the basis of price quotations in active markets, include
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government debt securities, private sector debt securities, equity shares, short positions, and fixed-income securities issued.
In cases where price quotations cannot be observed in available markets, the Bank’s ~~Management (“Management”) makes its~~management determines a best estimate of the price that the market would set using its own internal models. In most cases, these models use ~~as significant inputs~~ data based on observable market parameters ~~and, in very specific cases, they use~~ as significant inputs ~~not observable~~however for some valuations of financial instruments, significant inputs are unobservable in ~~market data. Various~~the market. To determine a value for those instruments, various techniques are employed to make these estimates, including the extrapolation of observable market data.
The most reliable evidence of the fair value of a financial instrument on initial recognition usually is the transaction price, however due to lack of availability of market information, the value of the instrument may be derived from other market transactions performed with the same or similar instruments or may be measured by using a valuation technique in which the variables used include only observable market data, mainly interest rates.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-27
Note 1 – General Information and ~~other extrapolation techniques.~~Summary of Significant Accounting Policies, continued

The main ~~valuation~~ techniques used as of December 31, 2018 and 2017 by the Bank’s internal models to determine the fair value of ~~derivatives~~the financial instruments are as follows:
~~(i).~~i. In the valuation of financial instruments permitting static hedging (mainly ~~“forwards”~~forwards and ~~“swaps”)~~swaps), the ~~“present value”~~present value method is used. Estimated future cash flows are discounted using the interest rate curves of the related currencies. The interest rate curves are generally observable market data.
~~(ii).~~ii. In the valuation of financial instruments requiring dynamic hedging (mainly structured options and other structured instruments), the ~~Black-Scholes~~Black- Scholes model is normally used. Where appropriate, observable market inputs are used to obtain factors such as thebid-offer spread, exchange rates, volatility, correlation indexes and market liquidity.
~~(ii).~~iii. In the valuation of certain financial instruments exposed to interest rate risk, such as interest rate futures, caps and floors, the present value method (futures) and the Black-Scholes model (plain vanilla options) are used. The main inputs used in these models are observable market data, including the related interest rate curves, volatilities, correlations and exchange rates.
~~The non-observable inputs are described in Note 33 “Financial Assets and Liabilities Measured at Fair Value.”~~
The fair value of the financial instruments ~~arising from~~calculated by the aforementioned internal models considers contractual terms and observable market data, which include interest rates, credit risk, exchange rates, ~~the~~ quoted market price of ~~raw materials and~~ shares, volatility and prepayments, among ~~other things.~~others. The ~~methodologies of the~~Bank’s management considers that its valuation models are not significantly subjective, since these methodologies can be adjusted and evaluated, as appropriate, bythrough the internal calculation of fair value and the subsequent comparison with the related actively traded ~~related~~ price.

o)
Recognizing income and expenses
~~j.4) Offsetting~~The most significant criteria used by the Bank to recognize its revenues and expenses are summarized as follows:
i. Interest revenue, interest expense, and similar items
Interest income is calculated by applying the effective interest rate to the gross carrying amount of financial assets, except for financial assets that have subsequently become credit-impaired (or ‘stage 3’), for which interest revenue is calculated by applying the effective interest rate to their amortized cost (i.e. net of the ECL provision).
ii. Commissions, fees, and similar items
Fee and commission income and expenses are recognized in the Consolidated Statements of Income using criteria established in IFRS 15 “Revenue from contracts with customers”. See disclosure in Note 2 relating adoption and impact of IFRS 15.
Under IFRS 15, the Bank recognizes revenue when (or as) satisfied a performance obligations by transferring a service (i.e. an asset) to a customer; under this definition an asset is transferred when (or as) the customer obtains control of that asset. The Bank considers the terms of the contract and its customary business practices to determine the transaction price. The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties.
The Bank transfers control of a good or service over time and, therefore, satisfies a performance obligation and recognizes revenue over time, and/or the Bank satisfies the performance obligation at a point in time.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-28
Note 1 – General Information and Summary of Significant Accounting Policies, continued

~~Financial asset~~The main revenues arising from commissions, fees and ~~liability balances~~similar items correspond to:
Fees and commissions for lines of credits and overdrafts: includes accrued fees related to granting lines of credit and overdrafts in checking accounts.
Fees and commissions for guarantees and letters of credit: includes accrued fees in the period relating to granting of guarantee payment for current and contingent third party obligations.
Fees and commissions for card services: includes accrued and earned commissions in the period related to use of credit cards, debit cards and other cards
Fees and commissions for management of accounts: includes accrued commissions for the maintenance of checking, savings and other accounts
Fees and commissions for collections and payments: includes income arising from collections and payments services provided by the Bank.
Fees and commissions for intermediation and management of securities: includes income from brokerage, placements, administration and securities’ custody services.
Fees and commissions for insurance brokerage fees: includes income arising for insurances distribution.
Other fees and commissions: includes income arising from currency changes, financial advisory, cashier check issuance, placement of financial products and online banking services.
The main expenses arising from commissions, fees and similar items correspond to:
Compensation for card operation: includes commission expenses for credit and debit card operations related to income commissions’ card services.
Fees and commissions for securities transactions: includes commissions’ expense for deposits, securities custody service and securities’ brokerage.
Other fees and commissions: includes mainly expenses generated from online services.
The Bank has incorporated disaggregated revenue and expense disclosures and reportable segment relationship in Note 28.
Additionally, the Bank maintains certain loyalty programs associated to its credit cards services, for which it has deferred a percentage of the consideration received in the statements of financial position to comply with its related performance obligation, or has liquidated on a monthly basis as far they arise.
Revenue recognition accounting and disclosures for the year 2017 and 2016, was under IAS 18 “Revenue recognition”, fees and commission income and expense were recognized in according to their nature. The main criteria was:
Fee and commission income and expenses on financial assets and liabilities were recognized when they are ~~offset if~~earned.
Those arising from transactions or services that were performed over a period of time, were recognized over the life of these transactions or services.
Those relating to services provided in a single transaction were recognized when the single transaction was performed.
iii. Loan arrangement fees
Fees that arise as a result of the origination of a loan, mainly application and ~~only if there~~analysis-related fees, are deferred and charged to the Consolidated Statement of Income over the term of the loan. In the case of commitment fees these are immediately recorded in the Consolidated Statement of Income when it is unlikely that a ~~legally enforceable right to offset the recorded amounts~~specific lending arrangement will be entered into and the loan commitment is not measured at FVTPL.
p)
Impairment
Assets are acquired or purchased based on the future economic benefits they produce. Accordingly, impairment is recorded when the carrying amount of those assets is lower than the recoverable amount, Assets are subject to impairment tests in order to properly reflect the future economic benefits that assets are capable to produce when used by the Bank.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-29
Note 1 – General Information and Summary of Significant Accounting Policies, continued
The Bank ~~intends either to settle them~~assesses on a ~~net~~forward-looking basis ~~or to realize~~ the ~~asset~~expected credit losses (ECL) associated with its debt instrument assets carried at amortized cost and ~~settle~~FVOCI and with the ~~liability simultaneously.~~exposure arising from loan commitments and financial guarantee contracts. The Bank recognizes a loss allowance for such losses at each reporting date. The measurement of ECL reflects:

~~j.5) Impairment~~An unbiased and probability-weighted amount that is determined by evaluating a range of ~~financial assets~~possible outcomes;
The time value of money; and
Reasonable and supportable information that is available without undue cost or effort at the repotting date about past events, current conditions and forecasts of future economic conditions.
The Bank follows the criteria described below in order to assess impairment, when applicable:

(i)
Financial assets
A financial asset, other than those ~~measured~~recorded at fair value through ~~net income, are assessed for indicators~~profit and loss, is evaluated on each financial statement reporting date in order to determine whether objective evidence of impairment atexists. At the end of each reporting ~~period. Financial~~period the Bank assesses if objective evidence exist for a financial asset or group of financial assets ~~are considered~~ to be impaired.
A financial asset or group of financial assets will be impaired ~~and impairment losses are incurred~~ if, and only if, ~~there is~~ objective evidence of impairment exists as a result of one or more events that occurred after initial recognition of the asset ~~(a “loss event”~~(“event causing the loss”), and ~~that~~this event or events causing the loss ~~event (or events) has~~have an impact on the estimated future cash ~~flow~~flows of a financial asset or group of financial ~~assets that can be reliably estimated. It may not be possible~~assets.
An impairment loss relating to ~~identify a single, discrete event that caused the impairment.~~
For available-for-sale equity investments, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment. For available-for-sale debt instruments, objective evidence of impairment could include significant financial difficulty of the issuer or breach of contract (such as a default or delinquency in payments), the probability that the issuer will enter bankruptcy or financial re-organization; or the cessation of an active market for that financial asset because of financial difficulties.
~~Additionally, certain categories of~~ financial assets ~~such as loans and receivables from banks and customer assets that are not deemed to be impaired individually are also assessed for impairment on a collective basis.~~
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~~Table of Contents~~
~~For financial assets carried~~recorded at amortized cost ~~the amount of impairment loss recognized~~ is calculated as the difference between the ~~asset’s carrying~~recorded amount of the asset and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.
~~For equity securities included~~Objective evidence for an asset or group of assets to be impaired includes the following events that cause losses: (i) significant financial difficulties of the issuer or debtor; (ii) noncompliance of the terms of the contract; (iii) the lender, due to economic or legal reasons related to financial difficulties of the debtor, grants waivers or give unusual conditions that will not be granted in normal circumstances; (iv) it is probable that the debtor is in bankruptcy or in another form of financial reorganization; (v) there is no longer a market for the financial asset due to financial difficulties; or (vi) observable data indicates that since initial recognition of a group of financial assets there is a decrease in the ~~available-for-sale~~estimated future cash flows regardless of individual identification for each asset, including data about: (a) adverse changes in the payment behavior of debtors in the group; or (b) local or national economic conditions correlated tonon-compliant in the group.
Individually significant financial ~~asset portfolio, should a significant or prolonged decline~~assets are individually assessed to determine their impairment. The remaining financial assets are collectively evaluated in ~~value occur, the impairment~~groups that share similar credit risk characteristics.
Impairment loss for available for sale investments is ~~equal to~~calculated as the difference between the acquisition cost (net of any principal reimbursement) and the current fair value less any impairment loss previously recorded in income. For equity investments classified as available for sale investment, objective evidence includes a significant and extended decrease under the initial fair value of the invested amount. In the case of debt instruments classified as available for sale investments, the Bank assess if objective evidence for impairment exist based on the criteria used for assessing loans impairment losses.
If impairment evidence exists, any amount previously recorded in equity is transferred from equity to the Consolidated Statement of Income, presented as available for sale investments net gains or losses. This amount is calculated as the difference between acquisition cost (net of any amortization and reimbursement) and the current fair value of the asset, less any impairment loss on the investment previously recorded in the ~~income statement.~~
When an available-for-sale financial asset is considered to be impaired, cumulative unrealized gains and losses previously recognized in other comprehensive income are reclassified to the income statement in the period.
Consolidated Statement of Income.
In respect ~~of available-for-sale~~to equity ~~securities,~~financial investments, impairment losses previously recognized in ~~net income~~the Consolidated Statement of Income are not reversed through income. Any increase in fair value subsequent to an impairment loss is recognized in other comprehensive income and accumulated under ~~the heading “financial instruments available-for-sale.”~~available for sale investments as part of “Valuation accounts”.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-30
Note 1 – General Information and Summary of Significant Accounting Policies, continued

~~In respect of available-for-sale debt securities,~~All impairment losses are ~~subsequently reversed through net income~~recorded in income. Any impairment loss relating to a financial asset available for sale previously recorded in equity is transferred to profit or loss. The reversal of an impairment loss occurs only if ~~an increase in fair value of the investment~~it can be objectively related to an event occurring after the ~~recognition~~initial impairment loss was recorded. The reversal of ~~the~~an impairment ~~loss.~~
~~The~~loss shall not exceed the carrying amount ~~of the financial asset is reduced by the~~that would have been determined if no impairment loss ~~directly~~has been recognized for the asset in prior years. The reversal is recorded in income with the exception of ~~loans and receivables from banks and customers, where the carrying amount is reduced through the use of an allowance account (“allowance~~available for ~~loan losses”). When a loan and receivable is considered uncollectible, and a related allowance for loan losses was recognized previous to its write-off,~~sale equity financial assets, in which case it is written off against the allowance account by charging and releasing provision through the income statement. Subsequent recoveries of amounts previously written off are credited against the income statement.recorded in other comprehensive income.

~~For financial~~
(ii)
Non-financial assets measured at amortized cost, if, in a subsequent period, the amount of impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through net income to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.
k)~~Revenue and expense recognition~~
The ~~most significant criteria used by the Bank to recognize revenue and expenses are summarized as follows:~~
Bank’s~~1 Interest revenue, interest expense and similar items~~non-financial
~~Interest revenue and expense are recorded on an accrual basis using the effective interest method.~~
~~2 Commissions, fees, and similar items~~
~~Fee and commission income and expenses are recorded in the Consolidated Statements of Income based on criteria that differ according to their nature. The main criteria are:~~
·             ~~Income/expenses arising from transactions or services that are performed over a period of time are recorded over the period of such transactions or services.~~
·             ~~Income/expenses originating in a specific transaction are recognized they occur.~~
~~3 Non-finance income and expenses~~
~~Non-finance income and expenses are recognized on an accrual basis.~~
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l)~~Impairment~~
~~Assets are acquired for the benefit they will produce. Therefore, impairment occurs whenever their book value exceeds their recoverable amount;~~ assets, are ~~tested for impairment whenever there are indicators that the carrying amount may exceed the recoverable value.~~
~~The Bank and its subsidiaries use the following criteria to test for impairment, if any:~~
~~Financial assets~~
~~A financial asset that is not recorded at fair value through profit and loss is evaluated~~reviewed at each ~~period end in order~~reporting date to determine whether there is objective evidence of impairment. As of each reporting date, the Bank assesses whether there is objective evidence that a financial asset or a group of financial assets may be impaired. Financial assets or asset groups are considered impaired only if there is objective evidencethey show signs of impairment as a result of one or more loss events that occurred after the initial recognition of the asset and the loss event(s) had an impact on the estimated future cash flows of the financial asset or asset group that can be reliably estimated. It may not be possible to identify a single loss event that individually caused the impairment.
~~An impairment loss for financial assets recorded at amortized cost is calculated as the difference between the asset’s~~(i.e. its carrying amount ~~and the present value of the estimated future cash flows, discounted using the original effective interest rate of the financial asset.~~
~~Losses expected as the result of future events, whatever their probability, are not recognized. Objective~~exceeds its recoverable amount). If any such evidence that an asset or group of assets is impaired includes observable data that comes to the attention of the asset holder about the following loss events: (i) significant financial difficulties of the issuer or the debtor; (ii) breach of a contract; (iii) granting of a concession by the lender to the issuer or the borrower, for economic or legal reasons relating to the borrower’s financial difficulty, that the lender would not otherwise consider; (iv) high probability of bankruptcy or other financial reorganization; (v) disappearance of an active market for a given financial asset due to financial difficulties; or (vi) evidence that there has been a measurable reduction in the estimated future cash flows from a group of financial assets since initial recognition, even if it cannot yet be identified with individual financial assets, including data such as: (a) adverse changes in the status of payments by borrowers included in the group; or (b) local or national economic conditions that are linked to delinquency for group assets).
·             Individually significant financial assets are examined individually to determine impairment. Remaining financial assets are evaluated collectively in groups that share similar credit risk characteristics. When the Bank determines that there is no objective evidence of impairment for an individually significant loan, it includes the loan in a group of loans of similar credit risk characteristics and collectively evaluates such loans for impairment.
All impairment losses are recognized in the income statement. Any cumulative loss related to available-for-sale debt instruments recognized previously in equity is transferred to the income statement, as explained in the circumstances note in j.5).
An impairment loss can only be reversed if it is objectively related to an event occurring after the impairment loss was recognized. Reversal of impairment on financial assets recorded at amortized cost and those classified as available-for-sale debt instruments is recorded in the income statement.
~~Non-financial asset~~
~~The carrying amounts of the Bank’s non-financial assets, excluding investment property and deferred taxes,~~
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~~are reviewed regularly, or at least every reporting period, to determine whether indications of impairment exist.~~ ~~If such indication~~ exists, the recoverable amount of the asset is ~~then estimated. The~~estimated, in order to determine the extent of the impairment loss.
If the recoverable amount of an asset is estimated to be less than its carrying amount, the ~~greater~~carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognized immediately in profit or loss.
Recoverable amount is the higher of fair value less costs to sell ~~whether for an asset or a cash-generating unit “CGU,”~~ and ~~its~~ value in use. ~~That recoverable amount is determined for an individual asset, unless the asset does not generate cash flows that are largely independent from the cash flows of other assets or asset groups.~~
~~When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered to be impaired and its value is reduced to its recoverable amount.~~
~~Upon~~In assessing ~~the~~ value in use, ~~of an individual asset or CGU,~~the estimated future cash flows are discounted to their present value using apre-tax discount rate that reflects current market assessments of the time value of money and the risks specific ~~risks that an~~to the asset ~~may have.~~for which the estimates of future cash flows have not been adjusted.
~~Impairment~~In connection with other assets, impairment losses ~~recognized~~recorded in prior ~~years~~periods are assessed at each reporting date ~~in search of any indication that~~to determine whether the loss has decreased ~~or disappeared. An~~and should be reversed. The increased carrying amount of an asset other than goodwill attributable to a reversal of an impairment loss ~~will be reversed only to the extent that the book value of the asset does~~shall not exceed the carrying amount that would have been determined ~~net~~(net of ~~depreciation~~amortization or ~~amortization, if~~depreciation) had no impairment loss ~~had~~ been ~~recognized.~~recognized for the asset in prior years. Goodwill impairment is not reversed.
The Bank shall assess at the end of each reporting period whether there is any indication that an impairment loss recognized in prior periods for an asset other than goodwill may no longer exist or may have decreased.
If any such indication exists, the entity shall estimate the recoverable amount of that asset.
In assessing whether there is any indication that an impairment loss recognized in prior periods for an asset other than goodwill may no longer exist or may have decreased, an entity shall consider, as a minimum, external sources of information, such as there are observable indications that the asset’s value has increased significantly during the period; significant changes with a favorable effect on the entity have taken place during the period, or will take place in the near future, in the technological, market, economic or legal environment in which the entity operates or in the market to which the asset is dedicated; market interest rates or other market rates of return on investments have decreased during the period, and those decreases are likely to affect the discount rate used in calculating the asset’s value in use and increase the asset’s recoverable amount materially and internal sources of information such as significant changes with a favorable effect on the entity have taken place during the period, or are expected to take place in the near future, in the extent to which, or manner in which, the asset is used or is expected to be used. These changes include costs incurred during the period to improve or enhance the asset’s performance or restructure the operation to which the asset belongs.
In the case of goodwill and indefinite useful life intangible assets or not yet available for use the recoverable amount is estimated at least annually.
When impairment exists the carrying amount of the asset shall be reduced to its recoverable amount if, and only if, the recoverable amount of an asset is less than its carrying amount. This reduction is an impairment loss.
An impairment loss shall be recognized immediately in profit or loss, unless the asset is carried at revalued amount in accordance with another standard. Any impairment loss of a revalued asset shall be treated as a revaluation decrease in accordance with that other standard.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-31
Note 1 – General Information and Summary of Significant Accounting Policies, continued

~~Goodwill~~When the amount estimated for an impairment loss is greater than the carrying amount of the asset to which it relates, an entity shall recognize a liability if, and only if, that is required by another standard. After the recognition of an impairment loss, the depreciation (amortization) charge for the asset shall be adjusted in future periods to allocate the asset’s revised carrying amount, less its residual value (if any), on a systematic basis over its remaining useful life.
If an impairment loss is recognized, any related deferred tax assets or liabilities are determined in accordance with IAS 12 “Income Taxes” by comparing the revised carrying amount of the asset with its tax base.
Impairment losses recognized in previous years are assessed at the end of each reporting period in order to identify any indication for impairment reduction or disappearance. The increased carrying amount of an asset other than goodwill attributable to a reversal of an impairment loss shall not exceed the carrying amount that would have been determined (net of amortization or depreciation) had no impairment loss been recognized for the asset in prior years.

(iii)
Goodwill
Goodwill is tested annually in order to determine ~~whether~~if impairment ~~exists~~losses exist and ~~when circumstances indicate~~whenever there is an indication that ~~its book~~the carrying value may be impaired. ~~Impairment~~The impairment of goodwill is determined by evaluating the recoverable amount of each ~~cash~~ CGU (or group of CGUs) to which the goodwill relates. An impairment loss is ~~allocated. Where~~recognized when the recoverable amount of the CGU is less than its carrying ~~amount, an~~amount.
For the purpose of impairment ~~loss is recognized.~~
~~Goodwill~~testing, goodwill acquired in a business combination shall, ~~be allocated as of~~from the acquisition date, ~~among the CGUs or group of CGUs~~be allocated to each of the ~~acquirer that are expected to benefit from the synergies~~acquirer’s cash-generating units, or groups of ~~the business combination, regardless~~cash-generating units irrespective of whether other ~~of the acquiree’s~~ assets or liabilities of the acquire are ~~allocated~~assigned to ~~these~~those units or groups of units. ~~Impairment losses relating to~~An impairment loss recognized for goodwill ~~cannot~~shall not be reversed in ~~future periods.~~a subsequent period.
~~In accordance with~~According to IAS 36 ~~“Impairment~~“Impairment of Assets” the annual impairment ~~testing is required~~test for a ~~CGU~~cash-generating unit to which goodwill has been allocated ~~and~~or for intangible assets with indefinite useful ~~lives.~~lives may be performed at any time during an annual period, provided the test is performed at the same time every year. Different ~~CGUs and different intangible assets can~~cash-generating units may be tested for impairment at different ~~times during the year as long as testing for the named asset is carried out at the same time each year.~~times.

q)
Property, plant and equipment
m)~~Property,~~Items of property, plant and equipment are measured at acquisition cost, net of accumulated depreciation and impairment, if any.
In addition to the price paid to acquire each item, the cost also includes, where applicable, the capitalized cost. The capitalized cost includes expenses attributed directly to the asset acquisition and any other costs directly attributable to the process of placing the asset in conditions to be used.
~~Property, plant~~When some part of an item of the plan and equipment ~~consist~~are measured has a different useful life to that fixed asset, it is recognized as a separate component (significant components of ~~buildings,~~plan and equipment are measured).
This item includes the amounts of property, land, furniture, vehicles, ~~computer hardware~~technological equipment and other ~~fixtures owned~~facilities own by the ~~Bank~~consolidated entities or acquired under ~~finance~~financial leases. These assets are classified based on their use in:

(i)
Property, plant and equipment for own use
Property, plant and equipment for own use includes but is ~~measured at acquisition cost less accumulated depreciation and accumulated impairment losses. Property, plant and equipment also includes~~not limited to tangible assets received by the consolidated entities in ~~lieu~~full or partial satisfaction of ~~payment that~~financial assets representing accounts receivable from third parties which are intended to be held for continuing own use ~~(See letter bb) below)~~ and tangible assets acquired under finance ~~leases (see letter cc) below)~~leases. These assets are presented at acquisition cost less the related accumulated depreciation and, if applicable, any impairment losses (when net carrying amount was higher than recoverable amount). For accounting purposes, acquisition cost of the received asset is considered to be its net amount.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-32
Note 1 – General Information and Summary of Significant Accounting Policies, continued

Depreciation is calculated using the straight line method over the acquisition cost of assets ~~minus~~less their residual ~~value. The~~value, assuming that the land on which buildings and other structures stand has an indefinite life and, therefore, is not subject to depreciation.
~~The estimated useful lives and residual value of the items of property,~~ Property, plant and equipment ~~held for own use~~in leased properties are ~~reviewed at least~~depreciated over the shorter period of time between their useful lives or the term of the lease, unless it is certain that the Bank will acquire the property at the end of ~~each reporting period to determine significant changes therein. If changes are detected,~~ the ~~useful lives of the assets are adjusted by correcting the depreciation charge to be recorded~~
F-27

~~Table of Contents~~
~~in the consolidated statements of income in future years of the new useful lives.~~
lease.
Maintenance expenses relating to tangible assets held for own use are recorded as an expense in the period in which they are incurred.

(ii)
Assets leased out under operating leases
n)~~Loans~~The criteria used to record the acquisition cost of assets leased out under operating leases, to calculate their depreciation and ~~receivables~~their respective estimated useful lives, and to record the impairment losses thereof, are consistent with those described in relation to property, plant and equipment held for own use.

r)
Intangible assets
~~Loans~~Intangible assets are identified asnon-monetary assets (separately identifiable from other assets) without physical substance which arise as a result of legal or contractual rights or it is separable. The Bank recognizes an intangible asset, whether purchased or self-created (at cost), when the cost of the asset can be measured reliably and ~~receivables from customers~~it is probable that the future economic benefits that are attributable to the asset will flow to the Bank. The cost of intangible assets acquired in a business combination correspond to its fair value at the acquisition date.
Intangible assets are recorded initially at acquisition or production cost and ~~loans~~are subsequently measured at cost less any accumulated amortization and ~~receivables from banks, both originally granted~~any accumulated impairment losses.
An entity shall assess whether the useful life of an intangible asset is finite or indefinite and, if finite, the length of, or number of production or similar units constituting, that useful life. An intangible asset shall be regarded by the entity as having an indefinite useful life when, based on an analysis of all of the relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows for the entity.
The accounting for an intangible asset is based on its useful life. An intangible asset with a finite useful life is amortized over its useful life, and it is reviewed in order to determine if the asset is impaired, the amortization period and the amortization method shall be reviewed at least at each financialyear-end. An intangible asset with an indefinite useful life are not amortized and the entity tests for impairment by comparing its recoverable amount with its carrying amount annually and whenever there is an indication that the intangible asset may be impaired.
Internally developed computer software is recorded as an intangible asset if, among other requirements (basically the Bank’s ability to use or sell it), it can be identified and its ability to generate future economic benefits can be demonstrated.
Expenditure on research activities is recorded as an expense in the year in which it is incurred and cannot be subsequently capitalized.
(i)
Software
The software acquired by the Bank is recognized at cost less the accumulated amortization and ~~acquired,~~impairment, if any.
The expenses in software developed internally are ~~non-derivative financial~~recorded as assets ~~with fixed or defined charges that are not quoted on an active market and that~~when the Bank ~~has no~~is capable of proving its intention and ability to complete development, when internal use will generate future economic benefits, and when the cost of ~~selling immediately~~completing its development can be reliably measured. The capitalized costs of the software developed internally include all the direct costs attributable to the development of the software, and it is amortized over the course of its useful life. Software developed internally is recorded at cost less the accumulated amortization and losses from impairment.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
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Note 1 – General Information and Summary of Significant Accounting Policies, continued
The subsequent expenditures associated with the asset are capitalized only when future economic benefits from them will flow to the entity. The rest of the expenditures are recognized in income. Intangible assets are amortized on a straight-line basis over their estimated useful life; starting on the date it is ready for use.
(ii)
Generated in a business combination
According to IFRS 3 “Business combinations”, when an intangible asset is acquired or generated in a business combination it cost will be the fair value at the acquisition date. The fair value of an intangible asset represents expectations of market participants at the acquisition date over the probability that future economic benefits from the asset will flow to the entity. In other words, the entity expects that economic benefits flows to it, even though there is uncertainty about the date or the amount of them.
As set forth by IAS 38 “Intangibles Assets” and IFRS 3 “Business combinations”, the acquirer will recognize an intangible asset from the acquiree at the acquisition date separately from Goodwill independently if the asset was previously recognized by the acquiree before the business combination.
In connection with the aforementioned, the business combination between Itaú Chile y Corpbanca gave rise to intangible assets and Goodwill as indicated in Note 13 “Intangible Assets”.
(iii)
Other identifiable intangibles
Correspond to those intangible assets that can be identified, the Bank controls them, can be reliably measured and it is probable that future benefits will flow to the Bank.
s)
Factoring transactions
The Bank performs operations with their clients, in which they receive invoices and other credit representative trading instruments with or without recourse to the transferor, anticipating a percentage of the total amount receivable of the borrower upon collection. These transactions are valued at the disbursed amounts by the Bank in exchange for invoices or other credit representative trading instruments.
The price differences between the disbursed amounts and the nominal amount of the documents are recorded in the ~~short term. These items are valued initially at cost plus incremental transaction costs and subsequently measured at amortized cost using~~Consolidated Statement of Income as interest income applying the effective interest rate ~~method.~~method, over the term of the transaction. The responsibility of payment remains with the client (assignor).

t)
Leasing transactions
Accounts receivable for lease contracts, included as “Loans and accounts receivable form customers” correspond to installments for contracts that qualify as financial leases and are presented at nominal amounts net of unearned interest at year end. When the Bank is the lessor in a lease ~~agreement~~contract and transfers substantially all ~~incidental~~ risks and rewards ~~over~~of the ~~leased~~ asset, the transaction is ~~presented~~included as a loan.
o)~~Factored receivables~~Leased assets between consolidated entities are considered as assets for own use in the Consolidated Financial Statements.

(i)
Finance leases
~~Factored receivables~~Finance leases are ~~valued at~~leases that substantially transfer all the ~~purchase~~risks and rewards incidental to ownership of the leased asset to the lessee.
The Bank recognized as lending to third parties under “Loans and accounts receivable from customers” in the Consolidated Statement of Financial Position the sum of the present value of the lease payments receivable from the lessee, including the exercise price of the ~~loan. The price difference~~lessee’s purchase option at the end of the lease term, when at the inception of the lease it is reasonably certain that the lessee will exercise the option.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-34
Note 1 – General Information and Summary of Significant Accounting Policies, continued
When consolidated entities act as lessees, the leased assets are classified based on their nature in the Consolidated Statement of Financial Position, and recognizing an asset and liability at the same amount (the lower between the ~~amounts paid and the current face~~fair value of the ~~receivables is recognized as deferred interest income derived from~~leased property and the ~~related receivables and recorded as interest income over the financing period, except if such receivables are derecognized.~~
p)~~Lease receivables~~
Lease receivables, included in “loans and receivables from customers” are periodic payments from lease agreements that meet certain requirements necessary to qualify as finance leases. These receivables are presented at the aggregatepresent value of the minimum lease payments, plus ~~residual value net~~purchase option). These assets are depreciated in accordance with property, plant and equipment for own use criteria.
In both cases, income and expenses arising from these contracts are recorded under “Interest income” and “Interest expense”, respectively, in Consolidated Statement of ~~unearned interest as of year-end.~~Income to achieve constant return rate over the lease term.

(ii)
Operating leases
~~Assets~~In operating leases, ownership of the leased ~~among~~asset and substantially all the risks and rewards incidental thereto remain with the lessor.
When the consolidated ~~companies~~entities act as lessor, the leased assets are ~~treated as~~classified at their acquisition cost under “Property, plant and equipment”. The depreciation criterion for these assets is consistent with that for similar items of property, plant and equipment held for own use and revenues from operating leases is recorded on a straight line basis under “Other operating income” in the Consolidated Statement of Income.
When the consolidated entities act as the lessees, the lease expenses, including any incentives granted by the lessor, are charged on a straight line basis to “Administrative expenses” in the Consolidated Statement of Income.
u)
Expected credit losses allowance – under IFRS 9
Starting from January 1, 2018, the Bank replaced the “incurred loss” model of IAS 39 with an “expected credit loss (ECL)” model established by IFRS 9. The new impairment model applies to all financial ~~statements.~~assets measured at amortized cost and debt securities measured at fair value through other comprehensive income (FVOCI), including commitment and contingent loans. Investments in equity are outside of the scope of the new impairment requirements.
The Bank accounted ECL related to financial assets measured at amortized cost as a loss allowance in the statements of financial position, but the carrying amount of these assets is stated net of the loss allowance. ECL related to contingent loans is accounted for as a provision in the statements of financial position. The Bank recognizes in profit or loss, as an impairment gain or loss, the amount of ECL (or reversal) that was required to adjust the loss allowance at the reporting date to the amount that is required to be recognized in accordance IFRS 9, for financial assets measured at amortized cost and contingent loans.
The new model uses a dual measurement approach, under which the loss allowance is measured as either:
12-month expected credit losses
Lifetime expected credit losses
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-35
Note 1 – General Information and Summary of Significant Accounting Policies, continued

The Bank has defined default on an individual or collective basis as follows:
q)Individual: when exposure is more than 89 days past due, it has been restructured, it is in judicial collection, or it has beenwritten-off.
~~Allowances~~Collective: when exposure is more than 89 days past due, it has been restructured, or has been identified as impaired by an internal risk committee.
For collective assessment purposes, financial assets are grouped based on characteristics of shared credit risk, considering the type of instrument, credit risk classifications, initial recognition date, remaining term, industry, geographical location of the counterparty, among other significant factors.
An instrument is considered to be no longer in default when it no longer meets the default criteria for a consecutive period between4-11 months, depending on the type of loan.
The ECL measurement basis depends on whether there has been a significant increase in credit risk since initial recognition. Based on changes in credit quality since initial recognition, IFRS 9 outlines a “three-stage” model impairment in accordance with the following diagram:
Change in credit quality since initial recognition
Stage 1
Stage 2
Stage 3
Initial recognition Significant increase in credit risk (“SICR”) since initial recognition Credit impaired assets
12-month expected credit losses Lifetime expected credit losses Lifetime expected credit losses
The Bank, at the end of each reporting period, evaluates whether a financial instrument’s credit risk has significantly increased since initial recognition or whether an asset is considered to be credit-impaired, and consequently classify financial instrument in the respective stage:
Stage 1: When loans are first recognized, the Bank recognizes an allowance based on 12 months ECL. Stage 1 loans also include facilities where the credit risk has improved and the loan ~~losses~~has been returned to Stage 1.
Stage 2: When a loan has shown a significant increase in credit risk since origination, the Bank records an allowance based on lifetime ECL. Stage loans also include facilities where the credit risk has improved and the loan has been returned to stage 2.
Stage 3: Loans considered credit-impaired. The Bank records an allowance based on lifetime ECL, setting the Probability of Default (“PD”) at 100%.
The Banks assessment of a SICR and the calculation of ECL both incorporate forward-looking information. The Bank performs historical analysis and identify the key economic variables that impacts credit risk and ECL for each portfolio. These can include GDP, inflation, interest rates, and unemployment, among others. Where applicable, we incorporate these economic variables and their associated impacts into our models.
Credit risk assessment and forward looking information (including macro-economic factors), includes quantitative and qualitative information based on the Bank’s historical experience, some examples are:
a. Financial or economic conditions that are expected to cause a significant change in the borrower��s ability to meet its debt obligations
b. An actual or expected internal credit rating downgrade for the borrower or decrease in behavioral scoring
c. An actual or expected significant change in the operating results of the borrower.
d. Significant increases in credit risk on other financial instruments of the same borrower.
e. Significant changes in the value of the collateral supporting the obligation or in the quality of third-party guarantees or credit enhancements.
f. Reductions in financial support from a parent entity or other affiliate.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-36
Note 1 – General Information and Summary of Significant Accounting Policies, continued

~~Clients~~g. Expected changes in the loan documentation including an expected breach of contract that may lead to covenant waivers or amendments, interest payment holidays, interest ratestep-ups, requiring additional collateral or guarantees, or other changes to the contractual framework of the instrument.
The Bank has considered that if contractual payments are ~~individually~~more than 30 days past due, the credit risk is deemed to have increased significantly since initial credit recognition, but is not an absolute indicator. The bank did not rebut the backstop presumption of IFRS 9 relating to SICR or default.
i.
Expected credit loss measurement
The ECL are the probability-weighted estimate of credit losses, i.e. the present value of all cash shortfalls. A cash shortfall is the difference between the cash flows that are due to an entity in accordance with the contract and the cash flows that the entity expects to receive. The three main components to measure the ECL are:
PD: The Probability of default is an estimate of the likelihood of default over a given time horizon. A default may only happen at a certain time over the assessed ~~for impairment mainly considering~~period, if the ~~significance~~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 ~~year end. Large number~~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 measuring12-month and lifetime ECL, cash shortfalls are identified as follows:
12-month expected credit losses: the portion of lifetime expected credit losses that represents the expected credit losses that result from default events on the financial instruments that are possible within the 12 months after the reporting date.
Lifetime expected credit losses: the expected credit losses that result from all possible default events over the expected life of the financial instrument.
The Bank considered a multi-factor analysis to perform credit risk analysis. The type of portfolio or transactions, and whether individually or collectivelly assessed.
The Bank divides its portfolio in commercial loans, mortgage loans, consumer loans and contingent loans.
The Bank assesses individually whether objective evidence of impairment exists for ~~amounts~~loans that are individually significant, then collectively assesses loans that are not individually significant and loans which are ~~collectively assessed~~significant but for ~~impairment. The criteria used for determining whether the financial assets are individually significant is periodically reviewed by the Bank.~~
~~The impairment losses on these loans are determined:~~
·             ~~individually, for all individually significant loans and for those~~ which although not significant, cannot be classified as part of homogenous groups of loans of similar characteristics, i.e., by type of loan, customer’s industry and geographical location, type of guarantee, age of past-due amounts, etc.
·             ~~collectively, for those with similar credit risk characteristics.~~
·             ~~when the Bank determines that~~ there is no objective evidence of impairment ~~for an~~available under individually ~~significant~~assessment.
ii. Contingent loans
The Bank enters into various irrevocable loan ~~it includes~~commitments and contingent liabilities. Even though these obligations may not be recognized on the ~~loan in a group~~statements of ~~loans of similar~~financial position, they contain credit risk ~~characteristics~~ and, ~~collectively evaluates such loans for impairment.~~
~~Criteria for determining impairment losses may consist of:~~
·             ~~significant financial difficulty on the~~therefore, form part of the ~~customer;~~
·             ~~evidence of a deterioration~~overall risk of the ~~customer’s ability to pay, either because~~Bank.
When the Bank estimates the ECL for contingent loans, it ~~is in arrears or for other reasons;~~estimates the expected portion of the loan commitment that will be drawn down over its expected life.
·             ~~the probability that the customer will enter bankruptcy or other financial reorganization; and/or~~
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-37
Note 1 – General Information and Summary of Significant Accounting Policies, continued

F-28iii. Forward looking information

~~Table~~The ECL model includes a broad range of ~~Contents~~forward looking information as economic inputs, such as:

·             ~~observable data~~GDP growth
Unemployment rates
Central Banks interest rates
Real estate prices
iv. Modifications of financial assets
When a loan measured at ~~a portfolio (collectively analyzed) level indicating~~amortized cost has been renegotiated or modified but not derecognized, the Bank recognizes the resulting gains or losses as the difference between the carrying amount of the original loans, and modified contractual cash flows discounted using the EIR before modification.
For ECL estimation purposes of financial assets that have been modified, the Bank is required to distinguish between modification that result in derecognition from those that does not result in derecognition. If the modification does not result in derecognition, then the subsequent assessment of whether there is a ~~measurable decrease~~significant increase in credit risk is made comparing the ~~estimated future~~risk at the reporting date based on the modified contractual term and the risk at initial recognition based on the original, unmodified contractual term.
If the modification results in derecognition, then the modified asset is considered to be a new asset. Accordingly, the date of modification is treated as the date of initial recognition for the purposes of the impairment requirements.
v. Collateral
The Banks seeks to use collateral to mitigate its credit risks on financial assets, where possible. Types of collateral are cash, securities, letters of credit, real estate and inventories. The Bank’s accounting policy for collateral assigned to it through its lending arrangements under IFRS 9 is the same is it was under IAS 39. Collateral, unless repossessed, is not recorded on the Bank’s statements of financial position. However, the fair value of collateral affects the calculation of ECLs. The main collateral associated to mortgage loans are real estate, which are valued based on data provided by specialized third parties.
The estimation of ECL reflects the cash flows ~~although~~expected from collateral and other credit enhancement that are part of the ~~decrease~~contractual terms of the financial instruments.
According to the Bank’s policy when an asset (real estate) is repossessed, it is transferred to assets held for sale at its fair value less cost to sell and classified asnon-financial assets at the repossession date.
i) Guarantees
Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it occurs because a specified debtor fails to make payments when due, in accordance with the terms of a debt instruments. Such financial guarantees are given to banks, financial institutions and others on behalf of customers to secure loans, overdrafts and other banking facilities.
Financial guarantee contracts are initially measured at fair value and subsequently measured at the higher of:
The amount of the loss allowance (calculated as described in note 28); and
The premium received on initial recognition less income recognized in accordance with the principles of IFRS 15.
Loan commitments provided by the Bank are measured as the amount of the loss allowance (calculated as described in note 28). The Bank has not provided any commitment to provide loans at a below-market interest rate, or that can be settled net in cash or by delivering or issuing another financial instrument.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-38
Note 1 – General Information and Summary of Significant Accounting Policies, continued
For loan commitments and financial guarantee contracts, the loss allowance is recognized as a provision. However, for contracts that include both a loan and an undrawn commitment and the Bank cannot ~~yet be ascribed to individual loan in~~separately identify the ~~portfolio, such as adverse changes in the payment status of customer in the portfolio or national or local economic conditions that correlate with defaults~~expected credit losses on the ~~loans in~~undrawn commitment component from those on the ~~portfolio.~~loan component, the expected credit losses on the undrawn commitment are recognized together with the loss allowance for the loan. To the extent that the combined expected credit losses exceed the gross carrying amount on the loan, the expected credit losses are recognized as a provision.
vi. Charge-offs
~~Write-offs~~
~~Loans and receivables are written off (the entire unpaid principal balance and related accrued interest balance)~~The gross carrying amount of a financial asset is reduced when ~~we have determined that~~ there is no ~~longer any realistic prospect~~reasonable expectation of recovery. Acharge-off constitutes a derecognition event of the corresponding loan transaction in its entirety, and therefore, include portions notpast-due for installments loans or leasing operation (no partialcharge-off).
Subsequent recoveries of amounts previouslycharge-off are credited to the income statements, as recovery of ~~part or all of~~loans previouslycharged-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 ~~loans and receivable. The internal estimated~~ time ~~frames from initial impairment to write-off are~~periods expired since reaching overdue status, as ~~follows:~~described below:

Type of ~~loans~~loan
Term
Consumer loans with or without ~~collaterals~~collateral
~~6 months~~
~~Consumer leasing~~
~~6 months~~
Other ~~non-real estate leasing operations~~
~~12 months~~
~~Other operations~~transactions without ~~collaterals~~collateral
~~24 months~~
Commercial loans with ~~collaterals~~collateral
Mortgage loans
Consumer leasing
Othernon-mortgage leasing transactions
Mortgage leasing (household and business)
6 months
24 months
36 months
~~Real estate leasing (commercial and mortgage)~~48 months
6 months
12 months
36 ~~months~~
~~Mortgage loans~~
48 months

v)
Allowance for loan losses – under IAS 39
~~Initial impairment starts~~Up to December 31, 2017, the Bank established allowances to cover incurred losses on loans and account receivables from ~~the date~~customers in ~~which all or part~~accordance with its internal models and risk assessment.
The Bank performed an assessment of the risk associated with loans and ~~receivables fall into arrears.~~accounts receivable from customers to determine their allowance for loan losses as described below:

~~Subsequent payments received~~Individual assessment - represented cases where the Bank assesses a debtor as individually significant, or when he/she could not be classified within a group of financial assets with similar credit risk characteristics, due to their size, complexity or level of exposure.
Group assessment - a group assessment was relevant for analyzing a large number of transactions with small individual balances from ~~written-off~~individuals or small companies. The Bank grouped debtors with similar credit risk characteristics giving to each group a default probability and recovery rate based on a historical analysis.
The Bank models determined allowances and provisions for loan losses according to the type of portfolio or transactions. Loans and accounts receivables from customers were divided into three categories:
i. Commercial loans,
ii. Mortgage loans, and ~~receivables are recognized in the income statement as recoveries.~~
iii. Consumer loans.

Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-39
r)~~Contingent assets~~
Note 1 – General Information and ~~liabilities~~
~~Contingent assets and liabilities are those operations or commitments in which the Bank assumes a credit risk upon committing itself to third parties, before the occurrence~~Summary of ~~a future fact, to make a payment or disbursement that must be recovered from its clients.~~Significant Accounting Policies, continued

The models used to determine credit risk allowances are described as follows:
I. Allowances for individual assessment
An individual assessment of commercial debtors was necessary in the case of companies which, due to their size, complexity or level of exposure regarding the entity, must be known and analyzed in detail.
For the purposes of establishing its provisions, the Bank ~~keeps~~assigned a ~~record~~risk category to each debtor, their loans and contingent loans. The risk factors considered were: industry or economic sector of the borrower, owners or managers of the borrower, their financial situation and payment capacity, and payment behavior.
For individually analyzed commercial loans, we used a risk classification process that combined parametrical variables with expert judgment, to assign risk categories to each individually analyzed customer. This process considered financial risk factors such as profitability, payment ability and financial indebtedness, and qualitative risk factors such as the economic sector in which the customer develops its activities, the management and experience of the owners, and its historical payment behavior.
As a result of this classification process, we differentiated the normal loans from the impaired ones, identifying three mayor categories:
1. Customers classified in risk categories A1, A2, A3, A4, A5 or A6. These customers were current or have less than 30 days overdue on their payment obligations and showed no significant signs of deterioration in their credit quality.
2. Customers classified in risk categories B1, B2, B3 or B4. These customers were overdue between 30 and 89 days on their payment obligations, thus showing a certain level of deterioration in their credit quality.
3. Customers classified as C1, C2, C3, C4, C5 or C6. This portfolio included customers whose loans with us have been in default (over 90) or were managed by a specialized collection area.
For loans classified as A1, A2, A3, A4, A5, A6, B1, B2, B3 and B4, we assigned a specific allowance percentage on an individual basis to each rating. The amount of the allowance for loan losses was determined based on debt servicing capacity, the company��s financial history, solvency and capacity of shareholders and management and projections for the industry sector in which the customer operates. There was a determined allowance percentage by group of customers with similar characteristics (i.e., A1, A2, A3, A4, A5, A6, B1, B2, B3 and B4).
Estimated Incurred Loan Loss = Allowance for Loan Losses
The Estimated Incurred Loan Loss (EIL) was determined by multiplying the risk factors as defined in the following ~~balances related~~equation:
EIL = EAD X PD X LGD X LIP
EAD = Exposure at Default
PD = Probability of Default
LGD = Loss Given Default
LIP = Loss Identification Period
Estimated Incurred Loss (EIL) meant the amount of impairment losses that were incurred, only if there was objective evidence that the estimated future cash flows of the financial asset or group of financial assets was impaired as a result of a loss event.
Exposure at Default (EAD) was the loan amount outstanding at the balance sheet date that was considered in the calculation and not any future movements and drawdowns.
Probability of Default (PD) meant the probability, expressed as a percentage that a customer will default within the next 12 months. This percentage was associated with the rating that given to ~~commitments~~each client.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-40
Note 1 – General Information and Summary of Significant Accounting Policies, continued
Loss Identification Period (LIP) meant the period between the time at which the event occurred and the date when the entity identified it.
Loss Given Default (LGD) meant the effective loss rate given for default to customers in the same risk category, which was determined statistically based on the historical effective losses.
Allowances for loan losses for each C risk category were based mainly on the value of the collateral, adjusted for the estimated expenses associated with the recovery and asset sale discounted by the effective interest rate. The allowance percentage for each category was then based mostly on the level of collateral.
II. Allowances for group assessments
The Bank used the concept of estimation of incurred loss to quantify the allowances levels over the group-evaluated portfolios, considering the risk and the guarantees associated with each transaction.
Following the Bank’s definition, the Bank used a group evaluation to approach transactions that have similar credit risk features, which indicated the debtor’s payment capacity over the entire debt, principal and interests, pursuant to the contract’s terms. In addition, this allowed us to assess a high number of transactions with low individual amounts, whether they belong to individuals or SMEs (small and medium sized companies).
Therefore, debtors and loans with similar features were grouped together and each group has a risk level assigned to ~~liabilities of its own line of business in memorandum accounts: collateral~~it.
These models were meant to be used mainly to analyze loans granted to individuals (including consumer loans, credit lines, mortgage loans and ~~guarantees, confirmed foreign letters of credit, documentary letters of credit issued, bank vouchers, inter-bank vouchers, freely disposable lines of credit, other credit commitments~~commercial loans) and commercial loans to small tomiddle-sized entities (SMEs).
Allowances were established using these models, taking into account the historical Impairment and other ~~contingencies.~~known circumstances at the time of evaluation. After this, a historical loss rate was assigned to each portfolio profile constituting each evaluated group.
Allowances for group-evaluated loans were established based on the credit risk of the profile to which the loan belongs. The method for assigning a profile was based on statistical building method, establishing a relation through logistic regression of various variables, such as payment behavior in the Bank, payment behavior outside the Bank, various sociodemographic data, among others, and a response variable that determined a client’s risk level, which in this case was 90 days ofnon-performance (the chosen features are relevant when calculating future cash flows per group of assets). Afterwards, common profiles were established and with differentiated default rates, applying the real historical loss the Bank had with that portfolio.
The different risk categories were constructed and updated periodically based on the payment behavior of the client’s profile to which they belong, as well as his or her sociodemographic characteristics. Therefore, when a customer had past due balance or has missed some payments, the outcome was that the customer will move to a different segment with a higher loss rate, therefore capturing current trends for each risk profile.
Allowance quantification, once the customers were classified, was the product of three factors: exposure (EXP), Probability ofNon- Performance (PNP) and Severity (SEV), the same equation used for individual assessment mentioned above.
The estimated incurred loss rates for group-evaluated loans corresponded to charge-offs net of recoveries. The methodology established the period in which the estimated incurred loss for each risk profile emerges. Once the was considered as incurred, the estimated incurred loss rates were applied to the corresponding risk profile to obtain the netcharge-off level associated with this period. The loss rates applied to each risk profile were based only on the historical netcharge-off data for that specific profile within one of the four groups of loans (consumer loans, credit lines, mortgage loans and commercial loans). No other statistical or other information other than net charge-offs was used to determine the loss rates.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
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Note 1 – General Information and Summary of Significant Accounting Policies, continued

s)~~Provisions~~To determine the estimated incurred loss for commercial and ~~contingent liabilities~~mortgage loans collectively evaluated for impairment, we mainly analyzed the payment behavior of clients, particularly the payment behavior of clients with payments that are more than 90 days overdue, clients with other weaknesses, such as early nonperformance (i.e., payments that arepast-due, though by less than 90 days), clients with modified loans and clients with renegotiated loans, as well as success in recovery against these clients. We also took into account whether the loan is supported by collateral.
In connection with mortgage loans, historical net charge-offs were considered in the model to calculate loss rates for loans collectively evaluated for impairment. The risk categories were such that when a customer has apast-due balance or has missed some payments, the outcome was that the customer will move to a different risk category with a higher loss rate, therefore capturing current trends of the customer and, when aggregate, current trends in the market.
Our models for loans analyzed on a group basis (consumer loans, residential mortgage loans andsmall-and-mid- sized commercial loans) were monitored on a monthly basis with respect to predictability and stability, using indicators that seek to capture the underlying need to update the models for current loss trends. Therefore, the periods of historical net charge-offs used in the allowance model may were more than a year old as we only updated the historical net charge-offs when our assessment of predictability and stability indicators determine it was necessary.
For allowances calculation purposes, guarantees were treated according to the following, as applicable:
1)
Collateral and guarantees. Could be considered when the legal documentation for the guarantee can be directly linked to specific loans in a way that the coverage was clear and the rights over the guarantor is unquestionable.
2)
Property guarantees.In order to apply the deduction method to determine recovery rates, valuation of property and other guarantees (mortgages or financial instruments guarantees) must reflect the net inflow that will be obtained in the assets sale, debts instruments or shares, in case of the debtor defaulting and a secondary source of payment is required. According to this, the recovery amount for a loan by guaranties execution corresponded to the present value of the amount if the asset was sold in current market conditions at disposal, minus expenses required to keep the asset in its current conditions and to sell them, all this in accordance with the Bank policies and terms established by Law for assets disposal.
3)
Financial guarantees.The adjusted fair value of this type of guarantees could be deducted from the exposition amount only when the guarantee can be established with the unique aim to guarantee compliance with the related loans.
Leased assets
Estimated losses when establishing allowances based on the assessment method corresponding to each debtor, considered the amount that would have been obtained if the leased asset was sold, taking into account any potential impairment for the assets in case of debtor’s default and the related recovery and relocation expenses.
Factoring operations
Establishing allowances for factoring operations considered as counterparty the entity ceding rights over the endorsed in favor of the Bank when the cession was recourse for the latter, and to the debtor when the cession has been made without recourse.
III. Charge-offs
As a general rule, charge-offs should be done when all collection efforts have been exhausted. These charge-offs consisted of derecognition from the Consolidated Statements of Financial Position of the corresponding loans transactions in its entirety, and, therefore, included portions not past due of a loan in the case of installments loans or leasing transactions (no partial charge-offs exist).
Subsequent payments obtained fromcharged-off loans were recognized in the Consolidated Statements of Income as a recovery of loans previouslycharged-off.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
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Note 1 – General Information and Summary of Significant Accounting Policies, continued

~~Provisions are liabilities involving uncertainty about their amount or maturity. They are~~Loan and accounts receivable charge-offs were recorded for overdue and current installments based on the time periods expired since reaching overdue status, as described below:
Type of loan
Term
Consumer loans with or without collateral
Other transactions without collateral
Commercial loans with collateral
Mortgage loans
Consumer leasing
Othernon-mortgage leasing transactions
Mortgage leasing (household and business)
6 months
24 months
36 months
48 months
6 months
12 months
36 months
IV. Recovery of loans previously charged off and accounts receivable from customers
Any payment agreement of an alreadycharged-off loan did not give rise to income—as long as the operation was in an impaired status—and the effective payments received were accounted for as a recovery from loans previouslycharged-off.
Recovery of previouslycharged-off loans and accounts receivable from customers, were recorded in the Consolidated Statements of ~~Financial Position~~Income as a deduction from provisions for loan losses.
In accordance with ourcharge-off policy described in iii) above, we may subsequently recovered a portion of the amountcharged-off (at 100%). The allowance for loan losses on our collectively evaluated loans incorporates an expected recovery rate based on historical information. At the time wecharged-off the carrying amount of any loans which have been collectively evaluated for impairment, the allowance for loan losses on collectively evaluated loans was replenished to reflect incurred losses based on statistical models developed in compliance with IAS 39 on the remaining pool of loans. The amounts required for replenishment were recorded in the financial statements as provision established.
w)
Income taxes and deferred taxes
The Bank has recognized an expense (income) arising from gains or losses for each year, according to the applicable taxation rules for each country or jurisdiction it operates.
The Bank records, when appropriate, deferred tax assets and liabilities for the estimated future tax effects attributable to differences between the carrying amount of assets and liabilities and their tax bases. The measurement of deferred tax assets and liabilities is based on the tax rate, in accordance with the applicable tax laws, using the tax rate that applies to the period when the ~~following requirements~~deferred asset and liability will be settled. The future effects of changes in tax legislation or tax rates are ~~met:~~recorded in deferred taxes beginning on the date on which the law is enacted or substantially enacted.

x)
Provisions and contingent assets and liabilities
·~~a present (legal or implicit) obligation has arisen from a past event; and~~
·~~as of~~When preparing the ~~date~~financial statements of the consolidated ~~financial statements, it is probable that~~entities, the ~~Bank and/or its controlled entities will have to disburse resources to settle~~Bank’s directors made a distinction between:
Provisions: credit balances covering present obligations at the ~~obligation and the amount can be reliably measured.~~
~~A contingent liability is any obligation that arises~~reporting date arising from past events which could give rise to a loss for the consolidated entities, which is considered to be more likely than not to occur and certain as to its nature but uncertain as to its amount and/or timing.
Contingent liabilities: possible obligations that arise from past events and whose existence will be confirmed only ifby the occurrence ornon-occurrence of one or more future events not wholly within the control of the consolidated entities. They include the present obligations of the consolidated entities when it is not probable that an outflow of resources embodying economic benefits will be required to settle them. The Group does not recognize the contingent liability. The Group will disclose a contingent liability, unless the possibility of an outflow of resources embodying economic benefits is remote.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
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Note 1 – General Information and Summary of Significant Accounting Policies, continued
Contingent assets: possible assets that arise from past events and whose existence is conditional on, and will be confirmed only by, the occurrence ornon-occurrence of one or more uncertain future events ~~occur that are~~ not wholly within the control of the ~~Bank and its controlled entities.~~
Group. Contingent assets are not recognized in the consolidated balance sheet or in the consolidated income statement, but rather are disclosed in the notes, provided that it is probable that these assets will give rise to an increase in resources embodying economic benefits.
The ~~annual~~Group’s consolidated financial statements include all the material provisions with respect to which it is considered that it is more likely than not ~~that~~ the obligation will have to be settled. In accordance with accounting standards, contingent liabilities must not be recognized in the consolidated financial statements, but must rather be disclosed in the notes.
Provisions, ~~that~~which are quantified on the basis of the best information available ~~information regarding~~on the consequences of the event ~~that gives~~giving rise to them and are ~~re-estimated~~reviewed and adjusted at the end of each ~~accounting period~~year, are used to ~~cover~~cater for the specific obligations for which they were originally ~~recognized, and~~recognized. Provisions are fully or partially reversed ~~in full or in part~~ when ~~those~~ such obligations cease to exist or are reduced.
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~~Table of Contents~~
Provisions are classified ~~into the following groups in the Consolidated Statements of Financial Position based on~~according to the obligations ~~they cover:~~covered as follows (See Note 20):
·~~Employee benefits~~Provision for pensions and ~~staff salaries~~
·~~Mandatory dividends~~
·~~Contingencies~~
t)~~Income and Deferred taxes~~
The Bank and its subsidiaries have recorded income tax expense for each reporting period in accordance with current tax laws in the country where each of its entities and subsidiaries operates (see Note 14 “Income Taxes”).
~~The tax expense on profit for the period~~similar obligations: includes the ~~sum~~amount of ~~current taxes that result from applying current tax rates~~all the provisions made to cover post-employment benefits, including obligations topre-retirees and similar obligations.
Provisions for contingent liabilities and commitments: include the ~~taxable income for~~amount of the ~~period and the deferred tax expense recognized in consolidated profit or loss. The Bank and its subsidiaries recognize, when appropriate, deferred tax assets and~~provisions made to cover contingent liabilities ~~for future estimates of tax effects attributable to differences between the book and tax values of assets and liabilities.~~
~~Deferred tax assets and liabilities are determined based on the tax rate applicable in the period~~-defined as those transactions in which the ~~deferred tax assets~~Group guarantees the obligations of a third party, arising as a result of financial guarantees granted or contracts of another kind- and liabilities are expected to be recovered or settled. The effects of future changes in tax legislation or tax rates are recognized in deferred taxes when the tax legislation is enacted or substantially enacted. The effects of deferred taxes for temporary differences between the tax and book basis are recorded on an accrual basis in accordance with IAS 12 “Income Taxes.”
~~Tax Reforms~~
a.~~Chile~~
As of period end, the deferred taxes of the Bank and its Chilean subsidiaries have been adjusted based on the current corporate income tax rates contained in Law No. 20,780, published on September 29, 2014. The law progressively increases the tax rate to 21% for fiscal year 2014, 22.5% for 2015, 24% for 2016 and 25% for 2017 and beyond for taxpayers applying the Attributed Income System. Taxpayers applying the Partial Credit Imputation Regime will have a rate of 25.5% in 2017 and 27% in 2018 and beyond. The latter appliescontingent commitments -defined as irrevocable commitments that may give rise to the ~~Bank.~~
It should be pointed out that according to the new Article 14 of Chile’s Income Tax Law as amended by Law No. 20,899 of February 8, 2016, as of 2017, the Bank and Chilean subsidiaries are subject to the Partial Credit Imputation Regime, because public limited companies are subject to this regime, by default and unable to opt for the Attributed Income System.
b.~~Colombia~~
On December 29, 2016, Law No. 1,819 was published in Colombia. This law introduced a variety of amendments Colombia’s Tax Statutes, strengthened the role of the Colombian Internal Revenue Service (“DIAN”) and introduced several mechanisms to prevent tax evasion. One of the main amendments reduced the income tax rate for commercial year 2017 to 40%, consisting of a 34% general tax and a 6% surcharge. In 2018, the tax rate will fall to 37%, consisting of a 33% general rate and a 4% surcharge. Finally, from 2019 onwards, the income tax rate will be 33% and there will be no surcharge.
~~Deferred taxes for the Bank’s Colombian subsidiaries have been adjusted based on the new income tax rates contained in Law No. 1,819, published on December 29, 2016.~~
c.~~New York~~
On December 22, 2017, the United States enacted a tax reform statute that introduced various modifications to the system tax. This reform, among other things, reduced tax rates, modified international tax regulations
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~~Table of Contents~~
and made significant changes in the manner in which tax losses are recovered. One of the main modifications is related to a decrease in the income tax rate from 35% to 21% starting from January 1, 2018.
In light of these modifications, the deferred taxes of Chilean, Colombian and New York companies have been recorded according to the rates in the periods when reversal of each temporary difference is expected.
In consideration of the aforementioned legal changes, the deferred taxes of companies operating in Chile have been recorded at a maximum recovery or settlement rate of 27% for the temporary differences reversed as from 2018. For their part, the deferred taxes of companies operating in Colombia have been recorded at a recovery rate of 33%, for the temporary differences reversed as from 2019. The deferred taxes of New York branch have been recorded at a rate of 21%.
u)~~Derecognition~~recognition of financial ~~assets and liabilities~~assets.
~~Accounting~~Provisions for ~~transfers of financial assets is based on the degree and way in which the risks and rewards associated with the transferred assets are transferred:~~
1.         If the risks and rewards are substantially transferred to third parties (e.g.. unconditional sales, sales with repurchase agreements at fair value as of the date of repurchase, sales of financial assets with a purchase option deemed deep-out-of-the-money, use of assets in which the transferor does not retain subordinate financing or transfer any type of credit enhancement to the new holderstaxes and other ~~similar cases), the transferred asset is derecognized from the balance sheet and any rights or obligations retained or created upon transfer are simultaneously recognized.~~
2.         If the risks and rewards of the transferred financial asset are substantially retained (e.g.. sales of financial assets with repurchase agreements at fixed prices or for the sales price plus interest, securities lending agreements in which the borrower has the obligation to return the securities or similar assetslegal contingencies and other ~~similar cases)~~provisions: include the ~~transferred asset is not derecognized from the balance sheet and will continue to be valued using the same criteria used before the transfer. Otherwise, the following is recorded in accounting:~~
a)        ~~A financial liability for an amount equal to the consideration received, which is subsequently valued at amortized cost.~~
b)        ~~Both income from the transferred (but not derecognized) financial asset and expenses for the new financial liability.~~
3.         If the risks and rewards of the transferred financial asset are not substantially transferred or retained (e.g.. sales of financial assets with a purchase option deemed not deep-in-the-money or deep-out-of-the-money, use of assets in which the transferor assumes subordinate financing or another type of credit enhancement for part of the transferred asset and other similar cases), the following will be analyzed:
a)        ~~If the transferor has not retained control of the transferred financial asset, it will be derecognized, and any rights or obligations created or retained upon transfer will be recognized.~~
b)        If the transferor has retained control of the transferred financial asset, it will continue to be recognized in the Statement of Financial Position for an amount equal to its exposure to the changes in value that it may experience and a financial liability will be recognized for the financial asset transferred. The net amount of the ~~transferred asset~~provisions recognized to cover tax and legal contingencies and litigation and the ~~associated liability will be~~other provisions recognized by the ~~amortized cost of the rights~~consolidated entities. Other provisions includes, inter alia, any provisions for restructuring costs and ~~obligations retained if the transferred asset is measured at amortized cost, or the fair value of the rights and obligations retained if the transferred asset is measured at fair value.~~environmental measures.

y)
Employee benefits
~~As a result, financial assets will only be derecognized when the rights over the cash flows have been extinguished or when substantially all implicit rights and rewards have been transferred~~Short-term benefits
Correspond to ~~third parties. Likewise, financial liabilities are only derecognized from the Statement of Financial Position when the obligations they generate have been extinguished.~~
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~~Table of Contents~~
v)~~Employee Benefits~~
~~Short-term benefits~~
~~Short-term employee benefits are employee~~personnel benefits (other than termination benefits) that are ~~due~~expected to be ~~fully~~ settled within 12twelve months after ~~the~~year end ~~of the reporting period in~~over which the employees ~~render the related~~have rendered their services.
~~When an~~These are recognized when the employee has rendered the service ~~to an entity during an accounting period, the entity shall recognize~~and are measured at the undiscounted amount of ~~short-term employee~~ benefits expected to be paid in exchange for that service:

a)        ~~as an expense, unless another IFRS requires or permits the inclusion of the benefits in the cost of an asset.~~
b)as a liability (accrued expense), after deducting any ~~amount~~obligation already ~~paid.~~satisfied. If the amount already paid ~~exceeds~~is higher than the ~~undiscounted~~gross amount of the benefits, ~~an entity shall~~the Bank will recognize ~~that~~this excess as an asset ~~(prepaid expense) to the extent that the prepayment will lead to, for example,~~(amount paid in advance), when it represents a reduction inof future payments or a ~~cash refund.~~recoverable amount in cash.

~~Vacation~~as an expense when the entity consumes the economic benefit arising from the service provided by an employee in exchange for employee benefits, unless other IFRS requires or allows the recognition of those disbursements as part of the cost of an asset.
Personnel vacations
The annual cost of personnel ~~vacation~~vacations and benefits ~~is recorded~~are recognized on an accrual basis.

Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-44
~~Post-employment benefits~~
Note 1 – General Information and Summary of Significant Accounting Policies, continued

Post-employment benefits ~~are~~
Correspond to employee benefits (other than termination benefits and short-term employee benefits) that are ~~payable~~expected to be settled after the completion of employment. Post-employment ~~benefit~~benefits plans are agreements, formal orand informal, ~~arrangements under~~in which ~~an entity provides post-employment~~the Bank is committed to provide benefits ~~for~~to one or more ~~employees. Post-employment benefit plans~~employees after termination of their employment. Plans providing these benefits are classified as either defined contribution plans or defined benefit plans, depending on the economic substance of the plan as derived from its principal terms and conditions.
Other long-term benefits
~~Other long-term employee benefits include~~These are all employee benefits other than short-term employee benefits, post-employment benefits and termination benefits. Measurement is similar to defined benefit plans.
The standard requires a simplified method of accounting for other long-term employee benefits. In contrast to the accounting required for post-employment benefits, this method does not recognize new measurements in other comprehensive income.
Termination benefits
Termination benefits are employee benefits ~~payable~~provided in exchange for the termination of an employee’s employment, as a ~~result of either:~~consequence of:

a)        ~~an entity’s~~a decision of the entity to terminate anthe employee’s employment before the normal ~~retirement~~termination date; or
b)
the decision of an ~~employee’s decision~~employee to accept ~~voluntary redundancy~~an offer with benefits in ~~exchange for those benefits.~~order to terminate the employment before the normal termination date.
An entity ~~shall recognize termination benefits as~~recognizes a liability and an expense for termination benefits at the ~~first~~earlier of the following dates:

~~(i)~~when the entity can no longer ~~has a realistic possibility~~withdraw the offer of ~~withdrawal; or~~those benefits; and
~~(ii)~~     ~~when the entity recognizes restructuring costs that fall within the scope of IAS 37 “~~~~Provisions, Contingent Liabilities and Contingent Assets~~~~” and involve~~
•
when the entity recognizes costs for a restructuring that is within the scope of IAS 37 “Provisions, Contingent Liabilities and Contingent Assets” and involves the payment of termination benefits.
z)
Provision for mandatory dividends
The Bank recorded a provision for mandatory dividends calculated as a portion of income for the year in order to comply with dispositions of the Chilean Corporations Act (Ley de Sociedades Anónimas) which requires to distribute at least 30% of income of the year, consistent with the Bank’s internal policy. As of December 31, 2018 and 2017 the Bank provisioned 30% of its income for the year. This provision is recorded, as a deducting item, under the “Retained earnings – provision for mandatory dividends” line of the Consolidated Statement of Changes in Equity.
In the Bank’s bylaws, title VII, it is established that the Bank should distribute annually as a dividend to its shareholders, as a proposal of the Board of Directors and based on the number of shares, at least thirty percent (30%) of the net income of the year. Furthermore, no dividends distribution will take place if there are equity losses (negative reserves) until these losses are recovered or if a dividend distribution will cause anon-compliance of the capital requirements established by the Ley General de Bancos (General Bank Law).
For all matters related to dividends distributions, the Bank is subject to the terms incorporated in the Transaction Agreement (dated January 29, 2014 and its subsequent modifications), which was approved by the Ordinary Shareholders Meeting (dated March 11, 2016).
aa)
Assets received or awarded in lieu of payment
Assets received or awarded in lieu of payment of loans and accounts receivable from clients are recognized at their fair value (as determined by an independent appraisal). A price is agreed upon by the parties through negotiation or, when the parties do not reach an agreement, at the amount at which the Bank is awarded those assets at a judicial auction. In both cases, an independent appraisal is performed.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-45
Note 1 – General Information and Summary of Significant Accounting Policies, continued

w)~~Debt issued~~The excess of the outstanding loan balance over the fair value is charged to net income for the year, under “Provision for loan losses”.
Any excess of the fair value over the outstanding loan balance, less costs to sell of the collateral, is returned to the client. These assets are subsequently adjusted to their net realizable value less cost to sale, and the difference between the carrying value of the asset and the estimated fair value less costs to sell is charged to income, under “Other operating expenses”.

bb)
Customer loyalty programs
The ~~financial instruments~~Bank maintains a loyalty program to provide incentives to its customers, allowing them to purchase goods or services with certain benefits which are granted through credit cards issued by the Bank ~~and subsidiaries are classified in~~when they purchase according to the ~~Consolidated Statement of Financial Position within “debt issued,” where the~~conditions established for each loyalty program.
The Bank has an ~~obligation either~~adequate level of provisions in order comply with its current obligations and to ~~deliver cash or another~~properly reflect the associated expense when providing the benefits.

cc)
Non- current assets held for sale (in “Other Assets”)
F-Non-current32

~~Table~~ assets (or a group holding assets and liabilities for disposal) expected to be recovered mainly through the sale of ~~Contents~~
~~financial asset~~these items rather than through the continued use, are classified as held for sale. Immediately prior to ~~the holder, or to satisfy the obligation by the exchange~~this classification, assets (or elements of a ~~fixed amount of cash or other financial asset.~~
disposable group) are~~After initial measurement, debt issued is subsequently~~re-measured in accordance with the Bank’s policies. The assets (or disposal group) are measured at ~~amortized cost using~~ the ~~effective interest rate. Amortized cost is calculated by taking into account any discount, premium or cost related directly to the issuance~~.
x)~~Intangible assets~~
~~Intangible assets are identified as non-monetary assets (separately identifiable from other assets) without physical substance that arise as a result~~lower of ~~a legal transaction or are separately identifiable. They are assets for which cost can be estimated reliably~~carrying amount and ~~from which the consolidated entities consider it probable that future economic benefits will be generated. The cost of intangible assets acquired in a business combination is their~~ fair value asless cost to sell.
Impairment losses in initial classification of ~~the date of acquisition.~~
~~These intangible~~non-current assets held for sale and with subsequent gains and losses are recorded ~~initially at acquisition or production cost and~~in income. Gains are ~~subsequently measured at cost less any accumulated amortization or any accumulated impairment~~not recorded over previously recorded losses.

dd)
Earnings per share
~~An entity will evaluate whether~~Basic earnings per share are determined by dividing the ~~useful life~~net income attributable to the equity holders of ~~an intangible asset is finite or indefinite and, if finite, will evaluate~~ the ~~duration or~~Bank for the reported period by the weighted average number of ~~units~~shares outstanding during the reported period.
Diluted earnings per share are determined in the same way as basic earnings, but the weighted average number of ~~production or other similar units~~outstanding shares is adjusted to take into consideration the potential diluting effect of stock options, warrants, and convertible debt.
As of December 31, 2018, 2017 and 2016 the Bank did not have any instruments that make up its useful life. The entity will consider an intangible asset to have an indefinite useful life when, on the basis of an analysis of all relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows for the entity.generated dilution.

An intangible asset is accounted for based on its useful life. An intangible asset with a finite useful life is amortized over its economic useful life and reviewed to determine whether any indication of impairment may exist. The amortization period and method are reviewed at least once every reporting period. An intangible asset with an indefinite useful life is not amortized and the relevant entity will determine if the asset has experienced an impairment loss by comparing its recoverable amount to its carrying amount on a yearly basis and at any time during the year in which there is an indication that its value may be impaired.
~~(i) Software~~
~~Computer software acquired by the Bank is accounted for at cost less accumulated amortization and impairment losses.~~
Expenses for internally developed software are recognized as an asset when the Bank is able to demonstrate its intent and ability to complete development and use it internally to generate future economic benefits and can reliably measure the costs of completing development. Capitalized costs of internally developed software include all costs directly attributable to developing the software and are amortized over their useful lives. Internally developed software is accounted for at capitalized cost less accumulated amortization and impairment losses.
~~Subsequent expenses for the recognized asset are capitalized only when they increase the future economic benefit for the specific assets. All other expenses are recognized in profit or loss.~~
~~(ii) Arising from business combinations~~
In accordance with IFRS 3, when intangible assets are acquired and/or generated in a business combination, their cost is the fair value as of the date of acquisition. The fair value of an intangible asset must reflect the expectations of market participants as of the acquisition date regarding the likelihood that the future economic benefits incorporated into the asset will flow to the entity. In other words, the entity expects an inflow of economic benefits, even if there is uncertainty regarding the date or amount.
~~In accordance with IAS 38 “~~~~Intangible Assets~~~~” and IFRS 3~~ ~~“Business Combinations”~~~~, the acquirer shall~~
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recognize an intangible asset from the acquiree on the date of acquisition separately from goodwill, regardless of whether the asset had been recognized by the acquiree before the business combination.
~~The business combination between Banco Itaú Chile and Corpbanca gave rise to intangible assets and goodwill.~~
~~(iii) Other identifiable intangible assets~~
This item applies to intangible assets that qualify as identifiable, which means the assets are controlled by the Bank, their cost can be reliably measured and the assets are likely to generate future economic benefits.
y)~~Cash flow statement~~
ee)
Consolidated Statement of Cash Flows
The Bank presents ~~its~~ cash flows from operating activities, investing activities, and financing activities in a manner that ~~is most appropriate to~~best represent the nature of its ~~business. Classification by activity~~activities. The classification of cash flows into the aforementioned categories provides information that allows users to ~~assess~~evaluate the impact of ~~those activities on~~the transactions in the financial position of the ~~entity and~~Bank, as well as over the ~~amount~~ending balance of ~~its~~ cash and cash equivalents. This information ~~may~~can be also beuseful when evaluating the relation between those activities (IAS 7).
For the preparation of the cash flow statement, the indirect method was used, ~~to evaluate~~starting with the ~~relationships among those~~Bank’s consolidatedpre-tax income and incorporatingnon-cash transactions, as well as income and expenses associated with cash flows, which are classified as operating, investment or financing activities.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-46
Note 1 – General Information and Summary of Significant Accounting Policies, continued

For the preparation of the cash flow statement, the Bank applied the indirect method, in which, starting with the Bank’s consolidated income before taxes, non-cash transactions were subsequently added/subtracted, as were income and expenses associated with cash flows classified as investing or financing activities.following items are considered:

~~The preparation of the cash flow statements takes the following items into account:~~
a)Cash ~~flows. The inflow or outflow~~flows: Inflows and outflows of cash and cash equivalents, ~~which includes~~such as deposits with the Central Bank of Chile, deposits in domestic ~~bank~~banks, and deposits ~~and~~in foreign ~~bank deposits (includes Bank of the Republic of Colombia deposits).~~banks.

b)Operating ~~activities. Normal~~activities: Principal revenue-producing activities performed by ~~the Bank, as well as~~banks and other activities that cannot be classified as ~~either~~ investing or ~~financing. In this~~financing activities. This section ~~the Bank~~ includes, among ~~other, items, investments under agreements to resell and obligations under repurchase agreements,~~others, foreign ~~borrowings, available-for-sale and held-to-maturity investments,~~loans obtained, dividends received, ~~from investment, etc.~~available for sale investments and held to maturity.

~~The Bank’s activity of granting loans encompasses~~Investing activities ~~with its debtors and related activities that provide the funding~~: Correspond to the ~~loans granted. Since the funding for granting such loans is provided by, among other sources, foreign borrowings, repurchase agreements~~acquisition and ~~securities lending, the company presents the related cash flows as operating activities.~~
c)                                     ~~Investment activities. The acquisition, sale or~~ disposal ~~by other means,~~ of long-term assets and other investments not included in cash and cash equivalents.
d)Financing ~~activities.~~activities: Activities that ~~produce~~result in changes in the size and composition of the ~~net shareholders’~~ equity and liabilities that are not part of operating activities ~~or investments.~~nor investing activities.
~~In the~~For cash flow statement ~~of cash flows,~~purposes, it has been considered as cash and cash equivalents ~~are defined as cash balances~~amounts included in “Cash and ~~bank~~ deposits in Banks” plus the net ~~balance~~amount of cash items in ~~the~~ process of collection, plus ~~highly-liquid~~ trading investment and ~~available-for-sale securities with insignificant~~FVTOCI / available for sale investment instruments highly liquid and minimal value change risk ~~of changing value, maturing in no more~~which due date is less than three months ~~from~~since the acquisition date ~~of acquisition~~ and ~~repurchase~~investments under resale agreements ~~with similar conditions. Cash and cash equivalents balances and their reconciliation to~~under the ~~cash flow statement are detailed in Note 5 “Cash and cash equivalents.”~~same terms.
~~The Statements of Cash Flows~~Includes also ~~includes~~ investments in ~~fixed-income~~fixed income mutual funds ~~that~~which are presented ~~together with~~under FVTPL / trading ~~securities~~investments in the Consolidated Statement of Financial Position. ~~Balances of~~The amounts for cash and cash equivalents and ~~their~~the corresponding reconciliation ~~with~~to the Consolidated Statement of Cash Flows are detailed in Note 5 “Cash and Cash ~~Equivalents.”~~
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Equivalents”.
The provision for loan losses ~~presented in~~included under the operating activities section ~~does not correspond to~~differs from the amount presented in the ~~statements~~Consolidated Statement of ~~income~~Income, because ~~for cash flow statement purposes, the provision for loan losses~~such amount excludes recoveries of ~~assets~~transactions previously ~~written-off.~~charged-off for cash flows purposes.

ff)
Consolidated Statement of Changes in Equity
z)~~Use~~The Consolidated Statement of ~~estimates~~Changes in Equity presents all movements affecting net equity, including those originated by accounting changes or errors recognition. This statement shows a conciliation between opening and ending balances for the year for all items that form part of consolidated equity, grouping transactions based on their nature, according to the following:

~~The preparation of the financial statements requires Management~~Adjustments due to ~~make estimates~~accounting changes and ~~assumptions that affect the application of the accounting policies and the reported amounts of assets, liabilities, revenues and expenses. Actual results may differ from these estimates.~~
~~The Bank has established allowances to cover incurred losses. Therefore to estimate the allowances, the allowances must be regularly evaluated taking into consideration factors such as~~errors recognition: Includes changes in ~~the nature and volume~~equity arising as a consequence of the loan portfolio, trends in forecasted portfolio quality, credit quality and economic conditions that may adversely affect the borrowers’ payment capacity. Increases in the allowances for loan losses are reflected as “Provisions for loan losses”restating amounts previously reported in the Consolidated ~~Statement of Income. Loans are write-off when Management determines that a loan~~Financial Statements resulting from accounting changes or ~~a portion thereof is uncollectible. Write-offs are recorded as a reduction of~~error recognition.
Net comprehensive income for the ~~provisions for loan losses.~~
~~The relevant estimates and assumptions are regularly reviewed by Management to quantify certain assets, liabilities, revenues, expenses, and commitments. Revised accounting estimates are recorded~~year: Includes, in ~~the period in which the estimate is revised and in any affected future period.~~
~~These estimates, made on the basis of the best available information, mainly refer to:~~
~~• Useful life of material and intangible assets (Notes 12, 13 and 30)~~
~~• Valuation of goodwill (Notes 12 and 30)~~
~~• Provisions (Note 19)~~
~~• Fair value of financial assets and liabilities (Notes 6, 7, 8, 11 and 33)~~
~~• Contingencies and commitments (Note 21)~~
~~• Impairment losses for certain assets (Notes 9, 10, 27 and 30)~~
~~• Current and deferred taxes (Note 14)~~
~~• Consolidation perimeter and evaluation of control (Note 1.2, letter c)).~~
~~aa)~~~~Mandatory dividends~~
~~The Bank records within liabilities (as a provision) the portion of profit~~an aggregated manner, net income for the year ~~that should be distributed to comply with~~and other comprehensive income for the ~~Chilean Corporations Act (30%)~~year.
Other changes in equity: Includes retained earnings distributions, equity increases, provision for mandatory dividends, dividends paid, among other increases or ~~its bylaws. For the years 2017~~decreases in consolidated equity.
This information is presented in two statements: The Consolidated Statement of Other Comprehensive Income and ~~2016, the Bank provisioned 30% and 50% of its profits, respectively. This provision is recorded within “provision for minimum dividends” by reducing “retained earnings” within~~ the Consolidated Statement of Changes in Equity.

Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
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~~Banco Itaú Chile had~~
Note 1 – General Information and Summary of Significant Accounting Policies, continued
gg)
Consolidated Statement of Other Comprehensive Income
In the Consolidated Statement of Other Comprehensive Income are presented income and expenses generated by the Bank as a ~~policy~~consequence of ~~not distributing dividends, but~~its regular activities during the year, clearly identifying those recorded in ~~accordance with~~profit and loss from those recorded in net equity.
Due to this, in this statement the ~~transaction agreement signed~~following is shown:
Income for the ~~integration~~year.
Net amount of ~~Corpbanca, the companies agreed to distribute 50% of the profit generated~~income and expenses recorded in equity as “Valuation accounts”.
Deferred income taxes originated by transactions described above, except for the year 2016. Notwithstanding the above, for the distribution of dividends for that year, on March 27, 2017, at an Ordinary Shareholders’ Meeting, the shareholders agreed to reduce said amount to MCh$618 (see note 22).
Title VII of the bylaws of Itaú Corpbanca establishes that the Bank must distribute an annual cash dividend to its shareholders, as proposed by the Board and prorated based on their shareholdings, of at least thirty percent (30%) of profit for each year. In any event, no dividends may be distributed if there are any capital losses until those ~~losses have been remedied, nor may dividends by distributes if any distribution would cause the Bank to breach any of the capital requirements in the Chilean General Banking Law.~~
For the purpose of distributing dividends, the Bank will adhere to the terms of the Transaction Agreement (signed January 29, 2014), which was approved at an Ordinary Shareholders’ Meeting held March 11, 2016.
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~~bb)~~~~Leasing~~
~~a. Finance leases~~
~~Finance leases are leases that substantially transfer all the risks and rewards incidental to ownership of the leased asset to the lessee.~~
When the Bank acts as the lessor of an asset, the sum of the present value of the lease payments receivable from the lessee plus the guaranteed residual value, which is generally the exercise price of the lessee’s purchase option at the end of the lease term, is recorded as loans to third parties and is therefore included under “Loans and accounts receivable from customers, net” in the Consolidated Statements of Financial Position.
When the Bank acts as lessee, it shows the cost of the leased assets in the Consolidated Statements of Financial Position based on the nature of the leased asset, and simultaneously records a liability for the same amount (which is the lower of the fair value of the leased asset and the sum of the present value of the lease payments payable to the lessor plus, if appropriate, the exercise of the purchase option). The depreciation policy for these assets is consistent with that for property, plant and equipment for own use.
In both cases, the finance revenues and finance expenses arising from these contracts is credited and debited, respectively, to “Interest income” and “Interest expense” in the Consolidated Statements of Income so as to achieve a constant rate of return over the lease term.
~~b. Operating leases~~
~~In operating leases, ownership of the leased asset and substantially all the risks and rewards incidental thereto remain with the lessor.~~
When the consolidated entities act as the lessor, they present the acquisition cost of the leased assets under property, plant and equipment. The depreciation policy for these assets is consistent with that for similar items of property, plant and equipment held for own use. Income from operating leases is recorded on a straight line basis under “Other operating income” in the Consolidated Statements of Income.
When the consolidated entities act as the lessees, the lease expenses, including any incentives granted by the lessor, are charged on a straight line basis to “Administrative and other expenses” in the Consolidated Statements of Income.
~~cc)~~~~Fiduciary activities~~
The Bank and its subsidiaries provide trust and other fiduciary services that result in the holding or investing of assets on behalf of customers. Assets held in a fiduciary capacity are not reported in the consolidated financial statements, as they are not the assets of the Bank. Contingencies and commitments arising from this activity are disclosed in Note 21 “Contingencies, Commitments and Responsibilities.”
~~dd)~~~~Non-Current assets held for sale~~
Non-current assets (or disposal groups made up of assets and liabilities) that are expected to be recovered primarily through sale, rather than through continued use, are classified as held for sale. Immediately before being classified as such, the assets (or elements of a disposal group) are remeasured in accordance with the Bank’s accounting policies. From this time forward, assets (or disposal groups) are measured at the lesser of the carrying amount or the fair value less costs to sell.
Impairment losses after the initial classification of assets held for sale and gains and losses after revaluation are recognized in profit or loss. Gains are not recognized if they exceed any accumulated loss.
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~~The Bank includes the following as non-current assets held for sale:~~
·             Assets received or awarded in lieu of payment of loans and accounts receivable from customers are initially recognized at the price agreed by the parties or when the parties do not reach an agreement, at the value at which the Bank is awarded those assets at a judicial settlement. Such values approximate the assets’ market value as the valuations are determined from market-based evidence by appraisals from by professionally qualified appraisers at the time of the receipt of the assets. The value as of December 31, 2017 was MCh$18.308 (MCh$ 18,855 as of December 31, 2016 and MCh$1,785 as of December 31, 2015).
·             ~~As of December 31, 2016, the values~~amounts related to the investment in SMU CORP S.A., after evaluating the requirements in IFRS 5, are classified as non-current assets available for sale. SMU CORP S.A. is a subsidiary that was acquired exclusively for resale. Its assetsexchange differences from foreign net investments.
Total amount of consolidated income and liabilities are valued at MCh$18,309 (disclosed in “Non-current assets held for sale”) and MCh$7,032 (disclosed in “Liabilities directly associated with non-current assets held for sale”). See Note 15 letter b) and Note 20 letter b).
~~As of December 31, 2016 the investment was available for immediate sale in its current condition and the sale was considered highly likely as the Bank’s senior management was committed~~expenses recorded attributable to the sale. The Bank had no intention of changing its mind regarding this sale and, therefore, had already begun the process of identifying a buyer, which it expected to conclude within a year. The transaction was completed within one year as detailed in Note 3 “Relevant Events”.
~~ee)~~~~Earnings per share~~
~~Basic earnings per share are determined by dividing the net income attributable to~~ equity holders of the Bank, ~~in a period by~~calculated as the ~~weighted average number~~sum of ~~shares outstanding during~~ the ~~period.~~items listed above, is presented separately fromnon-controlling interest.

hh)
New accounting pronouncements introduced by IASB
~~Diluted earnings per share are determined in a similar manner as basic earnings per share, but the net income attributable to equity holders of the bank~~1) Standards and ~~the weighted average number of outstanding shares are adjusted to take into account the potential diluting effect of stock options, warrants, and convertible debt.~~
~~As of December 31, 2017, 2016 and 2015, the Bank did not have instruments~~interpretations that ~~generated diluting effects on income attributable to equity holders of the Bank.~~
~~ff)~~~~Securitization~~
~~The Bank does not have any securitized financial liabilities or equity instruments.~~
~~gg)~~~~Statement of compliance with International Financial Reporting Standards (IFRS)~~
These consolidated financial statements for the years ended December 31, 2017, 2016 and 2015, have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the IASB.
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~~Application of International Financial Reporting Standards (IFRS)~~
a)~~The following new standards and interpretations~~ have been adopted in these Consolidated Financial ~~Statements:~~Statements
1.1
IFRS 9 “Financial Instruments”
On 1 January 2018, Itaú Corpbanca and subsidiaries adopted IFRS 9 ‘Financial Instruments’ (IFRS 9). The new or revised accounting policies are set out below.
The impact of applying IFRS 9 is disclosed in Note 2. The accounting policy changes for IFRS 9, set out below, have been applied from 1 January 2018. Comparatives have not been restated. As a result of the change from IAS 39 to IFRS 9, some disclosures presented in respect of certain financial assets are not comparable because their classification may have changed between as a result of the adoption of the new standard. This means that some IFRS 9 disclosures are not directly comparable and some disclosures that relate to information presented on an IAS 39 basis are no longer relevant in the current period. As explained in Note 2, the classification and measurement changes to financial assets that arose on adoption of IFRS 9 are aligned to the presentation in the Consolidated Statement of Financial Position. The Bank decided to continue adopting IAS 39 hedge accounting requirements and consequently there have been no changes to the hedge accounting policies and practices following the adoption of IFRS 9. However, additional hedge accounting disclosure requirements of IFRS 7 ‘Financial Instruments: Disclosures’ (IFRS 7) were included in these Consolidated Financial Statements.
In addition, new categories of financial instruments in accordance with IFRS 9 are presented in the Consolidated Statement of Financial Position as of December 31, 2018, as explained in detail in Note 2 to the Consolidated Financial Statements.
1.2 IFRS 15 “Revenues from contracts with customers”
On May 28, 2014, the IASB issued IFRS 15, which provides a single model to account for revenues from contracts with customers based on principles, through five steps that will be applied to all contracts with customers, i) contract identification, ii) performance obligations identification, iii) transaction price determination, iv) allocating the transaction price to performance obligations, v) recognize income when (or as) the entity satisfies a performance obligation.
Initially, IFRS 15 was to be applied in the first annual financial statements under IFRS for the year beginning on or after January 1, 2017, however, its entry into force has been deferred for annual periods beginning on or after January 1, 2018. The application of the standard is mandatory and its early adoption is permitted.
The adoption of this standard had no significant impact on the Consolidated Financial Statements. See Note 2.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-48
Note 1 – General Information and Summary of Significant Accounting Policies, continued

·1.2 Clarifications to IFRS 15 “~~Amendments~~Revenues from contracts with customers”
Issued on April 12, 2016, clarifies and ~~improvements~~offers some alternatives for the transition process. The subject are related with identification of performance obligations, principal and agent considerations and licenses.
This modifications shall be applied to annual periods beginning on January 1, 2018. Early adoption is allowed.
The adoption of this standard had no significant impact in the Consolidated Financial Statements.
1.3 Amendment to IFRS 2, “Share-based Payment” – Classification and measurement of transactions
Issued on June 20, 2018, it presents the following subjects:
Accounting of payments transactions based on shares settled in cash that includes a performance condition.
Classification of payment transactions based on shares with balance compensation features.
Accounting for changes in payment transactions based on shares that have been settled in cash and settled in equity instruments.
This amendment applies prospectively since January 1, 2018. The early adoption is allowed.
The adoption of this standard had no significant impact in the Consolidated Financial Statements.
1.4 IFRIC 22 “Foreign Currency Transactions and Advance Consideration”
Issued on December 8, 2016, it is applies to a transaction in foreign currency (or a part of it) when an entity recognizes anon-financial asset ornon-financial liability arising from the payment or receipt of an advance consideration before the entity recognizes the related asset, expense or income (or the part of these that corresponds). The interpretation provides a guide for a payment/ receipt, as well as for situations in which multiple payment/ receipt are made. It has as objective to reduce diversity in practice.
Its adoption is mandatory for periods beginning on or after January 1, 2018.
The adoption of this standard had no significant impact in the Consolidated Financial Statements.
1.5 Amendment to IAS 40 “Investment Property”, in relation to investments property transfers.
Issued in December 2016, it clarifies when there is a transfer to, or from, investment property.
This amendment is effective for periods beginning in or after January 1, 2018.
The adoption of this standard had no significant impact in the Consolidated Financial Statements.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-49
Note 1 – General Information and Summary of Significant Accounting Policies, continued

~~IAS Amendments to IAS 7, “Statement of cash flows”~~ — Published in February 2016. These amendments to IAS 7 introduce an additional disclosure that will enable users of financial statements to evaluate changes in liabilities arising from financing activities.1.6 Annual improvements - Cycle 2014 - 2016
The document covers the following standards, which begin after January 1, 2018:

•
Amendment to IFRS 1 “First-time Adoption of International Financial Reporting Standards”
It is related to the suspension of short-term exceptions for adopters for the first time with respect to IFRS 7, IAS 19 and IFRS 10.
The Bank’s Administration analyzed in detail this amendments and concludes that it does not apply, since the IFRS will not be transitioned for the first time in the mandatory year of the amendment.
•
Amendment to IAS 28, “Investments in Associates and Join Ventures”
In relation to the measurement of the associate or joint venture at fair value. The Bank’s Management concluded that this amendment does not apply, since neither the Bank nor its subsidiaries have joint ventures.
The adoption of this standard had no significant impact in the Consolidated Financial Statements.
2) Standards and interpretations that have not been adopted in these Consolidated Financial Statements
2.1 IFRS 16 “Leases”
On January 13, 2016, the IASB published a new standard, IFRS 16 “Leases”. The new standard shall imply that most leases are presented in the lessee’s balance under a single model, eliminating the distinction between operating and financial leases. However, the accounting for the lessors remains largely unchanged and the distinction between operating and financial leases is retained. IFRS 16 replaces IAS 17 “Leases” and related interpretations and is effective for periods beginning on or after January 1, 2019. Its early application is allowed, provided that IFRS 15 “Income from Contracts with Customers” is also applied.
The Bank’s management evaluated the impact of the adoption of this new standard ~~and concluded that~~through the valuation of its ~~application had no significant impact on its consolidated financial statements and presents~~lease agreements, recording an asset forright-of-use for an amount equal to the ~~additional disclosures in the Consolidated Statements of Cash Flows.~~
~~Amendments to IAS 12,~~ “~~Income taxes~~” ~~— Published in February 2016. These amendments on the recognition of deferred tax assets~~lease liability for ~~unrealized losses clarify how to account for deferred tax assets related to debt instruments measured at fair value, in the following aspects:~~
·             Losses on debt instruments measured at fair value and at cost for tax purposes give rise to a deductible temporary difference, regardless of whether the debt instrument’s holder expects to recover the carryingan amount of ~~the debt instrument by sale or by use.~~
·             ~~The carrying amount of an asset does not limit the estimation of probable future taxable profits.~~
·             ~~Estimates for future taxable profits exclude tax deductions resulting from the reversal of deductible temporary differences.~~
·             ~~An entity assesses~~MCh$176,795, which will generate a deferred tax asset in combination with other deferred tax assets. Where tax law restricts the utilization of tax losses, an entity would assess a deferred tax asset in combination with other deferred tax assets of the same type.
The Bank’s management evaluated the impact of adopting these amendments/new standards and concluded that the amendments would not impact tax disclosures because deferred taxes arising from unrealized losses are determined on the basis of their ability to be credited against tax concepts.
·~~Amendment to IFRS 12,~~ “~~Disclosure of interests in other entities”.~~ ~~This amendment clarifies the scope of IFRS 12. This amendment should be applied retrospectively for annual periods beginning on or after January 1, 2017.~~
~~The Bank’s management analyzed this amendment in detail and concluded that the disclosures under IFRS 12 that are applicable have been complied with materially.~~
b)~~The following new standards and interpretations have been issued but are not yet in effect as of December 31, 2017:~~
·~~Standards and interpretations~~
~~IFRS 9 “Financial instruments”~~ ~~- IFRS 9 “Financial Instruments” (2015) (IFRS 9) - IFRS 9 (2015). In July 2014, IASB approved IFRS 9 to replace IAS 39 “Financial Instruments: Recognition and Measurement.”~~
The IASB has published the full version of IFRS 9, which replaces the application guidance of IAS 39. This final version includes requirements relating to the classification and measurement of financial assets and liabilities and an expected credit loss model that replaces the current impairment loss model incurred. The section of IFRS9 relating to hedge accounting that is part of this final version of IFRS 9 had already been published in November 2013. Its early adoption is allowed.
~~The Bank currently expects that the first financial statements to be disclosed under IFRS 9 will be effective for those for the years ended December 31, 2018.~~
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a.~~Implementation of IFRS 9 “Financial Instruments”~~
~~The new standard is structured to address the following concepts:~~
I.           Classification and measurement of financial assets. The classification of financial assets should depend on two criteria: the entity´s business model for managing its financial assets and the characteristics of the contractual cash flow of financial assets;
·            The business model is determined at a level that reflects how the groups of financial assets are jointly managed to achieve a specific commercial purpose and generate cash flows, not depending on the management’s intentions with respect to an individual instrument. Accordingly, it represents whether cash flows will result from contractual cash flows, the sale of financial assets or both; and
·            Characteristics of the contractual cash flows of financial assets: identification of asset cash flows that constitute only payment of principal and interest by applying the Solely Payment Principal and Interest (“SPPS”) test.
II.          Allowances for impairment. The new standard introduces the concept of expected loss (including the use of prospective information) and classification in three phases. An asset will migrate from the phase as the credit risk deteriorates. If, in a subsequent period, the quality of a financial asset improves or the significant increase in the previously identified credit risk is reversed, the financial asset may return to the phase 1, unless it is a financial asset originated with credit recovery issues.
·            Phase 1. Credit losses expected for 12 months: represented possible default events within 12 months. Applicable to financial assets without significant increase in credit risk and no credit recovery issues in origination.
·            Phase 2. Permanent credit losses expected over the life of the financial instrument: resulting from any possible default event. Applicable to financial assets with a significant increase in credit risk, but which were not originated with recovery issues.
·            Phase 3. Permanent credit losses expected for assets with credit recovery issues: Applicable to financial assets considered to have credit recovery issues due to the occurrence of one or more events that negatively impact the estimated cash flows for such asset. Financial assets that are not originated with recovery issues, but that subsequently had recovery issues, differ from phase 2 due to the recognition of interest income by applying the effective interest rate at amortized cost (net of provision) rather than the gross carrying amount.
III.        Hedge accounting. The hedge accounting requirements are directly related to risk management and should be applied prospectively. Itaú Corpbanca will continue to apply the hedge accounting requirements established in IAS 39, as permitted by IFRS 9. An entity may elect to begin to apply the hedge accounting requirements of IFRS 9 after the transit to IFRS 9 at the beginning of any subsequent reporting period.
During the second half of 2017, Itaú Corpbanca conducted simulations to obtain a better understanding of the potential effect of the new accounting standard. The transition to IFRS 9 will cause, in accordance with management’s best estimate, a reduction in stockholder’s equity of not higher than 3.8%.
The impacts of the transition are based on the Bank’s best estimates as of the date of this report and the identified adjustments will be recognized in accumulated results as of the transition date, directly raising equity (prospectively).
~~The SBIF has not adopted IFRS 9 as part of the accounting standards and instructions issued by the SBIF. As a result the changes introduced to IFRS 9 are not currently expected to have any~~negative impact on the ~~financial statements used for regulatory purposes or~~solvency indicator of 11 basis points going from 14.62% to 14.53% on ~~its solvency indicators.~~
January 1, 2019.
~~IFRS 15 “Revenue from contracts with customers~~2.2 IFRIC 23 “Uncertainly over Income Tax Treatments” ~~— Published~~
Issued on ~~May 2014. This standard establishes the guidance that an entity must apply for the presentation of useful information to the users of the financial~~
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~~Table of Contents~~
statements in relation to the nature, amount, timing and uncertainty of the revenues and cash flows derived from contracts with customers. The basic principle is that an entity will recognize the revenues that represent the transfer of goods or services promised to customers in an amount that reflects the consideration that the entity expects to be entitled to in exchange for those goods or services. Its application supersedes IAS 11 “Construction Contracts”; IAS 18 “Revenue”; IFRIC 13 “Customer loyalty programs”; IFRIC 15 “Agreements for the construction of real estate”; IFRIC 18 “Transfers of Assets from Customers”; and SIC-31 “Barter transactions involving advertising services.” Early adoption is permitted.
~~The Bank’s management evaluated the impact of the adoption of this new standard and concluded that its application had no significant impact on its consolidated financial statements.~~
~~IFRS 16 “Leases~~” — Published in January 2016. This standard establishes the recognition, measurement, presentation and disclosure of leases. IFRS 16 replaces IAS 17 and introduces a single lease accounting model and requires a lessee to recognize the assets and liabilities of all leases with a maturity of more than 12 months, unless the underlying asset is of a low value. The objective is to ensure that lessees and lessors provide relevant information in a way that faithfully represents the transactions. IFRS 16 is effective for annual periods beginning on or after January 1, 2019, and its early application is permitted for entities applying IFRS 15 or before the date of the initial application of IFRS 16.
The Bank’s Management is evaluating the potential impact of the adoption of this new pronouncement through by analyzing its lease agreements, which will allow the Bank to reflect the effects both in its Consolidated Financial Statements and in its solvency indicators. For this, The Bank’s parent company (Itaú Unibanco Holding S.A) made available material that allowed us to define and identify the Bank’s initial status in this matter.
~~IFRS interpretation Committee (“IFRIC”) 22 “Foreign currency transactions and advance consideration~~” — Published in December 2016. This IFRIC standard addresses foreign currency transactions or parts of transactions in which consideration is denominated or priced in a foreign currency. The interpretation provides guidance for when a single payment/receipt is made as well as for situations where multiple payments/receipts are made. The guidanceJune 7, 2017, it aims to reduce ~~diversity in practice. Its application is mandatory for annual periods beginning on January 1, 2018.~~
~~The Bank’s management evaluated~~ the ~~potential impact of these amendments / new pronouncements on the Bank’s financial statements and concluded that there are no relevant impacts.~~
~~IFRIC 23 “Uncertainty over Income Tax Treatments”~~~~— Published in June 2017. This standard aims to reduce~~ diversity in how companies recognize and measure a tax liability or a tax asset when there is uncertainty ~~over~~about the treatment of income ~~tax treatments.~~tax. The ~~interpretation addresses~~Interpretation deals with how to reflect the uncertainty in accounting for income taxes ~~and is~~being applicable to the determination of the tax base (tax loss), tax bases, unused tax losses, ~~unused~~ tax credits not used and tax rates when there is uncertainty ~~over income~~about tax treatments under IAS 12. ~~This standard is effective~~
An entity shall apply this Interpretation for the annual reporting periods ~~beginning on or after~~as of January 1, 2019. Early application is permitted, and this fact must be disclosed.
Management do not expect that the adoption of this standard will have significant impact in the Consolidated Financial Statements.

Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-50
~~The Bank’s management is still in the process~~
Note 1 – General Information and Summary of ~~evaluating the potential impact of these amendments / new pronouncements.~~Significant Accounting Policies, continued

·~~Amendments and improvements~~
~~Amendments to IFRS 10 “Consolidated financial statements” and IAS 28 “Investments in associates and joint ventures”~~ ~~— Published in September 2014. These amendments address a conflict between the requirements of IAS 28 and IFRS 10 and clarify the treatment of the sale or contribution of assets from an~~
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~~Table of Contents~~
investor to its associate or joint venture. The amendments require the recognition in the investor’s financial statements of gains and losses arising on the sale or contribution of assets that constitute a business and a partial recognition of gains and losses where the assets do not constitute a business, i.e. a gain or loss is recognized only to the extent of the unrelated investors’ interests in that associate or joint venture.
~~On December 17, 2015, the IASB deferred the effective date for these amendments indefinitely.~~
The Bank’s management analyzed these amendments in detail and concluded that they do not apply to the Bank financial statements because the Bank does not engage in this type of transaction with its associates and does not currently have any joint ventures.
2.3 Amendment to IFRS ~~15,~~ 9 “~~Revenue from contracts~~Financial instruments”
Issued on October 17, 2017, this amendment allows more assets to be measured at amortized cost than in the previous version of IFRS 9, in particular some prepaid financial assets with ~~costumers”-~~ ~~Published in April 2016. These amendments comprise clarifications~~negative compensation. Qualifying assets, which include some loans and debt securities that would otherwise have been measured at fair value through profit or loss (FVTPL). To qualify for the amortized cost, the negative compensation must be “reasonable compensation for the early termination of the ~~guidance on identifying performance obligations, accounting for licenses of intellectual property and the principal versus agent assessment (gross versus net revenue presentation)~~contract”. ~~New and amended illustrative examples have been added for each of those areas of guidance and additional practical expedients related to transition to the new revenue standard.~~
~~This amendment is~~The amendments are effective for annual periods beginning on ~~or after~~ January 1, ~~2018, and its early application is permitted.~~
2019.
~~The Bank’s management evaluated the impact of~~According to Management the adoption of this ~~new standard and concluded that its application had no~~amendment is not expected to have significant impact ~~on its consolidated financial statements.~~in the Consolidated Financial Statements.
~~Amendments to IFRS 2,~~ “~~Share based payments.~~” Published in June 2016. This amendment clarifies the measurement basis for cash-settled, share-based payments and the accounting for modifications that change an award from cash-settled to equity-settled. It also introduces an exception to the principles in IFRS 2 that will require an award to be treated as if it was wholly equity-settled, where an employer is obliged to withhold an amount for the employee’s tax obligation associated with a share-based payment.
~~This amendment is effective for annual periods beginning on or after January 1, 2018.~~
~~The Bank’s management evaluated the potential impact of these amendments / new pronouncements on the Bank’s financial statements and concluded that there are no relevant impacts.~~
~~Annual Improvements Cycle 2014-2016.~~ ~~The document covers the following standards:~~
·~~Amendment to IFRS 1,’First-time adoption of IFRS’,~~ ~~- Published in December 2016.This amendment regards the deletion of short term exemptions for first-time adopters regarding IFRS 7, IAS 19, and IFRS 10.~~
The Bank’s management analyzed these amendments in detail and concluded that they do not apply to the bank´s financial statements because the Bank will not be a first-time adopter to IFRS during the year the amendment becomes effective.
·2.4 Amendment to IAS 28 ~~“Investments~~“Investments in Associates and ~~Joint Ventures” -~~ Join Ventures ~~Published~~”
Issued on October 17, 2017, this amendment clarifies that companies that account for long-term investments in ~~December 2016. This amendment relates to the fair value measurement of the~~an associate or joint ~~venture.~~
venture -where the equity method is not applied- using IFRS 9. The ~~Bank’s management analyzed these amendments in detail and concluded that they do not~~Board has published an example which illustrates how companies apply to the ~~bank´s financial statements because the Bank does not have investments in associates and joint ventures.~~
~~Materiality Practice Statement “Making materiality judgments”~~ — Published in September 2017. The practice statement provides guidance on how to use judgement when selecting information to provide in financial statements prepared applying IFRS Standards. It is a non-mandatory document that companies are permitted to apply to financial statements prepared any time after 14 September 2017.
~~Amendment to~~requirements of IFRS 9 ~~“Financial instruments”~~ ~~- Published in October 2017. The IASB issued Prepayment Features with Negative Compensation (Amendments to IFRS 9). Applying the amendments, if a specific~~
F-41

~~Table of Contents~~
~~condition is met, entities will be able to measure at amortized cost some prepayable financial assets with so-called negative compensation.~~
~~Information about the implementation of IFRS9, including this amendment is presented elsewhere in this note”.~~
~~Amendment to~~and IAS 28 ~~“Investments in Associates and Joint Ventures”~~ ~~— Published in October 2017, these amendments clarify that a company applies IFRS 9 “Financial instruments”~~ to long-term interests in an associate or ~~joint venture that form part of the net investment in the associate or~~a joint venture.
The amendments are effective for annual periods beginning on January 1, 2019.
These modifications do not apply because neither the Bank nor its subsidiaries have joint ventures.
2.5
Annual improvements – Cycle 2015- 2017
Amendment issued on December 2017 introduces the following improvements:
•
IFRS 3 “Business Combinations”/ IFRS 11 “Joint Arrangements” – Deals with the prior interest in a joint operation, as a business combination in stages.
•
IAS 12 “Income Taxes” – Deals with the consequences in income taxes of financial instruments payments classifies as equity.
•
IAS 23 “Borrowing Costs” – Deals with eligible costs for capitalization.
This amendment is effective for annual periods beginning on or after January 1, 2019.
These amendments / new pronouncements have no impact in the Consolidated Financial Statements.
2.6
Amendment to Conceptual Framework
In March, 2018, the International Accounting Standards Board (IASB) issued a complete set of concepts for the presentation of financial reports, the revised Conceptual Framework for financial information, replacing the previous version of the Conceptual Framework issued in 2010.
The revised Conceptual Framework has an effective date from January 1, 2020.
The Bank’s ~~management analyzed~~Management is evaluating the potential impact of the adoption of these amendments/ new pronouncements in its Consolidated Financial Statements.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-51
Note 1 – General Information and Summary of Significant Accounting Policies, continued
2.7
Amendment to IAS 19 “Employees benefits” – Reduction or liquidation
In February 2018, the International Accounting Standards Board (IASB) issued the Amendment, Reduction or Settlement of the Plan (Amendments to IAS 19). Modifications to accounting when a modification, reduction or liquidation of the plan occurs.
The amendments are effective for annual periods beginning on January 1, 2019.
These amendments/new pronouncements had no impact in the Consolidated Financial Statements.
2.8
Amendment to IFRS 3 “Business Combination” – Business definition
In October 2018, the International Accounting Standards Board (IASB) issued the Definition of a business to enable companies to decide whether the activities and assets they acquire are a business or simply a group of assets. Reducing the definitions of a company by focusing the definition of products on goods and services provided to customers and other income from ordinary activities, instead of providing dividends or other economic benefits directly to investors or reducing costs. Amendment to IFRS 3 or has a validity date from January 1, 2020.
The Bank’s Management is evaluating the potential impact of these amendments / new pronouncements in ~~detail and concluded that they do not apply~~its Consolidated Financial Statements.
2.9
Amendment to IAS 1 “Presentation of Financial Statements” and IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors”
In October, 2018, the IASB issued amendments to the ~~Bank´s~~aforementioned standards to align the definition of materiality across the standards and the Conceptual Framework for Financial Information. These amendments clarity the explanation of the definition of material and incorporate some of the guidance in IAS 1 on intangible information.
The amendments are effective for annual periods beginning on January 1, 2020.
The Bank’s Management is evaluating the potential impact of the adoption of these amendments / new pronouncements in its Consolidated Financial Statements.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-52
Note 2 – Accounting Changes
IFRS 9 “Financial instruments” adoption
The Bank has adopted IFRS 9 as issued by the IASB in July 2014 with a date of transition of January 1, 2018, which resulted in changes in accounting policies.
The adoption of IFRS 9 has resulted in changes in our accounting policies for recognition, classification and measurement of financial assets and financial liabilities and impairment of financial assets. IFRS 9 also significantly amends other standards dealing with financial instruments such as IFRS 7“Financial Instruments: Disclosures”.
As per the permitted transitional provisions of IFRS 9, the Bank elected not to revise comparative figures and thus some IFRS 9 disclosures presented in respect to certain financial assets are not comparable because their classification may have changed between both standards.
Any adjustments to the ~~statements because does not~~carrying amounts of financial assets and liabilities as of the date of transition were recognized as an adjustment to the opening balance of retained earnings. The Bank has also elected to continue to apply the hedge accounting requirements of IAS 39 on the adoption of IFRS 9.
Consequently, for disclosures purposes, the amendments to IFRS 7 have also been applied to the current period only. The comparative period disclosures shows those disclosures made in the prior year.
Set out below are disclosures regarding the impact of the adoption of IFRS 9 on the Bank and further details of the specific IFRS 9 accounting policies applied in the current period (as well as the previous IAS 39 accounting policies applied in the comparative period).
a) Classification and measurement of financial instrument


IAS 39 as of December 31, 2017

IFRS 9 as of January 1, 2018
Balance

Measurement
category

Portfolio

Book Value MCh$

Measurement
category

Portfolio

Book Value
MCh$
Trading investments    Fair value through profit or loss    Financial instruments classified as trading investments    415,061    Financial instruments at fair value through profit or loss    Financial instruments at fair value through profit or loss    423,855




Investments instruments    Fair value through profit or loss    Financial assets available for sale (including those that were valued at cost at December)    2,663,478    Financial instruments at fair value through other comprehensive income    Financial instruments at fair value through other comprehensive income    2,658,739




   Amortized cost    Financial assets classified as held to maturity    202,030    Amortized cost    Financial instruments at fair value through profit or loss    201,993




Loans and accounts receivable from customers    Amortized cost    Loans and accounts receivable from customers, net of allowances for loan losses according to IAS 39.    19,764,078    Amortized cost    Loans and accounts receivable from customers, net of allowances for loan losses according to IFRS 9.    19,642,032




Interbank loans    Amortized cost    Interbank loans, net of allowances for loan losses according to IAS 39.    70,077    Amortized cost    Interbank loans, net of allowances for loan losses according to IFRS 9.    70,077




Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-53
Note 2 – Accounting Changes, continued
b)
The following table shows in detail the reconciliation the consolidated balance sheet under IAS 39 as of December 31, 2017 to IFRS 9 as of January 1, 2018 distinguishing between the impacts due to classification and measurement and due to impairment once adopted IFRS9:


IAS 39
Carrying
amount
Reclassifications Remeasurements
IFRS 9
Carrying
amount

   As of December
31, 2017

As of January 1,
2018
   MCh$ MCh$ MCh$ MCh$
ASSETS

Cash and deposits in banks
   964,030 —   —   964,030
Cash items in process of collection
   157,017 —   —   157,017
Financial instruments at fair value through profit or loss
   —   421,331 2,524 423,855 (i )
Financial instruments at fair value through other comprehensive income
   —   2,657,208 1,531 2,658,739 (ii )
Interbank loans at amortized cost
   —   70,077 —   70,077 (iii )
Loans and accounts receivable from customers at amortized cost
   —   19,764,078 (122,046 ) 19,642,032 (iv )
Financial instruments at amortized cost
   —   202,030 (37 ) 201,993 (v )
Investments under resale agreements
   28,524 —   —   28,524
Financial derivative contracts
   1,248,775 —   —   1,248,775
Interbank loans, net
   70,077 (70,077 ) —   —
Trading investments
   415,061 (415,061 ) —
Loans and accounts receivable from customers, net
   19,764,078 (19,764,078 ) —   —
Available for sale investments
   2,663,478 (2,663,478 ) —   —
Held to maturity investments
   202,030 (202,030 ) —   —
Intangible assets
   1,562,654 —   —   1,562,654
Property, plant, and equipment
   130,579 —   —   130,579
Current taxes
   238,452 —   —   238,452
Deferred taxes
   140,685 —   46,144 186,829 (vi )
Other assets
   429,025 —   —   429,025
Othernon-current assets held for sale
   18,308 —   —   18,308


TOTAL ASSETS
   28,032,773 —   (71,884 ) 27,960,889


LIABILITIES
   —
Deposits and other demand liabilities
   4,141,667 —   —   4,141,667
Cash in process of being cleared
   109,496 —   —   109,496
Obligations under repurchase agreements
   420,920 —   —   420,920
Time deposits and other time liabilities
   10,065,243 —   —   10,065,243
Financial derivative contracts
   1,095,154 —   —   1,095,154
Interbank borrowings
   2,196,130 —   —   2,196,130
Debt instruments issued
   5,950,038 —   —   5,950,038
Other financial liabilities
   17,066 —   —   17,066
Current taxes
   624 —   —   624
Deferred taxes
   26,354 —   (2,550 ) 23,804 (vii )
Provisions
   117,889 —   59,691 177,580 (viii )
Other liabilities
   463,435 —   —   463,435
Liabilities directly associated withnon-current assets held for sale
   —   —   —   —


TOTAL LIABILITIES
   24,604,016 —   57,141 24,661,157


EQUITY

Attributable to equity holders of the Bank:

Capital
   1,862,826 —   —   1,862,826
Reserves
   1,290,131 —   —   1,290,131
Valuation accounts
   (4,735 ) —   997 (3,738 ) (ix )
Retained earnings:
   63,255 —   (126,865 ) (63,610 )
Retained earnings from prior years
   12,668 —   (59,044 ) (46,376 ) (x )
Net income for the year
   67,821 —   (67,821 ) —
Less: Provision for mandatory dividends
   (17,234 ) —   —   (17,234 )


Total equity attributable to equity holders of the Bank
   3,211,477 —   (125,868 ) 3,085,609
Non-controlling interest
   217,280 —   (3,157 ) 214,123 (xi )


TOTAL EQUITY
   3,428,757 —   (129,025 ) 3,299,732


TOTAL LIABILITIES AND EQUITY
   28,032,773 —   (71,884 ) 27,960,889


Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-54
Note 2 – Accounting Changes, continued
(i) Includes reclassifications and remeasurements of instruments previously classified as trading investments and investments in ~~associates~~equity instruments previously classified as Available for sale investments according to IAS 39.
(ii) Includes reclassifications and ~~joint ventures.~~remeasurements of financial assets previously classified as Available for sale instruments according to IAS 39.
(iii) Includes reclassifications of financial instruments previously classified as interbank loans according to IAS 39 and remeasurement of the allowances for expected credit losses under the new model according to IFRS 9.
(iv) Includes reclassifications of financial instruments previously classified as loans and accounts receivable from customers according to IAS 39 and remeasurement of the allowances for expected credit losses under the new model according to IFRS 9.
(v) Includes reclassifications of financial instruments previously classified as held to maturity investments according to IAS 39 and remeasurement due to allowances for expected credit losses under the new model according to IFRS 9.
(vi) Recognition of deferred taxes according to IAS 12 due to IFRS 9 adoption.
(vii) Recognition of deferred taxes according to IAS 12 due to IFRS 9 adoption.
(viii) Includes the recognition of provision for expected credit losses related to contingent loans under the new model according to IFRS 9.
(ix) Includes remeasurement due to recognition of credit risk related to financial assets classified as FVTOCI.
(x) Includes all the effects due to IFRS 9 first application.
(xi) Includes thenon-controlling portion of the effects arising from IFRS 9 first application.
There were no changes to the classification and measurement of financial liabilities.
The composition of the loan portfolio classified as loans and accounts receivable at amortized cost as of January 1, 2018 is as follows:

   Individual    Group
   Stage 1    Stage 2    Stage 3    Subtotals    Stage 1    Stage 2    Stage 3    Subtotals    Total loans
   12-Month
ECL    Lifetime
ECL    Lifetime
ECL    12-Month
ECL    Lifetime
ECL    Lifetime
ECL
Balances as of December 31, 2017
   —
432,862


73,894

   506,756
16,235,974


2,892,547


747,328


19,875,849

   20,382,605
Restatement of the prior year
   —      —      —      —      —      —      —      —      —
Balances as of January 1, 2018
   —      432,862    73,894
506,756


16,235,974

   2,892,547    747,328    19,875,849    20,382,605
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-55
Note 2 – Accounting Changes, continued

~~NOTE 2 ACCOUNTING CHANGES.~~IFRS 15 “Revenue from Contracts with Customers” adoption
On January 1, 2018, IFRS 15 “Revenues from contracts with customers” has become effective. In accordance with the Bank’s activities, income and expenses arising from fees and commission are under the scope of this new standard. Consequently a review over fees and commissions has been performed, to ensure the five step approach is fully met.
The Bank has elected to adopt IFRS 15 using a modified retrospective approach where the cumulative effect of initially applying it is recognized as an adjustment to the opening balance of retained earnings and comparatives are not restated.
The Bank concluded that there is no impact as of January 1, 2018, however new disclosure requirements must be adopted. See Note 1 and Note 24.
Changes in CVA and DVA accounting estimate
In June, 2018, improvements were made to the methodology for the determination of the CVA (Credit Value Adjustment) and DVA (Debit Value Adjustment), mainly in the determination of the Exposure and LGD (loss given default), which is part of the valuation of the Bank’s financial derivative contracts. These improvements generated a positive effect producing a lower loss of MCh$5,809 related to CVA and a negative effect producing a lower income of MCh$1,089 related to DVA, which has been recognized as a change in an estimate in accordance with IAS 8 “Accounting policies, changes in accounting estimates and errors”.

Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-56
~~No accounting changes have taken place in comparison with the prior periods presented, except for those mentioned in~~
Note 1.
~~NOTE~~ 3 ~~RELEVANT EVENTS~~– Significant Events
As of December 31, ~~2017,~~2018, the following ~~material~~significant events ~~affecting~~have influenced the operations of the Bank and its subsidiaries or the Consolidated Financial ~~Statements have occurred:~~Statements:
ITAÚ CORPBANCA
a.~~Distribution of Dividends~~.
Dividend Distributions
On March ~~13, 2017,~~15, 2018, the ~~Bank´s~~Bank’s Board of Directors (the “Board”) agreed to propose to the Bank’s shareholders at the Annual Ordinary Meeting ~~to be~~ held on March 27, ~~2017,~~2018 the distribution of ~~30%~~40% of ~~profit~~the income for the year ~~2016, or~~ended December 31, 2017 (as filed with the SBIF) equivalent to MCh$~~618,~~22,979, as a dividend to the shareholders of all 512,406,760,091 shares validly issued by the Bank, resulting in a dividend of Ch$~~0.001205475~~0.04484469 per share.
At the Annual Ordinary Shareholders Meeting ~~of the shareholders~~ of Itaú Corpbanca, held on March 27, ~~2017,~~2018, the shareholders approved the following:
~~1.-~~1. Distribution of ~~30%~~40% of ~~profit~~the income for the year ~~2016, or~~ended December 31, 2017 (as filed with the SBIF) equivalent to MCh$~~618,~~22,979, as dividends to shareholders, resulting in a dividend of Ch$~~0.001205475~~0.04484469 per ~~share entitled to dividends.~~share.
~~2.-~~2. The ~~final~~official appointment of Bernard Pasquier as Board of Directors Member, in accordance with article 50bis of the ~~following directors: Messrs. Pedro Samhan Escándar, Eduardo Mazzilli de Vassimon and Andrés Bucher Cepeda,~~Chilean Corporations Act who shall hold office until the next Annual General Meeting ~~at which time~~of Shareholders, when all ~~Board~~board members must be renewed. ~~Mr. Pedro Samhan Escándar was appointed as an independent director, in accordance with article 50 bis of the Chilean Corporations Act.~~
b.~~Modifications to the Board~~
Chief Executive Officer Appointment
On ~~February 23, 2017,~~August 1, 2018 the Bank’s Board of Directors (the “Board”) agree to appoint Mr. Manuel Olivares Rossetti as Chief Executive Officer, starting January 1, 2019. Until December 31, 2018 Mr. Milton Maluhy Filho served as the Bank’s Chief Executive Officer.
Change of Directors
In the ordinary session held on November 27, 2018, the Board of ~~Itaú Corpbanca was notified of and accepted the resignation of the director Nicolás Abovic Wiegand. On that same date, the Board~~Directors of Itaú Corpbanca ~~appointed Mr. Andrés Bucher Cepeda to replace him. Mr. Bucher shall hold~~accepted the resignations of directors Eduardo Vassimon and Boris Buvinic Guerovic, which became effective as of December 31, 2018.
As of January 1, 2019, Caio Ibrahim David and Milton Maluhy Filho, respectively, assume as Directors, who will remain in office until the next ~~Annual~~ Ordinary General Shareholders’ Meeting, at which ~~time shareholders shall ratify his appointment.~~final appointments will be made.
Participation increase of the shareholder Itaú Unibanco Holding S.A.
On October 12, 2018 the shareholder Itaú Unibanco Holding S.A. (“Itaú Unibanco”) announced that through its subsidiary ITB Holding Brasil Participações Ltda., indirectly acquired the amount of 10,651,555,020 shares (“Shares”) of Itaú Corpbanca, at the price of MCh$65,686. This type of operation is part of the Itaú Corpbanca shareholders’ agreement signed by Itaú Unibanco and Corp Group and its related entities, on April 1, 2016. As a result of this acquisition, Itaú Unibanco’s share has increased from approximately 36.06% to 38.14%, without any changes in the corporate governance of Itaú Corpbanca (see Note 23, letter a).
This operation was implemented through the acquisition of 100% of the shares of the companies named Saga II SpA and Saga III SpA, which are the actual owners of the Shares.
All regulatory approvals to carry out this operation were duly obtained.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-57
Note 3 – Significant Events, continued

F-42SBIF Administrative procedure
By resolution dated June 30, 2017, notified to Itaú Corpbanca on July 17, 2017, the SBIF resolved, among other matters, to order the continuation of a sanctioning administrative procedure against the Bank, for supposed transgressions of the individual credit limits in granting certain loans to Norte Grande S.A., Potasios de Chile S.A. and Sociedad de Inversiones Pampa Calichera S.A., same operations that had motivated fines annulled by the First Court of Appeals of Santiago by legal sentence dated August 31, 2016.
On July 19, 2017, the Bank appealed for a reversal against the resolution, considering it contrary to Law, among other reasons, considering that there is no administrative procedure instructed by the SBIF against the Bank that can be continued, as declared by the aforementioned procedure and by the ruling of the Supreme Court, which dismissed the appeal required by the SBIF against it. By resolution dated July 24, 2017, the SBIF rejected the aforementioned appeal for reconsideration, arguing that the proceeding was in the investigative stage, without the Bank being formally a forming part of a sanctioning administrative proceeding.
On October 23, 2017, the Bank received a letter from the SBIF, charging Itaú Corpbanca with a procedure for the same operations. The Bank has the conviction that this procedure does not comply with the Law, giving it the right to take action, as a consequence, that the legal order grants. On November 22, 2017, the Bank proceeded to formulate its corresponding releases.
Subsequently, through a letter dated December 27, 2018, the SBIF informed the conclusion of the investigation phase of the aforementioned sanctioning administrative procedure.
The results of this procedure and the Bank’s decision in this regard are detailed in Note 37 “Subsequent Events”
INSURANCE BROKERAGE SUBSIDIARIES
Merge of subsidiaries
On March 29, 2018, the partners of Itaú Chile Corredora de Seguros Limitada considered the conditions of the merger with Corpbanca Corredores de Seguros S.A. were successfully executed according to what was agreed by the partners on September 30, 2017. On April 1, 2018, the merger of Itaú Chile Corredora de Seguros Limitada into Corpbanca Corredores de Seguros S.A. was completed. For all legal purposes the legal continuation name is Itaú Corredores de Seguros S.A.
COMPANIES TRANSFORMATION
Itaú Corredores de Bolsa Limitada
Through an Extraordinary Shareholders Meeting held on July 11, 2018, reduced to a public document dated August 1, 2018 at the Santiago Notary Office of Mr. Juan Ricardo San Martin Urrejola, the shareholders approved the transformation of the company into a limited liability company under the Itaú Corredores de Bolsa Limitada corporate name, which will be governed by its bylaws and by the provisions of Law No. 3,918 and its subsequent amendments and the relevant regulations of the Civil Code and the Commercial Code.
Itaú Asesorías Financieras S.A.
On July 5, 2018, authorization was requested from the SBIF to transform Itaú Asesorías Financieras S.A. into a limited liability company. As of the date of these Consolidated Financial Statements, there is still no pronouncement from the regulator on this matter.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-58
Note 4 – Reporting Segments
The information reported by segments is determined by the Bank on the basis of its operating segments (Chile, that includes the New York Branch, and Colombia), which are mainly differentiated by the risks and rewards that affect them.
The reporting segments and the criteria used to inform the highest authority of the Bank on the decision making of the operation are in accordance with what is set forth in IFRS 8 “Operating Segments
a)
Segments
According to the above, the descriptions of each operating segment are as follows:
i) Chile
The Bank’s business activities in Chile take place mainly in the local market. It has strategically aligned its operations into the following five business areas that are directly related to its customers’ needs and the Bank’s strategy:1)Wholesale Banking (a) Corporate Banking, (b) Large Companies, and (c) Real Estate and Construction; 2) Retail Banking (a) Itaú Private Bank, (b) Itaú Companies, (c) Itaú Personal Bank (d) Itaú and (e) Banco Condell; 3) Treasury; 4) Corporate; and 5) Other Financial Services.
The Bank manages these business areas using a reporting system for internal profitability. The operating results are reviewed regularly by the entity’s highest decision-making authority for operating decisions as one single cash generating unit, to decide about resource allocation for the segment and evaluate its performance.
The Bank did not enter into transactions with a particular customer or third party that exceed 10% of its total revenue in 2018, 2017 and 2016.
ii) Colombia
Colombia has been identified as a separate operating segment based on the business activities. Its operating results are regularly reviewed by the entity’s highest decision-making authority for operating decisions as one single CGU, to decide on the resource allocation for the segment and evaluate its performance. Separate financial information is available for this segment.
The commercial activities of this segment are carried out by Itaú Corpbanca Colombia S.A. and subsidiaries
b)
Geographical information
The segments reported by Itaú Corpbanca, discloses revenue from ordinary activities from external clients:
(i)
attributed to the entity’s country of domicile and
(ii)
Attributed, in aggregate, to all foreign countries where the entity obtains revenue.
When revenue from external customers attributed to a particular foreign country is significant, it is disclosed separately. Pursuant to the foregoing, the Bank operates in two main geographic areas: Chile and Colombia.
Chile segment includes operations carried out by Itaú Corpbanca New York Branch and the Colombia segment includes the operations carried out by Itaú S.A. (Panama) and Itaú Casa de Valores S.A.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-59
Note 4 – Reporting Segments, continued
The information on interest income and interest expenses for the years ended December 31, 2018, 2017 and 2016 of the aforementioned geographic areas is presented below:

   2018 2017 2016
   Chile Colombia Total Chile Colombia Chile Colombia Total
   MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$
Interest income
   1,208,481 530,836 1,739,317 1,067,124 579,205 1,646,329 1,013,951 495,252 1,509,203
Interest expense
   (593,796 ) (257,858 ) (851,654 ) (529,584 ) (333,763 ) (863,347 ) (554,246 ) (315,782 ) (870,028 )


Net interest income
   614,685 272,978 887,663 537,540 245,442 782,982 459,705 179,470 639,175


c)
Information on assets, liabilities and income
Segment information on assets and liabilities is presented as of December 31, 2018 and 2017.
c.1 Assets and Liabilities
   As of December 31, 2018
   Chile    Colombia    Total
   MCh$    MCh$    MCh$
Cash and deposits in banks
   483,416    504,264    987,680
Cash items in process of collection
   318,433    225    318,658
Financial instruments at fair value through profit or loss
   54,162    42,781    96,943
Financial instruments at fair value through other comprehensive income
   1,594,955    1,062,199    2,657,154
Loans and accounts receivable at amortized cost and interbank loans
   16,616,358    4,439,256    21,055,614
Financial instruments at amortized cost
   122,385    76,538    198,923
Investments under resale agreements
   91,510    17,957    109,467
Financial derivative contracts
   1,266,218    102,739    1,368,957
Intangible assets
   1,432,529    138,435    1,570,964
Property, plant, and equipment
   78,430    17,134    95,564
Current taxes
   70,255    52,874    123,129
Deferred taxes
   151,194    27,492    178,686
Other assets
   378,691    123,106    501,797
Othernon-current assets held for sale
   59,802    —      59,802






TOTAL ASSETS
   22,718,338    6,605,000    29,323,338






   As of December 31, 2018
   Chile    Colombia    Total
   MCh$    MCh$    MCh$
LIABILITIES

Deposits and other demand liabilities
   2,463,722    1,836,753    4,300,475
Cash in process of being cleared
   247,165    —      247,165
Obligations under repurchase agreements
   370,623    644,991    1,015,614
Time deposits and other time liabilities
   8,104,729    2,016,382    10,121,111
Financial derivative contracts
   1,035,394    77,412    1,112,806
Interbank borrowings
   1,602,125    725,598    2,327,723
Debt instruments issued
   5,445,000    565,124    6,010,124
Other financial liabilities
   12,400    —      12,400
Current taxes
   528    663    1,191
Deferred taxes
   —      471    471
Provisions
   140,663    74,240    214,903
Other liabilities
   471,672    50,123    521,795
Liabilities directly associated withnon-current assets held for sale
   —      —      —






TOTAL LIABILITIES
   19,894,021    5,991,757    25,885,778






Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-60
Note 4 – Reporting Segments, continued

      As of December 31, 2017
   Note    Chile    Colombia    Total
      MCh$    MCh$    MCh$
Cash and deposits in banks
      609,279    354,751    964,030
Cash items in process of collection
      155,950    1,067    157,017
Investments under resale agreements
      2,292    26,232    28,524
Financial derivative contracts
      1,158,002    90,773    1,248,775
Trading investments
      25,652    389,409    415,061
Loans and accounts receivable from customers, net and interbank loans
      15,599,269    4,234,886    19,834,155
Available for sale instruments
      1,937,909    725,569    2,663,478
Held to maturity investments
      95,652    106,378    202,030
Intangible assets
      1,378,942    183,712    1,562,654
Property, plant, and equipment
      82,481    48,098    130,579
Current taxes
      202,093    36,359    238,452
Deferred taxes
      140,685    —      140,685
Other assets
      348,717    80,308    429,025
Othernon-current assets held for sale
      18,308    —      18,308






TOTAL ASSETS
      21,755,231    6,277,542    28,032,773






      As of December 31, 2017
   Note    Chile    Colombia    Total
      MCh$    MCh$    MCh$
LIABILITIES

Deposits and other demand liabilities
   16    2,399,159    1,742,508    4,141,667
Cash in process of being cleared
   5b )    109,496    —      109,496
Obligations under repurchase agreements
   7    44,264    376,656    420,920
Time deposits and other time liabilities
   16    7,868,572    2,196,671    10,065,243
Financial derivative contracts
   8    1,036,024    59,130    1,095,154
Interbank borrowings
   17    1,545,143    650,987    2,196,130
Debt instruments issued
   18    5,484,562    465,476    5,950,038
Other financial liabilities
   18    16,255    811    17,066
Current taxes
   14    624    —      624
Deferred taxes
   14    53    26,301    26,354
Provisions
   19    61,038    56,851    117,889
Other liabilities
   20    399,760    63,675    463,435
Liabilities directly associated withnon-current assets held for sale
   20    —      —      —






TOTAL LIABILITIES
      18,964,950    5,639,066    24,604,016






(*)
This includes goodwill generated in business combinations between Itaú Chile and Corpbanca totaling MCh$1,135,392 as of December 31, 2018 (MCh$1,126,663 in 2017).
c.2 Income for the years ended December 31, 2018, 2017, and 2016
   2018 2017 2016
   Chile Colombia Total Chile Colombia Total Chile Colombia Total
   MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$
Net interest income
   591,575 296,088 887,663 537,540 245,442 782,982 459,705 179,470 639,175
Net fee and commission income
   149,673 36,456 186,129 135,624 41,947 177,571 112,147 38,649 150,796
Net income from financial operations
   128,264 44,491 172,755 (49,615 ) 57,883 8,268 38,642 74,310 112,952
Net foreign exchange gain (loss)
   5,726 (23,691 ) (17,965 ) 34,661 11,504 46,165 (26,744 ) (22,104 ) (48,848 )
Other operating income
   14,337 12,319 26,656 33,398 8,134 41,532 9,058 10,389 19,447
Provision for loan losses
   (127,804 ) (151,994 ) (279,798 ) (169,233 ) (146,184 ) (315,417 ) (146,812 ) (99,178 ) (245,990 )


NET OPERATING PROFIT
   761,771 213,669 (975,440 ) 522,375 218,726 741,101 445,996 181,536 627,532


Depreciation and amortization
   (53,544 ) (33,273 ) (86,817 ) (51,213 ) (30,632 ) (81,845 ) (40,610 ) (23,082 ) (63,692 )
Operating expenses (*)
   (442,943 ) (211,767 ) (654,710 ) (424,733 ) (224,569 ) (649,302 ) (397,060 ) (155,875 ) (552,935 )


OPERATING INCOME
   265,284 (31,371 ) 233,913 46,429 (36,475 ) 9,954 8,326 2,579 10,905


Income taxes
   (85,269 ) 18,210 (67,059 ) 31,188 21,683 52,871 (84 ) 3,652 3,568
Income from discontinued operations
   —   —   —   —   —   —   (504 ) —   (504 )


CONSOLIDATED INCOME FOR THE YEAR
   180,015 (13,161 ) 166,854 77,617 (14,792 ) 62,825 7,738 6,231 13,969


(*) Includes personnel salaries and expenses, administrative expenses, impairment, and other operating expenses

Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-61
Note 5 – Cash and Cash Equivalents
a)
Detail of cash and cash equivalents
The detail of the balances included under cash and cash equivalents is as follows:

   As of December 31,
   2018    2017
   MCh$    MCh$
Cash and deposits in banks

Cash
   255,449    254,824
Deposits in the Central Bank of Chile
   70,444    53,187
Deposits in local banks
   4,422    9,389
Deposits in foreign banks
   657,365    646,630




Subtotals cash and deposits in banks
   987,680    964,030




Cash items in process of collection, net
   71,493    47,521
Highly liquid financial instruments (1)
   194,412    35,014
Investments under resale agreements (2)
   109,467    28,524




Totals cash and cash equivalents
   1,363,052    1,075,089




(1)
Highly liquid financial instruments: Corresponds to those financial instruments included in the Financial instruments at fair value through profit or loss Financial trading andavailable-for-sale portfolios with maturities that do not exceed three months from the acquisition date and the detail is as follows:
      As of December 31,
   Notes    2018    2017
      MCh$    MCh$
Highly liquid financial instruments

Financial instruments at fair value through profit or loss
   6    15,741    —
Trading investments
   6    —      19,239
Financial instruments at fair value through other comprehensive income
   11    178,671    —
Available for sale investments
   11    —      15,775




Totals
      194,412    35,014




(2)
Investments under resale agreements: corresponds to resale agreements with maturities that do not exceed three months from the acquisition date, which are presented under the item “Investments under resale agreements” in the Consolidated Statement of Financial Position. The detail is as follows:
      As of December 31,
   Notes    2018    2017
      MCh$    MCh$
Investment under resale agreements
   7a )    109,467    28,524
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-62
Note 5 – Cash and Cash Equivalents, continued
b)
Cash in the process of collection
a.
Cash in process of collection and in process of being cleared
Cash items in process of collection and in process of being cleared represent domestic transactions, which have not been processed through the central domestic clearinghouse, or international transactions that may be delayed in settlement due to timing differences. The detail of these balances is as follows:

   As of December, 31
   2018    2017
   MCh$    MCh$
Assets

Documents held by other banks (documents to be cleared)
   77,085    66,996
Funds receivable
   241,573    90,021




Subtotals assets
   318,658    157,017




Liabilities

Funds payable
   247,165    109,496




Subtotals liabilities
   247,165    109,496




Cash items in process of collection, net
   71,493    47,521




b.
Other operating cash flows
Based on the nature of its activities, the Bank considers that its funding has a direct relationship with its loan and investing portfolio; for such purpose all those activities are taken into consideration to determine, approve and monitor the financial strategies that guide the Bank with respect to the composition of its assets and liabilities, cash inflows and outflows and transactions with financial instruments.
Finally, the Bank, based on its overall business strategy, considers that gains and losses derived from these transactions are part of the main revenue generating activities and core business, and that the presentation of the cash flows from those items under operating activities consequently shows consistency between our Consolidated Statement of Income and our Consolidated Statement of Cash Flows.
Examples of cash flows from operating activities are:
i.Investments under resale agreements and obligations under repurchase agreements. These items represent the cash flows (collections and payments) corresponding to the purchase and sale of obligations and securities lending associated with financial intermediation activities (see Note 7).
ii.Investments portfolio.This item represents the cash flows (collections and payments) of our trading and investment portfolios (see Notes 6 and 11).
iii.Foreign borrowings and repayment of foreign borrowings. These items represent the cash flows (funds received and payments made) from interbank borrowings (see note 17) which are mainly used in the financing of customers through foreign trade loans, which are included as part of the following items: “Interbank loans” (see Note 9) and “Loans and accounts receivable from customers” (see Note 10).
iv.Increase and repayment of other borrowings.These items represent the cash flows (collections and payments) arising from the obligations corresponding to financing or operations specific to the business (see Note 18).
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-63
Note 6 – Financial Instruments at Fair Value through Profit or Loss and Trading Investments
a. The detail of the financial instruments at fair value through profit or loss according to IFRS 9 is as follows:
As of December 31, 2018
MCh$
Chilean Central Bank and Government securities
Chilean Central Bank securities
21,736
Other Chilean Central Bank and Government securities
14,872
Other Chilean securities
Bonds
3
Notes
4,014
Foreign financial securities
Bonds
23,276
Other securities
19,505
Investments in mutual funds
Funds managed by related entities
3,532
Other investments
Other financial instruments at FVTPL
10,005
Totals
96,943
As of December 31, 2018, the financial instruments at fair value through profit or loss include MCh$15,741 in instruments with maturities which do not exceed three months from the acquisition date and are considered as cash equivalents (see Note 5).
b. The detail of the trading investments according to IAS 39 is as follows:
As of December 31, 2017
MCh$
Chilean Central Bank and Government securities
Chilean Central Bank securities
3,963
Other Chilean Central Bank and Government securities
3,163
Other Chilean securities
Bonds
5
Other securities
—
Foreign financial securities
Bonds
381,262
Other securities
8,147
Investments in mutual funds
Funds managed by related entities
18,521
Other investments
Other trading investments
—
Totals
415,061
As of December 31, 2017 trading investments include MCh$19,239 in instruments with maturities which do not exceed three months from the acquisition date and are considered as cash equivalents (see Note 5).
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-64
Note 7 – Investments under Resale Agreements and Obligations under Repurchase Agreements
a.
The Bank purchases financial instruments agreeing to resell them at a future date. As of December 31, 2018 and 2017 the instruments acquired under resale agreements are as follows:

   As of December 31, 2018    As of December 31, 2017
   Up to 3
months    Between 3
months and 1
year    Over 1
year    Totals    Up to 3
months    Between 3
months and
1 year    Over 1
year    Totals
   MCh$    MCh$    MCh$    MCh$    MCh$    MCh$    MCh$    MCh$
Chilean Central Bank and Government securities

Chilean Central Bank securities
   14,533    —      —      14,533    2,292    —      —      2,292
Government securities
   76,977    —      —      76,977    —      —      —      —
Other Chilean Central Bank and Government securities
   —      —      —      —      —      —      —      —
Other Chilean securities

Bonds
   —      —      —      —      —      —      —      —
Notes
   —      —      —      —      —      —      —      —
Other securities

Foreign financial securities
   —      —      —      —      —      —      —      —
Central Banks and Government securities
   17,351    —      —      17,351    21,248    —      —      21,248
Other foreign instruments
   606    —      —      606    4,984    —      —      4,984
















Totals
   109,467    —      —      109,467    28,524    —      —      28,524
















b.
As of December 31, 2018 and 2017, the instruments acquired under agreements to repurchase are as follows:
   As of December 31, 2018    As of December 31, 2017
   Up to 3
months    Between 3
months and
1 year    Over 1
year    Totals    Up to 3
months    Between
3 months
and 1
year    Over 1
year    Totals
   MCh$    MCh$    MCh$    MCh$    MCh$    MCh$    MCh$    MCh$
Chilean Central Bank and Government securities

Chilean Central Bank securities
   21,018    —      —      21,018    —      —      —      —
Government securities
   283,898    —      —      283,898    11,703    —      —      11,703
Other Chilean Central Bank and Government securities
   —      —      —      —      —      —      —      —
Other Chilean securities

Bonds
   —      —      —      —      26,573    —      —      26,573
Notes
   —      —      —      —      5,988    —      —      5,988
Other Chilean securities
   65,707    —      —      65,707    —      —      —      —
Foreign financial securities

Central Banks and Government securities
   —      —      —      —      —      —      —      —
Other foreign instruments
   644,991    —      —      644,991    376,656    —      —      376,656
















Totals
   1,015,614    —      —      1,015,614    420,920    —      —      420,920
















Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-65
Note 8 – Financial Derivative Contracts and Hedge Accounting
The Bank and subsidiaries use the following derivative financial instruments for hedge accounting and trading purposes, which, in order to capture the credit risk in the valuation, are adjusted to reflect the CVA (Credit Value Adjustment). The detail of these instruments is presented below:

   As of December 31, 2018    As of December 31, 2017
   Assets    Liabilities    Assets    Liabilities
   MCh$    MCh$    MCh$    MCh$
Derivatives held for hedge accounting
   86,562    75,615    51,409    121,378
Derivatives held for trading
   1,282,395    1,037,191    1,197,366    973,776








Totals
   1,368,957    1,112,806    1,248,775    1,095,154








a.1 Financial derivative assets
   As of December 31, 2018
   Notional    Fair value
   Up to 3 months    Between 3 months
and 1 year    Over 1 year
   MCh$    MCh$    MCh$    MCh$
Currency forwards
   3,643,505    703,790    419,833    342,993
Currency swaps
   168,254    1,817,002    6,449,984    468,093
Interest rate swaps
   3,061,784    8,933,622    34,958,699    553,608
Call currency options
   26,435    102,163    17,750    4,217
Put currency options
   1,119    33,260    —      46








Totals
   6,901,097    11,589,837    41,846,266    1,368,957








   As of December 31, 2017
   Notional    Fair value
   Up to 3
months    Between 3
months and
1 year    Over 1 year
   MCh$    MCh$    MCh$    MCh$
Currency forwards
   8,855,360    5,728,141    700,252    316,901
Currency swaps
   92,772    299,288    3,260,432    396,239
Interest rate swaps
   5,781,923    10,258,903    23,469,906    534,505
Call currency options
   33,709    47,300    26,223    421
Put currency options
   6,675    9,827    25,808    709








Totals
   14,770,439    16,343,459    27,482,621    1,248,775








Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-66
Note 8 – Financial Derivative Contracts and Hedge Accounting, continued
a.2 Financial derivative liabilities

   As of December 31, 2018
   Notional    Fair value
   Up to 3 months    Between 3 months
and 1 year    Over 1 year
   MCh$    MCh$    MCh$    MCh$
Currency forwards
   1,406,262    550,427    113,872    322,241
Currency swaps
   658,937    1,035,357    3,169,546    298,415
Interest rate swaps
   3,111,787    5,826,465    26,522,433    489,718
Call currency options
   11,540    35,344    —      1,493
Put currency options
   16,367    38,172    11,115    939








Totals
   5,204,893    7,485,765    29,816,966    1,112,806








   As of December 31, 2017
   Notional    Fair value
   Up to 3 months    Between 3 months
and 1 year    Over 1 year
   MCh$    MCh$    MCh$    MCh$
Currency forwards
   9,023,102    5,821,573    807,071    333,482
Currency swaps
   109,275    414,355    2,822,789    290,288
Interest rate swaps
   5,481,548    8,843,640    20,720,506    468,928
Call currency options
   6,675    7,369    —      86
Put currency options
   17,629    25,459    415    2,370








Totals
   14,638,229    15,112,396    24,350,781    1,095,154








Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-67
Note 8 – Financial Derivative Contracts and Hedge Accounting, continued
a.3 Portfolio detail
As of December 31, 2018 and 2017, the portfolio of financial derivative instruments held for hedge accounting and trading purposes is as follows:

   As of December 31, 2018
   Notional    Fair value
   Up to 3 months    Between 3
months and
1 year    Over 1 year    Assets    Liabilities
   MCh$    MCh$    MCh$    MCh$    MCh$
Derivatives held for hedge accounting
   3,661,557    1,323,671    2,527,255    86,562    75,615










Fair value hedge

Currency forwards
   32,639    17,421    102,847    16,461    5,814
Currency swaps
   610,980    192,926    —      7,697    11,038
Interest rate swaps
   1,231    52,105    2,194,956    15,492    16,995










Subtotals
   644,850    262,452    2,297,803    39,650    33,847










Cash flow hedge

Currency forwards
   2,188,426    —      130,191    4,835    1,283
Currency swaps
   —      330,033    —      13,363    17,593
Interest rate swaps
   —      198,573    99,261    1,119    1,892










Subtotals
   2,188,426    528,606    229,452    19,317    20,768










Hedge of net investment in a foreign operation

Currency forwards
   828,281    532,613    —      27,595    21,000










Subtotals
   828,281    532,613    —      27,595    21,000










Derivatives held for trading
   8,444,433    17,751,931    69,135,977    1,282,395    1,037,191










Currency forwards
   2,000,421    704,183    300,667    294,102    294,144
Currency swaps
   216,211    2,329,400    9,619,530    447,033    269,784
Interest rate swaps
   6,172,340    14,509,409    59,186,915    536,997    470,831
Call currency options
   37,975    137,507    17,750    4,217    1,493
Put currency options
   17,486    71,432    11,115    46    939










Subtotals
   8,444,433    17,751,931    69,135,977    1,282,395    1,037,191










Totals
   12,105,990    19,075,602    71,663,232    1,368,957    1,112,806










Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-68
Note 8 – Financial Derivative Contracts and Hedge Accounting, continued

   As of December 31, 2017
   Notional    Fair value
   Up to 3 months    Between 3
months and
1 year    Over 1 year



   MCh$    MCh$    MCh$    MCh$    MCh$
Derivatives held for hedge accounting
   2,950,441    1,195,024    3,516,621    51,409    121,378










Fair value hedge

Currency forwards
   —      —         1,417    78
Currency swaps
   —      —      264,226    2,735    40,441
Interest rate swaps
   442,426    7,567    2,186,949    7,832    39,327










Subtotals
   442,426    7,567    2,451,175    11,984    79,846










Cash flow hedge

Currency forwards
   1,401,144    590,463    219,453    8,787    3,946
Currency swaps
   —      —      309,970    —      22,315
Interest rate swaps
   —      305,800    536,023    1,680    6,481










Subtotals
   1,401,144    896,263    1,065,446    10,467    32,742










Hedge of net investment in a foreign operation

Currency forwards
   1,106,871    291,194    —      28,958    8,790










Subtotal
   1,106,871    291,194    —      28,958    8,790










Derivatives held for trading
   26,458,227    30,260,831    48,316,781    1,197,366    973,776










Currency forwards
   15,370,447    10,668,057    1,287,870    277,739    320,668
Currency swaps
   202,047    713,643    5,509,025    393,504    227,532
Interest rate swaps
   10,821,045    18,789,176    41,467,440    524,993    423,120
Call currency options
   40,384    54,669    26,223    421    86
Put currency options
   24,304    35,286    26,223    709    2,370










Subtotals
   26,458,227    30,260,831    48,316,781    1,197,366    973,776










Totals
   29,408,668    31,455,855    51,833,402    1,248,775    1,095,154







��



Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-69
Note 8 – Financial Derivative Contracts and Hedge Accounting, continued
b.
Hedge accounting
b.1) Fair value hedges:
The Bank uses interest rate derivatives to manage its structural risk by minimizing accounting asymmetries in the Statement of Financial Position. Through different hedging strategies, it redenominates an element originally at a fixed rate to a floating rate, thus decreasing the financial duration and consequently risk, aligning the balance sheet structure with expected movements in the yield curve.
The following table presents the hedged items and the hedging instrument at fair value as of December 31, 2018 and 2017, detailed by maturity:

   As of December 31, 2018
   Notional
   Up to 1 year    Between 1
and 3 years    Between 3 and
6 years    Over 6 years    Totals
   MCh$    MCh$    MCh$    MCh$    MCh$
Hedged items

Loans and accounts receivable from customers

Commercial and mortgage loans
   1,232    156,772    261,860    289,724    709,588
Financial instruments at FVTPL

Treasury bonds
   666,388    52,132    35,297    42,189    796,006
Debt instruments issued

Current bonds
   239,682    55,132    94,000    1,310,697    1,699,511










Totals
   907,302    264,036    391,157    1,642,610    3,205,105










Hedging instruments
               —
Currency forwards
   —      —      —      —      —
Currency swaps
   187,578    —      —      —      187,578
Interest rate swaps
   719,724    264,036    391,157    1,642,610    3,017,527










Totals
   907,302    264,036    391,157    1,642,610    3,205,105










   As of December 31, 2017
   Notional
   Up to 1 year    Between 1
and 3 years    Between 3 and
6 years    Over 6 years    Totals
   MCh$    MCh$    MCh$    MCh$    MCh$
Hedged items

Loans and accounts receivable from customers

Commercial and mortgage loans
   12,978    7,704    402,977    320,539    744,198
Available for sale investments

Treasury bonds
   —      57,003    1,629    183,675    242,307
Debt instruments issued

Current bonds
   437,015    488,291    77,728    1,009,468    2,012,502










Totals
   449,993    552,998    482,334    1,513,682    2,999,007










Hedging instruments

Currency swaps
   —      264,226    —      —      264,226
Interest rate swaps
   449,993    288,772    482,334    1,513,682    2,734,781










Totals
   449,993    552,998    482,334    1,513,682    2,999,007










Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-70
Note 8 – Financial Derivative Contracts and Hedge Accounting, continued
Below is an estimate of the periods in which flows are expected to be produced:
Forecasted cash flows by interest rate risk:

   As of December 31, 2018
   Notional
   Up to 1 year Between 1 and
3 years Between 3 and
6 years Over 6 years Totals
   MCh$ MCh$ MCh$ MCh$ MCh$
Hedged items

Inflows
   9,678 17,366 15,632 7,728 50,404
Outflows
   (24,604 ) (37,185 ) (50,215 ) (70,615 ) (182,619 )


Net Flows
   (14,926 ) (19,819 ) (34,583 ) (62,887 ) (132,215 )


Hedging instruments (*)

Outflows
   (9,678 ) (17,366 ) (15,632 ) (7,728 ) (50,404 )
Inflows
   24,604 37,185 50,215 70,615 182,619


Net flows
   14,926 19,819 34,583 62,887 132,215


   As of December 31, 2017
   Notional
   Up to 1 year Between 1 and
3 years Between 3 and
6 years Over 6 years Totals
   MCh$ MCh$ MCh$ MCh$ MCh$
Hedged items

Inflows
   14,981 27,525 32,376 18,608 93,490
Outflows
   (25,575 ) (37,197 ) (39,863 ) (76,755 ) (179,390 )


Net flows
   (10,594 ) (9,672 ) (7,487 ) (58,147 ) (85,900 )


Hedging instruments (*)

Outflows
   (14,981 ) (27,525 ) (32,376 ) (18,608 ) (93,490 )
Inflows
   25,575 37,197 39,863 76,755 179,390


Net flows
   10,594 9,672 7,487 58,147 85,900


(*)
Only includes cash flows forecast portion of the hedge instruments used to cover interest rate risk.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-71
Note 8 – Financial Derivative Contracts and Hedge Accounting, continued
b.2) Cash flow hedges:
Cash flow hedge is used by the Bank mainly to:
Reduce the volatility of cash flows in items in the Statement of Financial position that are indexed to inflation through the use of inflation forwards and combinations of swaps in pesos and indexed units.

~~Table~~Set the rate of ~~Contents~~a portion of the pool of short-term liabilities in pesos, thus reducing the risk of an important part of the Bank’s cost of funding, although still maintaining the liquidity risk of the pool. This is achieved by setting the cash flows of the hedged items equal to those of the derivative instruments, modifying uncertain cash flows for certain cash flows.
It also sets the rate of funding sources at a floating rate, decreasing the risk that its funding costs increase.
The following table presents the nominal values of the hedged item as of December 31, 2018 and 2017:
   As of December 31, 2018
   Notional
   Up to 1 year    Between 1 and 3
years    Between 3 and
6 years    Over 6 years    Totals
   MCh$    MCh$    MCh$    MCh$    MCh$
Hedged item

Loans and accounts at amortized cost


Loans (inflation-indexed)
   2,015,643    9,961    —      —      2,025,604
Commercial loans (interest rate)
   —      28,000    20,000    —      48,000
Time deposits and other time liabilities

Time deposits
   129,100    52,027    —      46,698    227,825
Debt instruments issued

Current bonds
   173,683    —      —      —      173,683
Interbank borrowings

Interbank loans
   398,606    —      72,766    —      471,372










Totals
   2,717,032    89,988    92,766    46,698    2,946,484










Hedging instruments

Currency forwards
   2,073,971    —      —      —      2,073,971
Currency swaps
   444,488    —      72,766    —      517,254
Interest rate swaps
   198,573    89,988    20,000    46,698    355,259










Totals
   2,717,032    89,988    92,766    46,698    2,946,484










   As of December 31, 2017
   Notional
   Up to 1 year    Between 1 and 3
years    Between 3 and
6 years    Over 6 years    Totals
   MCh$    MCh$    MCh$    MCh$    MCh$
Hedged item

Loans and accounts receivables from customers


Loans (inflation-indexed)
   1,991,607    188,730    —      —      2,180,337
Commercial loans (interest rate)
   —      30,723    57,823    174,300    262,846
Time deposits and other time liabilities

Time deposits
   305,800    303,900    —      —      609,700
Debt instruments issued

Current bonds
   —      309,970    —      —      309,970
Interbank borrowings

Interbank loans
   —      —      —      —      —










Totals
   2,297,407    833,323    57,823    174,300    3,362,853










Hedging instruments

Currency forwards
   1,991,607    219,453    —      —      2,211,060
Currency swaps
   —      309,970    —      —      309,970
Interest rate swaps
   305,800    303,900    57,823    174,300    841,823










Totals
   2,297,407    833,323    57,823    174,300    3,362,853










Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-72
Note 8 – Financial Derivative Contracts and Hedge Accounting, continued
Below is an estimate of the periods in which flows are expected to occur.
Forecasted cash flows by interest rate risk:

   As of December 31, 2018
   Notional
   Up to 1 year Between 1 and
3 years Between 3 and
6 years Over 6 years Totals
   MCh$ MCh$ MCh$ MCh$ MCh$
Hedged items

Inflows
   1,848,702 169,442 521 —   2,018,665
Outflows
   (11,046 ) (3,797 ) (5,693 ) (2,837 ) (23,373 )


Net Flows
   1,837,656 165,645 (5,172 ) (2,837 ) 1,995,292


Hedging instruments (*)

Outflows
   (1,848,702 ) (169,442 ) (521 ) —   (2,018,665 )
Inflows
   11,046 3,797 5,693 2,837 23,373


Net flows
   (1,837,656 ) (165,645 ) 5,172 2,837 (1,995,292 )


   As of December 31, 2017
   Notional
   Up to 1 year Between 1 and
3 years Between 3 and
6 years Over 6 years Totals
   MCh$ MCh$ MCh$ MCh$ MCh$
Hedged items

Inflows
   1,982,371 225,180 2,459 —   2,210,010
Outflows
   (29,873 ) (33,024 ) (21,918 ) (15,460 ) (100,275 )


Net Flows
   1,952,498 192,156 (19,459 ) (15,460 ) 2,109,735


Hedging instruments (*)

Outflows
   (1,982,371 ) (225,180 ) (2,459 ) —   (2,210,010 )
Inflows
   29,873 33,024 21,918 15,460 100,275


Net flows
   (1,952,498 ) (192,156 ) 19,459 15,460 (2,109,735 )


(*)
Only includes cash flows forecast portion of the hedge instruments used to cover interest rate risk.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-73
Note 8 – Financial Derivative Contracts and Hedge Accounting, continued

   As of December 31,
   2018    2017
   Effective
portion    Ineffective
portion    Effective
portion    Ineffective
portion
   MCh$    MCh$    MCh$    MCh$
Hedged item

Loans and accounts receivables from customers


Loans (inflation-indexed)
   8,557    2,032    —      —
Commercial loans (interest rate)
   1,024    270    1,890    155
Time deposits and other time liabilities

Time deposits
   (236 )    —      (3,037 )    (126 )
Debt instruments issued

Current bonds
   (3,829 )    (2,718 )    (4,583 )    (1,329 )
Interbank borrowings

Interbank loans
   43    —      —      —








Totals
   5,559    (416 )    (5,730 )    (1,300 )








The effective portion generated by cash flow derivatives recorded in the Consolidated Statement of Changes in Equity as of December 31, 2018 and 2017.
The income generated by cash flow hedge derivatives whose effect was transferred from Other Comprehensive Income to Income for the year, is as follow:
   As of December 31,
   2018    2017
   MCh$    MCh$
Hedged item

Loans and accounts receivables from customers


Loans (inflation-indexed)
   —      —
Commercial loans (interest rate)
   —      —
Time deposits and other time liabilities

Time deposits
   200    72
Debt instruments issued

Current bonds
   —      —
Interbank borrowings

Interbank loans
   —      —




Totals
   200    72




Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-74
Note 8 – Financial Derivative Contracts and Hedge Accounting, continued
b.3) Hedge of net investment in foreign operations:
Itaú Corpbanca, the parent company whose functional currency is the Chilean peso, has foreign business investments consisting of a branch in New York and subsidiaries in Colombia. As a result of the proper accounting treatment for these investments, fluctuations in the value of the investments as a result of changes in the Chilean peso-Colombian peso exchange rate alter the parent company’s equity. The objective of these hedges is to safeguard the value of equity by managing exchange rate risk affecting the investments.
Hedges of a net investment in a foreign operation, including hedges of monetary items that are accounted for as part of a net investment, are recorded to cash flow hedges, where:
The portion of the gain or loss from the hedge instrument that is determined to be an effective hedge is recognized in equity. As of December 31, 2018, this was a debit of MCh$19,791 (credit of MCh$45,759 net of deferred taxes as of December 31, 2017).
The ineffective portion is recognized in profit or loss. No such amounts were recorded in 2018 and 2017.

      As of December 31,
   Notes    2018    2017
      MCh$    MCh$
Opening balances
      45,759    10,773
Gains (losses) on hedge of net investment in foreign operation, before tax
   22 j    (36,533 )    49,197
Income tax relating to hedges of net investment in foreign operations
   22 j    10,565    (14,211 )




Ending balances
      19,791    45,759




Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-75
Note 8 – Financial Derivative Contracts and Hedge Accounting, continued
Each hedge is detailed in the table below:
b.3.1) Hedge of net investment in New York Branch

   Notional    Market value of
hedging
instruments    Gain or loss on
hedging
instruments
recognized in
equity for the year    Ineffectiveness
recognized in
profit or loss
   MUSD    MCh$    MCh$    MCh$
As of December 31, 2018
   168    (5,151 )    (10,354 )    —
As of December 31, 2017
   150    4,698    4,698    —
b.3.2) Hedge of net investment in Itaú Corpbanca Colombia
   As of December 31, 2018
   Notional    Statements of
Changes in
Equity Statement of
Income
   Up to 1
year    Between 1 and
3 years    Between 3 and
6 years    Over 6 years    Effective portion
for the year Ineffective
portion
   MCh$    MCh$    MCh$    MCh$    MCh$ MCh$
Hedged items

Equity

Foreign investments
   1,360,894    —      —      74,648    (26,179 ) —
Hedging instrument

Foreign currency forwards
   1,360,894    —      —      —      (26,179 ) —
   As of December 31, 2017
   Notional    Statements of
Changes in
Equity Statement of
Income
   Up to 1
year    Between 1 and
3 years    Between 3 and
6 years    Over 6 years    Effective portion
for the year Ineffective
portion
   MCh$    MCh$    MCh$    MCh$    MCh$ MCh$
Hedged items

Equity

Foreign investments
   1,398,065    —      —      —      44,499 —
Hedging instrument

Foreign currency forwards
   1,398,065    —      —      —      44,499 —
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-76
Note 9 – Interbank Loans
As of December 31, 2018, the balances presented under the item “Interbank loans, net”, according to IFRS 9 are as follows:
As of December 31, 2018
MCh$
Local banks
Loans to local banks
—
Allowances for loans losses
—
Subtotals
—
Foreign banks
Interbank cash loans
30,507
Loans to foreign banks
5,594
Non-transferable deposits with foreign banks
65,556
Allowances for loans losses
(463 )
Subtotals
101,194
Chilean Central Bank
Deposits with the Chilean Central Bank not available (*)
240,050
Subtotals
240,050
Totals
341,244
(*)
These are deposits that do not qualify as time deposits
Movements in allowances and impairment for interbanks loans during the year ended December 31, 2018 are detailed as follows:

   Foreign banks
   Stage 1    Stage 2    Stage 3    Totals
   12-Month ECL    Lifetime ECL    Lifetime ECL
   MCh$    MCh$    MCh$    MCh$
Balances as of December 31, 2017
   208    —      —      208
Restatement of the prior year
   —      —      —      —
Balances as of January 1, 2018
   208    —      —      208
Changes in the allowances

- Transfer to stage 1
   —      —      —      —
- Transfer to stage 2
   —      —      —      —
- Transfer to stage 3
   —      —      —      —
- Increases due to change in credit risk
   —      —      —      —
- Decreases due to change in credit risk
   —      —      —      —
- Charge-offs
   —      —      —      —
- Changes due to modifications that did not result in derecognition
   —      —      —      —
New financial assets originated or purchased
   344    —      —      344
Financial assets that have been derecognized
   (131 )    —      —      (131 )
Changes in models/risk parameters
   —      —      —      —
Foreign exchange and other movements
   42    —      —      42
Balances as of December 31, 2018
   463    —      —      463
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-77
Note 9 - Interbank Loans, continued
As of December 31, 2017, the balances presented under the item “Interbank loans, net”, according to IAS 39 are as follows:
As of December 31, 2017
MCh$
Local banks
Loans to local banks
—
Allowances for loans losses
—
Subtotals
—
Foreign banks
Interbank cash loans
862
Loans to foreign banks
13,875
Non-transferable deposits with foreign banks
21,544
Allowances for loans losses
(208 )
Subtotals
36,073
Chilean Central Bank
Deposits with the Chilean Central Bank not available (*)
34,004
Subtotals
34,004
Totals
70,077
(*)
These are deposits that do not qualify as time deposits
Movements in allowances and impairment for loans with domestic and foreign Banks during as of December 31, 2017 are detailed as follows:

   Notes    Local banks    Foreign banks    Totals
   MCh$    MCh$    MCh$
Balances as of January 1, 2017
      —      (212 )    (212 )
Charge-offs
      —      —      —
Allowances established
   27    —      (226 )    (226 )
Allowances released
   27    —      209    209
Impairment
      —      —      —
Exchange differences
      —      21    21






Balances as of December 31, 2017
      —      (208 )    (208 )






Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-78
Note 10 – Loans and Accounts Receivable from Customers
a.
Loans and account receivables from customers
As of December 31, 2018, the composition of the loan portfolio under IFRS 9 is as follows:

      Allowances for loan losses
As of December 31, 2018
   Gross
assets    Individual
allowances    Group
allowances    Totals    Net assets
   MCh$    MCh$    MCh$    MCh$    MCh$
Commercial loans:

Commercial loans
   11,457,388    133,610    258,177    391,787    11,065,601
Foreign trade loans
   928,443    —      7,964    7,964    920,479
Checking account debtors
   131,100    —      6,801    6,801    124,299
Factoring transactions
   210,567    —      9    9    210,558
Student loans
   676,689    —      51,091    51,091    625,598
Leasing transactions
   928,160    —      25,113    25,113    903,047
Other commercial loans and receivables
   34,553    —      1,942    1,942    32,611










Subtotals
   14,366,900    133,610    351,097    484,707    13,882,193










Mortgage loans:

Loans with mortgage finance bonds
   38,364    —      472    472    37,892
Endorsable mutual mortgage loans
   118,668    —      8,016    8,016    110,652
Other mutual mortgage loans
   3,953,245    —      52,138    52,138    3,901,107
Mortgage leasing transactions
   312,118    —      4,395    4,395    307,723
Other mortgage loans and receivables
   23,432    —      1,096    1,096    22,336










Subtotals
   4,445,827    —      66,117    66,117    4,379,710










Consumer loans:

Installment consumer loans
   1,921,785    —      155,472    155,472    1,766,313
Checking account debtors
   209,492    —      17,579    17,579    191,913
Credit card balances
   481,567    —      38,426    38,426    443,141
Consumer leasing transactions
   6,203    —      476    476    5,727
Other consumer loans and receivables
   50,716    —      5,343    5,343    45,373










Subtotals
   2,669,763    —      217,296    217,296    2,452,467










Totals
   21,482,490    133,610    634,510    768,120    20,714,370










Movements in the loan portfolio for the year ended December 31, 2018 is as follows:
   Loans
   Stage 1    Stage 2    Stage 3
   12-Month
ECL    Lifetime
ECL    Lifetime
ECL    Totals
Balances as of December 31, 2017
   16,235,974    3,325,409    821,222    20,382,605
Restatement of the prior year
   —      —      —      —
Balances as of January 1, 2018
   16,235,974    3,325,409    821,222    20,382,605
Changes in the allowances
            —
- Transfer to stage 1
   —      159,276    108,329    267,605
- Transfer to stage 2
   (284,179 )    —      134,222    (149,957 )
- Transfer to stage 3
   (109,278 )    (153,171 )    —      (262,449 )
- Charge-offs
   (25,209 )    (24,473 )    (131,943 )    (181,625 )
- Changes due to modifications that did not result in derecognition
   —      —      —      —
New financial assets originated or purchased
   7,894,302    700,572    322,298    8,917,172
Financial assets that have been derecognized
   (6,165,474 )    (1,126,300 )    (375,859 )    (7,667,633 )
Foreign exchange and other movements
   151,638    18,426    6,708    176,772
Balances as of December 31, 2018
   17,697,774    2,899,739    884,977    21,482,490
   Assets before allowances    ECL allowance
As of December 31, 2018
   Stage 1    Stage 2    Stage 3       Stage 1    Stage 2    Stage 3       Net
   MCh$    MCh$    MCh$    Total    MCh$    MCh$    MCh$    Total    Assets
Commercial loans
   11,935,270    1,796,562    635,068    14,366,900    61,971    155,958    266,778    484,707    13,882,193
Mortgage loans
   3,626,811    659,119    159,897    4,445,827    5,756    37,800    22,561    66,117    4,379,710
Consumer loans
   2,135,693    444,058    90,012    2,669,763    70,765    84,842    61,689    217,296    2,452,467


















Total
   17,697,774    2,899,739    884,977    21,482,490    138,492    278,600    351,028    768,120    20,714,370


















Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-79
Note 10 – Loans and Accounts Receivable from Customers, continued
As of December 31, 2017, the composition of the loan portfolio under IAS 39 is as follows:

   Gross assets    Allowances for loan losses
As of December 31, 2017
   Normal
portfolio    Impaired
portfolio    Totals    Individual
allowances    Group
allowances    Totals    Net assets
   MCh$    MCh$    MCh$    MCh$    MCh$    MCh$    MCh$
Commercial loans:

Commercial loans
   10,345,995    770,081    11,116,076    263,552    117,666    381,218    10,734,858
Foreign trade loans
   650,959    49,774    700,733    21,617    7,638    29,255    671,478
Checking accounts debtors
   131,332    8,016    139,348    1,903    2,848    4,751    134,597
Factoring transactions
   140,375    363    140,738    270    93    363    140,375
Student loans
   598,108    54,895    653,003    —      12,794    12,794    640,209
Leasing transactions
   851,882    88,907    940,789    10,445    6,837    17,282    923,507
Other commercial loans and receivables
   24,261    1,598    25,859    365    886    1,251    24,608














Subtotals
   12,742,912    973,634    13,716,546    298,152    148,762    446,914    13,269,632














Mortgage loans:

Loans with mortgage finance bonds
   44,432    2,968    47,400    —      140    140    47,260
Endorsable mortgage mutual loans
   127,153    8,766    135,919    —      1,816    1,816    134,103
Other mortgage mutual loans
   3,507,384    153,516    3,660,900    —      23,736    23,736    3,637,164
Mortgage leasing transactions
   272,544    9,591    282,135    —      8,960    8,960    273,175
Other mortgage loans and receivables
   24,231    2,168    26,399    —      367    367    26,032














Subtotals
   3,975,744    177,009    4,152,753    —      35,019    35,019    4,117,734














Consumer loans:

Installment consumer loans
   1,725,652    84,397    1,810,049    —      100,068    100,068    1,709,981
Checking account debtors
   193,325    14,176    207,501    —      11,840    11,840    195,661
Credit card balances
   405,786    15,383    421,169    —      19,664    19,664    401,505
Consumer leasing transactions
   10,832    344    11,176    —      398    398    10,778
Other consumer loans and receivables
   60,651    2,760    63,411    —      4,624    4,624    58,787














Subtotals
   2,396,246    117,060    2,513,306    —      136,594    136,594    2,376,712














Totals
   19,114,902    1,267,703    20,382,605    298,152    320,375    618,527    19,764,078














Normal portfolio
This includes individual debtors in the Normal portfolio (A1 to A6) and in the Substandard portfolio (categories B1 and B2, only). For collectively assessed loans, it includes the Normal portfolio.
Impaired Portfolio
This includes individual debtors in theNon-compliant portfolio (C1 to C6) and in the Substandard portfolio (categories B3 and B4, only). For collectively assessed loans, it includes theNon-compliant portfolio.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-80
Note 10 – Loans and Accounts Receivable from Customers, continued
Guarantees taken by the Bank to secure collections of rights reflected in its loan portfolios are real mortgage-type guarantees (urban and rural property, farm land, ships and aircraft, mining claims and other assets) and pledges (inventory, farm assets, industrial assets, plantings and other pledged assets). As of December 31, 2018 and 2017, the fair value of guarantees taken corresponds to 136.48% and 126.76% of the assets covered, respectively.
In the case of mortgage guarantees, as of December 31, 2018 and 2017, the fair value of the guarantees taken corresponds to 90.10% and 85.38% of the balance receivable on loans, respectively.
The Bank finances its customers’ purchases of assets, including real estate and other personal property, through finance lease agreements that are presented within this item. As of December 31, 2018, the Bank recorded MCh$436,654 in finance leases for property (MCh$306,931 as of December 31, 2017) and MCh$809,826 in finance leases for real estate property (MCh$927,168 as of December 31, 2017).
b.
Portfolio characteristics
As of December 31, 2018 and 2017, the loan portfolio before allowances for loan losses by customer economic activity was as follows:

   As of December 31, 2018
   Local loans    Foreign loans    Totals    Distribution percentage
   MCh$    MCh$    MCh$    %
Commercial loans

Manufacturing
   982,497    114,714    1,097,211    5.11 %
Mining
   424,883    252,894    677,777    3.16 %
Electricity, gas and water
   600,667    356,706    957,373    4.46 %
Agriculture and livestock
   207,271    139,098    346,369    1.61 %
Forestry and wood extraction
   24,511    5,172    29,683    0.14 %
Fishing
   1,945    1,530    3,475    0.02 %
Transport
   509,354    191,047    700,401    3.26 %
Communications
   23,886    62,191    86,077    0.40 %
Construction
   1,436,096    310,530    1,746,626    8.13 %
Commerce
   861,291    758,817    1,620,108    7.54 %
Services
   2,735,023    1,137,037    3,872,060    18.02 %
Others
   2,436,337    793,403    3,229,740    15.03 %








Subtotals
   10,243,761    4,123,139    14,366,900    66.88 %








Mortgage loans
   3,852,962    592,865    4,445,827    20.70 %
Consumer loans
   1,750,986    918,777    2,669,763    12.43 %








Total
   15,847,709    5,634,781    21,482,490    100 %








   As of December 31, 2017
   Local loans    Foreign loans    Totals    Distribution percentage
   MCh$    MCh$    MCh$    %
Commercial loans

Manufacturing
   784,608    255,883    1,040,491    5.10 %
Mining
   363,065    280,996    644,061    3.16 %
Electricity, gas and water
   589,067    347,416    936,483    4.59 %
Agriculture and livestock
   205,333    210,597    415,930    2.04 %
Forestry and wood extraction
   22,975    15,832    38,807    0.19 %
Fishing
   1,527    12,385    13,912    0.07 %
Transport
   461,486    206,991    668,477    3.28 %
Communications
   29,296    65,143    94,439    0.46 %
Construction
   1,368,057    270,063    1,638,120    8.04 %
Commerce
   815,184    897,666    1,712,850    8.40 %
Services
   2,616,171    1,164,562    3,780,733    18.55 %
Others
   2,322,773    409,470    2,732,243    13.40 %








Subtotals
   9,579,542    4,137,004    13,716,546    67.30 %








Mortgage loans
   3,635,993    516,760    4,152,753    20.37 %
Consumer loans
   1,544,062    969,244    2,513,306    12.33 %








Total
   14,759,597    5,623,008    20,382,605    100 %








Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-81
Note 10 – Loans and Accounts Receivable from Customers, continued
c.
Allowances for loans losses
Movements in allowances for loan losses during the year ended December 31, 2018, under IFRS 9, detailed as follows:

Individually assessed Group assessed
Stage 1 Stage 2 Stage 3 Subtotals Stage 1 Stage 2 Stage 3 Subtotals Totals
12-Month
ECL Lifetime
ECL Lifetime
ECL 12-Month
ECL Lifetime
ECL Lifetime
ECL
Balances as of January 1, 2018
—   49,389 32,736 82,125 126,230 248,129 284,089 658,448 740,573
Changes in the allowances

- Net transfers to stage 1
—   —   —   —   —   36,325 41,471 77,796 77,796
- Net transfer to stage 2
—   —   —   —   (5,233 ) —   49,097 43,864 43,864
- Net transfer to stage 3
—   —   —   —   (4,354 ) (22,811 ) —   (27,165 ) (27,165 )
- Increases due to change in credit risk
—   3,732 16,587 20,319 18,307 18,459 28,670 65,436 85,755
- Decreases due to change in credit risk
—   (532 ) (1,706 ) (2,238 ) (23,460 ) (27,162 ) (9,105 ) (59,727 ) (61,965 )
- Charge-offs
(21,316 ) (18,559 ) (95,091 ) (134,966 ) (134,966 )
- Changes due to modifications that did not result in derecognition
—
New financial assets originated or purchased
—   6,428 17,037 23,465 66,074 54,568 77,069 197,711 221,176
Financial assets that have been derecognized
—   (20,636 ) (15,355 ) (35,991 ) (19,950 ) (58,405 ) (78,728 ) (157,083 ) (193,074 )
Net transfer from (to) group assessed
—   7,772 38,158 45,930 138 (1,761 ) (38,158 ) (39,781 ) 6,149
Foreign exchange and other movements
2,056 3,664 4,257 9,977 9,977
Balances as of December 31, 2018
—   46,153 87,457 133,610 138,492 232,447 263,571 634,510 768,120
The detail by type of portfolio (commercial, mortgage and consumer) is as follow:
Individually assessed Group assessed
Stage 1 Stage 2 Stage 3 Subtotals Stage 1 Stage 2 Stage 3 Subtotals Totals
Commercial
12-Month
ECL Lifetime
ECL Lifetime
ECL 12-Month
ECL Lifetime
ECL Lifetime
ECL
Balances as of January 1, 2018
—   49,389 32,736 82,125 63,093 131,854 211,463 406,410 488,535
Changes in the allowances

- Net transfers to stage 1
—   —   —   —   —   14,148 24,174 38,322 38,322
- Net transfer to stage 2
—   —   —   —   (1,047 ) —   39,461 38,414 38,414
- Net transfer to stage 3
—   —   —   —   (3,426 ) (18,176 ) —   (21,602 ) (21,602 )
- Increases due to change in credit risk
—   3,732 16,587 20,319 8,594 6,716 12,823 28,133 48,452
- Decreases due to change in credit risk
—   (532 ) (1,706 ) (2,238 ) (12,651 ) (10,713 ) (8,321 ) (31,685 ) (33,923 )
- Charge-offs
(10,983 ) (7,447 ) (57,566 ) (75,996 ) (75,996 )
- Changes due to modifications that did not result in derecognition
—
New financial assets originated or purchased
—   6,428 17,037 23,465 27,419 16,594 42,544 86,557 110,022
Financial assets that have been derecognized
—   (20,636 ) (15,355 ) (35,991 ) (10,395 ) (23,782 ) (50,516 ) (84,693 ) (120,684 )
Net transfer from (to) group assessed
—   7,772 38,158 45,930 138 (1,761 ) (38,158 ) (39,781 ) 6,149
Foreign exchange and other movements
1,229 2,372 3,417 7,018 7,018
Balances as of December 31, 2018
—   46,153 87,457 133,610 61,971 109,805 179,321 351,097 484,707
   Stage 1    Stage 2    Stage 3
Mortgage
   12-Month
ECL    Lifetime
ECL    Lifetime
ECL    Totals
Balances as of January 1, 2018
   3,962    37,460    19,049    60,471
Changes in the allowances

- Transfer to stage 1
   —      5,344    2,644    7,988
- Transfer to stage 2
   (206 )    —      4,253    4,047
- Transfer to stage 3
   (73 )    (2,918 )    —      (2,991 )
- Increases due to change in credit risk
   1,203    5,921    1,619    8,743
- Decreases due to change in credit risk
   (394 )    (7,002 )    (321 )    (7,717 )
- Write-Offs
   —      (13 )    (2,491 )    (2,504 )
- Changes due to modifications that did not result in derecognition
            —
New financial assets originated or purchased
   1,639    1,577    405    3,621
Financial assets that have been derecognized
   (399 )    (2,792 )    (2,710 )    (5,901 )
Changes in models/risk parameters
            —
Foreign exchange and other movements
   24    223    113    360
Balances as of December 31, 2018
   5,756    37,800    22,561    66,117
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-82
Note 10—Loans and Accounts Receivable from Customers, continued

Consumer
   Stage 1 Stage 2 Stage 3 Totals
   12-Month
ECL Lifetime
ECL Lifetime
ECL
Balances as of January 1, 2018
   59,175 78,815 53,577 191,567
Changes in the allowances

- Transfer to stage 1
   —   16,833 14,653 31,486
- Transfer to stage 2
   (3,980 ) —   5,383 1,403
- Transfer to stage 3
   (855 ) (1,717 ) —   (2,572 )
- Increases due to change in credit risk
   8,510 5,822 14,228 28,560
- Decreases due to change in credit risk
   (10,415 ) (9,447 ) (463 ) (20,325 )
- Write-Offs
   (10,333 ) (11,099 ) (35,034 ) (56,466 )
- Changes due to modifications that did not result in derecognition

New financial assets originated or purchased
   37,016 36,397 34,120 107,533
Financial assets that have been derecognized
   (9,156 ) (31,831 ) (25,502 ) (66,489 )
Changes in models/risk parameters

Foreign exchange and other movements
   803 1,069 727 2,599
Balances as of December 31, 2018
   70,765 84,842 61,689 217,296
Movements in credit risk provisions during the years ended December 31, 2017, under IAS 39, detailed as follows:
   Note Individual
allowances Group
allowances Total
MCh$ MCh$ MCh$
Balances as of January 1, 2017
   366,058 193,246 559,304
Portfolio charge-offs

Commercial loans
   (69,702 ) (39,648 ) (109,350 )
Mortgage loans
   —   (8,303 ) (8,303 )
Consumer loans
   —   (115,708 ) (115,708 )


Total charge-offs
   (69,702 ) (163,659 ) (233,361 )


Allowances established
   338,701 480,567 819,268
Allowances released
   (302,504 ) (169,801 ) (472,305 )
Application of provisions
   (9,760 ) —   (9,760 )
Exchange rate differences
   (24,641 ) (19,978 ) (44,619 )


Balances as of December 31, 2017
   10a ) 298,152 320,375 618,527


d.
Portfolio sales
As of December 31, 2018 and 2017, the Bank and its subsidiaries engaged in portfolio purchases and sales. The effect on result of these transactions amounts to MCh$1,602 as of December 31, 2018 (MCh$15,121 as of December 31, 2017), the effect on income of these transactions as a whole does not exceed 5% of before tax profit for the year, and is recorded within net gains from trading and investment income activities in the consolidated statement of income for the year, disclosed in Note 25 “Net income (expense) from financial operations” within “Sale of loans and accounts receivable from customers”.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-83
Note 10 – Loans and Accounts Receivable from Customers, continued
d.1
Current andcharged-off portfolios sales
As of December 31, 2018 and 2017, the Bank and its subsidiaries derecognized 100% of its sold portfolio, thus complying with the requirements of the accounting policy for derecognizing financial assets and liabilities in Note 1, letter l), point iv) of the annual Consolidated Financial Statements. The main sales during 2018 and 2017 were of loans related to Law 20,027, which are detailed in point d.2).

   For the year ended December 31, 2018 For the year ended December 31, 2017
Portfolio
   Loan value    Allowances    Sale price    Adjustment
to EIR    Net effect on
income Loan value    Allowances    Sale price    Adjustment
to EIR    Net effect on
income
   MCh$    MCh$    MCh$    MCh$    MCh$ MCh$    MCh$    MCh$    MCh$    MCh$
Current
   62,261    24,797    24,662    —      (12,802 ) 22,739    5,619    14,715    —      (2,405 )
Charged-off
   —      —      1,132    —      1,132 —      —      1,674    —      1,674


















Totals
   62,261    24,797    25,794    —      (11,670 ) 22,739    5,619    16,389    —      (731 )


















d.2
CAE portfolio sale
For the year ended December 31, 2018, a gain was recognized amounting to MCh$13,272 (MCh$15,852 for the year ended December 31, 2017) corresponding to the income generated in the sale included directly in the Consolidated Statement of Income under “Net income from financial operations”. An adjustment to the effective interest rate for MCh$11,768 as of December 31, 2018 (MCh$14,058 as of December 31, 2017) is allocated to the portion of the CAE portfolio that was classified as loans at amortized cost, recognizing an effective interest rate equivalent for all these operations, according to IFRS 9 (IAS 39 in 2017).
   For the year ended December 31, 2018    For the year ended December 31, 2017
Portfolio
   Loan value    Allowances    Sale price    Adjustment
to EIR    Net effect on
income    Loan value    Allowances    Sale
price    Adjustment
to EIR    Net effect on
income
   MCh$    MCh$    MCh$    MCh$    MCh$    MCh$    MCh$    MCh$    MCh$    MCh$
CAE
   95,521    119    120,442    11,768    13,272    118,027    212    147,725    14,058    15,852
e.
Lease
As of December 31, 2018 and 2017, the Bank’s scheduled cash flows to be received from finance lease contracts have the following maturities:
   Total receivable    Unearned income    Net lease receivable
   As of December 31,    As of December 31,    As of December 31,
   2018    2017    2018    2017    2018    2017
   MCh$    MCh$    MCh$    MCh$    MCh$    MCh$
Up to 1 month
   29,177    29,846    1,310    3,677    27,867    26,169
More than 1 month to 3 months
   31,278    32,672    2,636    2,857    28,642    29,815
More than 3 months up to 1 year
   116,526    120,691    10,621    11,596    105,905    109,095
More than 1 year up to 3 years
   257,976    262,576    31,491    33,717    226,485    228,859
More than 3 years up to 6 years
   284,920    283,010    54,922    57,453    229,998    225,557
More than 6 years
   1,077,447    1,062,625    449,864    448,020    627,584    614,605












Totals
   1,797,324    1,791,420    550,844    557,320    1,246,481    1,234,100












   As of December 31,
   2018    2017
Leasing transactions
   MCh$    MCh$
Commercial
   928,160    940,789
Mortgage
   312,118    282,135
Consumer
   6,203    11,176




Totals
   1,246,481    1,234,100




Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-84
Note 11 – Investment instruments
a) Financial instruments at fair value through other comprehensive income and at amortized cost—under IFRS 9
As of December 31, 2018, the detail of financial instruments measured at FVOCI and at amortized cost is as follows:

   As of December 31, 2018
   At FVTOCI    At amortized cost    Totals
   MCh$    MCh$    MCh$
Securities quoted in active markets

Chilean Central Bank and Government securities

Chilean Central Bank securities
   411,431    —      411,431
Chilean Treasury bonds
   913,041    —      913,041
Other government securities
   27,612    —      27,612
Other local institutions financial instruments

Time deposits in local banks
   185,501    —      185,501
Mortgage finance bonds
   50    —      50
Chilean financial institutions bonds
   —      —      —
Other local financial investments
   5,979    —      5,979
Foreign institutions financial instruments

Foreign Governments and Central Banks financial instruments
   769,693    198,923    968,616
Other foreign financial instruments
   332,560    —      332,560
Investments not quoted in active markets

Corporate bonds
   4,909    —      4,909
Other financial instruments at FVOCI
   6,378    —      6,378






Totals
   2,657,154    198,923    2,856,077






As of December 31, 2018 this total includes MCh$178,671, included in Note 5 “Cash and cash equivalents,” which corresponds to those financial instruments with maturities that do not exceed three months from their dates of acquisition.
As of December 31, 2018, the portfolio at FVTOCI includes an unrealized gain of MCh$25,450, presented in Equity as valuation accounts, distributed among a gain of MCh$17,793 attributable to equity holders and a gain of MCh$7,657 attributable tonon-controlling interest.
Impairment
As of December 31, 2018 the portfolio of debt securities classified as investment instruments at fair value through other comprehensive income includes impairment movements as summarized below:
   Financial instruments at FVOCI
   Stage 1    Stage 2    Stage 3    Totals
   12-Month ECL    Lifetime ECL    Lifetime ECL
Balances as of December 31, 2017
   —      —      —      —
Restatement of the prior year due to IFRS 9 adoption
   520    —      —      520
Balances as of January 1, 2018
   520    —      —      520
Changes in the allowances

- Transfer to stage 1
   —      —      —      —
- Transfer to stage 2
   —      —      —      —
- Transfer to stage 3
   —      —      —      —
- Increases due to change in credit risk
   —      —      —      —
- Decreases due to change in credit risk
   —      —      —      —
- Charge-offs
   —      —      —      —
- Changes due to modifications that did not result in derecognition
   —      —      —      —
New financial assets originated or purchased
   25    —      —      25
Financial assets that have been derecognized
   (411 )    —      —      (411 )
Changes in models/risk parameters
   —      —      —      —
Foreign exchange and other movements
   —      —      —      —
Balances as of December 31, 2018
   134    —      —      134
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-85
Note 11 – Investment instruments, continued
As of December 31, 2018 the portfolio of investment instruments at amortized cost includes impairment movements as summarized below:

   Financial instruments at Amortized cost
   Stage 1    Stage 2    Stage 3    Totals
   12-Month ECL    Lifetime ECL    Lifetime ECL
Balances as of December 31, 2017
   —      —      —      —
Restatement of the prior year due to IFRS 9 adoption
   37    —      —      37
Balances as of January 1, 2018
   37    —      —      37
Changes in the allowances

- Transfer to stage 1
   —      —      —      —
- Transfer to stage 2
   —      —      —      —
- Transfer to stage 3
   —      —      —      —
- Increases due to change in credit risk
   —      —      —      —
- Decreases due to change in credit risk
   (50 )    —      —      (50 )
- Charge-offs
   —      —      —      —
- Changes due to modifications that did not result in derecognition
   —      —      —      —
New financial assets originated or purchased
   —      —      —      —
Financial assets that have been derecognized
   —      —      —      —
Changes in models/risk parameters
   —      —      —      —
Foreign exchange and other movements
   —      —      —      —
Balances as of December 31, 2018
   (13 )    —      —      (13 )
Unrealized gains and losses of the portfolio at FVTOCI
Unrealized gains and losses of the FVTOCI portfolio as of December 31, 2018 are detailed as follows:

   As of December 31, 2018
   Acquisition cost    Unrealized    Fair value
   Gain    Losses
Securities quoted in active markets

Chilean Central Bank and Government securities

Chilean Central Bank instruments
   411,223    533    (325 )    411,431
Chilean Treasury bonds
   911,596    2,458    (1,013 )    913,041
Other government securities
   28,131    —      (519 )    27,612
Other local institutions financial instruments

Time deposits in local banks
   185,468    70    (37 )    185,501
Mortgage finance bonds
   50    —      —      50
Chilean financial institutions bonds
   —      —      —      —
Other local financial investments
   4,001    1,978    —      5,979
Foreign institutions financial instruments

Foreign governments and Central Banks financial instruments
   752,791    24,505    (7,603 )    769,693
Other foreign financial instruments
   329,196    5,741    (2,377 )    332,560
Investments not quoted in active markets

Corporate bonds
   4,924    5    (20 )    4,909
Other financial instruments at FVOCI
   4,324    2,054    —      6,378








Totals
   2,631,704    37,344    (11,894 )    2,657,154








Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-86
Note 11 – Investment instruments, continued
b) Investment instruments - under IAS 39
As of December 31, 2017, the detail of available for sale and held to maturity financial instruments is as follows:

   As of December 31, 2017
   Available for sale    Held to maturity    Total
   MCh$    MCh$    MCh$
Securities quoted in active markets

Chilean Central Bank and Government securities

Chilean Central Bank securities
   687,945    —      687,945
Chilean Treasury bonds
   1,081,879    —      1,081,879
Other government securities
   14,053    —      14,053
Other local institutions financial instruments

Time deposits in local banks
   114,038    —      114,038
Mortgage finance bonds
   64    —      64
Chilean financial institutions bonds
   9,032    —      9,032
Other local financial investments
   6,159    —      6,159
Foreign institutions financial instruments

Foreign governments and Central Banks financial instruments
   420,687    —      420,687
Other foreign financial instruments
   300,740    202,030    502,770
Investments not quoted in active markets

Corporate bonds
   18,469    —      18,469
Other financial instruments
   10,412    —      10,412






Total
   2,663,478    202,030    2,865,508






As of December 31, 2017 this total includes MCh$15,775, included in Note 5 “Cash and cash equivalents,” which corresponds to those financial instruments with maturities that do not exceed three months from their dates of acquisition.
As of December 31, 2017, the portfolio of available for sale includes an unrealized gain of MCh$24,552, presented as equity reserve accounts, distributed among a profit of MCh$16,592 attributable to equity holders and a gain of MCh$7,960 attributable tonon-controlling interest.
Impairment of investment instruments
The Bank’s portfolio of fair value through other comprehensive income does not present impairment as of December 31, 2017.
The detail of investments quoted innon-active markets classified as available for sale has been recorded at fair value.
Itaú Corpbanca reviewed the instruments with unrealized losses as of December 31, 2017, concluding that they were not impairments other than temporary. Therefore, they do not imply adjustments to results of the fiscal year.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-87
Note 11 – Investment instruments, continued
Unrealized gains and losses of the available for sale portfolio
Unrealized gains and losses of the available for sale portfolio as of December 31, 2017 are detailed as follows:

   As of December 31, 2017
   Amortized cost    Unrealized    Fair value
      Gain    Losses
Securities quoted in active markets

Chilean Central Bank and Government securities

Chilean Central Bank securities
   688,770    806    (1,631 )    687,945
Chilean Treasury bonds
   1,081,633    3,526    (3,280 )    1,081,879
Other government securities
   14,206    —      (153 )    14,053
Other local institutions financial instruments

Time deposits in local banks
   114,073    —      (35 )    114,038
Mortgage finance bonds
   64    —      —      64
Chilean financial institutions bonds
   9,034    25    (27 )    9,032
Other local financial investments
   3,942    2,217    —      6,159
Foreign institutions financial instruments

Foreign Governments and Central Banks financial instruments
   416,995    3,921    (229 )    420,687
Other foreign financial instruments
   281,833    19,090    (183 )    300,740
Investments not quoted in active markets

Corporate bonds
   17,964    505    —      18,469
Other financial instruments
   10,412    —      —      10,412








Totals
   2,638,926    30,090    (5,538 )    2,663,478








Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-88
Note 12 – Intangible assets
a.
Composition of intangibles assets as of December 31, 2018 and 2017 is as follows:

Concept
   Useful
life years    Remaining
amortization
years    Net assets as
of January 1,
2018    Gross
balance    Accumulated
amortization Net assets as
of December
31, 2018
         MCh$    MCh$    MCh$ MCh$
Computer equipment system or software
   6    3    113,355    263,179    (111,339 ) 151,840
IT projects and licenses
   6    2    16,663    42,601    (29,987 ) 12,614
Assets generated in business combination
         1,431,990    1,518,599    (112,583 ) 1,406,016
Goodwill
   —      —      1,126,663    1,135,392    —   1,135,392
Trademarks
   10    8    42,106    51,432    (14,430 ) 37,002
Customer relationship
   12    10    76,038    93,591    (24,332 ) 69,259
Core deposits
   9    7    187,183    238,184    (73,821 ) 164,363
Other projects
   10    1    646    3,645    (3,151 ) 494










Totals
         1,562,654    1,828,024    (257,060 ) 1,570,964






Concept
   Useful
life years    Remaining
amortization
years    Net assets as
of January 1,
2017    Gross
balance    Accumulated
amortization Net assets as
of December
31, 2017
         MCh$    MCh$    MCh$ MCh$
Computer equipment system or software
   6    5    87,324    203,080    (89,725 ) 113,355
IT projects and licenses
   6    5    21,300    42,474    (25,811 ) 16,663
Assets generated in business combination
         1,505,034    1,502,615    (70,625 ) 1,431,990
Goodwill
         1,145,308    1,126,663    —   1,126,663
Trademarks
   10    9    47,209    51,417    (9,311 ) 42,106
Customer relationship
   12    11    89,827    91,046    (15,008 ) 76,038
Core deposits
   9    8    222,690    233,489    (46,306 ) 187,183
Other projects
   10    1    817    3,645    (2,999 ) 646










Totals
         1,614,475    1,751,814    (189,160 ) 1,562,654






b.
Movements on gross balances of intangible assets as of December 31, 2018 and 2017 are as follows:
   Computer
equipment
system or
software IT projects
and licenses Assets
generated in
business
combination Goodwill Other
projects    Total
   MCh$ MCh$ MCh$ MCh$ MCh$    MCh$
Balances as of January 1, 2018
   203,080 42,474 375,952 1,126,663 3,645    1,751,814
Acquisitions
   58,085 111 —   —   —      58,196
Disposals
   (147 ) —   —   —   —      (147 )
Exchange differences
   2,161 16 7,255 8,729 —      18,161




Balances as of December 31, 2018
   263,179 42,601 383,207 1,135,392 3,645    1,828,024




   Computer
equipment
system or
software IT projects
and licenses Assets
generated in
business
combination Goodwill Other
projects    Total
   MCh$ MCh$ MCh$ MCh$ MCh$    MCh$
Balances as of January 1, 2017
   162,385 42,447 391,583 1,145,308 3,645    1,745,368
Acquisitions
   42,867 36 —   —   —      42,903
Disposals
   (123 ) —   —   —   —      (123 )
Exchange differences
   (2,049 ) (9 ) (15,631 ) (18,645 ) —      (36,334 )




Balances as of December 31, 2017
   203,080 42,474 375,952 1,126,663 3,645    1,751,814




Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-89
Note 12 – Intangible assets, continued

c.    ~~Amendments~~Movements on accumulated amortization of intangible assets for the years ended December 31, 2018 and 2017 are as follows:

   Computer
equipment system
or software IT projects and
licenses Assets
generated in
business
combination Other projects Totals
   MCh$ MCh$ MCh$ MCh$ MCh$
Balances as of January 1, 2018
   (89,725 ) (25,811 ) (70,625 ) (2,999 ) (189,160 )
Amortization for the year
   (20,868 ) (4,164 ) (40,976 ) (150 ) (66,158 )
Exchange differences
   (746 ) (12 ) (982 ) (2 ) (1,742 )


Balances as of December 31, 2018
   (111,339 ) (29,987 ) (112,583 ) (3,151 ) (257,060 )


   Computer
equipment system
or software IT projects and
licenses Assets
generated in
business
combination Other projects Totals
   MCh$ MCh$ MCh$ MCh$ MCh$
Balances as of January 1, 2017
   (75,061 ) (21,147 ) (31,857 ) (2,828 ) (130,893 )
Amortization for the year
   (16,607 ) (4,672 ) (41,038 ) (158 ) (62,475 )
Exchange differences
   1,943 8 2,270 (13 ) 4,208


Balances as of December 31, 2017
   (89,725 ) (25,811 ) (70,625 ) (2,999 ) (189,160 )


d.
Impairment
Itaú Corpbanca evaluates, at the end of each reporting period, whether there is any indication of impairment of any asset (including Goodwill). If this indication exists, or when an impairment test is required, the Bank estimates the recoverable amount of the asset.
As of December 31, 2018 and 2017 there is no indication nor concrete evidence of impairment (see details in note 30). As of the date of these Consolidated Financial Statements, there have been no events that require the recognition of impairment.
e.
Restrictions
Itaú Corpbanca and its subsidiaries have no restrictions on intangible assets as of December 31, 2018 and 2017. In addition, no intangible assets have been pledged as collateral to ~~Transaction Agreement~~secure the fulfillment of any obligations. Moreover, there are no amounts owed by the Bank on intangible assets as of the aforementioned dates.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-90
Note 13 – Property, plant and equipment

a.
Property, plant and equipment as of December 31, 2018 and 2017 are broken down as follows.
~~In an ordinary meeting~~

   Useful life
years    Remaining
depreciation
years    Net assets as
of January
1, 2018    Gross
Balance    Accumulated
depreciation Net assets
as of December
31, 2018
         MCh$    MCh$    MCh$ MCh$
Land and buildings
   19    14    83,151    65,843    (22,778 ) 43,065
Equipment
   3    1    25,160    80,383    (47,776 ) 32,607
Others
   3    2    22,268    50,248    (30,356 ) 19,892
Furniture
         10,357    27,440    (18,067 ) 9,373
Leased assets
         —      28    (28 ) —
Others
         11,911    22,780    (12,261 ) 10,519






Totals
         130,579    196,474 �� (100,910 ) 95,564






   Useful life
years    Remaining
depreciation
years    Net assets as
of January
1, 2017    Gross
Balance    Accumulated
depreciation Net assets
as of December
31, 2017
         MCh$    MCh$    MCh$ MCh$
Land and buildings
   25    16    78,034    118,481    (35,330 ) 83,151
Equipment
   5    1    25,997    65,018    (39,858 ) 25,160
Others
   8    3    17,012    50,773    (28,505 ) 22,268
Furniture
         8,418    27,860    (17,503 ) 10,357
Leased assets
         50    28    (28 ) —
Others
         8,544    22,885    (10,974 ) 11,911






Totals
         121,043    234,272    (103,693 ) 130,579






The useful life presented in the preceding tables, corresponds to the total useful life and residual useful life for the property, plant and equipment. Total useful lives have been determined based on our expected use of the ~~Board of Directors’ committee of Itaú Corpbanca on December 19, 2016, and an ordinary meeting~~assets, considering quality of the ~~Board~~original construction, the environment in which the assets are located, quality and degree of maintenance carried out, and appraisals performed by external experts of the Bank.
b.
Movements on gross balances as of December 31, 2018, and 2017, are as follows:
   Land and buildings    Equipment    Other    Totals
   MCh$    MCh$    MCh$    MCh$
Balances as of January 1, 2018
   118,481    65,018    50,773    234,272
Acquisitions
   6,207    16,253    2,296    24,756
Sales and/or disposals for the year
   (14,010 )    (2,334 )    (3,187 )    (19,531 )
Reclassification to assets held for sale (*)
   (45,123 )    (101 )    (101 )    (45,325 )
Exchange differences
   288    1,547    467    2,302








Balances as of December 31, 2018
   65,843    80,383    50,248    196,474








(*) See detail in Note 15 “Other assets andnon-current assets held for sale”.
   Land and buildings    Equipment    Other    Totals
   MCh$    MCh$    MCh$    MCh$
Balances as of January 1, 2017
   107,989    62,007    42,726    212,722
Acquisitions
   27,125    7,853    9,274    44,252
Sales and/or disposals for the year
   (12,636 )    (2,241 )    (952 )    (15,829 )
Exchange differences
   (3,997 )    (2,601 )    (275 )    (6,873 )








Balances as of December 31, 2017
   118,481    65,018    50,773    234,272








Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-91
Note 13 – Property, plant and equipment, continued
c.
Movements of accumulated depreciation of property, plant and equipment for years ended December 31, 2018 and 2017, are as follows:

   Land and buildings    Equipment    Other    Total
   MCh$    MCh$    MCh$    MCh$
Balances as of January 1, 2018
   (35,330 )    (39,858 )    (28,505 )    (103,693 )
Depreciation for the year
   (7,833 )    (9,182 )    (3,644 )    (20,659 )
Sales and/or disposals for the year
   6,796    2,237    2,429    11,462
Reclassification to assets held for sale (*)
   (883 )    (987 )    (705 )    (2,575 )
Exchange differences
   14,472    42    69    14,583
Impairment
   —      (28 )    —      (28 )








Balances as of December 31, 2018
   (22,778 )    (47,776 )    (30,356 )    (100,910 )








(*) See detail in Note 15 “Other assets andnon-current assets held for sale”.
   Land and buildings    Equipment    Other    Total
   MCh$    MCh$    MCh$    MCh$
Balances as of January 1, 2017
   (29,955 )    (36,010 )    (25,714 )    (91,679 )
Depreciation of the year
   (7,218 )    (8,054 )    (4,098 )    (19,370 )
Sales and/or disposals for the year
   —      2,178    481    2,659
Exchange Differences
   1,843    2,055    826    4,724
Impairment
   —      (27 )    —      (27 )








Balances as of December 31, 2017
   (35,330 )    (39,858 )    (28,505 )    (103,693 )








d.
As of December 31, 2018 and 2017, the Bank has contracts of operating lease that cannot be cancel unilaterally. The information for future payments is as follows:

Future operating lease payments for land, buildings and equipment

   Up to 1 year    Between 1 and
5 years    Over 5
years    Totals
   MCh$    MCh$    MCh$    MCh$
As of December 31, 2018
   23,140    59,171    54,892    137,203
As of December 31, 2017
   23,021    76,949    103,195    203,165
e.
As of December 31, 2018 and 2017, the Bank holds finance lease contracts that cannot be rescinded or unilaterally terminated. The future payment information is detailed as follows:

Future financial leasing payments for land, buildings and equipment

   Up to 1 year    Between 1 and
5 years    Over 5
years    Totals
   MCh$    MCh$    MCh$    MCh$
As of December 31, 2018
   9,373    181,804    45,451    236,628
As of December 31, 2017
   9,078    43,730    43,730    96,538
f.
The Bank and subsidiaries have no restrictions on property, plant and equipment as of December 31, 2018 and 2017. Additionally, property, plant and equipment has not been pledged to ensure compliance with obligations. Furthermore, there are no amounts owed by the Bank on property, plant and equipment as of the aforementioned dates.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-92
Note 14 – Current Taxes and Deferred Taxes
a)
Current taxes
At the end of each reporting period, the Bank and subsidiaries recognize a First Category Income Tax Provision, which is determined based on currently enacted tax legislation. The net provision for current taxes recognized as of December ~~20, 2016,~~31, 2018 was MCh$121,938 (MCh$237,828 as of December 31, 2017), according to the following ~~amendments to the Transaction Agreement were approved:~~detail:
1. The acquisition of Itaú Colombia. The obligation of the parties to cause Itaú Corpbanca to acquire all of the outstanding shares of Itaú Colombia or to carry out a merger of Banco Corpbanca Colombia with Itaú Colombia was amended and replaced with the obligation of the parties to cause Banco Corpbanca Colombia to acquire thea.1) Current taxes assets and liabilities by geographical area:

   As of December 31, 2018 As of December 31, 2017
   Chile USA (*)    Colombia Totals Chile USA (*)    Colombia Totals
   MCh$ MCh$    MCh$ MCh$ MCh$ MCh$    MCh$ MCh$
Current tax assets
   68,094 2,161    52,874 123,129 202,093 —      36,359 238,452
Current tax liabilities
   (528 ) —      (663 ) (1,191 ) (624 ) —      —   (624 )






Totas, net
   67,566 2,161    52,211 121,938 201,469 —      36,359 237,828






a.2) Details of current tax items by geographical area:

   As of December 31, 2018 As of December 31, 2017
   Chile USA (*)    Colombia Total Chile USA (*)    Colombia Total
   MCh$ MCh$    MCh$ MCh$ MCh$ MCh$    MCh$ MCh$
Income tax
   (81,487 ) —      (14,273 ) (95,760 ) (8,332 ) —      (11,357 ) (19,689 )
      —   —      —   —
Less:
      —   —      —   —
Monthly Provisional Payment
   21,424 —      1,544 22,968 49,529 —      2,940 52,469
Tax Credit for Training Costs
   800 —      —   800 — —      —   —
Tax Credit Donations
   745 —      —   745 831 —      —   831
Other taxes to be recovered (**)
   126,084 2,161    64,940 193,185 159,441 —      44,776 204,217






Totals
   67,566 2,161    52,211 121,938 201,469 —      36,359 237,828






(*)
Corresponds to the subsidiary located in New York.
(**)
The other taxes to be recovered correspond mainly to monthly provisional payments paid in previous years, credits for training expenses, provisional payments for absorbed utilities with right to return, among others.
b)
Effect on income
The tax expense for the years ended December 31, 2018, 2017 and 2016 is comprised of the following items:
   2018    2017    2016
   MCh$    MCh$    MCh$
Income tax expense

Current tax expense
   (95,760 )    (19,689 )    (19,326 )
Deferred taxes

Deferred tax expenses
   28,110    74,611    23,105






Subtotals
   (67,650 )    54,922    3,779






Others
   591    (2,051 )    (211 )






Net expense for income taxes
   (67,059 )    52,871    3,568






Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-93
Note 14 – Current Taxes and Deferred Taxes, continued
c)
Effective tax rate reconciliation
The following table reconciles the income tax rate to the effective rate applied to determine the Bank’s income tax expense as of December 31, 2018, 2017 and 2016.
The nominal tax rates of the countries where consolidated subsidiaries are located are:

   2018 2017 2016
   Tax rates Tax rates Tax rates
Chile
   27.0 % 25.5 % 24.0 %
Colombia
   37.0 % 40.0 % 40.0 %
USA
   21.0 % 35.0 % 35.0 %
   For the years ended December 31,
   2018 2017 2016
   Tax rate Amount Tax rate Amount Tax rate Amount
   % MCh$ % MCh$ % MCh$
Amount calculated by using the statutory rates
   27.00 (63,157 ) 25.50 (2,538 ) 24.00 (2,617 )
Exchange differences due to investments in Colombia
   13.47 (31,499 ) (204.84 ) 20,390 (1.06 ) 116
Equity price level restatement for tax purposes
   (9.49 ) 22,188 (141.93 ) 14,128 (129.59 ) 14,132
Local tax for USA and Panama income
   0.02 (54 ) (98.46 ) 9,801 57.55 (6,276 )
Effect of rate change Chile
   —   —   (51.68 ) 5,144 (36.27 ) 3,955
Tax Reform USA35%-21%
   —   —   95.21 (9,477 ) —   —
Effect of rate change Colombia
   (0.01 ) 20 47.07 (4,685 ) (21.57 ) 2,352
Effect of rates New York subsidiary (**)
   (0.18 ) 433 14.65 (1,458 ) (20.52 ) 2,238
Effect of rates Colombia subsidiary (**)
   0.50 (1,173 ) (54.55 ) 5,430 (34.06 ) 3,714
Penalty fee SBIF
   0.69 (1,616 ) —   —   —   —
Permanent and other differences (*)
   (3.33 ) 7,799 (162.11 ) 16,136 128.80 (14,046 )


Totals
   28.67 (67,059 ) (531.14 ) 52,871 (32.72 ) 3,568


(*)
Other includes, mainly, a) benefits derived from the tax effect of goodwill from business combinations in Colombia made by Corpbanca prior to the acquisition of Itaú, amounting to MCh$ 11,276 in 2018, MCh$20,568 in 2017, and MCh$14,276 in 2016 and b) the 2016 period includes effects of wealth tax in Colombia andone-time effects derived from the business combination between Itaú and Corpbanca.
(**)
This line reflects the differences in tax rates in other jurisdictions, based on the Bank’s consolidated results.
d)
Other comprehensive income – tax effects
The table below sets for a summary of the deferred tax effect on other comprehensive income for the years ended December 31, 2018, 2017 and 2016, which consists of the following items:
d.1 Tax effect of “OCI” that may be reclassified subsequently to profit or loss:

   2018    2017    2016
   MCh$    MCh$    MCh$
Financial instruments at fair value through other comprehensive income
   (2,172 )    —      —
Available for sale investments
   —      (3,333 )    (4,025 )
Hedge of a net investment in foreign operations
   10,565    (14,211 )    (2,685 )
Cash flow hedge
   (1,669 )    44    1,345






Total charge to other comprehensive income
   6,724    (17,500 )    (5,365 )






d.2 “OCI” that may not be reclassified subsequently to profit or loss:

   2018    2017    2016
   MCh$    MCh$    MCh$
Income tax relating to defined benefit obligation
   (44 )    (6 )    1,090






Total charge to other comprehensive income
   (44 )    (6 )    1,090






Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-94
Note 14 – Current Taxes and Deferred Taxes, continued
e)
Effect of deferred taxes
e.1)Totals deferred taxes
Detail of effects for deferred taxes presented in assets and liabilities is as follows:

   As of December 31, 2018 As of December 31, 2017
   Assets (*) Liabilities (*) Net Assets (*) Liabilities (*) Net
   MCh$ MCh$ MCh$ MCh$ MCh$ MCh$
Allowances for loan losses
   124,408 —   124,408 105,479 17,621 123,100
Accrued interest on past due portfolio
   7,377 —   7,377 6,970 —   6,970
Unearned price differences
   288 —   288 220 —   220
Personnel provisions
   18,220 (155 ) 18,065 7,891 4,659 12,550
Miscellaneous provisions
   51,033 —   51,033 29,803 4,225 34,028
Tax losses
   62,685 —   62,685 25,753 46,166 71,919
Net tax value of amortizable assets
   14,739 —   14,739 20,683 —   20,683
Depreciation of property, plant and equipment
   (42,581 ) —   (42,581 ) (34,169 ) (11,687 ) (45,856 )
Lease division and others
   19,261 —   19,261 25,392 4,175 29,567
Mark to market of financial instruments
   (26,821 ) 138 (26,683 ) (12,259 ) (26,730 ) (38,989 )
Itaú-Corpbanca business combination
   (61,521 ) —   (61,521 ) (18,139 ) (50,158 ) (68,297 )
Others
   11,598 (454 ) 11,144 (16,939 ) (14,625 ) (31,564 )


Totals assets (liabilities) for deferred taxes
   178,686 (471 ) 178,215 140,685 (26,354 ) 114,331


e.2 Deferred taxes by geographic area:
   As of December 31, 2018 As of December 31, 2017
   Chile    USA    Colombia Total Chile USA    Colombia Total
   MCh$    MCh$    MCh$ MCh$ MCh$ MCh$    MCh$ MCh$
Deferred tax assets
   130,883    20,311    27,492 178,686 125,917 14,768    —   140,685
Deferred tax liabilities
   —      —      (471 ) (471 ) (53 ) —      (26,301 ) (26,354 )








Net by geographic area
   130,883    20,311    27,021 178,215 125,864 14,768    (26,301 ) 114,331








Effects of deferred taxes on assets and liabilities arising from temporary differences (by geographic area) are as follows:
   As of December 31, 2018 As of December 31, 2017
   Chile USA Colombia Total Chile USA Colombia Total
   MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$
Allowances for loan losses
   99,621 (4,531 ) 29,318 124,408 93,864 11,615 17,621 123,100
Accrued interest on past due portfolio
   7,377 —   —   7,377 6,970 —   —   6,970
Unearned price differences
   288 —   —   288 220 —   —   220
Personnel provisions
   13,871 139 4,055 18,065 7,829 282 4,439 12,550
Miscellaneous provisions
   43,824 3,843 3,366 51,033 28,582 1,221 4,225 34,028
Tax losses
   2,460 11,034 49,191 62,685 16,607 9,146 46,166 71,919
Net tax value of amortizable assets
   14,739 —   —   14,739 20,683 —   —   20,683
Depreciation of property, plant and equipment
   (37,513 ) —   (5,068 ) (42,581 ) (34,308 ) —   (11,548 ) (45,856 )
Lease division and others
   9,422 —   9,839 19,261 25,392 —   4,175 29,567
Mark to market of financial instruments
   (6,535 ) —   (20,148 ) (26,683 ) (12,259 ) —   (26,730 ) (38,989 )
Itaú-Corpbanca business combination
   (16,613 ) —   (44,908 ) (61,521 ) (18,139 ) —   (50,158 ) (68,297 )
Others
   (58 ) 9,826 1,376 11,144 (9,577 ) (7,496 ) (14,491 ) (31,564 )


Totals assets (liabilities), net
   130,883 20,311 27,021 178,215 125,864 14,768 (26,301 ) 114,331


Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-95
Note 15 – Other assets and assetsnon-current assets held for sale
a)
The detail of other assets is as follows:

   As of December 31,
   2018    2017
   MCh$    MCh$
Assets for leasing (1)
   33,991    25,741
Other assets
   467,806    403,284
Deposits in guarantee
   30,016    28,539
Accounts and notes receivable (2)
   147,248    167,450
Rights on brokerage transactions
   52,361    33,247
Repossessed assets from leasing transactions
   5,368    9,733
Hedge accounting valuation adjustments
   12,800    13,980
Rentals paid in advance (3)
   5,698    7,960
Prepaid expenses (4)
   19,674    13,501
Collateral for financial transactions (threshold)
   155,641    88,520
Claims receivable from insurance companies
   360    690
Asset management fees receivable
   1,496    986
Insurance brokerage fees receivable
   6,537    4,236
Other assets
   30,607    34,442




Totals
   501,797    429,025




(1)
Property, plant and equipment acquired to be ceded under financial leases.
(2)
This includes rights and accounts receivable that fall outside the Bank’s line of business such as tax credits, cash guarantee deposits and other balances pending of collection.
(3)
Leases paid in advance to SMU S.A. in connection with ATM locations (see Note 32, letter b)
(4)
Includes payments made in advance for different services that will be received (leases, insurance, and others).
b)
The detail ofnon-currents assets held for sale is as follows:

   As of December 31,
   2018    2017
   MCh$    MCh$
Assets received in lieu of payment
   29,060    18,308
Property, plant and equipment held for sale (1)
   30,742    —




Totals
   59,802    18,308




(1)
Corresponds to buildings owned by Itaú Corpbanca Colombia S.A. held for sale, as approved by the Board of Directors of the entity, during the meeting held on July 31, 2018.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-96
Note 16 – Deposits and Other Demand Liabilities and Time Deposits
a)
As of December 31, 2018 and 2017 deposits and other demand liabilities are as follow:

   As of December 31,
   2018    2017
   MCh$    MCh$
Checking accounts
   2,570,436    2,473,283
Other deposits and demand accounts
   1,396,573    1,363,017
Advance payments received from customers
   79,801    131,169
Other demand liabilities
   253,665    174,198




Totals
   4,300,475    4,141,667




b)
As of December 31, 2018 and 2017 the composition of time deposits and other time liabilities is as follows:
   As of December 31,
   2018    2017
   MCh$    MCh$
Time deposits
   10,093,703    10,036,583
Time savings accounts
   27,156    28,410
Other time liabilities
   252    250




Totals
   10,121,111    10,065,243




Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-97
Note 17 – Interbank Borrowings
a.
As of December 31, 2018 and 2017, interbank borrowings are as follows:

   As of December 31,
   2018    2017
   MCh$    MCh$
Loans obtained from local financial institutions

Banco de Chile
   —      21,958
Banco BTG Pactual Chile
   5,863    —




Subtotals
   5,863    21,958




Loans obtained from foreign financial institutions

Sumitomo Mitsui Banking Corporation
   242,883    145,156
Wells Fargo Bank, N.A.
   209,615    157,029
Credicorp Capital SASAF
   175,326    125,706
Bank of America, N.A.
   153,546    248,514
IFC Corporación Financiera Internacional
   145,817    187,507
Citibank N.A.
   118,975    168,232
Scotia Fondos Sociedad Administradora de Fondos S.A.
   108,979    62,205
Bank of Montreal
   106,586    42,836
Corporación Andina de Fomento
   104,273    30,724
BNP Paribas
   91,072    39,480
Banco Crédito del Perú
   90,022    31,031
Bancoldex S.A. (Colombia)
   80,394    100,834
Commerzbank A.G.
   75,032    89,274
BBVA Asset Management Continental S.A. (Perú)
   73,481    39,791
Standard Chartered Bank
   68,169    140,397
Bank of Nova Scotia
   65,802    65,442
Banco Latinoamericano de Exportación
   52,817    57,132
Interfondos S.A. Sociedad Administradora de Fondos
   45,149    19,906
HSBC USA
   43,214    15,362
Findeter S.A. Financiera del Desarrollo Territorial
   38,364    49,528
Cobank C.B.
   33,850    9,108
Mizuho Corporate Bank
   31,763    39,480
Ing Bank NV
   30,874    16,965
Apple Bank for Saving
   18,147    12,290
Bancaribe Curacao Bank N.V.
   12,694    13,831
Export Development Canada
   11,199    30,724
Banco de Bogotá
   8,560    4,118
China Construction Bank
   5,155    14,133
Fondos SURA SAF S.A.C.
   2,827    25,436
Shanghai Commercial & Savings Bank
   2,244    6,145
TheExport-IM Apple Bank for Saving
   2,244    6,145
Bayern Landesbank
   2,237    11,245
Banco República
   1,805    15,119
Scotiabank Perú S.A
   1,457    —
Corporación Financiera de Desarrollo S.A (Cofide)
   —      10,407
Mercantil CA Banco Universal
   —      17,395
Deg Deutsche Investitions
   —      21,410
Kookmin Bank of New York
   —      12,324
Other banks
   67,288    91,811




Subtotals
   2,321,860    2,174,172




Totals
   2,327,723    2,196,130
c.
Interbank borrowings from financial institutions by maturity is as follows:

   As of December 31,
   2018    2017
   MCh$    MCh$
Within 1 year
   1,829,814    1,475,588
After 1 year but within 2 years
   319,870    422,911
After 2 years but within 3 years
   17,595    106,260
After 3 years but within 4 years
   77,993    15,154
After 4 years but within 5 years
   11,644    73,536
After 5 years
   70,807    102,681




Totals
   2,327,723    2,196,130




Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-98
Note 18 - Debt Instruments Issued and Other Financial Liabilities
As of December 31, 2018 and 2017, composition of debt instruments issued and other financial liabilities is as follows:

   As of December 31,
   2018    2017
   MCh$    MCh$
Debt instruments issued

Mortgage finance bonds
   53,463    67,938
Senior bonds
   4,882,341    4,840,918
Subordinated bonds
   1,074,320    1,041,182




Subtotals
   6,010,124    5,950,038




Other financial liabilities

Liabilities with the public sector
   10    —
Borrowings from local financial institutions
   12,390    16,255
Foreign borrowings
   —      811




Subtotals
   12,400    17,066




Totals
   6,022,524    5,967,104




Debt classified as short term includes demand obligations or obligations that will mature in less than one year. All other debt is classified as long term, and is detailed as follows:
   As of December 31, 2018
   Long term    Short term    Totals
   MCh$    MCh$    MCh$
Mortgage finance bonds
   43,029    10,434    53,463
Senior bonds
   4,220,626    661,715    4,882,341
Subordinated bonds
   1,052,111    22,209    1,074,320






Debt instruments issued
   5,315,766    694,358    6,010,124






Other financial liabilities
   —      12,400    12,400






   As of December 31, 2017
   Long term    Short term    Totals
   MCh$    MCh$    MCh$
Mortgage finance bonds
   55,678    12,260    67,938
Senior bonds
   4,178,313    662,605    4,840,918
Subordinated bonds
   1,041,182    —      1,041,182






Debt instruments issued
   5,275,173    674,865    5,950,038






Other financial liabilities
   —      17,066    17,066






Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-99
Note 18 - Debt Instruments Issued and Other Financial Liabilities, continued
The following tables provide with additional information, including maturities, for each type of debt issued as of December 31, 2018 and 2017.
a.
Mortgage finance bonds
Detail of maturities for mortgage finance bonds is as follows:

   As of December 31,
   2018    2017
   MCh$    MCh$
Within 1 year
   10,434    12,260
After 1 year but within 2 years
   7,612    9,965
After 2 years but within 3 years
   7,092    8,114
After 3 years but within 4 years
   6,516    7,554
After 4 years but within 5 years
   5,908    6,952
After 5 years
   15,901    23,093




Totals
   53,463    67,938




b.
Senior bonds
Details for senior bonds, by currency, are as follows:

   As of December 31,
   2018    2017
   MCh$    MCh$
Bonds in UF
   3,568,532    3,258,201
Bonds in CLP
   416,116    373,135
Bonds in USD
   529,363    923,718
Bonds in COP
   368,330    285,864




Totals
   4,882,341    4,840,918




Detail of maturities for senior bonds is as follows:

   As of December 31,
   2018    2017
   MCh$    MCh$
Due within 1 year
   661,715    662,605
After 1 year but within 2 years
   637,595    516,061
After 2 years but within 3 years
   216,695    653,601
After 3 years but within 4 years
   446,323    199,908
After 4 years but within 5 years
   276,047    312,597
After 5 years
   2,643,966    2,496,146




Totals
   4,882,341    4,840,918




Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-100
Note 18 - Debt Instruments Issued and Other Financial Liabilities, continued
The following table presents details for senior bonds issued:
Senior bonds issued during the year ended December 31, 2018
Serie
Currency
Amount
Term
Issuance rate
Placement date Maturity date
BCORAQ0710
UF 2,000,000 10 years and 4 months 3% annual 02/06/2018 07/01/2028
BCORAR0710
UF 2,450,000 11 years and 4 months 3% annual 02/21/2018 07/01/2029
BCORAR0710
UF 5,000,000 11 years and 4 months 3% annual 03/14/2018 07/01/2029
BCORAN0710
UF 2,000,000 7 years and 5 months 3% annual 06/05/2018 07/01/2025
Totals
11,450,000
Serie
Currency
Amount
Term
Issuance rate
Placement date Maturity date
BCORBY0914
CLP 70,000,000,000 4 years and 5 months 5% annual 04/13/2018 09/01/2022
Totals
70,000,000,000
Serie
Currency
Amount
Term
Issuance rate
Placement date Maturity date
SUBSERIE B30
COP 55,470,000,000 3 years and 6 months 1.20% annual 11/22/2018 05/10/2021
SUBSERIE C48
COP 258,706,000,000 4 years 2.91% annual 11/22/2018 11/01/2022
Totals
314,176,000,000
Senior bonds issued during the year ended December 31, 2017
Serie
Currency
Amount
Term
Issuance rate
Placement date Maturity date
BCORAO0710
UF 2,900,000 9 years and 6 months 3% annual 01/03/2017 07/01/2026
BCORAP0710
UF 5,000,000 10 years and 6 months 3% annual 01/05/2017 07/01/2027
BCORAP0710
UF 5,000,000 10 years and 6 months 3% annual 01/10/2017 07/01/2027
BCORAQ0710
UF 3,000,000 11 years and 6 months 3% annual 01/16/2017 07/01/2028
BCORAQ0710
UF 4,000,000 11 years and 6 months 3% annual 01/20/2017 07/01/2028
BCORAQ0710
UF 3,000,000 11 years and 6 months 3% annual 01/25/2017 07/01/2028
BCORAP0710
UF 3,000,000 10 years and 5 months 3% annual 02/10/2017 07/01/2027
BCORAO0710
UF 100,000 9 years and 5 months 3% annual 02/16/2017 07/01/2026
BCORAK0710
UF 6,000,000 5 years and 3 months 3% annual 04/04/2017 07/01/2022
BCORAJ0710
UF 1,000,000 3 years and 9 months 3% annual 08/25/2017 07/01/2021
Totals
33,000,000
Serie
Currency
Amount
Term
Issuance rate
Placement date Maturity date
BCORBY0914
CLP 30,000,000,000 5 years 5% annual 09/25/2017 09/01/2022
BCORBZ0914
CLP 100,000,000,000 6 years 5% annual 10/17/2017 09/01/2023
Totals
130,000,000,000
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-101
Note 18 - Debt Instruments Issued and Other Financial Liabilities, continued
c.
Subordinated bonds
Details of subordinated bonds, by currency, are as follows

   As of December 31,
   2018    2017
   MCh$    MCh$
Bonds in UF
   95,599    95,485
Bonds in CLP
   781,925    766,086
Bonds in COP
   196,796    179,611




Totals
   1,074,320    1,041,182




Detail of maturities for subordinated bonds is as follows

   As of December 31,
   2018    2017
   MCh$    MCh$
Within 1 year
   22,209    —
After 1 year but within 2 years
   —      21,500
After 2 years but within 3 years
   —      —
After 3 years but within 4 years
   18,604    —
After 4 years but within 5 years
   22,484    22,303
After 5 years
   1,011,023    997,379




Totals
   1,074,320    1,041,182




For the years ended December 31, 2018 and 2017no issuance of subordinated bonds took place.
d.
Others financial obligations

   As of December 31,
   2018    2017
   MCh$    MCh$
Within 1 year
   —      811
After 1 year but within 2 years
   —      —
After 2 years but within 3 years
   —      —
After 3 years but within 4 years
   —      —
After 4 years but within 5 years
   —      —
After 5 years
   —      —




Totals financial liabilities
   —      811




Short-term financial liabilities

Amounts due to credit card transactions
   12,390    16,255
Others
   10    —




Totals short-term financial liabilities
   12,400    16,255




Totals other financial liabilities
   12,400    17,066




As of December 31, 2018 and 2017, the Bank has no financial debt covenants to comply with.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-102
Note 19 – Provisions
As of December 31, 2018 and 2017, the Bank has registered the following movements in its provisions:
a.
Other provisions
Provisions disclosed in liabilities as of December 31, 2018 and 2017 present the following detail:

   As of December 31,
   2018    2017
   MCh$    MCh$
Provisions for personnel salaries and expenses
   99,945    90,559
Provisions for mandatory dividends
   51,614    17,234
Provisions for contingent loans risk
   45,848    —
Provisions for contingencies
   17,496    10,096




Totals
   214,903    117,889




b.
Movements in the provisions for contingent loans risk according to IFRS 9, for the year ended December 31, 2018 are as follows:
   Contingent loans risk
   Stage 1    Stage 2    Stage 3    Totals
   12-Month ECL    Lifetime ECL    Lifetime ECL
Balances as of December 31, 2017
   —      —      —      —
Restatement of the prior year due to IFRS 9 adoption
   13,485    44,107    2,099    59,691
Balances as of January 1, 2018
   13,485    44,107    2,099    59,691
Changes in the allowances

- Transfers to stage 1
   —      (504 )    116    (388 )
- Transfers to stage 2
   (155 )    —      268    113
- Transfers to stage 3
   (42 )    (66 )    —      (108 )
- Increases due to change in credit risk
   2,283    5,528    38    7,849
- Decreases due to change in credit risk
   (1,298 )    (446 )    (39 )    (1,783 )
- Charge-offs

- Changes due to modifications that did not result in derecognition

New financial assets originated or purchased
   5,104    965    126    6,195
Financial assets that have been derecognized
   (3,763 )    (21,558 )    (754 )    (26,075 )
Changes in models/risk parameters
            —
Foreign exchange and other movements
   265    86    3    354
Balances as of December 31, 2018
   15,879    28,112    1,857    45,848
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-103
Note 19 – Provisions, continued
c.
The provision balance changes during 2018 and 2017, were as follows:

   Provisions for personnel
salaries and expenses
(i) Provisions for
mandatory dividends
(ii) Provisions for
contingent loans risk Provisions for
contingencies
(iii) Totals
   MCh$ MCh$ MCh$

MCh$
Balances as of January 1, 2018
   90,559 17,234 —   10,096 117,889
Provisions established due to IFRS 9 adoption
   —   —   59,691 —   59,691
Provisions applied
   (27,026 ) (17,234 ) —   —   (44,260 )
Provisions recorded
   53,156 51,614 14,511 8,993 128,274
Provisions released
   (25,561 ) —   (28,354 ) (1,347 ) (55,262 )
Other movements
   8,817 —   —   (246 ) 8,571


Balances as of December 31, 2018
   99,945 51,614 45,848 17,496 214,903


   Provisions for personnel
salaries and expenses
(i)    Provisions for
mandatory dividends
(ii)    Provisions for
contingencies
(iii)    Totals
   MCh$    MCh$    MCh$    MCh$
Balances as of January 1, 2017
   89,295    1,029    9,724    100,048
Provisions applied
   (23,815 )    —      —      (23,815 )
Provisions recorded
   91,722    17,234    586    109,542
Provisions released
   (62,231 )    (1,029 )    —      (63,260 )
Other movements
   (4,412 )    —      (214 )    (4,626 )








Balances as of December 31, 2017
   90,559    17,234    10,096    117,889








(i)
Employee benefits and staff salaries are recorded in “Personnel salaries expenses.”
(ii)
Mandatory dividends are recorded in the Consolidated Statement of Changes in Equity, against “Provision for mandatory dividends.”
(iii)
The contingency provisions/ (releases) are included in Other operating (expenses)/income, depending on whether they are debit or a credit.
d.
Provisions for payroll and employee benefits
   As of December 31,
   2018    2017
   MCh$    MCh$
Provision for long-term termination benefits
   (e.1) 8,298    7,914
Provision for pension plan
   (e.2) 30,908    31,761
Provision for retroactive unemployment plan
   (e.3) 373    371
Provision for retirements bonus plan
   (e.4) 542    476
Provision for other employee benefits
   (*) 46,249    36,811
Vacation accrual
   (*) 13,575    13,226




Totals
   99,945    90,559




(*)
Short-term benefits
e. The main aspects of the Bank’s long term employee benefits are detailed below
e.1) Other long-term employee benefits
Description: Annual payment during the month in which the employee completes a given number of years of service (in five-year intervals from 5 to 50).
Measurement:The projected unit credit method was used to determine the present value of the defined-benefit obligation and the corresponding service cost. For all active plan participants, the “projected accrued benefit” is based on the plan formula and years of service as of the date of calculation, but using assumptions such an average salary and social security benefits, projected to the age at which it is assumed that the employee will stop providingservices. The total benefit is used for inactive members. The plan does not have any related policies (and therefore no reimbursements) or assets, but rather uses structured funding based on the entity’s financial conditions.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-104
Note 19 – Provisions, continued
The economic assumptions are summarized as follows:

   As of December 31,
   2018    2017
   %    %
Summary of economic assumptions

Discount rate
   6.25    7.25
Expected rate of salary increase
   5.70    6.50
The movements of the present value of the obligation for this type of benefit and the amounts recognized in the Consolidated Statements of Income are determined using the projected credit unit method and it consist of the following:
   As of December 31,
   2018    2017
   MCh$    MCh$
Balances as of January 1,
   7,914    7,950
Net cost of benefits (*)
   1,397    1,487
Payments
   (973 )    (856 )
Provisions recorded
   (350 )    (51 )
Exchange differences
   310    (616 )




Balances as of December 31,
   8,298    7,914




(*) Detail of net cost of benefit is as follows:
   As of December 31,
   2018    2017
   MCh$    MCh$
Current services cost
   836    866
Interest expense on obligation
   561    621




Total
   1,397    1,487




e.2) Pension plan
Description:Old-age pension or Survivors in accordance with the ~~terms and conditions agreed by Banco Corpbanca~~Social Security Law in Colombia and ~~Itaú Colombia on November 1, 2016 (the “Colombian Acquisition”). This agreement also contemplates~~benefits acquired with the ~~rendering~~Entity.
Measurement:The projected unit credit method is using for the determination of ~~certain services~~present value of the obligation by ~~Banco Corpbanca Colombia in favor of Itaú Colombia~~benefit and the ~~hiring~~associated cost to that. Using this method the obligation by benefit is the present value of current benefits for past services, but calculating the plan benefit basing on the salary projected to the date on which it is assumed that the participant receives the benefit. The plan has no policy (without refund) or associated assets, being a structured financing according to the financial conditions of the ~~senior management~~entity.
The summary of the economic assumptions is as follows:
   As of December 31,
   2018    2017
   %    %
Assumptions

Discount rate
   6.75    7.25
Expected rate of salary increases
   3.20    4.00
Inflation rate
   3.20    4.00
Itaú ~~Colombia by Banco~~ Corpbanca and Subsidiaries – Consolidated Financial Statements – December 31, 2018
F-105
Note 19 – Provisions, continued
The detail of Pension plan balances movements is as follows:

   2018    2017
   MCh$    MCh$
Balances as of January 1,
   31,761    34,768
Interest expense on obligation
   2,359    2,742
Payments
   (3,802 )    (3,581 )
Actuarial losses (gains)
   (698 )    223
Exchange differences
   1,288    (2,391 )




Balances as of December 31,
   30,908    31,761




e.3) Retroactive unemployment plan
Description: Retroactive unemployment plan prior to Law 50 from 1990 in Colombia.
Measurement:The ~~Colombian Acquisition~~projected unit credit method was used to determine the present value of the defined-benefit obligation and the corresponding service cost. For all active plan participants, the “projected accrued benefit” is based on the plan formula and years of service as of the date of calculation, but using an average salary and social security benefits, etc., projected to the age at which it is assumed that the employee will ~~be carried out~~stop providing services. The total benefit is used for inactive members. The plan does not have any related policies (and therefore no reimbursements) or assets, but rather uses structured funding based on the entity’s financial conditions.
The economic assumptions are summarized as ~~soon~~follows:
   As of December 31,
   2018    2017
   %    %
Assumptions

Discount rate
   5.75    7.25
Expected rate of salary increases
   5.70    6.50
Inflation rate
   3.20    4.00
The details of movements for this benefits during years ended December 31, 2018 and 2017 are as ~~practicable once~~follows:
   2018    2017
   MCh$    MCh$
Balances as of January 1,
   371    472
Current services costs
   108    13
Interest expense on obligations
   24    36
Actuarial gains
   (32 )    (19 )
Payments of benefits
   (115 )    (93 )
Exchange differences
   17    (38 )
Balances as of December 31,
   373    371
e.4) Retirement Bonus Plan
Description:Fixed payment upon retirement
Measurement:The projected unit credit method is used to determine the ~~same has been approved~~present value of the benefit obligation and the corresponding cost. Under this method, the benefit obligation is the present value of the current benefits for past service but calculating the plan benefit based on the projected salary as of the date in which it is assumed that the participant will receive the benefit.
Itaú Corpbanca and Subsidiaries – Consolidated Financial Statements – December 31, 2018
F-106
Note 19 – Provisions, continued
The economic assumptions are summarized as follows:

   As of December 31,
   2018    2017
   %    %
Summary of economic hypothesis

Discount rate(s)
   6.75    7.50
Expected rate(s) of salary increase
   5.20    6.00
Inflation rate
   3.20    4.00
The amounts recognized for this benefit are as follows:
   2018    2017
   MCh$    MCh$
Balances as of January 1,
   476    439
Current service costs
   39    34
Interest expense on obligation
   37    36
Actuarial (gains) losses
   (24 )    4
Payments of benefits
   (5 )    (3 )
Exchange differences
   19    (34 )




Balances as of December 31,
   542    476




The effect on Other Comprehensive Income is summarized as follows:
      For the years ended December 31,
      2018    2017    2016
      MCh$    MCh$    MCh$
Pension plan
   (e.2 )    (698 )    223    3,761
Retroactive unemployment plan
   (e.3 )    (32 )    (19 )    159
Retirement bonus plan
   (e.4 )    (24 )    4    —






Total recognition of obligations for defined benefits
      (754 )    208    3,920






Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-107
Note 19 – Provisions, continued
Future payments
Future actuarial calculations may differ with respect to the calculations presented, due to the following factors: The experience of the plans differs from those anticipated by the ~~Colombian Financial Superintendency (the “CFS”). The CFS has been informed that the Colombian Acquisition was already approved by the shareholders of Corpbanca Colombia.~~selected economic and demographic hypotheses.

~~2. The acquisition of shares of Banco Corpbanca Colombia. The acquisition by Itaú Corpbanca~~Changes in economic and demographic assumptions.
Expected increases or decreases as a natural part of the ~~shares~~functioning of ~~Banco Corpbanca Colombia held by CorpGroup (currently representing 12.36%~~the methodology for these calculations (for example, the end of ~~shares outstanding), which was previously agreed to be carried out no later than January 29, 2017, will be postponed until January 28, 2022, subject to receipt~~the amortization period or additional costs based on the financing situation of the plan).
Changes in the characteristics of the applicable ~~regulatory approvals~~plan or law, and with respect thereto, there are no significant events affecting the results presented since the last assessment.
The following is a detail of future payments for the year 2018 and 2017:

   Long-term
termination
benefits    Pension plan    Retroactive
unemployment
plan    Retirement
benefit plan
2018
   MCh$    MCh$    MCh$    MCh$
Fiscal year 2019
   783    2,995    66    40
Fiscal year 2020
   842    2,858    38    22
Fiscal year 2021
   1,003    2,682    20    26
Fiscal year 2022
   1,147    2,527    70    40
Fiscal year 2023-2031 (combined)
   1,160    2,457    102    43
Fiscal year 2024-2031 (combined)
   4,749    11,751    94    203
~~3.            Registry of the Shares of Banco Corpbanca Colombia.~~
   Long-term
termination
benefits    Pension plan    Retroactive
unemployment
plan    Retirement
bonus plan
2017
   MCh$    MCh$    MCh$    MCh$
Fiscal year 2018
   944    2,996    55    36
Fiscal year 2019
   752    2,922    32    12
Fiscal year 2020
   868    2,757    38    21
Fiscal year 2021
   1,038    2,586    22    26
Fiscal year 2022
   1,177    2,434    68    42
Fiscal year 2023-2027 (combined)
   5,384    11,512    177    246
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-108
Note 20 – Other liabilities and ~~CorpGroup will carry out commercially reasonable efforts, in accordance~~liabilities directly associated with the shareholders agreement of Banco Corpbanca Colombia, to cause Banco Corpbanca Colombia to (i) be registered as a public company in the National Registry of Securities and Issuers of the CFS, and (ii) have its shares listed in the Colombian Stock Market (the “CSM”).
Once the abovementioned registry and listing have been obtained, CorpGroup will be permitted to sell all of its shares, or a portion thereof, of Banco Corpbanca Colombia in the CSM, subject to a right of first offer granted to Itaú Corpbanca. The shares sold by CorpGroup in the CSM will be deducted from the shares that Itaú Corpbanca must acquire from CorpGroup on January 28, 2022.
d.non-current~~Transfer of Ownership SMU Corp S.A.~~ assets held for sale

a)
As of December 31, 2018 and 2017 the other liabilities are as follows:
~~On January 30, 2017, Itaú Corpbanca transferred all of its shares in SMU Corp S.A., equivalent to 51%.~~

   As of December 31,
   2018    2017
   MCh$    MCh$
Accounts and notes payable (1)(2)
   317,703    348,036
Dividends payable
   270    703
Unearned income (3)
   9,089    7,850
Valuation adjustment for hedge accounting
   2,102    3,091
Payables due to brokerage transactions
   75,872    21,933
Collateral for financial transactions (threshold)
   91,223    79,589
Other liabilities
   25,536    2,233




Totals
   521,795    463,435




(1)
Obligations other than those directly related to the business operations, such as payable withholding taxes, payable social security contributions, balances due on purchases of materials, balances due on obligations under lease agreements for the acquisition of Bank, accounts payable for expenses, and others.
(2)
It includes MCh$5,985 correspondent to a penalty fee payable to the SBIF. For additional information see Note 37 “Subsequent events”.
(3)
It corresponds to commissions associated with financial advisory and insurance brokerage businesses that must be deferred in accordance with applicable regulations.
b)
As of December 31, 2018 and 2017 there are no liabilities directly associated withnon-current assets held for sale.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-109
Note 21 – Contingencies, Commitments, and Responsibilities
a)
Lawsuits and Legal Proceedings
As ~~a result, that company is no longer a subsidiary~~ of the ~~Bank. The shares were acquired by Inversiones Monserrat S.A.~~date of issuance of these Financial Statements, legal actions have been filed against the Bank and its subsidiaries involving its transactions in the ordinary course of business. They are mainly lawsuits pending against the Bank related to loans and other matters, most of which, according to the Bank’s Legal Services Divisions involved in the suits, present no risk of significant loss. Notwithstanding the above, provisions for MCh$956 and MCh$1,191 as of December 31, 2018 and December 31, 2017, respectively have been recorded in the Consolidated Financial Statements.
e.Lawsuit ~~Brought by~~of Helm LLC against Itaú Corpbanca
On December 20, 2016, Helm LLC filed a lawsuit in the New York State Supreme Court (“the State Court Lawsuit”) and a Request for Arbitration before the ICC International Arbitration Court (the “Arbitration”), against Itaú Corpbanca, CorpBank Holding Inversiones Lade e Itaú Corpbanca Colombia, the latter as nominal defendant, alleging certain breaches of ~~contract.~~
~~These alleged breaches refer to (i)~~ the shareholders’ agreement of Itaú Corpbanca Colombia as amended ~~shareholder agreement~~and restated of HB Acquisition S.A.S. ~~dated~~on July 31, 2013 (“SHA”) and (ii) the Transaction Agreement (“TA”) dated January 29, 2014, as amended, which governs, among other matters, the merger between Itaú Chile S.A. and Corpbanca, by which Itaú Corpbanca was formed, and the potential acquisition by Itaú Corpbanca of certain shares of Corpbanca Colombia (the “Acquisition of the Shares under the TA”) on or before January 29, 2017.
In the State Court Lawsuit, Helm LLC sought an injunction to support the arbitration to prevent the Acquisition of the Shares from taking place, which, as reported by Itaú Corpbanca as a relevant event on December 20, 2016, was postponed until January 28, 2022.
F-43

~~Table of Contents~~
On December 30, 2016, Itaú Corpbanca filed its response to the motions filed by Helm LLC in accordance with the State Court Lawsuit and, later, on January 26, 2017, Helm LLC filed a notice to withdraw the State Court Lawsuit. The Arbitration has begun in accordance with applicable procedures.
.
In its lawsuit, Helm LLC ~~pursues,~~seeks, among other things, compensation that would correspond to the value it estimates and ~~claim a change of~~claims in exchange for its shares in Itaú Corpbanca Colombia, plus interest. On February 14, 2017 the defendants ~~responded~~answered to the complaint of Helm LLC, ~~lawsuit,~~ rejecting their claims in full. ~~Also,~~Moreover, Itaú ~~CorpBanca~~Corpbanca and ~~CorpGroup~~CorpBank Holding Inversiones Ltda. filed a counterclaim against Helm LLC for ~~non-compliance with~~breach of the SHA, according to which they ~~pursue,~~request the court, among other things, to declare the termination of the aforementioned ~~SHA is declared, on~~SHA.
On April 19, ~~April~~ 2017, Helm LLC ~~submitted its response to this~~answered such counterclaim. The arbitration procedure has continued in accordance with the judicial proceedings and the ~~probationary~~evidentiary period ~~are~~is expected to take place in July 2018. Itaú Corpbanca estimates that the claim of Helm LLC has no merit and will proceed to defend its rights under the SHA and the ~~legislation applicable.~~applicable legislation.
Other lawsuits
Other legal actions have been filed against the Bank and its subsidiaries involving its transactions carried out in the ordinary course of business. The Bank’s maximum exposure for these lawsuits amounts to approximately MCh$26,995 as of December 31, 2018 and MCh$36,309 as of December 31, 2017. However, in Management’s opinion based on reports from the Legal Division as of December 31, 2018, it is more likely than not that these lawsuits will not result in significant losses not contemplated by the Bank in these Consolidated Financial.
Itaú Corpbanca Colombia S.A.
The Bank and its subsidiaries are involved in civil, administrative and labor proceedings. The outstanding civil and administrative proceedings, them are related to Banking transactions, and the remaining ones derive from the ownership of leased assets.
Such claims amount, in the aggregate, to MCh$32,375 as of December 31, 2018 (MCh$13,748 as of December, 2018). According to the evaluation of the expected results in each lawsuits the Bank has recorded a provision of MCh$152 as of December 31, 2018 (MCh$977 as of December 31, 2017).
There are labor processes of which amounted to MCh$2,527, for which the Bank has recorded a provision of MCh$1,057 as of December 31, 2018. (MCh$865 as of December 31, 2017)
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-110
Note 21 – Contingencies, Commitments, and Responsibilities, continued

f.~~Fine~~Recovery of fine for ~~Exceeding Credit Margins~~exceeding credit margins
Via Ruling No. 16,191 dated December 30, 2015, the SBIF fined Corpbanca MCh$21,765 ~~(see Note 21 “~~~~Contingencies, Commitments and Responsibilities~~”) for violations of credit margins established in articles84-1 and 85 of the Chilean General Banking Law (“GBL”) related to Chapter12-3 of the SBIF’s Updated Standards. On January 18, 2016, Corpbanca filed an appeal with the Santiago Court of Appeals to challenge the fine in ~~conformity~~accordance with the GBL. On August 31, 2016, the Court of Appeals ruled in favor of Corpbanca and rendered all fines null and void. Five business days ~~later,~~thereafter, the SBIF filed ~~a complaint~~an appeal complaining against the appellate court ministers, which was heard by the Supreme Court under CaseNo. 62,128-2016.
On May 9, 2017, the Supreme Court dismissed ~~the complaint~~such appeal filed by the SBIF disagreeing with the aforementioned final ruling issued by the Santiago Court of Appeals. Therefore, the appeal filed by the Bank to render the SBIF fines null and void was accepted, consequently declaring the fines unlawful.
As previously reported, the aforementioned fines were recognized as an expense in the result of the 2015 fiscal year. Pursuant to this decision of the Supreme Court, the reverse of such expense and the other corresponding financial effects.
g.SBIF Ruling
Through a resolution dated June 30, 2017, served to Itaú Corpbanca (the “Bank”) on July 17, 2017, the Chilean Superintendence of Banks and Financial Institutions (“SBIF”) resolved, among other matters, the continuation of the administrative proceeding against the Bank for alleged violations of individual credit limits in granting certain loans to Norte Grande S.A., Potasios de Chile S.A. and Sociedad de Inversiones Pampa Calichera S.A., the same transactions which were the basis for the fines rendered null and void by the Santiago Court of Appeals on August 31, 2016.
On July 19, 2017, the Bank filed a motion against that resolution for considering it against the law, among other reasons, because there is no administrative proceeding in existence to be continued by the SBIF against the Bank, as resolved by the Santiago Court of Appeals and by Chilean Supreme Court, which dismissed the complaint filed by the SBIF against that resolution. In accordance with a resolution dated July 24, 2017, the SBIF dismissed the aforementioned motion, claiming that the proceeding is in the investigation stage and that the Bank is not formally a party to any administrative ~~proceeding.~~
proceedings.
On October 23, 2017, the Bank received a communication from the SBIF, filing charges against Itaú Corpbanca for the same operations ~~above-mentioned.~~mentioned above. The Bank has the conviction that this administrative procedure is not in accordance with the applicable law and the Bank will exercise the defenses granted by the law to that extent. On November 22, 2017, the Bank filed its response with the SBIF. Subsequently, on December 27, 2018 through communication the SBIF report the conclusion of the investigation phase of the referred sanctioning administrative procedure. For details see Note 37 “Subsequent events”.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-111
Note 21 – Contingencies, Commitments, and Responsibilities, continued
Transaction Agreement
On January 29, 2014, Inversiones Corp Bank Limitada, Inversiones Saga Limitada (CorpBank), Itaú-Unibanco Holding S.A., Corpbanca and Bank Itaú, subscribed a contract called “Transaction Agreement”, in accordance to the contract, they agreed a strategic association of its operations in Chile and Colombia. This strategic association gave rise at April 1, 2016 the merger of Corpbanca and Itaú, which was be renamed “Itaú Corpbanca”.
Additionally, the Transaction Agreement also included the postponement of the date for Itaú Corpbanca to purchase the shares that CorpBank holds in Corpbanca Colombia. The purchase of those shares of Corpbanca Colombia held by CorpBank (currently representing 12.36% of shares outstanding), which was previously agreed to be carried out no later than January 29, 2017, was postponed until January 28, 2022, subject to receipt of the applicable regulatory approvals. The purchase price for the shares has not changed and will be US$3.5367 per share plus interest from August 4, 2015 until the payment date at an annual interest rate equal to Libor plus 2.7% minus the sum of the aggregate amount of dividends paid by Corpbanca Colombia to CorpBank since the date of the Transaction Agreement.
According to article 76 of the General Banking Law, investments in shares of Banks established abroad are subject to the prior approval of the Superintendency of Banks and Financial Institutions in Chile (SBIF), as well as the Central Bank of Chile (BCCH), which in turn is subject to compliance with ~~its defense~~the conditions set forth in ~~substantive and procedural matters. The trial period for this administrative procedure carried on~~article 78 of said legal corp. Additionally, in the case of Banks incorporated in Colombia, an eventual acquisition of shares in Itaú Corpbanca Colombia by Itaú Corpbanca is also subject to the prior authorization of the Financial Superintendency of Colombia (SFC).
Consequently, the aforementioned transaction must be confirmed only by the ~~SBIF has ended.~~
h.~~Increase in Shareholding~~occurrence of ~~Itaú Unibanco Holding S.A.~~
On September 15, 2017, Itaú Unibanco Holding S.A. acquired 1,800,000 shares of Itaú Corpbanca. As a result of this acquisition, its interest in Itaú Unibanco has increased from 35.71% to 36.06%, with no
F-44

~~Table of Contents~~
~~modifications to~~one or more future and uncertain events that are not entirely under the ~~corporate governance within Itaú Corpbanca.~~
~~The shares of the Bank were acquired by purchasing 100% of the shares of CGB III SpA, which currently holds the shares~~control of the Bank.
~~CORPBANCA ADMINISTRADORA GENERAL DE FONDOS S.A.~~
a.~~Merger Date Postponed~~.
At an extraordinary Board meeting held January 25, 2017, the Board agreed to render null and void the merger agreement (with Itaú Chile Administradora General de Fondos S.A.) and the amended bylaws that were agreed upon on September 30, 2016, at an Extraordinary Shareholders’ Meeting. They also agreed to initiate, as soon as possible, a new merger process to integrate the businesses of both companies and to request the corresponding authorizations.
b.~~Merger~~
At an Extraordinary Shareholders’ Meeting held on June 30, 2017, the shareholders agreed to approve the related party transaction by which the company would merge with Itaú Chile Administradora General de Fondos S.A., and they approved the merger of the subsidiaries of Itaú Corpbanca, Corpbanca Administradora General de Fondos S.A.—absorbed company—and Itaú Chile Administradora General de Fondos S.A.—absorbing company—by which the latter would incorporate the former.
~~On December 29, 2017, the merger became effective. There was no impact to the Consolidated Financial Statements.~~
~~ITAÚ CHILE ADMINISTRADORA GENERAL DE FONDOS S.A.~~
a.~~Merger Date Postponed~~.
At an Extraordinary Shareholders’ Meeting held on January 25, 2017, the Bank´s shareholders agreed to render null and void the merger agreement (with Corpbanca Administradora General de Fondos S.A.) and the amended bylaws agreed upon on September 30, 2016. The shareholders also agreed to initiate, as soon as possible, a new merger process to integrate the businesses of both companies and to request the corresponding authorizations.
b.~~Merger~~
At an Extraordinary Shareholders’ Meeting held on June 30, 2017, the shareholders agreed to approve the related party transaction by which the company would merge with Corpbanca Administradora General de Fondos S.A., and they approved the merger of the subsidiaries of Itaú Corpbanca, Corpbanca Administradora General de Fondos S.A.—absorbed company—and Itaú Chile Administradora General de Fondos S.A.—absorbing company—by which the latter would incorporate the former.
~~On December 29, 2017, the merger became effective. There was no impact to the consolidated financial statements.~~
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~~Table of Contents~~
~~ITAÚCORPBANCA CORREDORES DE BOLSA S.A.~~
a.~~Merger of Subsidiaries.~~
On January 1, 2017, the merger of Corpbanca Corredores de Bolsa S.A. and Itaú BBA Corredor de Bolsa Ltda. took place, by which the latter absorbed the former. The new resulting company is the legal successor of Corpbanca Corredores de Bolsa S.A., and its new corporate name is Itaú Corpbanca Corredores de Bolsa S.A.
~~ITAU CHILE CORREDORA DE SEGUROS LIMITADA~~
a.~~Merger Approved by SBIF~~
~~On June 30, 2017, the SBIF authorized the merger of Itaú Chile Corredora de Seguros Limitada and Corpbanca Corredores de Seguros S.A.~~
b.~~Merger Approved~~
On June 30, 2017, the partners of Itaú Chile Corredora de Seguros Limitada approved the company’s merger with Corpbanca Corredores de Seguros S.A., by which the latter would incorporate the former. The merger must comply with certain conditions and deadlines established in the merger agreement.
~~CORPBANCA CORREDORES DE SEGURO S.A.~~
a.~~Merger Approved by SBIF.~~
~~On June 30, 2017, the SBIF authorized the merger of Itaú Chile Corredora de Seguros Limitada and Corpbanca Corredores de Seguros S.A.~~
b.~~Merger Approved~~
On June 30, 2017, the shareholders of Corpbanca Corredores de Seguros S.A., approved the company’s merger with Itaú Chile Corredora de Seguros Limitada, by which the latter would incorporate the former. The merger must comply with certain conditions and deadlines established in the merger agreement.
~~The merger process to integrate the businesses of both brokers will be effective during 2018.~~
~~BANCO CORPBANCA COLOMBIA S.A.~~
a.~~Profit Distribution~~
~~At the Annual General Meeting in March 2017, the shareholders agreed to record the losses for the year 2016 of MCh$150,926 in the 2017 financial statements as prior year losses.~~
b.~~Bylaw Amendments~~
At the Annual General Meeting held on March 28, 2017, the shareholders agreed to change the Bank’s corporate name to Itaú Corpbanca Colombia S.A., and permit the use of Itaú or Banco Corpbanca or Corpbancato refer to the Bank.
~~The bylaw amendment to modify the name of the following subsidiaries was also registered in the mercantile registry:~~
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~~Table of Contents~~
~~Previous Legal Name~~
b)
~~New Legal Name~~
~~New Commercial Name~~
~~Helm Fiduciaria S.A.~~
~~Itaú Asset Managment Colombia S.A. Sociedad Fiduciaria~~
~~Itaú Asset Managment~~
~~Itaú Fiduciaria~~
~~CorpBanca Investment Trust Colombia S.A.~~
~~Itaú Securities Services Colombia S.A. Sociedad Fiduciaria~~
~~Itaú Securities Services~~
~~Helm Comisionista de Bolsa S.A.~~
~~Itaú Comisionista de Bolsa Colombia S.A.~~
~~Itaú Comisionista de Bolsa~~
~~Helm Casa de Valores Panamá~~
~~Itaú Casa de Valores S.A.~~
~~Itaú Casa de Valores~~
~~Helm Bank Panamá~~
~~Itaú (Panamá) S.A.~~
~~Itaú~~Contingent loans
c.~~Transfer of Financial Assets and Liabilities from Itaú BBA Colombia S.A. to Banco Itaú Corpbanca Colombia S.A.~~
As established in the agreement to transfer financial assets, liabilities and contracts signed on June 1, 2017, between Itaú Corpbanca Colombia S.A., as transferee, and Itaú BBA Colombia S.A. Corporación Financiera, as assignor, the procedure of notifying the contracting parties of the transfer was completed on June 16, 2017. ~~In relation to this transaction, Banco Itaú Corpbanca Colombia S.A. paid MCh$33,205 to Itaú BBA Colombia S.A. Corporación Financiera.~~
d.~~Investments~~
On December 22, 2017, Itaú Corpbanca Colombia performed consummated the exchange of Deceval shares for shares of the Colombian Stock Exchange, in compliance with the previously executed Subscription Framework Contract.
~~Two subsidiaries of the Bank, Itaú Securities Services S.A. and Itaú Asset Management also consummated the exchange of Deceval shares for shares of the Colombian Stock Exchange.~~
~~ITAU CORPBANCA NEW YORK BRANCH~~
a.~~Capital increase~~
~~Itaú Corpbanca Branch New York had two capital increases during the year 2017: the first for US$30 million in June and the second for US$60 million in December.~~
~~ITAU CORPBANCA RECAUDACIONES Y COBRANZAS S.A.~~
~~a. Capital increase~~
~~On September 29, 2017 a capital increase of MCh $ 4,446 was agreed, where 502,287 nominal shares of one series were issued without a nominal value.~~
~~b. Acquisition of Recuperadora de Crédito Limitada~~
On October 2, 2017, a subsidiary of Itaú Corpbanca Recaudaciones y Cobranzas S.A. completed the purchase and absorption of 100% of the interest ownership in Recuperadora de Credito Limitada, a company formerly controlled by Itaú Chile Inversiones, Servicios y Administración S.A.. Recaudaciones y Cobranzas is the legal continuation of the absorbed entity.
Recuperadora de Credito Limitada had the purpose of providing judicial and extrajudicial collection services of credits, which as of the date of the consummation of the acquisition will be rendered by Itaú Corpbanca Recaudaciones y Cobranzas S.A..
~~Due to the foregoing, an effect in equity due to the merger was recognized, amounting to MCh$ (3,977).~~
F-47

~~Table of Contents~~
~~NOTE 4 SEGMENT INFORMATION~~
~~The segment reporting is determined by the Bank on the basis of its operating segments (Chile(14)~~ ~~and Colombia), which are mainly differentiated by the risks and returns that affect them(15)~~.
~~The reportable segments and the criteria used to inform the Bank’s highest authority in the decision-making process of the transaction are in accordance with IFRS 8 “Operating Segments.”~~
a)~~Segments~~
~~The descriptions of each operating segment are as follows:~~
~~i) Chile~~
The Bank’s business activities in Chile take place mainly in the domestic market. It has strategically aligned its operations into the following five business areas that are related directly to its customers’ needs and the Bank’s strategy: 1) Wholesale Banking (a) Corporate; Real Estate and Construction and (b) Large Companies; 2) Retail Banking (a) Itaú Private Bank, (b) Itaú Companies, (c) Itaú Personal Bank (d) Itaú and (e) Banco Condell; 3) Treasury; 4) Corporate; and 5) Other Financial Services.
The Bank manages these business areas using a reporting system for internal profitability. The operating results are reviewed regularly by the entity’s highest decision-making authority for operating decisions as one single cash generating unit, to decide about resource allocation for the segment and evaluate its performance.
~~The Bank did not enter into transactions with a particular customer or third party that exceeded 10% of its total income in 2017, 2016 and 2015.~~
~~ii) Colombia~~
Colombia has been identified as a separate operating segment based on the business activities. Its operating results are reviewed regularly by the entity’s highest decision-making authority for operating decisions as one single CGU, to decide about resource allocation for the segment and evaluate its performance. Separate financial information is available for this segment.
~~The commercial activities of this segment are carried out by Banco Itaú Corpbanca Colombia S.A. and its subsidiaries.~~
b)~~Geographical information~~
~~The segments reported by Itaú Corpbanca, disclose revenue from ordinary activities from external clients:~~
~~(i)~~        ~~attributed to the entity’s country of domicile and~~
~~(ii)~~     ~~attributed, in aggregate, to all foreign countries in which the entity obtains revenue.~~
~~When revenue from external customers attributed to a particular foreign country is significant, it is disclosed separately.~~
~~The Group´s operations in its two main geographic areas (Chile(16)~~ ~~and Colombia(17)) are represented in the following table:~~
~~(14) Includes the New York Branch.~~
~~(15) The segments presented here correspond to the segments used by the merged Bank. Information for 2015 (referring to Banco Itaú Chile) was presented using the current segmenting criteria.~~
~~(16) Includes the New York Branch.~~
~~(17) This segment includes operations carried out by Itaú (Panamá) S.A., and Itaú Casa de Valores (Panamá).~~
F-48

~~Table of Contents~~

2017

2016

2015

Chile

Colombia

Total

Chile

Colombia

Total

Chile

Colombia

Total

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

Interest income

1,067,124

579,205

1,646,329

1,013,951

495,252

1,509,203

501,982

—

501,982

Interest expense

(529,584
)
(333,763
)
(863,347
)
(554,246
)
(315,782
)
(870,028
)
(278,692
)
—

(278,692
)
Net interest income

537,540

245,442

782,982

459,705

179,470

639,175

223,290

—

223,290

c)~~Information on assets, liabilities and income~~
~~Segment information on assets and liabilities is presented as of December 31, 2017 and 2016; segment information on income is presented as of December 31, 2017, 2016 and 2015.~~
~~c.1 Assets and Liabilities~~

As of December 31, 2017

Chile

Colombia

Total

Note

MCh$

MCh$

MCh$

ASSETS

Cash and deposits in banks

5a)

609,279

354,751

964,030

Cash in the process of collection

5b)

155,950

1,067

157,017

Trading portfolio financial assets

6

25,652

389,409

415,061

Investments under agreements to resell

7

2,292

26,232

28,524

Derivative financial instruments

8

1,158,002

90,773

1,248,775

Loans and receivables from banks - Loans and receivables from customers, net

9/10

15,599,269

4,234,886

19,834,155

Financial investments available-for-sale

11

1,937,909

725,569

2,663,478

Held to maturity investments

11

95,652

106,378

202,030

Intangible assets (*)

12

1,378,942

183,712

1,562,654

Property, plant and equipment, net

13

82,481

48,098

130,579

Current income taxes

14

202,093

36,359

238,452

Deferred income taxes

14

140,685

—

140,685

Other assets

15

348,717

80,308

429,025

Non-current assets held for sale

15

18,308

—

18,308

21,755,231

6,277,542

28,032,773

As of December 31, 2017

Chile

Colombia

Total

Note

MCh$

MCh$

MCh$

LIABILITIES

Current accounts and demand deposits

16

2,399,159

1,742,508

4,141,667

Transaction in the course of payment

5b)

109,496

—

109,496

Obligations under repurchase agreements

7

44,264

376,656

420,920

Time deposits and saving accounts

16

7,868,572

2,196,671

10,065,243

Derivative financial instruments

8

1,036,024

59,130

1,095,154

Borrowings from financial institutions

17

1,545,143

650,987

2,196,130

Debt issued

18

5,484,562

465,476

5,950,038

Other financial obligations

18

16,255

811

17,066

Current income tax provision

14

624

—

624

Deferred income taxes

14

53

26,301

26,354

Provisions

19

61,038

56,851

117,889

Other liabilities

20

399,760

63,675

463,435

Liabilities directly associated with non-current assets held for sale

20

—

—

—

18,964,950

5,639,066

24,604,016

~~(*)This~~~~includes~~~~goodwill~~~~generated~~in~~business combinations between Banco Itaú Chile and Corpbanca totaling MCh$1,126,663~~~~(18)~~ ~~as of December 31, 2017 (MCh$1,145,308 in 2016).~~
(18) In order to verify the impairment, the goodwill acquired in the business combination was allocated, from the date of acquisition, between each of the acquiring entity’s CGUs or groups of CGUs, taking into account expected synergies of the business combination, regardless of whether other assets or liabilities of the acquired entity are allocated to those units or groups of units, in the case of the Bank: Chile MCh$904,868 (MCh$904,868 in 2016) and Colombia MCh$221,795 (MCh$240,440 in 2016), see Note 30.
F-49

~~Table of Contents~~

As of December 31, 2016

Chile

Colombia

Total

Note

MCh$

MCh$

MCh$

ASSETS

Cash and deposits in banks

5a)

816,190

670,947

1,487,137

Cash in the process of collection

5b)

142,553

3,216

145,769

Trading portfolio financial assets

6

64,707

567,850

632,557

Investments under agreements to resell

7

33,820

136,422

170,242

Derivative financial instruments

8

1,010,134

92,635

1,102,769

Loans and receivables from banks - Loans and receivables from customers, net

9/10

15,763,007

4,832,209

20,595,216

Financial investments available-for-sale

11

1,626,951

447,126

2,074,077

Held to maturity investments

11

94,269

132,164

226,433

Intangible assets (*)

12

1,403,454

211,021

1,614,475

Property, plant and equipment, net

13

81,798

39,245

121,043

Current income taxes

14

138,942

25,354

164,296

Deferred income taxes

14

110,739

26

110,765

Other assets

15

334,161

93,233

427,394

Non-current assets held for sale

15

37,164

—

37,164

21,657,889

7,251,448

28,909,337

As of December 31, 2016

Chile

Colombia

Total

Note

MCh$

MCh$

MCh$

LIABILITIES

Current accounts and demand deposits

16

2,331,735

2,121,456

4,453,191

Transaction in the course of payment

5b)

67,410

3

67,413

Obligations under repurchase agreements

7

5,470

368,409

373,879

Time deposits and saving accounts

16

8,889,741

2,691,969

11,581,710

Derivative financial instruments

8

854,431

52,903

907,334

Borrowings from financial institutions

17

1,640,136

539,734

2,179,870

Debt issued

18

4,874,653

585,600

5,460,253

Other financial obligations

18

23,298

2,265

25,563

Current income tax provision

14

475

1,411

1,886

Deferred income taxes

14

29

57,607

57,636

Provisions

19

43,600

56,448

100,048

Other liabilities

20

205,364

64,446

269,810

Liabilities directly associated with non-current assets held for sale

20

7,032

—

7,032

18,943,374

6,542,251

25,485,625

F-50

~~Table of Contents~~
~~c.2 Income~~

As of December 31, 2017

Chile

Colombia

Total

MCh$

MCh$

MCh$

Net interest income

537,540

245,442

782,982

Net services fees income

135,624

41,947

177,571

Trading and investment income, net

(49,615
)
57,883

8,268

Foreign exchange gains (losses), net

34,661

11,504

46,165

Other operating income

33,398

8,134

41,532

Provision for loan losses

(169,233
)
(146,184
)
(315,417
)
Total operating income, net of provision for loan losses, interest and fees

522,375

218,726

741,101

Other income and expenses

—

—

—

Depreciaion and Amortization

(51,213
)
(30,632
)
(81,845
)
Other Operating expenses

(424,733
)
(224,569
)
(649,302
)
Total operating expenses

(475,946
)
(255,201
)
(731,147
)
Income before taxes

46,429

(36,475
)
9,954

Income (loss) taxes

31,188

21,683

52,871

Income from continuing operations

77,617

(14,792
)
62,825

Income (loss) discontinued operations

—

—

Net income for the period

77,617

(14,792
)
62,825

Average loans

15,950,784

4,906,758

20,857,542

Average investments

1,565,017

1,141,938

2,706,955

As of December 31, 2016

Chile

Colombia

Total

MCh$

MCh$

MCh$

Net interest income

459,705

179,470

639,175

Net services fees income

112,147

38,649

150,796

Trading and investment income, net

38,642

74,310

112,952

Foreign exchange gains (losses), net

(26,744
)
(22,104
)
(48,848
)
Other operating income

9,058

10,389

19,447

Provision for loan losses

(146,812
)
(99,178
)
(245,990
)
Total operating income, net of provision for loan losses, interest and fees

445,996

181,536

627,532

Other income and expenses

—

—

—

Depreciation and Amortization

(40,610
)
(23,082
)
(63,692
)
Other Operating expenses

(397,060
)
(155,875
)
(552,935
)
Total operating expenses

(437,670
)
(178,957
)
(616,627
)
Income before taxes

8,326

2,579

10,905

Income (loss) taxes

(84
)
3,652

3,568

Income from continuing operations

8,242

6,231

14,473

Income (loss) discontinued operations

(504
)
—

(504
)
Net income for the period

7,738

6,231

13,969

Average loans

12,645,761

5,156,124

17,801,885

Average investments

830,584

1,142,595

1,973,179

F-51

~~Table of Contents~~

As of December 31, 2015

Chile

Colombia

Total

MCh$

MCh$

MCh$

Net interest income

223,290

—

223,290

Net services fees income

71,088

—

71,088

Trading and investment income, net

(33,182
)
—

(33,182
)
Foreign exchange gains (losses), net

74,461

—

74,461

Other operating income

8,761

—

8,761

Provision for loan losses

(42,929
)
—

(42,929
)
Total operating income, net of provision for loan losses, interest and fees

301,489

—

301,489

Other income and expenses

—

—

—

Depreciation and Amortization

(9,785
)
—

(9,785
)
Other operating expenses

(168,675
)
—

(168,675
)
Total operating expenses

(178,460
)
—

(178,460
)
Income before taxes

123,029

—

123,029

Income (loss) taxes

(17,263
)
—

(17,263
)
Income from continuing operations

105,766

—

105,766

Income (loss) discontinued operations

—

—

—

Net income for the period

105,766

—

105,766

Average loans

6,410,592

—

6,410,592

Average investments

496,220

—

496,220

F-52

~~Table of Contents~~
~~NOTE 5 CASH AND CASH EQUIVALENTS~~
a)~~Detail of cash and cash equivalents~~
~~The detail of the balances included under cash and cash equivalents is as follows:~~

As of December 31,

2017

2016

MCh$

MCh$

Cash and deposits in banks (1)

Cash

254,824

274,570

Deposits in the Central Bank of Chile

53,187

207,483

Deposits in national banks

9,389

2,116

Foreigns deposits

646,630

1,002,968

Subtotal cash and deposits in banks

964,030

1,487,137

Cash in the process of collection, net (5b))

47,521

78,356

Highly liquid financial instruments (2)

35,014

381,009

Investments under agreements to resell (3)

28,524

170,242

Total cash and cash equivalents

1,075,089

2,116,744

~~(1)~~Amount in “Cash,” “Deposits in Central Bank of Chile” and Bank of the Republic of Colombia (included in “Foreign deposits”) are regulatory reserve deposits for which the Bank must maintain a certain monthly average.
~~(2)~~~~Corresponds to those financial instruments in the trading portfolio and available-for-sale portfolio with maturities that do not exceed three months from their dates of acquisition:~~

As of December 31,

2017

2016

Notes

MCh$

MCh$

Trading securities

6

19,239

29,472

Financial assets available for sale

11

15,775

351,537

Highly Liquid Financial Instruments

35,014

381,009

~~(3)~~~~Corresponds to investments under agreements to resell with maturities that do not exceed three months from their dates of acquisition.~~

As of December 31,

2017

2016

Notes

MCh$

MCh$

Investment under agreement to resell

7a)

28,524

170,242

F-53

~~Table of Contents~~
b)~~Cash in the process of collection~~
~~Cash in the process of collection is short-term, amounts in transit of collection.~~

As of December 31,

2017

2016

MCh$

MCh$

Assets (Cash in the process of collection)

Outstanding notes from other banks

66,996

60,546

Funds receivable

90,021

85,223

Subtotal assets

157,017

145,769

Liabilities (Transaction in the course of payment)

Funds payable

109,496

67,413

Subtotal liabilities

109,496

67,413

Net items in course of collection

47,521

78,356

c)~~Cash flows from operations~~
Based on the banking nature of our activities, we considered that our funding has a direct relationship with our loan and investing portfolio, as all those activities are taken into consideration to determine, approve and monitor the financial strategies that guide the Bank with respect to the composition of its assets and liabilities, cash inflows and outflows and transactions with financial instruments.
Based on our overall strategy, the Bank considers gains and losses derived from these operations are part of our main revenue producing activities and core business and the presentation of the cash flows from those items under operating activities shows consistency between our Statement of Income and our Statement of Cash Flows.
~~Examples of cash flows from operating activities are:~~
i.~~Receivables from repurchase agreements and securities borrowing and Payables from repurchase agreements and securities lending.~~ These items represent the cash flows (collections and payments) corresponding to the purchase and sale of obligations and securities lending, financial intermediation activities (see Note 7 and Note 1.i).
~~ii.~~~~Investing Portfolio.~~ ~~This item represents the cash flows (collections and payments) of our trading and non-trading portfolio related financial instruments (see Notes 11, 16 and Note 1.j).~~
~~iii.~~~~Foreign borrowings obtained and Repayment of foreign borrowings.~~ These items represent the cash flows (collections and payments) of obligations with foreign banks (see note 17) for the financing of foreign trade loans, which are included as part of the items entitle “Loans and receivables from banks” (see note 9) and “Loans and receivables from customers” (see note 10 and note 1.n).
~~iv.~~~~Repayment of other borrowings.~~ ~~These items represent the cash flows (collections and payments) arising from the obligations corresponding to financing or operations specific to the business (see note 18).~~
F-54

~~Table of Contents~~
~~NOTE 6 TRADING PORTFOLIO FINANCIAL ASSETS~~
~~The detail of the financial instruments classified as trading financial assets is as follows:~~

As of December 31,

2017

2016

MCh$

MCh$

Chilean Central Bank and Goverment securities

Chilean Central Bank bonds

1,705

8,349

Chilean - Central Bank notes

2,258

—

Other Chilean Central Bank and Goverment securities

3,163

17,855

Other national institution securities

Bonds

5

786

Note

—

—

Other Securities

—

12,608

Foreign Institution Securities

Bonds

381,262

547,499

Note

—

—

Other foreign Securities

8,147

11,727

Mutual funds Investments

Funds managed by related subsidiaries

18,521

33,733

Funds managed by third parties

—

—

Total

415,061
(*)
632,557
(*)
(*) This total includes trading securities as of December 31, 2017 MCh$19,239 (MCh$29,472 as of December 31, 2016), that are presented in Note 5 “Cash and cash equivalents,” which corresponds to those financial instruments with maturities that do not exceed three months from their dates of acquisition.
F-55

~~Table of Contents~~
~~NOTE 7~~ ~~INVESTMENT AND OBLIGATIONS UNDER REPURCHASE AGREEMENTS~~
a)        ~~The Bank purchases financial instruments agreeing to resell them at a future date. As of December 31, 2017 and 2016, the instruments acquired under agreements to resell were as follows:~~

As of December 31, 2017

Less than
three months

More than three
months and less
than one year

More than
one year

Total

MCh$

MCh$

MCh$

MCh$

Government and Chilean Central Bank Securities:

Chilean Central Bank Securities

2,292

—

—

2,292

Treasury Bonds and Notes

—

—

—

—

Other fiscal securities

—

—

—

—

Other securities issued locally:

Other local bank securities

—

—

—

—

Bonds and company business papers

—

—

—

—

Other securities issued locally

—

—

—

—

Securities issued abroad:

Government and Central Bank securities

21,248

—

—

21,248

Other Securities issued abroad

4,984

—

—

4,984

Mutual Funds Investment

Funds managed by related companies

—

—

—

—

Funds managed by third parties

—

—

—

—

Total

28,524

—

—

28,524

As of December 31, 2016

Less than
three months

More than three
months and less
than one year

More than
one year

Total

MCh$

MCh$

MCh$

MCh$

Government and Chilean Central Bank Securities:

Chilean Central Bank Securities

—

—

—

—

Treasury Bonds and Notes

14,416

—

—

14,416

Other fiscal securities

—

—

—

—

Other securities issued locally:

Other local bank securities

8,620

—

—

8,620

Bonds and company business papers

—

—

—

—

Other securities issued locally

—

—

—

—

Securities issued abroad:

Government and Central Bank securities

143,866

—

—

143,866

Other Securities issued abroad

3,340

—

—

3,340

Mutual Funds Investment

Funds managed by related companies

—

—

—

—

Funds managed by third parties

—

—

—

—

Total

170,242

—

—

170,242

F-56

~~Table of Contents~~
b)   ~~As of December 31, 2017 and 2016, obligations under repurchase agreements were the following:~~

As of December 31, 2017

Less than
three months

More than three
months and less
than one year

More than
one year

Total

MCh$

MCh$

MCh$

MCh$

Government and Chilean Central Bank Securities:

Chilean Central Bank Securities

—

—

—

—

Treasury Bonds and Notes

11,703

—

—

11,703

Other fiscal securities

—

—

—

—

Other securities issued locally:

Other local bank securities

26,573

—

—

26,573

Bonds and company business papers

5,988

—

—

5,988

Other securities issued locally

—

—

—

—

Securities issued abroad:

Government and Central Bank securities

—

—

—

—

Other Securities issued abroad

376,656

—

—

376,656

Mutual Funds Investment

Funds managed by related companies

—

—

—

—

Funds managed by third parties

—

—

—

—

Total

420,920

—

—

420,920

As of December 31, 2016

Less than
three months

More than three
months and less
than one year

More than
one year

Total

MCh$

MCh$

MCh$

MCh$

Government and Chilean Central Bank Securities:

Chilean Central Bank Securities

3,367

—

—

3,367

Treasury Bonds and Notes

2,103

—

—

2,103

Other fiscal securities

—

—

—

—

Other securities issued locally:

Other local bank securities

—

—

—

—

Bonds and company business papers

—

—

—

—

Other securities issued locally

—

—

—

—

Securities issued abroad:

Government and Central Bank securities

368,409

—

—

368,409

Other Securities issued abroad

—

—

—

—

Mutual Funds Investment

Funds managed by related companies

—

—

—

—

Funds managed by third parties

—

—

—

—

Total

373,879

—

—

373,879

F-57

~~Table of Contents~~
~~NOTE 8 DERIVATIVE FINANCIAL INSTRUMENT AND HEDGE ACCOUNTING~~
a)   ~~As of December 31, 2017 and 2016, the Bank held the following portfolio of derivative financial instruments:~~
~~a.1) Derivatives financial assets~~

As of December 31, 2017

Notional

Up to three
months

Three months
to one year

Over one year

Fair Value

MCh$

MCh$

MCh$

MCh$

Foreign Currency Forwards

8,855,360

5,728,141

700,252

316,901

Foreign Currency Swap

92,772

299,288

3,260,432

396,239

Interest Rate Swap

5,781,923

10,258,903

23,469,906

534,505

Foreign Currency Call Option

33,709

47,300

26,223

421

Foreign Currency Put Option

6,675

9,827

25,808

709

Total

14,770,439

16,343,459

27,482,621

1,248,775

As of December 31, 2016

Notional

Up to three
months

Three months
to one year

Over one year

Fair Value

MCh$

MCh$

MCh$

MCh$

Foreign Currency Forwards

10,287,421

6,857,963

1,348,556

177,590

Foreign Currency Swap

63,647

260,672

3,559,276

389,784

Interest Rate Swap

1,535,239

2,471,415

26,689,571

534,087

Foreign Currency Call Option

50,178

50,222

670

977

Foreign Currency Put Option

15,338

14,571

—

331

Total

11,951,823

9,654,843

31,598,073

1,102,769

~~a.2) Derivatives financial liabilities~~

As of December 31, 2017

Notional

Up to three
months

Three months
to one year

Over one year

Fair Value

MCh$

MCh$

MCh$

MCh$

Foreign Currency Forwards

9,023,102

5,821,573

807,071

333,482

Foreign Currency Swap

109,275

414,355

2,822,789

290,288

Interest Rate Swap

5,481,548

8,843,640

20,720,506

468,928

Foreign Currency Call Option

6,675

7,369

—

86

Foreign Currency Put Option

17,629

25,459

415

2,370

Total

14,638,229

15,112,396

24,350,781

1,095,154

As of December 31, 2016

Notional

Up to three
months

Three months
to one year

Over one year

Fair Value

MCh$

MCh$

MCh$

MCh$

Foreign Currency Forwards

9,302,930

5,458,077

1,456,181

147,783

Foreign Currency Swap

164,065

391,919

2,772,166

299,738

Interest Rate Swap

1,666,415

3,137,117

29,581,896

457,761

Foreign Currency Call Option

20,795

29,304

—

941

Foreign Currency Put Option

6,428

26,387

335

1,111

Total

11,160,633

9,042,804

33,810,578

907,334

F-58

~~Table of Contents~~
~~a.3) As of December 31, 2017 and 2016, the portfolio of derivative financial instruments for account hedging and for trading purposes were as follows:~~

As of December 31, 2017

Notional

Fair Value

Up to three
months

Three
months to
one year

Over one
year

Assets

Liabilities

MCh$

MCh$

MCh$

MCh$

MCh$

Hedge Accounting

Fair Value

Foreign Currency Forwards

—

—

1,417

78

Foreign Currency Swap

—

—

264,226

2,735

40,441

Interest Rate Swap

442,426

7,567

2,186,949

7,832

39,327

Subtotal

442,426

7,567

2,451,175

11,984

79,846

Cash Flow

Foreign Currency Forwards

1,401,144

590,463

219,453

8,787

3,946

Foreign Currency Swap

—

—

309,970

—

22,315

Interest Rate Swap

—

305,800

536,023

1,680

6,481

Subtotal

1,401,144

896,263

1,065,446

10,467

32,742

Net Investment in foreign operation

Foreign Currency Forwards

1,106,871

291,194

—

28,958

8,790

Subtotal

1,106,871

291,194

—

28,958

8,790

Derivatives held for trading

Foreign Currency Forwards

15,370,447

10,668,057

1,287,870

277,739

320,668

Foreign Currency Swap

202,047

713,643

5,509,025

393,504

227,532

Interest Rate Swap

10,821,045

18,789,176

41,467,440

524,993

423,120

Foreign Currency Call Option

40,384

54,669

26,223

421

86

Foreign Currency Put Option

24,304

35,286

26,223

709

2,370

Subtotal

26,458,227

30,260,831

48,316,781

1,197,366

973,776

Total

29,408,668

31,455,855

51,833,402

1,248,775

1,095,154

As of December 31, 2016

Notional

Fair Value

Up to three
months

Three
months to
one year

Over one
year

Assets

Liabilities

MCh$

MCh$

MCh$

MCh$

MCh$

Hedge Accounting

Fair Value

Foreign Currency Forwards

10,711

13,389

—

1,444

217

Foreign Currency Swap

—

140,660

325,921

735

18,658

Interest Rate Swap

46,628

86,515

1,673,563

5,072

28,411

Subtotal

57,339

240,564

1,999,484

7,251

47,286

Cash Flow

Foreign Currency Forwards

801,564

209,084

535,758

4,539

676

Foreign Currency Swap

—

—

323,803

7,553

11,780

Interest Rate Swap

25,478

—

657,325

2,786

7,289

Subtotal

827,042

209,084

1,516,886

14,878

19,745

Net Investment in foreign operation

Foreign Currency Forwards

551,435

684,562

—

13,864

10,431

Subtotal

551,435

684,562

—

13,864

10,431

Derivatives held for trading

Foreign Currency Forwards

18,226,641

11,409,005

2,268,979

157,743

136,459

Foreign Currency Swap

227,712

511,931

5,681,718

381,496

269,300

Interest Rate Swap

3,129,548

5,522,017

53,940,579

526,229

422,061

Foreign Currency Call Option

70,973

79,526

670

977

941

Foreign Currency Put Option

21,766

40,958

335

331

1,111

Subtotal

21,676,640

17,563,437

61,892,281

1,066,776

829,872

Total

23,112,456

18,697,647

65,408,651

1,102,769

907,334

~~In order to capture the credit risk in the valuation, the fair value of derivatives were adjusted to include the credit risk of the counterparty.~~
F-59

~~Table of Contents~~
b)~~Hedge accounting~~
~~b.1) Fair value hedges:~~
The Bank uses interest rate derivatives to manage its structural risk by minimizing the accounting asymmetries of the Statement of Financial Position. Through different strategies, an item originally contracted at a fixed rate is redenominated to a floating rate, thus reducing the financial stress and consequently the risk value by positioning the expected movements of the yield curve in the structure of the Statement of Financial Position.
~~The detail of the hedged items and fair value hedging instrument, effective~~ ~~as of December 31, 2017 and 2016 separated by term at maturity, are as follows:~~

As of December 31, 2017

Notional

Within one
year

Between one
and three years

Between three
and six years

Over six
years

MCh$

MCh$

MCh$

MCh$

Hedge Items

Loans

12,978

7,704

402,977

320,539

Investment

—

12,320

1,629

130,518

Bonds

437,015

488,291

77,729

1,009,468

Demand Deposits

—

—

—

—

Working capital

—

—

—

—

Total

449,993

508,315

482,335

1,460,525

Hedge instrument

Foreign Currency Forwards

—

—

—

—

Currency Swaps

—

264,226

—

—

Interest Rate Swaps

449,993

244,089

482,335

1,460,525

Total

449,993

508,315

482,335

1,460,525

As of December 31, 2016

Notional

Within one
year

Between one
and three years

Between three
and six years

Over six
years

MCh$

MCh$

MCh$

MCh$

Hedge Items

Loans

—

31,464

—

396,508

Investment

—

—

65,329

52,205

Bonds

16,745

993,535

123,832

319,088

Demand Deposits

133,144

4,127

—

—

Working capital

148,014

13,396

—

—

Total

297,903

1,042,522

189,161

767,801

Hedge instrument

Foreign Currency Forwards

24,100

—

—

—

Currency Swaps

140,660

325,921

—

—

Interest Rate Swaps

133,143

716,601

189,161

767,801

Total

297,903

1,042,522

189,161

767,801

F-60

~~Table of Contents~~
~~b.2)~~ ~~Cash flow hedges:~~
~~Cash flow hedges are used by the Bank to:~~
a)   ~~Reduce the volatility of cash flows in inflation-adjusted statements of financial position through the use of forward inflation contracts and combinations of swap contracts in pesos and readjustments.~~
b)   Fix the rate of a portion of the pool of short-term liabilities in pesos, reducing the risk of a significant portion of the Bank’s cost of financing, while maintaining liquidity risk in the pool of liabilities. This is achieved by equalizing the cash flows of hedged items and derivative instruments, modifying uncertain flows by known flows.
c)   ~~Set the funding source rate in floating rate, decreasing the risk that the cost of funds increases.~~
~~Below is a detailed account of hedged items and hedging instruments by maturity as of December 31, 2017, and 2016, under cash flow hedges:~~

As of December 31, 2017

Notional

Within one
year

Between
one and
three
years

Between
three and
six years

Over six
years

MCh$

MCh$

MCh$

MCh$

Hedge Items

Loans

1,991,607

219,453

57,823

174,300

Investment

—

—

—

—

Bonds

—

309,970

—

—

Demand Deposits

305,800

303,900

—

—

Working capital

—

—

—

—

Total

2,297,407

833,323

57,823

174,300

Hedge instrument

Foreign Currency Forwards

1,991,607

219,453

—

—

Currency Swaps

—

309,970

—

—

Interest Rate Swaps

305,800

303,900

57,823

174,300

Total

2,297,407

833,323

57,823

174,300

As of December 31, 2016

Notional

Within one
year

Between
one and
three
years

Between
three and
six years

Over six
years

MCh$

MCh$

MCh$

MCh$

Hedge Items

Loans

1,036,126

692,109

57,742

158,083

Investment

—

—

—

—

Bonds

—

167,452

—

—

Demand Deposits

—

320,800

79,400

41,300

Working capital

—

—

—

—

Total

1,036,126

1,180,361

137,142

199,383

Hedge instrument

Foreign Currency Forwards

1,010,648

535,758

—

—

Currency Swaps

—

323,803

—

—

Interest Rate Swaps

25,478

320,800

137,142

199,383

Total

1,036,126

1,180,361

137,142

199,383

F-61

~~Table of Contents~~
The effective portion of increase/decrease in fair value of the cash flow hedging instruments of the hedged items was MCh$127 (MCh$5,603 as of December 31, 2016) (see note 22j) “Equity”) and the ineffective portion of increase/decrease in fair value of the cash flow hedging instruments of the hedged items was, respectively, (MCh$(1,300) (MCh$(413) as of December 31, 2016) (see note 26 “Net Foreign Exchange Income (losses) — Fair value gains (losses) on hedging derivatives”), as of December 31, 2017 and 2016 respectively, were as follows with respect to the following hedged items:

As of December 31,

2017

2016

Effective
Portion

Ineffective
Portion

Effective
Portion

Ineffective
Portion

MM$

MM$

MM$

MM$

Loans

(1,890
)
155

(4,149
)
(465
)
Investment

—

—

—

—

Bonds

4,584

(1,329
)
5,272

120

Demand Deposits

3,036

(126
)
4,480

(68
)
Working capital

—

—

—

—

Net Flows

5,730

(1,300
)
5,603

(413
)
~~b.3)~~ ~~Hedging net investment in foreign operations:~~
Itaú Corpbanca, which has a functional currency in Chilean pesos, has business investments abroad corresponding to a branch in New York and subsidiaries in Colombia. As a result of the accounting treatment that these investments must receive, fluctuations in the value of investments caused by the variability of the exchange rate between the Chilean peso against the dollar and the Colombian peso, generate changes in the value of the assets of the parent company.
The objective of hedging is to safeguard the value of equity by managing the exchange rate risk of investments. The hedges of a net investment in a foreign operation, including the hedge of a monetary item that is accounted for as part of a net investment, will be recorded in a manner similar to the cash flow hedges, where:
·    The part of the gain or loss of the hedging instrument that is determined to be effective is recognized in equity, for an amount of MCh$45,759 credit net of deferred taxes (credit of MCh$10,773 as of December 31, 2016);
·    ~~The ineffective part is recognized in the result, not presenting amounts for this concept in 2017 and 2016.~~
~~Gains or losses on the hedge of the net investment in foreign operations that have been recognized in other comprehensive income and accumulated in equity are as follows:~~

As of December 31,

2017

2016

Notes

MCh$

MCh$

Beginning balance

10,773

—

Gains (losses) on hedge of net investment in foreign operation, before tax

22 j

49,197

13,458

Income tax relating to hedges of net investment in foreign operations

22 j

(14,211
)
(2,685
)
Closing Balance

45,759

10,773

F-62

~~Table of Contents~~
~~The detail of each hedge is explained below:~~
~~b.3.1) Hedging net investment in New York Branch~~

Notional

Hedging
Instrument
(Fair Value)

Effective
Portion

Ineffective
Portion

MUSD

MCh$

MCh$

MCh$

As of December 31, 2017

150.1

4,698

4,698

—

As of December 31, 2016

60.1

(164
)
(164
)
—

~~b.3.2) Hedging net investment in Colombia~~

As of December 31, 2017

Notional

Within one
year

Between
one and
three
years

Between
three and
six years

Over six
years

Effective
Portion

Ineffective
Portion

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

Hedged Items

Equity

Investment in foreign operation

1,398,065

—

—

—

44,499

—

Hedging Instrument

Foreign Currency Forwards

1,398,065

—

—

—

44,499

—

As of December 31, 2016

Notional

Within one
year

Between
one and
three
years

Between
three and
six years

Over six
years

Effective
Portion

Ineffective
Portion

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

Hedged Items

Equity

Investment in foreign operation

1,235,997

—

—

—

13,622

—

Hedging Instrument

Foreign Currency Forwards

1,235,997

—

—

—

—

—

F-63

~~Table of Contents~~
~~NOTE 9 LOANS AND RECEIVABLES FROM BANKS~~
~~As of December 31, 2017 and 2016, loans and receivables from banks were as follows:~~

As of December 31

2017

2016

MCh$

MCh$

Local Banks

Loans to local banks

—

—

Allowances for loans losses

—

—

Subtotal

—

—

Foreign Banks

Interbanks cash loans

862

59,393

Loans to foreign banks

13,875

27,618

Non-transferrable deposits with foreign banks

21,544

63,769

Allowances for loans losses

(208
)
(212
)
Subtotal

36,073

150,568

Banco Central of Chile

Deposits in the Central Bank of Chile

34,004

—

Subtotal

34,004

—

Total

70,077

150,568

~~The movement in the allowances for loan losses as of December 31, 2017 and 2016 was as follows:~~

As of December 31, 2017

Local Banks

Foreign Banks

Total

Notes

MCh$

MCh$

MCh$

Balance as of January 1, 2017

—

(212
)
(212
)
Write-offs

—

—

—

Established provisions

27

—

(226
)
(226
)
Released provisions

27

—

209

209

Impairment

—

—

—

Exchange differences

—

21

21

Balances as of December 31, 2017

—

(208
)
(208
)

As of December 31, 2016

Local Banks

Foreign Banks

Total

Notes

MCh$

MCh$

MCh$

Balance as of January 1, 2016

(17
)
(53
)
(70
)
Write-offs

—

—

—

Established provisions

27

(29
)
(278
)
(307
)
Integration Itaú Corpbanca

—

(120
)
(120
)
Released provisions

27

46

240

286

Impairment

—

—

—

Exchange differences

—

(1
)
(1
)
Balances as of December 31, 2016

—

(212
)
(212
)
F-64

~~Table of Contents~~
~~NOTE 10 LOANS AND RECEIVABLES FROM CUSTOMERS~~
a)~~Loans and receivables from customers~~
~~As of December 31, 2017 and 2016, the composition of the loan portfolio was as follows:~~

Gross Assets

Allowances for loan losses

Normal
Portfolio

Impaired
Portfolio

Total

Individually
Evaluated
for
impairment

Collectively
evaluated for
impairment

Total

Net carrying
amount

As of December 31, 2017

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

Commercial loans:

Commercial Loans

10,345,995

770,081

11,116,076

263,552

117,666

381,218

10,734,858

Foreign trade loans

650,959

49,774

700,733

21,617

7,638

29,255

671,478

Current Account debtors

131,332

8,016

139,348

1,903

2,848

4,751

134,597

Factoring operations

140,375

363

140,738

270

93

363

140,375

Student loans

598,108

54,895

653,003

—

12,794

12,794

640,209

Leasing transactions (*)

851,882

88,907

940,789

10,445

6,837

17,282

923,507

Other loans and receivables

24,261

1,598

25,859

365

886

1,251

24,608

Subtotals

12,742,912

973,634

13,716,546

298,152

148,762

446,914

13,269,632

Mortgage loans:

Letter of credit loans

44,432

2,968

47,400

—

140

140

47,260

Endorsable mutual mortgage loans

127,153

8,766

135,919

—

1,816

1,816

134,103

Other mutual mortgage loans

3,507,384

153,516

3,660,900

—

23,736

23,736

3,637,164

Leasing transactions (*)

272,544

9,591

282,135

—

8,960

8,960

273,175

Other loans and receivables

24,231

2,168

26,399

—

367

367

26,032

Subtotals

3,975,744

177,009

4,152,753

—

35,019

35,019

4,117,734

Consumer loans:

Consumer loans

1,725,652

84,397

1,810,049

—

100,068

100,068

1,709,981

Current account debtors

193,325

14,176

207,501

—

11,840

11,840

195,661

Credit card

405,786

15,383

421,169

—

19,664

19,664

401,505

Consumer leasing transactions (*)

10,832

344

11,176

—

398

398

10,778

Other loans and receivables

60,651

2,760

63,411

—

4,624

4,624

58,787

Subtotals

2,396,246

117,060

2,513,306

—

136,594

136,594

2,376,712

Total

19,114,902

1,267,703

20,382,605

298,152

320,375

618,527

19,764,078

Gross Assets

Allowances for loan losses

Normal
Portfolio

Impaired
Portfolio

Total

Individually
Evaluated
for
impairment

Collectively
evaluated for
impairment

Total

Net carrying
amount

As of December 31, 2016

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

Commercial loans:

Commercial Loans

11,312,885

643,479

11,956,364

299,630

31,647

331,277

11,625,087

Foreign trade loans

682,188

71,956

754,144

33,068

284

33,352

720,792

Current Account debtors

127,694

6,007

133,701

3,967

3,738

7,705

125,996

Factoring operations

74,967

1,174

76,141

1,531

177

1,708

74,433

Student loans

583,777

26,538

610,315

—

12,369

12,369

597,946

Leasing transactions (*)

979,305

94,201

1,073,506

26,952

3,508

30,460

1,043,046

Other loans and receivables

26,926

3,374

30,300

910

1,147

2,057

28,243

Subtotals

13,787,742

846,729

14,634,471

366,058

52,870

418,928

14,215,543

Mortgage loans:

Letter of credit loans

55,199

2,509

57,708

—

119

119

57,589

Endorsable mutual mortgage loans

147,562

4,758

152,320

—

1,153

1,153

151,167

Other mutual mortgage loans

3,243,747

117,203

3,360,950

—

16,665

16,665

3,344,285

Leasing transactions (*)

280,765

7,564

288,329

—

5,245

5,245

283,084

Other loans and receivables

28,097

1,113

29,210

—

290

290

28,920

Subtotals

3,755,370

133,147

3,888,517

—

23,472

23,472

3,865,045

Consumer loans:

Consumer loans

1,715,059

70,945

1,786,004

—

82,031

82,031

1,703,973

Current account debtors

174,617

8,215

182,832

—

9,894

9,894

172,938

Credit card

403,394

11,509

414,903

—

18,389

18,389

396,514

Consumer leasing transactions (*)

16,760

331

17,091

—

572

572

16,519

Other loans and receivables

77,179

2,955

80,134

—

6,018

6,018

74,116

Subtotals

2,387,009

93,955

2,480,964

—

116,904

116,904

2,364,060

Total

19,930,121

1,073,831

21,003,952

366,058

193,246

559,304

20,444,648

~~(*) Lease transactions (commercial, mortgage and consumer) are presented net of allowance and total MCh$1,209,715 as of December 31, 2017 (MCh$1,342,649 as of December 31, 2016).~~
F-65

~~Table of Contents~~
Guarantees taken by the Bank to secure collections reflected in its loan portfolios are collateral (urban and rural property, farm land, ships and aircraft, mining claims and other assets) and pledges (inventory, farm assets, industrial assets, plantings and other pledged assets). As of December 31, 2017 and 2016, the fair value of guarantees taken corresponds to 126.89% and 116.97% of the loans and receivables, respectively.
In the case of mortgage guarantees, as of December 31, 2017 and 2016, the fair value of the guarantees taken corresponds to 85.46% and 78.35% of the balance of these loans and receivables, respectively.
The Bank finances its customers’ asset purchases, both movable and real estate, through lease contracts that are included within loans and receivables from customers. As of December 31, 2017, MCh$306,931 corresponds to leases of movable assets (MCh$447,424 as of December 31, 2016) and MCh$927,168 to leases of real estate assets (MCh$931,502 as of December 31, 2016).
Where appropriate, we obtain collateral in respect of our loans and receivables from customers. The collateral normally takes the form of a mortgage (i.e., urban and rural properties, agricultural lands, maritime vessels and aircraft, mineral rights and other assets) and liens (i.e., inventories, agricultural goods, industrial goods, plantations and other property pledged as security) over the customer’s assets. The existence and amount of collateral generally varies from loan to loan, based on the credit-worthiness of the borrower.
~~We review collateral fair values by obtaining appraisals on impaired secured loans every 18 months and on normal secured loans every three years.~~
We monitor collateral values between appraisals on an ongoing basis in order to capture any unusual significant changes (i.e., improved conditions in the real estate industry, changes in overall economic conditions, etc.) in market-based evidence used in the appraisals. In the event that unusual significant changes occur between appraisals, the collateral values are reassessed and recalculated.
During 2017, the Bank received assets such as homes, apartments, commercial and agricultural lands, among others, with a fair value of MCh$7,227 (MCh$2,813 in 2016) through foreclosure or judicial proceedings.
b)~~Portfolio characteristics~~
~~As of December 31, 2017 and 2016, the loan portfolio before allowances for loan losses by customer economic activity was as follows:~~

Local loans

Foreign loans

Total

Distribution Percentage

As of December 31,

As of December 31,

As of December 31,

As of December 31,

2017

2016

2017

2016

2017

2016

2017

2016

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

%

%

Commercial loans

Manufacturing

784,608

1,065,647

255,883

155,749

1,040,491

1,221,396

5.11

5.81

Mining

363,065

428,384

280,996

275,056

644,061

703,440

3.16

3.35

Electricity, gas and water

589,067

720,818

347,416

414,511

936,483

1,135,329

4.59

5.41

Agriculture and livestok

205,333

262,449

210,597

165,296

415,930

427,745

2.04

2.04

Forestry and wood extraction

22,975

28,853

15,832

6,494

38,807

35,347

0.19

0.17

Fishing

1,527

58,770

12,385

—

13,912

58,770

0.07

0.28

Transport

461,486

442,468

206,991

251,885

668,477

694,353

3.28

3.31

Comunications

29,296

31,712

65,143

48,448

94,439

80,160

0.46

0.38

Construction

1,368,057

1,359,125

270,063

265,669

1,638,120

1,624,794

8.04

7.74

Commerce

815,184

912,877

897,666

801,712

1,712,850

1,714,589

8.40

8.16

Services

2,616,171

2,869,113

1,164,562

1,418,260

3,780,733

4,287,373

18.55

20.41

Others

2,322,773

2,465,332

409,470

185,843

2,732,243

2,651,175

13.41

12.62

Subtotals

9,579,542

10,645,548

4,137,004

3,988,923

13,716,546

14,634,471

67.30

69.68

Mortgage loans

3,635,993

3,360,930

516,760

527,587

4,152,753

3,888,517

20.37

18.51

Consumer loans

1,544,062

1,353,422

969,244

1,127,542

2,513,306

2,480,964

12.33

11.81

Total

14,759,597

15,359,900

5,623,008

5,644,052

20,382,605

21,003,952

100.00

100.00

F-66

~~Table of Contents~~
c)~~Allowances for loans losses~~
~~The changes in allowances for loan losses during the periods ended December 31, 2017 and 2016 are summarized as follows:~~

Individually
evaluated for
impairment

Collectively
evaluated for
impairment

Total

Note

MCh$

MCh$

MCh$

Balances as January 1, 2017

366,058

193,246

559,304

Impaired portfolio write-offs:

Commercial loans

(69,702
)
(39,648
)
(109,350
)
Mortgage loans

—

(8,303
)
(8,303
)
Consumer loans

—

(115,708
)
(115,708
)
Total write-offs

(69,702
)
(163,659
)
(233,361
)
Established provision

27

338,701

480,567

819,268

Provision released

27

(302,504
)
(169,801
)
(472,305
)
Application of provisions

(9,760
)
—

(9,760
)
Exchange rate differences

(24,641
)
(19,978
)
(44,619
)
Balances as of December 31, 2017

10a)

298,152

320,375

618,527

Individually
evaluated for
impairment

Collectively
evaluated for
impairment

Total

Note

MCh$

MCh$

MCh$

Balances as January 1, 2016

50,914

44,665

95,579

Impaired portfolio write-offs:

Commercial loans

(61,460
)
(24,184
)
(85,644
)
Mortgage loans

—

(8,157
)
(8,157
)
Consumer loans

—

(94,294
)
(94,294
)
Total write-offs

(61,460
)
(126,635
)
(188,095
)
Established provision

27

387,737

286,297

674,034

Provision released

27

(251,582
)
(153,212
)
(404,794
)
Integration Itaú Corpbanca

297,850

145,097

442,947

Application of provisions

(57,170
)
(1,576
)
(58,746
)
Exchange rate differences

(231
)
(1,390
)
(1,621
)
Balances as of December 31, 2016

10a)

366,058

193,246

559,304

d)~~Portfolio sales~~
1.   As of December 31, 2017, 2016 and 2015, the Bank and its subsidiaries engaged in portfolio purchases and sales. The effect on income of these transactions as a whole does not exceed 5% of before-tax profit for the year, and is recorded within net gains from trading and investment income activities in the Consolidated Statement of Income for the period, disclosed in Note 25 “Net Trading and Investment Income” within “Other financial investments at fair value with effect on profit or loss.”
2.   As of December 31, 2017, 2016 and 2015, the Bank and its subsidiaries derecognized 100% of its sold portfolio, thus complying with the requirements of the accounting policy for derecognizing financial assets and liabilities in Note 1.2, letter u) of these annual Consolidated Financial Statements.
During 2017 and 2016, Itaú Corpbanca sold part of its portfolio of state-guaranteed loans and receivables (or “CAE” the Spanish acronym) acquired through a competitive bidding process for awards of the Financing Facility and Administration of Loans for Studies in Higher Education Law No. 20,027.The open bidding model for financial institutions, reflected in the respective databases, allows companies to sell a percentage of state-guaranteed loans and receivables to third parties. On the portfolio sale, Itaú Corpbanca transferred
F-67

~~Table of Contents~~
~~substantially all the risks and benefits associated with this portfolio. The detail of loans and receivables sold is as follows:~~

Carrying

Proceeds for

Gain (loss)

Amount

sales

on sale (*)

No. Of Loans

MCh$

MCh$

MCh$

As of December 31, 2017

60,675

118,027

147,725

29,910

As of December 31, 2016

72,780

142,636

175,707

33,871

As of December 31, 2015

23,662

46,405

60,324

14,639

(*) This amount is included under line item “Trading and investment income, net” in the Consolidated Statements of Income, disclosed in Note 25 Net Trading and Investment Income, line “Other financial investments at fair value with effect on profit or loss.”
The gain on the sale, excluding the effect of any provisions on these loans, is comprised of MCh$15.852 as of December 31, 2017 (MCh$18,332 in 2016, and MCh$9,533 in 2015), recognized in the Consolidated Statement of Income within net financial operating income, and the difference, amounting to MCh$14.058 as of December 31, 2017 (MCh$ 14,739 in 2016 and MCh$4,386 in 2015), is recorded in profit or loss based on its period of deferral at the effective tax rate, in accordance with IAS 39.
e)~~Lease~~
~~The Bank’s scheduled cash flows to be received from finance lease contracts have the following maturities:~~

Total receivable

Unearned income

Net lease receivable

As of December 31,

As of December 31,

As of December 31,

2017

2016

2017

2016

2017

2016

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

Up to one month

29,846

30,896

3,677

1,782

26,169

29,114

More than a month to three months

32,672

38,246

2,857

3,561

29,815

34,685

More than three months up to one year

120,691

146,124

11,596

14,774

109,095

131,350

More than one year up to three years

262,576

291,393

33,717

39,983

228,859

251,410

More than three years up to six years

283,010

319,920

57,453

69,467

225,557

250,453

More than six years

1,062,625

1,199,476

448,020

517,562

614,605

681,914

Total (*)

1,791,420

2,026,055

557,320

647,129

1,234,100

1,378,926

~~(*) Includes:~~

As of December 31,

2017

2016

Leasing Transactions

MCh$

MCh$

Commercial

940,789

1,073,506

Mortgage

282,135

288,329

Consumer

11,176

17,091

Total

1,234,100

1,378,926

F-68

~~Table of Contents~~
~~NOTE 11 INVESTMENT INSTRUMENTS~~
a)   ~~As of December 31, 2017 and 2016, the detail of the instruments that the Bank has designated as financial instruments held as available for sale and until their maturity was as follows:~~

As of December 31, 2017

As of December 31, 2016

Available for
sale

Held to
maturity

Total

Available for
sale

Held to
maturity

Total

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

Chilean Central Bank and Government Securities

Chilean Central Bank securities

687,945

—

687,945

901,239

—

901,239

Chilean Treasury Bonds

1,081,879

—

1,081,879

272,734

—

272,734

Other government securities

14,053

—

14,053

—

—

—

Other financial instruments

Promissory notes related to deposits in local banks

114,038

—

114,038

397,898

—

397,898

Chilean mortgage finance bonds

64

—

64

76

—

76

Chilean financial institutions bonds

9,032

—

9,032

2,607

—

2,607

Other local investments

6,159

—

6,159

32,230

—

32,230

Financial instruments issued abroad

Foreign government and central bank instruments

420,687

—

420,687

284,444

226,433

510,877

Other foreign investments

300,740

202,030

502,770

162,882

—

162,882

Unquoted securities in active markets

Chilean corporate bonds

18,469

—

18,469

—

—

—

Other investments

10,412

—

10,412

19,967

—

19,967

Total

2,663,478

202,030

2,865,508

2,074,077

226,433

2,300,510

As of December 31, 2017 this total includes MCh$15,775 (MCh$351,537 as of December 31, 2016), included in Note 5 “Cash and cash equivalents,” which corresponds to those financial instruments with maturities that do not exceed three months from their dates of acquisition.
~~As of December 31, 2017, the portfolio of financial investments available-for-sale includes~~ an unrealized gain of MCh$24,552 (loss of MCh$14,248 at December 31, 2016), presented as equity reserve accounts, distributed among a profit of MCh$16,592 attributable to equity holders and a gain of MCh$7,960 attributable to non-controlling interest (see detail in Note 22).
b)   ~~Impairment of investment instruments~~
~~The Bank’s portfolio of investment instruments does not present impairment as of December 31, 2017, and 2016.~~
c)   ~~The detail of investments quoted in non-active markets classified as available for sale has been recorded at fair value.~~
Itaú Corpbanca reviewed the instruments with unrealized losses as of December 31, 2017 and 2016, concluding that they were not impairments other than temporary. Therefore, they do require the bank to adjust the results of the fiscal year.
~~Unrealized gains and losses on the available-for-sale portfolio as~~ ~~of December 31, 2017 and 2016 were as follows:~~
F-69

~~Table of Contents~~

As of December 31, 2017

Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair Value

MCh$

MCh$

MCh$

MCh$

Chilean Central Bank and Government Securities

Chilean Central Bank securities

688,770

806

(1,631
)
687,945

Chilean Treasury Bonds

1,081,633

3,526

(3,280
)
1,081,879

Other government securities

14,206

—

(153
)
14,053

Other financial instruments

Promissory notes related to deposits in local banks

114,073

—

(35
)
114,038

Chilean mortgage finance bonds

64

—

—

64

Chilean financial institutions bonds

9,034

25

(27
)
9,032

Other local investments

3,942

2,217

—

6,159

Financial instruments issued abroad

Foreign government and central bank instruments

416,995

3,921

(229
)
420,687

Other foreign investments

281,833

19,090

(183
)
300,740

Unquoted securities in active markets

Chilean corporate bonds

17,964

505

—

18,469

Other investments

10,412

—

—

10,412

Total

2,638,926

30,090

(5,538
)
2,663,478

As of December 31, 2016

Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair Value

MCh$

MCh$

MCh$

MCh$

Chilean Central Bank and Government Securities

Chilean Central Bank securities

898,579

2,708

(48
)
901,239

Chilean Treasury Bonds

272,860

558

(684
)
272,734

Other government securities

—

—

—

—

Other financial instruments

Promissory notes related to deposits in local banks

397,804

105

(11
)
397,898

Chilean mortgage finance bonds

76

—

—

76

Chilean financial institutions bonds

2,586

21

—

2,607

Other local investments

31,823

454

(47
)
32,230

Financial instruments issued abroad

Foreign government and central bank instruments

271,179

14,416

(1,151
)
284,444

Other foreign investments

164,617

35

(1,770
)
162,882

Unquoted securities in active markets

Chilean corporate bonds

—

—

—

—

Other investments

20,305

—

(338
)
19,967

Total

2,059,829

18,297

(4,049
)
2,074,077

F-70

~~Table of Contents~~
d)   ~~The classification of investments in available-for-sale instruments, within the fair value hierarchy, is as follows (see note 33):~~

As of December 31, 2017

Available for sale Portfolio

Total

Level 1

Level 2

Level 3

Note

MCh$

MCh$

MCh$

MCh$

Chilean Central Bank and Government Securities

33

1,783,877

1,783,877

—

—

Chilean Central Bank securities

687,945

687,945

—

—

Chilean Treasury Bonds

1,081,879

1,081,879

—

—

Other government securities

14,053

14,053

—

—

Other financial instruments

33

129,293

6,159

123,134

—

Promissory notes related to deposits in local banks

114,038

—

114,038

—

Chilean mortgage finance bonds

64

—

64

—

Chilean financial institutions bonds

9,032

—

9,032

—

Other local investments

6,159

6,159

—

—

Financial instruments issued abroad

33

721,427

721,427

—

—

Foreign government and central bank instruments

420,687

420,687

—

—

Other foreign investments

300,740

300,740

—

—

Unquoted securities in active markets

33

28,881

—

28,881

—

Chilean corporate bonds

18,469

—

18,469

—

Other investments

10,412

—

10,412

—

Total

2,663,478

2,511,463

152,015

—

As of December 31, 2016

Available for sale Portfolio

Total

Level 1

Level 2

Level 3

Note

MCh$

MCh$

MCh$

MCh$

Chilean Central Bank and Government Securities

33

1,173,973

1,173,973

—

—

Chilean Central Bank securities

901,239

901,239

—

—

Chilean Treasury Bonds

272,734

272,734

—

—

Other government securities

—

—

—

—

Other financial instruments

33

432,811

—

432,811

—

Promissory notes related to deposits in local banks

397,898

—

397,898

—

Chilean mortgage finance bonds

76

—

76

—

Chilean financial institutions bonds

2,607

—

2,607

—

Other local investments

32,230

—

32,230

—

Financial instruments issued abroad

33

447,326

306,054

141,272

—

Foreign government and central bank instruments

284,444

150,009

134,435

—

Other foreign investments

162,882

156,045

6,837

—

Unquoted securities in active markets

33

19,967

4,118

15,849

—

Chilean corporate bonds

—

—

—

—

Other investments

19,967

4,118

15,849

—

Total

2,074,077

1,484,145

589,932

—

F-71

~~Table of Contents~~
~~NOTE 12 INTANGIBLE ASSETS~~
a)   ~~Intangibles assets as December 31, 2017 and 2016 consisted of the following:~~
~~As of December 31, 2017~~

Useful life

Remaining
amortization

Net Balance as of
January 1, 2017

Gross balance

Accumulated
amortization

Net Balance

Concept

years

years

MCh$

MCh$

MCh$

MCh$

Integrated banking system

15

1

1,214

9,824

(9,361
)
463

Computer equipment system or software

3

1

86,110

193,256

(80,364
)
112,892

IT Projects

8

5

21,300

42,474

(25,811
)
16,663

Generated in business combination

1,505,034

1,502,615

(70,625
)
1,431,990

- Goodwill

1,145,308

1,126,663

—

1,126,663

- Trademark

10

9

47,209

51,417

(9,311
)
42,106

- Customer relationship

12

11

89,827

91,046

(15,008
)
76,038

- Core deposit

9

8

222,690

233,489

(46,306
)
187,183

Other projects

10

1

817

3,645

(2,999
)
646

Total

1,614,475

1,751,814

(189,160
)
1,562,654

~~As of December 31, 2016~~

Useful life

Remaining
amortization

Net Balance as of
January 1, 2016

Gross balance

Accumulated
amortization

Net Balance

Concept

years

years

MCh$

MCh$

MCh$

MCh$

Integrated banking system

15

2

—

9,825

(8,611
)
1,214

Computer equipment system or software

3

2

49,960

152,560

(66,450
)
86,110

IT Projects

8

6

—

42,447

(21,147
)
21,300

Generated in business combination

899

1,536,891

(31,857
)
1,505,034

- Goodwill

—

1,145,308

—

1,145,308

- Trademark

10

10

—

51,449

(4,240
)
47,209

- Customer relationship

12

12

899

96,674

(6,847
)
89,827

- Core deposit

9

9

—

243,460

(20,770
)
222,690

Other projects

10

2

950

3,645

(2,828
)
817

Total

51,809

1,745,368

(130,893
)
1,614,475

b)   ~~The movement of intangible assets in the period ended December 31, 2017 and 2016 was as follows:~~

Integrated
banking
system

Computer
equipment
system or
software

IT Projets

Generated in
business
combination

Goodwill

Other
projects

Total

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

Balances as of January 1, 2017

9,825

152,560

42,447

391,583

1,145,308

3,645

1,745,368

Purchases

39

40,975

1,889

—

—

—

42,903

Integration Itaú Corpbanca

—

—

—

—

—

—

—

Additions resulting from business combination

—

—

—

—

—

—

—

Retirements

—

(123
)
—

—

—

—

(123
)
Exchange differences

(40
)
(156
)
(1,862
)
(15,631
)
(18,645
)
—

(36,334
)
Balances as of December 31, 2017

9,824

193,256

42,474

375,952

1,126,663

3,645

1,751,814

Integrated
banking
system

Computer
equipment
system or
software

IT Projets

Generated in
business
combination

Goodwill

Other
projects

Total

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

Balances as of January 1, 2016

—

73,554

—

1,284

—

1,520

76,358

Purchases

511

80,509

738

—

—

—

81,758

Integration Itaú Corpbanca

9,342

81,446

41,714

319,733

338,909

2,239

793,383

Additions resulting from business combination

—

—

—

389,558

1,144,338

—

1,533,896

Retirements

—

(83,205
)
—

(319,733
)
(338,909
)
(532
)
(742,379
)
Exchange differences

(28
)
312

(5
)
741

970

—

1,990

Others

—

(56
)
—

—

—

418

362

Balances as of December 31, 2016

9,825

152,560

42,447

391,583

1,145,308

3,645

1,745,368

F-72

~~Table of Contents~~
c)   ~~Movements of accumulated amortization of intangible assets as of December 31, 2017 and 2016 were detailed as follows:~~

Integrated
banking
system

Computer
equipment
system or
software

IT Projets

Generated in
business
combination

Other
projects

Total

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

Balances as of January 1, 2017

(8,611
)
(66,450
)
(21,147
)
(31,857
)
(2,828
)
(130,893
)
Amortization (Note 30)

(788
)
(15,819
)
(4,672
)
(41,038
)
(158
)
(62,475
)
Exchange differences

38

1,905

8

2,270

(13
)
4,208

Balances as of December 31, 2017

(9,361
)
(80,364
)
(25,811
)
(70,625
)
(2,999
)
(189,160
)

Integrated
banking
system

Computer
equipment
system or
software

IT Projets

Generated in
business
combination

Other
projects

Total

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

Balances as of January 1, 2016

—

(23,594
)
—

(385
)
(570
)
(24,549
)
Amortization (Note 30)

(855
)
(13,727
)
(3,693
)
(31,431
)
(152
)
(49,858
)
Integration Itaú Corpbanca

(7,755
)
(29,184
)
(17,452
)
(49,762
)
(1,688
)
(105,841
)
Retirements

—

—

—

49,762

—

49,762

Exchange differences

—

—

—

(41
)
—

(41
)
Others

(1
)
55

(2
)
—

(418
)
(366
)
Balances as of December 31, 2016

(8,611
)
(66,450
)
(21,147
)
(31,857
)
(2,828
)
(130,893
)
d)   ~~As of December 31, 2017 and 2016, the Bank has entered into the following contractual commitments for the acquisition of intangible assets:~~

As of December 31,

2017

2016

License detail

MCh$

MCh$

IBM

1,154

851

Microsoft

—

726

ULA

—

426

Kony

321

—

Vcloud Suite

169

—

MIS

129

—

Identify Guard IDG)

116

—

e)   ~~Impairment~~
At each reporting date, Banco Itaú Corpbanca evaluates whether there is any indication of impairment of any asset. Should any such indication exist, or when impairment testing is required, the entity will estimate the asset’s recoverable amount, (see note 30).
f)   ~~Restrictions~~
As of December 31, 2017 and 2016, the Bank and its subsidiaries have no restrictions on intangible assets. In addition, no intangible assets have been given in guarantee for compliance of any obligations. There are also no amounts owed by the Bank on intangible assets as of the aforementioned dates.
F-73

~~Table of Contents~~
~~NOTE 13 PROPERTY, PLANT AND EQUIPMENT~~
a)        ~~Property, plant and equipment as of December 31, 2017 and 2016 were as follows:~~

Useful life

Remaining depreciation

Net Balance
as of January
1, 2017

Gross
Balance

Accumulated
depreciation

Net Balance

Item

years

years

MCh$

MCh$

MCh$

MCh$

Land and building

25

16

78,034

118,481

(35,330
)
83,151

Equipment

5

1

25,997

65,018

(39,858
)
25,160

Other

8

3

17,012

50,773

(28,505
)
22,268

- Furniture

8,418

27,860

(17,503
)
10,357

- Leasing assets

50

28

(28
)
—

- Others

8,544

22,885

(10,974
)
11,911

Total

121,043

234,272

(103,693
)
130,579

Useful life

Remaining depreciation

Net Balance
as of January
1, 2016

Gross
Balance

Accumulated
depreciation

Net Balance

Item

years

years

MCh$

MCh$

MCh$

MCh$

Land and building

25

17

16,778

107,989

(29,955
)
78,034

Equipment

5

2

6,724

62,007

(36,010
)
25,997

Other

8

4

10,468

42,726

(25,714
)
17,012

- Furniture

1,011

26,513

(18,095
)
8,418

- Leasing assets

—

338

(288
)
50

- Others

9,457

15,875

(7,331
)
8,544

Total

33,970

212,722

(91,679
)
121,043

The useful lives have been determined based on our expected use considering the quality of the original construction, the environment in which the assets are located, the quality and degree of maintenance carried out, and appraisals performed by external specialists who are independent of the Bank that have been taken into consideration by management to determine the useful lives of our buildings.
b)        ~~The movement of property, plant and equipment for the periods ended December 31, 2017 and 2016:~~

Landing and
Building

Equipment

Other

Total

MCh$

MCh$

MCh$

MCh$

Balances as of January 1, 2017

107,989

62,007

42,726

212,722

Purchases

27,125

7,853

9,274

44,252

Sales/Retirements

(12,636
)
(2,241
)
(952
)
(15,829
)
Exchange differences

(3,997
)
(2,601
)
(275
)
(6,873
)
Balances as of December 31, 2017

118,481

65,018

50,773

234,272

Landing and
Building

Equipment

Other

Total

MCh$

MCh$

MCh$

MCh$

Balances as of January 1, 2016

18,808

15,876

31,533

66,217

Integration Itaú Corpbanca

75,797

42,354

21,629

139,780

Purchases

11,002

7,091

5,306

23,399

Sales/Retirements

(13,206
)
(3,423
)
(283
)
(16,912
)
Exchange differences

170

110

29

309

Others

15,418

(1
)
(15,488
)
(71
)
Balances as of December 31, 2016

107,989

62,007

42,726

212,722

F-74

~~Table of Contents~~
c)   ~~Movements of accumulated depreciation of property, plant and equipment as of December 31, 2017 and 2016, are detailed as follows:~~

Landing and
Building

Equipment

Other

Total

MCh$

MCh$

MCh$

MCh$

Balances as of January 1, 2017

(29,955
)
(36,010
)
(25,714
)
(91,679
)
Depreciation

(7,218
)
(8,054
)
(4,098
)
(19,370
)
Sales and retirements

—

2,178

481

2,659

Exchange Differences

1,843

2,055

826

4,724

Impairment (Note 30)

—

(27
)
—

(27
)
Balances as of December 31, 2017

(35,330
)
(39,858
)
(28,505
)
(103,693
)

Landing and
Building

Equipment

Other

Total

MCh$

MCh$

MCh$

MCh$

Balances as of January 1, 2016

(2,030
)
(9,152
)
(21,065
)
(32,247
)
Integration Itaú Corpbanca

(13,855
)
(24,500
)
(11,210
)
(49,565
)
Depreciation

(5,047
)
(5,281
)
(3,506
)
(13,834
)
Sales and retirements

732

3,006

259

3,997

Exchange Differences

(52
)
(84
)
(38
)
(174
)
Impairment (Note 30)

—

(351
)
—

(351
)
Others

(9,703
)
352

9,846

495

Balances as of December 31, 2016

(29,955
)
(36,010
)
(25,714
)
(91,679
)
d)   ~~As of December 31, 2017 and 2016, the Bank held operating lease contracts that cannot be unilaterally terminated. The future payment information is detailed as follows:~~
~~Future Operating Lease Payments Land, Buildings and Equipment~~

Up to one
year

From one to
five years

Over five
years

Total

MCh$

MCh$

MCh$

MCh$

As of December 31, 2017

23,021

76,949

103,195

203,165

As of December 31, 2016

24,599

100,482

15,900

140,981

e)   ~~As of December 31, 2017 and 2016, the Bank held finance lease contracts that cannot be rescinded or unilaterally terminated. The future payment information is detailed as follows:~~
~~Future Financial Leasing Payments Land, Buildings and Equipment~~

Up to one
year

From one to
five years

Over five
years

Total

MCh$

MCh$

MCh$

MCh$

As of December 31, 2017

9,078

43,730

43,730

96,538

As of December 31, 2016

46,540

189,623

47,406

283,569

f)   As of December 31, 2017 and 2016, the Bank and its subsidiaries had no restrictions on property, plant and equipment. In addition, no property, plant and equipment had been given in guarantee for compliance of any obligations. There are also no amounts owed by the Bank on property, plant and equipment as of the aforementioned dates.
F-75

~~Table of Contents~~
~~NOTE 14 INCOME TAXES~~
a)        ~~Current income tax provision.~~
At the end of each year the bank recognizes an income tax provision, which is determined based on currently enacted tax legislation. Current recoverable taxes recognized as of December 31, 2017 was MCh$237,828 (MCh$162,410 as of December 31, 2016). The income tax provision (net of recoverable taxes) is as follows:
~~a.1 Tax current:~~

As of December 31, 2017

Chile

New York (*)

Colombia

Total

MCh$

MCh$

MCh$

MCh$

Current tax assets

202,093

—

36,359

238,452

Current tax liabilities

(624
)
—

—

(624
)
Net total

201,469

—

36,359

237,828

As of December 31, 2016

Chile

New York

Colombia

Total

MCh$

MCh$

MCh$

MCh$

Current tax assets

138,172

770

25,354

164,296

Current tax liabilities

(475
)
—

(1,411
)
(1,886
)
Net total

137,697

770

23,943

162,410

~~a.2 Effect of current taxes by geographic area:~~

As of December 31, 2017

Chile

New York (*)

Colombia

Total

MCh$

MCh$

MCh$

MCh$

Income tax

8,332

—

11,357

19,689

Less:

Monthly Provisional Payment

(49,529
)
—

(2,940
)
(52,469
)
Tax Credit for Training Costs

(831
)
—

—

(831
)
Tax Credit Donations

—

—

—

Other taxes to be recovered (**)

(159,441
)
—

(44,776
)
(204,217
)
Total

(201,469
)
—

(36,359
)
(237,828
)

As of December 31, 2016

Chile

New York

Colombia

Total

MCh$

MCh$

MCh$

MCh$

Income tax

17,672

—

10,409

28,081

Less:

Monthly Provisional Payment

(153,330
)
(770
)
(32,232
)
(186,332
)
Tax Credit for Property Taxes on leased real estate assets

—

—

—

—

Tax Credit for Training Costs

(603
)
—

—

(603
)
Tax Credit Donations

(538
)
—

—

(538
)
Other taxes to be recovered

(898
)
—

(2,120
)
(3,018
)
Total

(137,697
)
(770
)
(23,943
)
(162,410
)
(*) Corresponds the subsidiary located in New York. On December 22, 2017, the United States enacted comprehensive tax reform, which introduced various modifications to the tax system. One modification was a decrease in the income tax rate from 35% to 21% as from January 1, 2018
~~(**) The balance is mainly comprised of the provisional payments on account of from income tax of the tax year 2017, pending return by the tax authority.~~
F-76

~~Table of Contents~~
b)        ~~Effect on income.~~
~~The tax expense for the years ended December 31, 2017, 2016 and 2015 was comprised of the following items:~~

2017

2016

2015

MCh$

MCh$

MCh$

Income Tax Expense

Current tax expense

(19,689
)
(19,326
)
(14,249
)
Deferred taxes

Deferred tax expenses / (benefit)

74,611

23,105

(966
)
Subtotal

54,922

3,779

(15,215
)
Others

(2,051
)
(211
)
(2,048
)
Net expense for income taxes

52,871

3,568

(17,263
)
c)         ~~Effective tax rate reconciliation.~~
~~The following table reconciles the income tax rate to the effective rate applied to determine the Bank’s income tax expense as of December 31, 2017, 2016 and 2015.~~
~~The nominal tax rates of the countries where consolidated subsidiaries were located are:~~

2017

2016

2015

Rate

Rate

Rate

Chile

25.5%

24.0%

22.5%

Colombia

40.0%

40.0%

39.0%

United States

35.0%

35.0%

34.0%

As of December 31,

2017

2016

2015

Tax Rate

Amount

Tax Rate

Amount

Tax Rate

Amount

%

MCh$

%

MCh$

%

MCh$

Calculation of Statutory Rate

(25.50
)
2,538

(24.00
)
2,617

(22.50
)
27,682

Colombia investment foreign exchange rate variation

204.84

(20,390
)
1.06

(116
)
—

—

Monetary Correction Tax Capital

141.93

(14,128
)
129.59

(14,132
)
5.12

(6,300
)
Local Tax for United States and Panama results

98.46

(9,801
)
(57.55
)
6,276

—

—

Effect of rate change Chile

51.68

(5,144
)
36.27

(3,955
)
(0.02
)
26

Tax Reform EE.UU 35%-21%

(95.21
)
9,477

—

—

—

—

Effect of rate change Colombia

(47.07
)
4,685

21.57

(2,352
)
—

—

Effect of rates New York subsidiary (**)

(14.65
)
1,458

20.52

(2,238
)
—

—

Effect of rates Colombia subsidiary (**)

54.55

(5,430
)
34.06

(3,714
)
—

—

Other differences (*)

162.11

(16,136
)
(128.80
)
14,046

3.37

(4,145
)

531.14

(52,871
)
32.72

(3,568
)
(14.03
)
17,263

(*)Other includes, mainly, a) benefits derived from the tax effect of goodwill from business combinations in Colombia made by Corpbanca prior to the acquisition of Itau, amounting to MCh($20,568) in 2017 and MCh($14,276) in 2016 and, b) the 2016 period includes effects of wealth tax in Colombia and one-time effects derived from a business combination between Itaú and Corpbanca.
~~(**) This line reflects the differences in tax rates in other jurisdictions, based on the Bank’s consolidated results.~~
F-77

~~Table of Contents~~
d)        ~~Other comprehensive income — tax effects.~~
~~The table below sets for a summary of the deferred tax effect on other comprehensive income for the years ended December 31, 2017, 2016 and 2015, which consists of the following items:~~
~~d.1 Tax effect of “OCI” that may be reclassified to profit in subsequent periods:~~

2017

2016

2015

MCh$

MCh$

MCh$

Financial assets available-for sale

(3,333
)
(4,025
)
(218
)
Hedge of a net investment in foreign operations

(14,211
)
(2,685
)
—

Cash flow hedge

44

1,345

—

Total charge to other comprehensive income

(17,500
)
(5,365
)
(218
)
~~d.2 “OCI” that will not be reclassified subsequently to profit or loss:~~

2017

2016

2015

MCh$

MCh$

MCh$

Income tax relating to defined benefit obligation

(6
)
1,090

—

Total charge to other comprehensive income

(6
)
1,090

—

e)         ~~Effect of deferred taxes.~~
~~The deferred tax effects presented by geographic area were as follows:~~
~~e.1 Deferred taxes:~~

As of December 31, 2017

Chile

New York

Colombia

Total

MCh$

MCh$

MCh$

MCh$

Deferred tax assets

125,917

14,768

—

140,685

Deferred tax liabilities

(53
)
—

(26,301
)
(26,354
)
Net by geographic area

125,864

14,768

(26,301
)
114,331

As of December 31, 2016

Chile

New York

Colombia

Total

MCh$

MCh$

MCh$

MCh$

Deferred tax assets

87,399

23,340

26

110,765

Deferred tax liabilities

(29
)
—

(57,607
)
(57,636
)
Net by geographic area

87,370

23,340

(57,581
)
53,129

F-78

~~Table of Contents~~
~~e.2 Deferred taxes~~ ~~by geographic area:~~
~~Below are the effects of deferred taxes on assets and liabilities assigned as a result of temporary differences (by geographic area):~~

As of December 31, 2017

Chile

New York

Colombia

Total

MCh$

MCh$

MCh$

MCh$

Loan provision

93,864

11,615

17,621

123,100

Accrued interest and indexation past due portfolio

6,970

—

—

6,970

Unaccrued price difference

220

—

—

220

Personnel provisions

7,829

282

4,439

12,550

Miscellaneous provisions

28,582

1,221

4,225

34,028

Subsidiary tax loss

16,607

9,146

46,166

71,919

Net tax value of amortizable assets

20,683

—

—

20,683

Depreciation of property, plant and equipment

(34,308
)
—

(11,548
)
(45,856
)
Lease division and others

25,392

—

4,175

29,567

Market value of financial instruments

(12,259
)
—

(26,730
)
(38,989
)
Intagration Itaú Corpbanca

(18,139
)
—

(50,158
)
(68,297
)
Others

(9,577
)
(7,496
)
(14,491
)
(31,564
)
Total asset (liability), net

125,864

14,768

(26,301
)
114,331

As of December 31, 2016

Chile

New York

Colombia

Total

MCh$

MCh$

MCh$

MCh$

Loan provision

73,019

8,846

15,988

97,853

Accrued interest and indexation past due portfolio

6,958

—

—

6,958

Unaccrued price difference

142

—

—

142

Personnel provisions

4,899

1,885

5,742

12,526

Miscellaneous provisions

7,627

14,058

22,534

44,219

Subsidiary tax loss

1,201

640

—

1,841

Net tax value of amortizable assets

18,557

—

—

18,557

Depreciation of property, plant and equipment

(23,864
)
—

(3,908
)
(27,772
)
Lease division and others

19,823

—

5,171

24,994

Market value of financial instruments

(12,554
)
—

(27,989
)
(40,543
)
Intangible assets Corpbanca Colombia

(1,512
)
—

(366
)
(1,878
)
Intangible assets mercantile credit Corpbanca Colombia

—

—

67

67

Intagration Itaú Corpbanca

(8,652
)
—

(55,727
)
(64,379
)
Others

1,726

(2,089
)
(19,093
)
(19,456
)
Total asset (liability), net

87,370

23,340

(57,581
)
53,129

F-79

~~Table of Contents~~
~~NOTE 15 OTHER ASSETS AND NON-CURRENT ASSETS HELD FOR SALE~~
a)        ~~The detail of other assets is as follows:~~

As of December 31,

2017

2016

MCh$

MCh$

Rentals in advance (1)

7,960

10,181

Accounts and notes receivable (2)

200,697

139,683

Prepaid expenses

13,501

5,715

Projects under development (3)

4,312

7,939

Assets for leasing (4)

25,741

29,017

Margin accounts (5)

117,059

195,995

Others

59,755

38,864

Total

429,025

427,394

~~(1)~~~~Rent paid in advance to SMU S.A for ATM locations (see note 32 “Related Party Transactions”, letter b)).~~
~~(2)~~~~This includes rights and accounts that fall outside the Bank’s line of business such as tax credits, cash guarantee deposits and other balances pending collections.~~
~~(3)~~~~Information system and other projects under development.~~
~~(4)~~Fixed assets available for delivery under the financial leases. Within this item, are included items recovered from leasing kept for sale, corresponding to computers, furniture, and transportation equipment. These assets are available for sale and have high probability of being sold. For most of such assets, the Bank expects to complete the sale within one year from the date when the assets are classified as available for sale and/or lease assets recovered held for sale.
~~(5)~~~~Guarantees for financial transactions.~~
b)        ~~The detail of non-current assets held for sale is as follows:~~

As of December 31,

2017

2016

MCh$

MCh$

Assets received in lieu of payment

18,308

18,855

Asset to fair value SMU Corp S.A.

—

18,309

Total

18,308

37,164

F-80

~~Table of Contents~~
~~NOTE 16 CURRENT ACCOUNTS, DEMAND DEPOSITS, TIME DEPOSITS AND SAVING ACCOUNTS~~
a)   ~~As of December 31, 2017 and 2016, “Current accounts and demand deposits” consisted of the following:~~

As of December 31,

2017

2016

MCh$

MCh$

Current Accounts

2,473,283

2,591,618

Other deposits and demand accounts

1,363,017

1,536,294

Advance payments received from customers

131,169

161,878

Other demand liabilities

174,198

163,401

Total

4,141,667

4,453,191

b)   ~~As of December 31, 2017 and 2016, “Time deposits and saving accounts” consisted of the following:~~

As of December 31,

2017

2016

MCh$

MCh$

Time deposits

10,036,583

11,549,010

Team saving accounts

28,410

32,425

Other term creditors

250

275

Total

10,065,243

11,581,710

F-81

~~Table of Contents~~
~~NOTE 17 BORROWINGS FROM FINANCIAL INSTITUTIONS~~
~~As of December 31, 2017 and 2016, borrowings from financial institutions included the following:~~

As of December 31,

2017

2016

MCh$

MCh$

Loans obtained from local financial institutions

21,958

—

Subtotal

21,958

—

Loans obtained from foreign financial institutions

Standard Chartered Bank

140,397

139,702

Kookmin Bank of New York

12,324

—

Multibank Inc

9,222

—

Bank of Taiwan (L.A. Branch)

4,965

—

Bayern Landesbank

11,245

—

China Construction Bank

14,133

—

Corp. Financiera de Desarrollo S.A (Cofide)

10,407

—

Export Develpment Canada

30,724

—

Interfondos S.A Sociedad Admin de fondos

19,906

—

Land Bank of Taiwan, (N.Y. Branch)

6,206

—

Shanghai Commercial & Savings Bank

6,145

—

The Export-IM Apple Bank for Saving

6,145

—

Commerzbank AG

89,274

83,876

Wells Fargo Bank, N.A.

157,029

281,670

Corporacion Interamericana de Inversiones USA

—

2,981

Citibank N.A.

168,232

113,450

Findeter S.A - Financiera del Desarrollo Territorial

49,528

61,763

Sumitomo Mitsui Banking Corporation

145,156

144,536

Bancoldex S.A - Banco de Comercio Exterior de Colombia S.A

100,834

51,327

Bank of America, N.A.

248,514

200,430

Bank of Montreal

42,836

79,088

Wachovia Bank N.A.

—

5

Corporacion Andina de Fomento

30,724

33,170

Bank of Nova Scotia

65,442

15,018

IFC Corp Financiera Internacional

187,507

133,962

Cobank CB

9,108

40,182

Scotiabank Canada

—

30,141

Banco Crédito del Peru

31,031

59,444

HSBC USA

15,362

26,792

Deg Deutsche Investitions

21,410

12,057

Ing Bank NV

16,965

10,019

Bank of China lt

4,609

5,024

KFW Ipex Bank

—

5,358

Barclays Bank PLC London

—

13,641

Mercantil CA Banco Universal

17,395

16,324

Bankinter SA

—

6,578

Banco de Bogota

4,118

31,690

Taiwan Cooperative Bank

9,384

53,117

Banco República

15,119

121,834

Banque Nationale Du Canada

—

23,443

Mizuho Corporate Bank

39,480

23,443

FONDOS SURA SAF S.A.C.

25,436

11,674

BNP Paribas

39,480

23,443

Banco de la Produccion SA

—

10,163

Banco Latinoamericano de export.

57,132

57,259

Apple Bank for Saving

12,290

13,396

Scotia Fondos Soc. Admin de Fondos S.A.

62,205

26,110

Credicorp capital SASAF

125,706

116,374

Uni Bank & Trust, Inc

4,916

10,049

Bancaribe curacao Bank n.v.

13,831

13,420

BBVA ASSET MGMT CONTL SA SOC ADM FONDOS PERU

39,791

34,262

Others

52,509

43,655

Subtotal

2,174,172

2,179,870

Total

2,196,130

2,179,870

F-82

~~Table of Contents~~
~~The detail of borrowings from financial institutions by maturity was as follows:~~

As of December 31,

2017

2016

MCh$

MCh$

Due within 1 year

1,475,588

1,206,576

Due within 1 year but within 2 years

422,911

730,642

Due within 2 years but within 3 years

106,260

5,068

Due within 3 years but within 4 years

15,154

12,887

Due within 4 years but within 5 years

73,536

6,889

Due after 5 years

102,681

217,808

Total

2,196,130

2,179,870

F-83

~~Table of Contents~~
~~NOTE 18 DEBT ISSUED AND OTHER OBLIGATIONS~~
a)        ~~As of December 31, 2017 and 2016, the composition of these items was as follows:~~

As of December 31,

2017

2016

MCh$

MCh$

Debt issued

Letters of credit

67,938

86,210

Bonds

4,840,918

4,290,747

Subordinated bonds

1,041,182

1,083,296

Subtotal

5,950,038

5,460,253

Other financial obligation

Public Sector liabilities

—

—

Borrowings from domestic financial institutions

16,255

23,298

Foreign borrowings

811

2,265

Subtotal

17,066

25,563

Total

5,967,104

5,485,816

b)   ~~Debt classified as “short term” includes demand obligations or obligations that will mature in less than one year. All other debt is classified as long term, and is detailed as follows:~~

As of December 31, 2017

Long term

Short term

Total

MCh$

MCh$

MCh$

Letters of credit

55,678

12,260

67,938

Bonds

4,178,313

662,605

4,840,918

Subordinated bonds

1,041,182

—

1,041,182

Debt issued

5,275,173

674,865

5,950,038

Other financial obligation

16,255

811

17,066

As of December 31, 2016

Long term

Short term

Total

MCh$

MCh$

MCh$

Letters of credit

71,239

14,971

86,210

Bonds

3,836,778

453,969

4,290,747

Subordinated bonds

1,051,148

32,148

1,083,296

Debt issued

4,959,165

501,088

5,460,253

Other financial obligation

23,298

2,265

25,563

c)         ~~The detail of letter of credit by maturity is as follows:~~

As of December 31,

2017

2016

MCh$

Due within 1 year

12,260

14,971

Due after 1 year but within 2 years

9,965

11,056

Due after 2 years but within 3 years

8,114

10,128

Due after 3 years but within 4 years

7,554

8,158

Due after 4 years but within 5 years

6,952

5,346

Due after 5 years

23,093

36,551

Total

67,938

86,210

F-84

~~Table of Contents~~
d)             ~~The detail of bonds issued is as follows:~~

As of December 31,

Expiration

Interest

2017

2016

Date

rate

Currency

MCh$

MCh$

A

01-07-2017

3.75%

UF

—

67,084

B

01-10-2017

3.50%

UF

—

66,466

E

01-06-2032

5.00%

UF

42,493

41,871

F

01-01-2032

4.00%

UF

27,399

26,961

G

01-03-2032

4.00%

UF

42,529

41,894

H

01-09-2015

3.00%

UF

—

—

I

01-10-2030

4.00%

UF

27,961

27,533

J

01-01-2031

4.00%

UF

27,625

27,203

K

01-06-2021

3.50%

UF

26,906

26,406

L-2

01-10-2022

3.50%

UF

26,543

26,039

M-2

01-10-2018

3.50%

UF

26,829

26,332

N

01-05-2019

3.50%

UF

26,839

26,364

O

01-03-2021

3.50%

UF

26,630

26,118

P

01-03-2026

3.75%

UF

26,725

26,262

Q-1

01-03-2023

3.75%

UF

26,912

26,451

R-2

01-02-2028

3.75%

UF

26,846

26,387

S

01-09-2020

3.50%

UF

26,814

26,321

T

10-09-2022

3.50%

UF

26,797

26,320

U

01-09-2024

3.75%

UF

26,621

26,144

V

01-09-2027

3.75%

UF

26,425

25,945

W

01-09-2029

3.75%

UF

26,388

25,914

X

01-03-2024

3.80%

UF

53,993

53,118

Y

01-03-2028

3.80%

UF

53,840

52,943

Z

01-02-2033

3.80%

UF

27,181

26,739

AA

01-06-2018

6.70%

CLP

27,868

30,765

AB

01-10-2029

3.80%

UF

42,360

41,770

AC

01-10-2033

3.80%

UF

55,727

54,867

AF

01-06-2022

3.50%

UF

54,437

53,663

AG

01-06-2024

3.50%

UF

164,469

162,150

AH

01-06-2029

3.60%

UF

55,595

54,792

AI

01-04-2020

3.50%

UF

138,739

137,924

AJ

01-06-2025

3.60%

UF

55,554

58,620

AL-2

01-07-2025

3.50%

UF

55,321

54,483

BCORAF0710

01-07-2017

3.00%

UF

—

166,897

BCORAG0710

10-09-2018

3.00%

UF

77,592

81,084

BCORAI0710

01-07-2020

3.00%

UF

197,220

195,199

BCOR-L0707

01-07-2017

3.40%

UF

—

107,869

BCORAJ0710

03-08-2021

3.00%

UF

104,654

75,080

BCOR-P0110

09-07-2020

7.30%

CLP

23,838

24,982

BCORBW0914

30-08-2020

5.00%

CLP

45,379

46,669

BCOR-R0110

09-07-2020

4.00%

UF

140,265

140,226

BCORUSD0118

15-01-2018

3.13%

USD

452,172

495,871

BCORUSD0919

22-09-2019

3.88%

USD

471,546

517,724

BCORAL0710

03-08-2023

3.00%

UF

112,173

110,845

BCORAN0710

01-07-2025

3.00%

UF

181,908

179,460

BCORAO0710

01-07-2026

3.00%

UF

324,089

234,079

BCORBX0914

30-08-2021

5.00%

CLP

41,718

43,336

BCORCA0914

01-09-2024

5.00%

CLP

100,105

99,917

BCORBZ0914

01-09-2023

5.00%

CLP

102,921

—

BCORBY0914

01-09-2022

5.00%

CLP

31,306

—

BCORAP0710

01-07-2027

3.00%

CLF

380,404

—

BCORAQ0710

01-07-2028

3.00%

CLF

293,884

—

BCORAK0710

01-07-2022

3.00%

CLF

173,514

—

BBSA168B18

02-03-2018

8.99%

COP

45,255

48,144

BBSA26SA48

10-08-2020

8.74%

COP

43,406

46,181

BBSA316SA060

23-11-2020

8.03%

COP

37,940

40,364

BBCR1109B84

28-10-2017

10.33%

COP

—

26,606

BBCR3119B84

03-08-2018

10.57%

COP

19,686

21,005

BBCR1099B120

10-12-2019

11.30%

COP

17,676

18,826

BBSA69C120

10-08-2026

10.68%

COP

21,732

23,198

BBSA69C180

10-08-2031

10.95%

COP

40,578

43,316

BBSA3169C180

23-11-2031

10.80%

COP

46,388

49,479

BBSA168B18

02-09-2017

9.74%

COP

—

19,047

BBCR3117C84

03-08-2018

4.58%

COP

13,203

13,494

Total

4,840,918

4,290,747

F-85

~~Table of Contents~~
e)              ~~The detail of bonds issued by maturity is as follows:~~

As of December 31,

2017

2016

MCh$

MCh$

Due within 1 year

662,605

453,969

Due after 1 year but within 2 years

516,061

716,695

Due after 2 years but within 3 years

653,601

562,914

Due after 3 years but within 4 years

199,908

657,866

Due after 4 years but within 5 years

312,597

695,324

Due after 5 years

2,496,146

1,203,979

Total

4,840,918

4,290,747

f)               ~~The detail of subordinated bonds was as follows:~~

As of December 31,

Expiration

Interest

2017

2016

Date

rate

Currency

MCh$

MCh$

AE1

01-01-2034

3.80%

UF

54,585

53,669

C1

01-04-2033

3.50%

UF

6,285

6,572

C2

01-04-2033

3.50%

UF

13,681

14,273

D

01-10-2033

4.50%

UF

20,934

21,833

UCOR-V0808

01-08-2033

4.60%

UF

159,479

157,444

UCOR-Y1197

01-11-2022

6.50%

UF

6,689

7,786

UCOR-Z1197

01-11-2022

6.50%

UF

15,614

18,176

UCORAA0809

09-08-2035

4.90%

UF

145,174

143,413

UCORBF0710

01-07-2032

4.00%

UF

14,013

13,795

UCORBI0710

01-07-2035

4.00%

UF

32,230

31,723

UCORBJ0710

01-07-2036

4.00%

UF

153,334

150,861

UCORBL0710

01-07-2038

4.00%

UF

111,668

109,868

UCORBN0710

01-07-2040

4.00%

UF

85,968

84,573

UCORBP0710

01-07-2042

4.00%

UF

41,917

41,237

US05968TAB17

08-03-2024

LIBOR +SPREAD 4

USD

106,041

115,706

BBSA1099B1

30-03-2019

10.79%

COP

445

483

BBSA110BAVA

23-09-2017

10.68%

COP

—

32,148

BBSA1099B4

30-03-2019

12.85%

COP

21,055

23,139

BBSA1139AS10

07-02-2023

10.08%

COP

21,659

23,542

BBSA1139AS15

07-02-2028

10.20%

COP

30,411

33,055

Total

1,041,182

1,083,296

g)              ~~The detail of subordinated bonds by maturity is as follows:~~

As of December 31,

2017

2016

MCh$

MCh$

Due within 1 year

—

32,148

Due after 1 year but within 2 years

21,500

—

Due after 2 years but within 3 years

—

23,622

Due after 3 years but within 4 years

—

—

Due after 4 years but within 5 years

22,303

—

Due after 5 years

997,379

1,027,526

Total

1,041,182

1,083,296

F-86

~~Table of Contents~~
h)             ~~The detail of other financial obligations by maturity is as follows:~~

As of December 31,

2017

2016

MCh$

MCh$

Due within 1 year

811

2,265

Due after 1 year but within 2 years

—

—

Due after 2 years but within 3 years

—

—

Due after 3 years but within 4 years

—

—

Due after 4 years but within 5 years

—

—

Due after 5 years

—

—

Total short term obligation

811

2,265

The detail of other long term financial obligations is as follows:

Amounts due to credit card operations

16,255

23,298

Others

—

—

Total long term financial obligations

16,255

23,298

Total other financial obligations

17,066

25,563

F-87

~~Table of Contents~~
~~NOTE 19 PROVISIONS~~
~~As of December 31, 2017 and 2016 the Bank has recorded the following provisions and changes in its provisions:~~
a)        ~~Other Provisions.~~
~~The provisions as of December 31, 2017 and 2016 were as follows:~~

As of December 31,

2017

2016

MCh$

MCh$

i) Employee benefits and staff salaries

90,559

89,295

ii) Mandatory dividends

17,234

1,029

iii) Contingencies

10,096

9,724

Total

117,889

100,048

~~(i)   Employee benefits and staff salaries~~
This item includes the following provisions related to: i) provisions for staff benefits and payroll, ii) provisions for compensation for years of service indemnities, iii) provisions for other employee benefits and iv) provisions for vacations.
~~(ii) Mandatory Dividends~~
~~This item corresponds to the minimum dividends to be paid~~
~~(iii) Contingencies~~
~~This item includes estimates for probable losses.~~
b)        ~~The provision balance changes during 2017 and 2016 were as follows:~~

i) Employee
benefits and
staff salaries

ii) Mandatory
dividends

iii) Contingencies

Total

MCh$

MCh$

MCh$

MCh$

Balances as of January 1, 2017

89,295

1,029

9,724

100,048

Application of provisions

(23,815
)
—

—

(23,815
)
Established provision

91,722

17,234

586

109,542

Provision released

(62,231
)
(1,029
)
—

(63,260
)
Other changes

(4,412
)
—

(214
)
(4,626
)
Balances as of December 31, 2017

90,559

17,234

10,096

117,889

i) Employee
benefits and
staff salaries

ii) Mandatory
dividends

iii) Contingencies

Total

MCh$

MCh$

MCh$

MCh$

Balances as of January 1, 2016

23,697

52,168

59

75,924

Application of provisions

(35,258
)
(52,168
)
(17
)
(87,443
)
Established provision

70,026

1,029

8,952

80,007

Provision released

(26,862
)
—

—

(26,862
)
Integration Itaú Corpbanca

57,491

—

1,019

58,510

Other changes

201

—

(289
)
(88
)
Balances as of December 31, 2016

89,295

1,029

9,724

100,048

F-88

~~Table of Contents~~
~~Accounting effects:~~
~~(i)   Employee benefits and staff salaries are recorded in “Personnel salaries expenses.”~~
~~(ii) Mandatory dividends are recorded in the Equity Statement, against “Accrual for mandatory dividends.”~~
(iii) The contingency provisions/(releases) are included in Other Operating (Expenses)/Income, depending on whether they are debit or a credit. The provision balance changes from 2017 and 2016 are shown below:

As of December 31,

2017

2016

Notes

MCh$

MCh$

Balances as of January 1,

9,724

59

Established provision

31b)

586

8,952

Provision released

31a)

—

—

Integration Itaú Corpbanca

—

1,019

Others

(214
)
(306
)
Total

10,096

9,724

c)         ~~Provisions employee benefits and staff salaries~~

As of December 31,

2017

2016

MCh$

MCh$

Employee benefits:

Long-term employee benefits (i)

7,914

7,950

Pension Plan (ii)

31,761

34,768

Severance (iii)

371

472

Retirement benefit plan (iv)

476

439

Total Provision for employee benefits

40,522

43,629

Provision for vacations (1)

36,811

13,122

Others (1)

13,226

32,544

Total

90,559

89,295

~~(1)~~~~Short-term personnel benefits.~~
~~(i)~~        ~~Long-term employee benefits.~~
Certain employees in Colombia are entitled to receive years-of-service awards starting with the 5th year employment anniversary and each five years thereafter. This award is paid in the month when the employee celebrates his/her corresponding employment anniversary.
~~1.- Assumptions used~~
~~The main assumptions used in the valuation are presented in the following tables:~~

As of December 31,

2017

2016

%

%

Summary of economic assumptions

Discount rate(s)

7.25

6.75

Expected rate(s) of salary increase

6.50

5.50

~~Summary of key demographic hypotheses~~
~~Retirement Age~~
~~62 years (men) and 57 years (women), both with 20 years of service or 30 years of service with no age requirement.~~
~~Mortality~~
~~RV-08 mortality table “Annuitants Valid” Colombian market.~~
F-89

~~Table of Contents~~
~~2.- Methodology~~
~~Cost Method~~
To determine the cost of benefits, the method of the Projected Unit Credit (PUC) was used, according to the provisions of IAS 19 (revised 2011). Under the PUC method, the “projected accrued benefit” is calculated for each benefit. For all active members of the award program, the “projected accrued benefit” determined by using a formula based on the years of service to the date of calculation. The formula takes into account items such as salary average, social security benefits and other items, projected to the age at which it is assumed that the employee will no longer provide services. The defined benefit obligation is the present value of the “projected benefits accrued.”
~~Method applied to assets~~
~~The award program does not have its own assets.~~
~~Others~~
The movements in the present value of the defined benefit obligation and the amounts recognized in the Consolidated Statements of Income in respect of this award are determined using the projected unit credit method and consisted of the following:
~~Changes in provision:~~

As of December 31,

2017

2016

MCh$

MCh$

Present value of obligations as of January 1, 2017 / April 1, 2016

7,950

6,886

Cost of net profit

1,487

970

Payments

(856
)
(439
)
Increase in provision

(51
)
504

Others

(616
)
29

Total

7,914

7,950

~~Cost of net profit~~

As of December 31,

2017

2016

MCh$

MCh$

Current services cost

866

640

Interest expense on obligation

621

330

Total

1,487

970

~~(ii)~~~~Pension Plan~~
The retirement pension liability is recorded based on the present value of the pension obligation for employees who meet certain statutory requirements as to age, length of service and other items, determined in accordance with actuarial adjustments under the existing Colombian law.
~~The present value of the defined benefit obligation was measured using the Projected Unit Credit method and other long-term employee benefits.~~
F-90

~~Table of Contents~~
~~1.-Assumptions used:~~
~~The principal assumptions used in the valuation are presented in the following tables:~~

As of December 31,

2017

2016

%

%

Summary of economic hypotheses

Discount rate(s)

9.00

7.25

Expected rate(s) of salary increase

5.60

3.00

Inflation rate

5.60

3.00

~~2.-Methodology~~
~~Cost Method~~
To determine the cost of benefits, the method of the PUC was used, according to the provisions of IAS 19 (revised 2011). Under the PUC method, the “projected accrued benefit” is calculated for each benefit. For all active members of the plan, the “projected accrued benefit” is determinate by using a formula based on the years of service to the date of calculation. The formula takes into account items such as salary average, social security benefits and other items, projected to the age at which it is assumed that the employee will no longer provide services. The defined benefit obligation is the present value of the “projected benefits accrued.”
~~The service cost is the amount of benefits earned in the year by the active members as a result of a year of credited service value.~~
~~The interest cost for the year is the interest on the defined benefit obligation.~~
~~Method applied to assets~~
~~The plan does not have its own assets~~
~~Others~~
~~Amounts recorded with respect to the defined pension benefit plan was as follows:~~
~~Changes in provision:~~

As of December 31,

2017

2016

MCh$

MCh$

Present value of obligations as of January 1, 2017 / April 1, 2016

34,768

31,149

Interest expense on obligation

2,742

1,081

Payments

(3,581
)
(1,349
)
Actuarial loss

223

3,761

Others

(2,391
)
126

Total

31,761

34,768

~~(iii)~~~~Severance~~
The severance benefit in Colombia is equivalent to one month’s salary, adjusted for the application of a severance factor (defined as the sum of 12 basic salaries plus additional payments included in salary per year of service and corresponding fraction.
~~1.- Assumptions used~~
~~The main assumptions used in the valuation are presented in the following tables:~~
F-91

~~Table of Contents~~

As of December 31,

2017

2016

%

%

Summary of economic hypotheses

Discount rate(s)

7.25

6.75

Expected rate(s) of salary increase

6.50

5.50

Inflation rate

4.00

3.00

~~2.- Methodology~~
~~Cost Method~~
~~To determine the cost of benefits, The PUC method was used.~~
~~Method applied to assets~~
~~The severance benefict plan does not have its own assets.~~
~~Others~~
~~Amounts recognized with respect to the severance benefit plan were as follows:~~
~~Changes in provision~~

As of December 31,

2017

2016

MCh$

MCh$

Present value of obligations as of January 1, 2017 / April 1, 2016

472

348

Current service cost

13

21

Interest expense on obligations

36

16

Actuarial losses

(19
)
159

Benefits paid

(93
)
(74
)
Other- exchange rate differences

(38
)
2

Closing defined benefit obligation

—

—

Total

371

472

~~(iv)~~~~Retirement benefit plan~~
~~This plan corresponds to the payment of a fixed amount in Colombian pesos at the time of retirement of the employee.~~
~~1.- Assumptions used~~
~~The main assumptions used in the valuation are presented in the following tables:~~

As of December 31,

2017

2016

%

%

Summary of economic hypotheses

Discount rate(s)

7.50

7.25

Expected rate(s) of salary increase

6.00

5.00

Inflation rate

4.00

3.00

~~2.- Methodology~~
~~Cost Method~~
~~To determine the cost of benefits, the method of the PUC was used.~~
~~Method applied to assets~~
~~The plan does not have its own assets.~~
F-92

~~Table of Contents~~
~~Others~~
~~Amounts recognized respect of these defined benefit plans were as follows:~~
~~Changes in provision~~

As of December 31,

2017

2016

MCh$

MCh$

Present value of obligations as of January 1, 2017 / April 1, 2016

439

329

Current service cost

34

20

Interest expense on obligations

36

17

Actuarial (gain)/losses

4

—

Benefits paid

(3
)
72

Other- exchange rate differences

(34
)
1

Total

476

439

~~(v)~~~~Summary effects in Other Comprehensive Income (OCI)~~

2017

2016

MCh$

MCh$

Pension Plan

223

3,761

Severance

(19
)
159

Retirement benefit plan

4

—

Total loss

208

3,920

~~(vi)~~~~Actuarial Valuation Nature~~
~~Future actuarial calculations may differ with respect to the calculations presented, due to the following factors:~~
·        ~~The experience of the plans differs from those anticipated by economic and demographic hypotheses selected.~~
·        ~~Changes in economic and demographic assumptions.~~
·        Increases or decreases expected as a natural part of the operation of the methodology for these calculations (for example, the end of the amortization period or additional costs based on the funding status of the plan).
·        ~~Changes in the characteristics of the plan or applicable law, and with respect thereto, significant events affecting the results presented since the last valuation.~~
~~(vii)~~~~Expected future payments~~
~~2017~~

Long-term
employee
benefits

Pension Plan

Severance

Retirement
benefit plan

MCh$

MCh$

MCh$

MCh$

Fiscal year 2018

944

2,996

55

36

Fiscal year 2019

752

2,922

32

12

Fiscal year 2020

868

2,757

38

21

Fiscal year 2021

1,038

2,586

22

26

Fiscal year 2022

1,177

2,434

68

42

Fiscal year 2023-2027 (combined)

5,384

11,512

177

246

F-93

~~Table of Contents~~
~~2016~~

Long-term
employee
benefits

Pension Plan

Severance

Retirement
benefit plan

MCh$

MCh$

MCh$

MCh$

Fiscal year 2017

946

3,482

60

33

Fiscal year 2018

1,008

3,312

23

11

Fiscal year 2019

806

3,146

45

12

Fiscal year 2020

953

2,963

63

23

Fiscal year 2021

1,136

2,773

42

26

Fiscal year 2022-2031 (combined)

5,590

12,510

366

242

~~The average duration of the obligation for these plans is: 13.2 years (long-term benefit award program); 14.9 years (pension plan); 6.2 years (severance plan) and 12.9 years (retirement benefit plan).~~
F-94

~~Table of Contents~~
~~NOTE 20 OTHER LIABILITIES AND LIABILITIES DIRECTLY ASSOCIATED WITH NON-CURRENT ASSETS HELD FOR SALE~~
a)        ~~As of December 31, 2017 and 2016, the Bank´s other liabilities are as follows:~~

As of December 31,

2017

2016

MCh$

MCh$

Accounts and notes payable (1)

348,036

190,111

Dividends payable

703

298

Income received in advance

7,850

6,383

Valuation adjustments for hedges

3,091

—

Creditors through intermediation

21,933

22,648

Guarantees constituted by threshold effect (2)

79,589

49,776

Others liabilities

2,233

594

Total

463,435

269,810

~~(1)~~Group obligations for business operations, such as withholding taxes, social security contributions, balances due on purchases of materials, balances due on obligations for leasing contracts for acquisition of fixed assets and other.
~~(2)~~~~Guarantees from financial operations.~~
b)        ~~As of December 31, 2017 and 2016, liabilities directly associated with non-current assets held for sale were as follows:~~

As of December 31,

2017

2016

MCh$

MCh$

Fair value liabilities SMU CORP S.A.

—

7,032

Total

—

7,032

F-95

~~Table of Contents~~
~~NOTE 21 CONTINGENCIES, COMMITMENTS AND RESPONSIBILITIES~~
This section discloses information on contingencies of significant loss, contingent loans, contingent liabilities not reflected in the financial statements and other responsibilities, lawsuits or other legal actions involving the Bank and/or its subsidiaries.
a)        ~~Lawsuits and Legal Proceedings~~
·             As of the date of issuance of these Consolidated Financial Statements, legal actions have been filed against the Bank and its subsidiaries involving its normal operations. They are mainly lawsuits pending against the Bank related to loans and other matters, most of which, according to the Bank’s Legal Services Divisions involved in the suits, present no risk of significant loss. These amounts are recorded as provisions in the Consolidated Statement of Financial Position.

As of December 31,

2017

2016

MCh$

MCh$

Balance as of January, 1

9,724

59

Integration Itaú Corpbanca

—

1,019

Established provision

586

8,952

Provision released

—

—

Application of provisions

—

(17
)
Others

(214
)
(289
)
Total

10,096

9,724

·             On December 20, 2016, Helm LLC initiated an arbitration proceeding (the “Arbitration”) against respondents Itaú CorpBanca and Corp Group Holding Inversiones Ltda. (“Corp Group”), and nominal respondent Itaú CorpBanca Colombia (collectively with Corp Group and Itaú CorpBanca, “Respondents”), by filing a Request for Arbitration in the ICC’s International Court of Arbitration in New York. Helm LLC alleged that Corp Group and Itaú CorpBanca had breached the Amended and Restated Shareholders Agreement of HB Acquisition S.A.S., dated July 31, 2013, between shareholders of Itaú CorpBanca Colombia (the “SHA”). As relief, Helm LLC is seeking, among other things, damages of $598 million, reflecting what it claims is the value to which it is entitled in return for its shares in Itaú CorpBanca Colombia, plus interest. On February 14, 2017, Respondents filed their answers to Helm LLC’s Request for Arbitration, denying Helm LLC’s claims, and Corp Group and Itaú CorpBanca filed a counterclaim against Helm LLC for breaching the SHA. As relief under their counterclaim, Corp Group and Itaú CorpBanca are seeking, among other things, for Helm LLC’s rights under the SHA to be terminated. On April 19, 2017, Helm LLC filed a reply to Corp Group and Itaú CorpBanca’s counterclaim. The Arbitration has continued pursuant to the applicable procedures and an evidentiary hearing is expected to take place in July 2018. Itaú CorpBanca believes Helm LLC’s claim is without merit and intends to enforce its rights under the SHA and applicable law.
·             Other legal actions have been filed against the Bank involving its normal operations. The Bank’s maximum exposure for these lawsuits amounts to approximately MCh$36,309 as of December 31, 2017 (MCh$24,000 as of December 2016). However, in management’s opinion, based on reports from the Legal Division as of year-end 2017 and 2016, it is more likely than not that these lawsuits will not result in significant losses not unforeseen by the Bank in these financial statements and, therefore, management has not recorded any provisions for them.
b)        ~~Contingent Loans.~~
The following table contains the amounts for which the Bank and its ~~Subsidiaries~~subsidiaries are contractually obliged to ~~provide loans and maintain off-balance sheet accounts:~~grant loans:

   Contingent loans
   As of December 31,
   2018    2017
   MCh$    MCh$
Collateral and guarantees
   411,023    262,924
Confirmed foreign letters of credit
   —      3,824
Letters of credit issued
   95,476    88,940
Documented guarantees
   1,286,805    1,286,807
Available on demand credit lines
   2,143,333    2,349,626
Other credit commitments
   1,447,277    1,299,494




Totals
   5,383,914    5,291,615




F-96

~~Table of Contents~~For information on provisions for contingent loans, see Note 19, letter b.

As of December 31,

2017

2016

MCh$

MCh$

Collaterals and Guarantees

262,924

264,081

Confirmes foreign letters of credit

3,824

167

Letter of credit

88,940

64,216

Bank Guarantees

1,286,807

1,146,598

Cleared lines of credit

2,349,626

2,581,859

Other credit commitments

1,299,494

1,253,215

Total

5,291,615

5,310,136

Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-112
c)         ~~Responsibilities.~~
Note 21 – Contingencies, Commitments, and Responsibilities, continued

c)
Responsibilities
The Bank and its subsidiaries have the following responsibilities arising from ~~the normal~~their regular course of ~~business~~ ~~regarding maintenance off-balance sheet accounts:~~business:

As of December 31,

2017

2016

MCh$

MCh$

Third Party Operations

Collections

26,143

41,171

Transferred financial assets administred by the bank

997,530

883,902

Third party funds under management

2,215,038

1,165,764

Subtotal

3,238,711

2,090,837

Security Custody

Security in custody held by the bank

8,675,906

5,636,858

Securities in custody deposited in another entity

549,848

455,678

Bank-issued Securities

163,713

200,333

Subtotal

9,389,467

6,292,869

Total

12,628,178

8,383,706

   As of December 31,
   2018    2017
   MCh$    MCh$
Third party operations

Collections
   17,030    26,143
Transferred financial assets managed by the Bank
   1,101,327    997,530
Third party funds under management
   2,306,154    2,215,038




Subtotals
   3,424,511    3,238,711




Custody of securities

Securities held in custody
   5,896,162    8,675,906
Securities held in custody deposited in other entities
   315,347    549,848
Securities issued by the Bank held in custody
   148,193    163,713




Subtotals
   6,359,702    9,389,467




Totals
   9,784,213    12,628,178




c)
Guarantees, Contingencies and other
d)        ~~Guarantees, Contingencies and Other.~~
~~Banco~~ Itaú ~~Corpbanca~~
~~During the fiscal years 2017 and 2016, the Bank did not fail to comply with covenants and other commitments associated with debt instruments issued and obligations with banks.~~
~~Banco Itaú Corpbanca Colombia S.A.~~
·             The Bank and its subsidiaries are involved in civil, administrative and labor proceedings. Of the 167 outstanding civil and administrative proceedings as of December 31,2017, 93 are related to banking operations and 74 to ownership of leased assets. In aggregate, the lawsuits are seeking MCh$13,748. The likelihood of loss is considered possible in 8 cases, remote in 142 cases and probable in 17 cases. Based on this evaluation, the Bank has recorded a provision of MCh$977. In aggregate, the plaintiffs in the labor proceedings are seeking MCh$2,230 and the Bank has provisioned MCh$865. Of the 167 cases, the likelihood of loss is considered probable in 52 cases and remote in 115 cases.
~~Corpbanca~~ Corredores de Seguros S.A.
·In order to comply with Article 58, letter d) of the Chilean ~~Finance Ministry~~ Decree with Force of Law (“DFL”) 251 of 1930, which states that, “Insurance Brokers, in order to conduct business, must comply with the requirement of contracting insurance policies as determined by the ~~SVS,~~Commission for the Financial Market(Ex- Superintendency of Securities and Insurance or “SVS”), in order to correctly and fully comply with the obligations arising from its activities and especially regarding damages that may be incurred by insured parties ~~that contract~~taking policies through the brokerage house,” the subsidiary has renewed the following (civil liability ~~(a)~~
F-97

~~Table of Contents~~
and ~~guarantee (b))~~guarantee) insurance policies:

Entity
From
~~End~~
To
Amount (UF)
Beneficiary
Consorcio Nacional de Seguros S.A.
~~04/15/2017~~
04-15-2018
~~04/14/2018~~
~~(a)~~
04-15-2019 60,000 and
~~(b)~~ 500
~~Corpbanca Corredora de Seguros~~
~~Itaú Corredora de Seguros Limitada~~
·             As established in Article 58, letter D of DFL 251 and SVS Ruling No. 1,160, the subsidiary has taken out liability (a) and guarantee (b) policies to cover the risk of potential damages that could affect it and to ensure correct and full compliance with all obligations arising from its activities and, especially, regarding damages that may be incurred by insured parties that contract policies through the brokerage house.
~~Entity~~
~~From~~
~~End~~
~~Amount (UF)~~
~~Beneficiary~~
~~Consorcio Nacional~~Itaú Corredores de Seguros S.A.
~~04/15/2017~~
~~04/14/2018~~
~~(a) 60,000 and~~
~~(b) 500~~
~~Itaú Corredora de Seguros~~
Itaú ~~Corpbanca~~ Corredores de Bolsa ~~S.A.~~
Limitada
In order to comply with articles 30 and 31 of Chilean Law 18,045, this subsidiary kept a ~~bank~~Bank guarantee certificate ~~is kept on~~with the Chilean Electronic Stock Exchange and Santiago Stock Exchange, to ensure the correct and complete fulfillment of its obligations as ~~stock broker.~~stockbroker. The beneficiaries are the current or future creditors that the subsidiary has or will have derived from its ~~operations.~~transactions. The detail of the ~~bank~~Bank guarantee certificate is as follows:

Entity
From
~~End~~
To
Amount (UF)
Beneficiary
Itaú Chile
~~06/30/2017~~
04-22-2018
~~04/22/2017~~
~~16,000~~
04-22-2019
16,000 Bolsa Electrónica de Chile
Mapfre Compañía de Seguros S.A
~~06/30/2017~~
04-22-2018
~~04/22/2017~~
~~4,000~~
04-22-2019
4,000 Bolsa de Comercio de Santiago
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-113
Note 21 – Contingencies, Commitments, and Responsibilities, continued

In addition, the company has ~~acquired~~taken out a comprehensive insurance policy to comply with Law No. 52 of the Chilean Electronic Stock Exchange.
Amounts recorded with respect to the comprehensive insurance policy ~~ere the following:~~are as follows:

~~Entity~~
~~From~~
~~End~~
~~Amount (MUS$)~~
~~Beneficiary~~
~~Orion~~Entity
From To Amount (UF) Beneficiary
Orión Seguros Generales S.A
~~05/01/2017~~
04-30-2018
~~04/30/2017~~
06-21-2019 5,000 and 10,000
Bolsa ~~Electronica~~Electrónica de Chile
The company pledged its shares onof the Santiago Stock Exchange in favor of said company, to ~~guarantee~~secure the fulfillment of the ~~obligations respect~~Obligations related to the transactions carried out with other brokers. This amounts to MCh$~~14,533.~~
12,630 as of December 31, 2018.
As of December 31, ~~2017,~~2018, this subsidiary is under guarantee with ~~CCLV, Contraparte Central S.A~~Bolsa de Comercio de Santiago, Bolsa de Valores in cash and financial assets ceded to guarantee transactions in Cámara de Compensación y Liquidación de Valores for ~~Mch$2,239 and a financial instrument for Mch$1,106.~~
MCh$5,042 (MCh$4,101 as of December 31, 2017).
The ~~company executed~~Company granted a Bank guarantee certificate, as a representative of the beneficiaries of the guarantee pursuant to Articles 98 and 99 of Chilean Law 20,172 ~~with the object of the guaranteeing~~to secure its obligations as ~~portfolio administrator.~~
·Portfolio Manager. The ~~company executed a~~detail of the Bank guarantee certificate is as representative of the beneficiaries of the guarantee pursuant to Articles 98 and 99 of Chilean Law 20,172, in order to ensure the faithful and full compliance with its obligations as portfolio manager.
~~Amounts recorded with respect to the comprehensive insurance policy were the following:~~follows

Entity
From
~~End~~
To
Amount ~~(MUS$)~~(UF)
Beneficiary
Itaú Chile
~~20/04/2017~~
06-21-2018
~~20/04/2018~~
~~10.000~~
06-21-2019
10,000 Itaú Chile
F-98

~~Table of Contents~~
Itaú ~~Chile~~ Administradora General de Fondos S.A.
On August 14, 2017, Corpbanca Administradora General de Fondos S.A. replaced the documented guarantee in Banco Santander Chile, at sight for MCh$14, equivalent to UF500, originally issued on June 6, 2017, in favor of the Production Development Corporation to ensure CORFO’s faithful and timely compliance with the obligations of the Portfolio Management contract, its Committees and Funds, and the payment of labor and social obligations with the contracting party’s employees, its expiration date is August 30, 2021.
On June 2, 2017, Corpbanca Administradora General de Fondos S.A. took a documented guarantee at Banco Santander Chile, at sight, for UF15,000 equivalent to MCh$400 in favor of the Production Development Corporation to ensure CORFO the faithful fulfillment of CORFO’s portfolio management contract, its Committees and Funds, and the payment of labor and social obligations with the workers of the contracting party. Its expiration date is August 31, 2021.
On April 30, 2018, Itaú Administradora General de Fondos S.A. contract the policy called Bankers Blanket Bond with Orión Seguros Generales.
On April 30, 2018, Itaú Administradora General de Fondos SA contracted the Global Banking Policy (Bankers Blanket Bond) with Orión Seguros Generales Company, in order to foresee possible situations of official infidelity, its maturity date being May 31, 2019. The insured amount of the policy amounts to US$5,000,000 for each individual loss event and US$10,000,000 in the combined aggregate.
During the year ~~2017,~~ended December 31, 2018, the ~~company executed guarantee certificates with~~Company has contracted Documented Guarantees in Itaú Corpbanca, for the funds it manages in order to guarantee the faithful fulfillment of the obligations of the ~~administrators, for~~Asset Manager, in connection with the ~~administration~~management of the funds of third parties and ~~the~~required compensation ~~for the damages resulting from their non-compliance~~ in ~~accordance~~case of failure to comply with the provisions established by articles N°12 and N°13 of ~~Article No. 226 and No. 227~~Law N°20,712, for UF773,051 as of ~~Chilean Law No. 18,045, for UF 1,166,462.~~
~~Corpbanca Administradora General de Fondos S.A.~~
·   On June 2, 2017, Corpbanca Administradora General de Fondos S.A. (“CORFO”), It executed a guarantee certificate with Bank Santander Chile, for the amount of MCh$399 equivalent to UF 15,000 in favor of the Development Corporation of the Production to ensure CORFO’s faithful fulfillment of the CORFO portfolio management contract, its committees and funds, and the payment of labor and social costs relating to the contractor’s workers. Their expiration is AugustDecember 31, ~~2021.~~
·   On June 28, 2017, Corpbanca Administradora General de Fondos S.A. renewed its insurance policy with Orión Seguros Generales S.A. with the period of validity from May 1, 2017; and maturity on April 30, 2018.

Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-114
·Note 22 – Equity   ~~On August 14, 2017, Corpbanca Administradora General de Fondos S.A. replaced its guarantee certificate with Bank Santander Chile, for the amount of MCh$14 equivalent to UF 500 issued on June 6, 2017~~
Movements in ~~favor of the [Production Development Corporation] to ensure CORFO the faithful~~equity accounts and ~~timely compliance with the obligations of the portfolio management contract, its committees and funds, and the payment of labor and social costs relating~~reserves (attributable to the ~~contractor’s workers, due on August 30, 2021.~~
F-99

~~Table of Contents~~
~~NOTE 22 EQUITY~~
The business combination (reverse acquisition) rules as established in IFRS3 require that the consolidated financial statements dated after the merger (from April 1, 2016 onward) to be prepared under the name of the legal acquirer (the acquiree for accounting purposes, or Corpbanca, the merged entity, which will take the name Itaú Corpbanca), and present the financial information of the legal acquiree (the acquirer for accounting purposes, or Banco Itaú Chile) from 2015, for comparative purposes, but for the April - December period present the numbers of Itaú - Corpbanca), with an adjustment that will be made retroactively in the legal capital of the acquirer for accounting purposes (Banco Itaú Chile) to reflect the legal capital of the acquiree for accounting purposes (Corpbanca). That adjustment is required to reflect the capital of the legal acquirer (the acquiree for accounting purposes).
a)        ~~Movement in shareholders’ equity accounts (attributable to~~ equity holders of the Bank)
:
As of December 31, 2018, 2017 and 2016, the ~~Bank’s issued shares are~~paid-in capital of the Bank is represented by ~~the following detail, Ordinary~~common shares ~~authorized,~~ subscribed and paid, with no par value, ~~detailed~~and its motion presented below:

Ordinary Shares

   Common shares

2017

2016

   2018    2017    2016

(number)

(number)

   (number)    (number)    (number)
Issued as of January 1,

512,406,760,091

115,039,690,651

   512,406,760,091    512,406,760,091    115,039,690,651
Issuance of paid shares

—

57,008,875,206

   —      —      57,008,875,206
Increase in shares for Itaú-CorpBanca business combination

—

340,358,194,234

Total

512,406,760,091

512,406,760,091

Increase in share for Itaú-Corpbanca business combination
   —      —      340,358,194,234
Issuance of shares pending payment
   —      —      —
Repurchase of own shares
   —      —      —
Sale of own shares
   —      —      —






Totals
   512,406,760,091    512,406,760,091    512,406,760,091






i.             ~~Purchases~~Subscribed and ~~sales of Bank Shares.~~paid shares
As of December 31, 2018, 2017 and 2016, the Bank has a capital in the amount of MCh$1,862,826, consisting of 512,406,760,091 common shares subscribed and paid, with no par value.
Purchase and sale of own shares
During the years ended December 31, 2018 and 2017, there were no transactions to buy and sell shares of own issuance.
List of major shareholders
The shareholders list as of December 31, 2018, 2017 and 2016, is as follows:
   Shares
   2018 2017 2016
Company name or shareholder name
   Number of
shares    Ownership
% Number of
shares    Ownership
% Number of
shares    Ownership
%
Itaú Unibanco
   195,408,043,473    38.14 % 184,756,488,453    36.06 % 184,756,488,453    36.06 %
Itaú Unibanco Holding S.A.
   115,039,610,411    22.45 % 115,039,610,411    22.45 % 115,039,610,411    22.45 %
ITB Holding Brasil Participaçoes Ltda.
   57,008,875,206    11.13 % 57,008,875,206    11.13 % 57,008,875,206    11.13 %
CGB II SpA
   10,908,002,836    2.13 % 10,908,002,836    2.13 % 10,908,002,836    2.13 %
CGB III SpA
   1,800,000,000    0.35 % 1,800,000,000    0.35 % 1,800,000,000    0.35 %
Saga II SpA
   7,000,000,000    1.37 % —      0.00 % —      0.00 %
Saga III SpA (1)
   3,651,555,020    0.71 % —      0.00 % —      0.00 %
Saieh Family
   146,394,540,608    28.57 % 157,046,095,628    30.65 % 157,046,095,628    30.65 %
Corp Group Banking S.A.
   136,127,850,073    26.57 % 136,127,850,073    26.57 % 136,127,850,073    26.57 %
Compañía Inmobiliaria y de Inversiones Saga SpA (2)
   10,266,690,535    2.00 % 20,918,245,555    4.08 % 20,918,245,555    4.08 %
International Finance Corporation
   17,017,909,711    3.32 % 17,017,909,711    3.32 % 17,017,909,711    3.32 %
Others
   153,586,266,299    29.97 % 153,586,266,299    29.97 % 153,586,266,299    29.98 %
Stock brokers
   55,791,614,655    10.89 % 53,400,666,996    10.42 % 33,053,299,686    6.45 %
ADR holders and foreign investors
   42,838,887,354    8.36 % 50,064,467,904    9.77 % 72,134,243,118    14.08 %
Asset management companies
   17,778,018,941    3.47 % 16,892,054,779    3.30 % —      —
Santo Domingo Group
   9,817,092,180    1.92 % 9,817,092,180    1.92 % 9,817,092,180    1.92 %
Insurance companies
   5,220,388,512    1.02 % 5,212,338,243    1.02 % 6,758,473,530    1.32 %
Pension funds management companies
   3,981,075,117    0.77 % 944,399,401    0.18 % 2,761,470,587    0.54 %
Other minority shareholders
   18,159,189,540    3.54 % 17,255,246,796    3.36 % 29,061,687,198    5.67 %








Totals
   512,406,760,091    100 % 512,406,760,091    100 % 512,406,760,091    100 %








(1)
Shares in custody of a third party.
(2)
Includes 640,844,096 shares in custody of a third party.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-115
Note 22 – Equity, continued
a.
Dividends
At the Ordinary Meeting of the Shareholders of Itaú Corpbanca held on March 27, 2018, the shareholders agreed to distribute net income for MCh$22,979 representing 40% of the profits for 2017 (as filed with the SBIF) and at an Ordinary Meeting of the Shareholders of Itaú Corpbanca held on March 27, 2017, the shareholders agreed to distribute profits for MCh$618, representing 30% of the 2016 net income (as filed with the SBIF). See Note 37 “Subsequent events” for 2018 dividends distribution decision.

   Income
attributable to
equity holders
(*)    Allocated to
reserves and
retained
earnings (*)    Allocated to
dividends    Percentage
distributed    Number of shares    Dividend per
share
(in pesos)
Years
   MCh$    MCh$    MCh$    %



Year 2017 (Shareholders’ Meeting March 2018)
   57,447    34,468    22,979    0.40    512,406,760,091    0.04485
Year 2016 (Shareholders’ Meeting March 2017)
   2,059    1,441    618    0.30    512,406,760,091    0.00121
(*)
According to the Consolidated Financial Statements filed with the SBIF.
As of December 31, 2018 and 2017 and for the year ended December 31, 2018, 2017 and 2016, the basic earnings and diluted earnings are as follows:
   As of and for the years ended December 31,
   2018    2017    2016
   N° of Shares    Amount    N° of Shares    Amount    N° of Shares    Amount
   Millions    MCh$    Millions    MCh$    Millions    MCh$
Basic earnings per share

Net income for the period
   —      171,331    —      67,821    —      14,407
Weighted average number of outstanding shares
   512,407    —      512,407    —      415,165    —
Assumed convertible debt conversion
   —      —      —      —      —      —
Adjusted number of outstanding shares
   512,407    —      —      —      415,165    —
Basic earnings per share (Chilean pesos)
   —      —      —      0.132    —      0.035
Diluted earnings per share

Net income for the period
   —      171,331    —      67,821    —      14,407
Weighted average number of outstanding shares
   512,407    —      512,407    —      415,165
Dilutive effects

Assumed convertible debt conversion
   —      —      —      —      —      —
Conversion of common shares
   —      —      ��      —      —      —
Options rights
   —      —      —      —      —      —
Adjusted number of shares
   512,407       512,407       415,165
Diluted earnings per share (Chilean pesos)
   —      0.334    —      0.132       0.035
During the years ended December 31, 2018, 2017 and 2016, there were no ~~purchase or sale transactions by the Bank involving its own shares.~~dilutive effects.

b.
Valuation accounts
~~ii.~~          ~~Subscribed and paid shares.~~
~~2017~~
~~As of December 31, 2017, the Bank’s paid capital was represented by 512,406,760,091 subscribed and paid common shares with no par value, totaling MCh$1,862,826.~~
~~2016(19)~~
~~As of December 31, 2016, the Bank’s paid capital was represented by 512,406,760,091 subscribed and paid common shares with no par value, totaling MCh$1,862,826.~~
On March 22, 2016, Banco Itaú Chile’s capital was increased by MCh$392,813, through the subscription of 710,477 of the Bank’s single-series shares with no par value (equivalent to 57,008,875,206 shares of the merged bank based on the exchange ratioFinancial instruments at FVTOCI/available for the business combination), which were subscribed and paid by ITB Holding Brasil Participações Ltda., a wholly owned subsidiary of Itaú Unibanco Holding S.A., within the framework of the merger of Banco Itaú Chile and Corpbanca and in compliance with the “Transaction Agreement” signed on January 29, 2014.
(19) The accounting acquiree, Corpbanca, made a capital increase of MCh$401,424 in 2016, as a result of the capitalization of the reserves generated by over-price paid in share placement (registered since 2014).
F-~~100~~

~~Table of Contents~~
~~iii.~~       ~~Profit distribution.~~
~~2017~~
~~At an ordinary meeting of the shareholders of Banco Itaú Chile on March 27, 2017, shareholders agreed to distribute MCh$618 in earnings, representing 30% of profit for the year 2016.~~
~~2016(20)~~
~~At an ordinary meeting of the shareholders of Banco Itaú Chile on March 11, 2016, shareholders agreed to distribute MCh$52,168 in earnings, representing 50% of profit for the year 2015.~~
b)        ~~List of major shareholders.~~
~~As of December 31, 2017, the shareholder composition was as follows:~~

Common Stock

Year 2017

N° of Shares

Share %

CORP GROUP BANKING SA

136,127,850,073

26.5700%
(**)
ITAU UNIBANCO HOLDING SA

115,039,610,411

22.4500%
(*)
ITB HOLDING BRASIL PARTICIPACOES LTDA

57,008,875,206

11.1300%
(*)
BANCO SANTANDER POR CUENTA DE INV EXTRANJEROS

23,969,149,414

4.6800%

BANCO DE CHILE POR CUENTA DE TERCEROS NO RESIDENTES

21,005,216,549

4.1000%

COMPANIA INMOBILIARIA Y DE INVERSIONES SAGA SPA

20,918,245,555

4.0800%
(**)
BANCO ITAU CORPBANCA POR CTA DE INVERSIONISTAS EXTRANJEROS

14,855,609,437

2.9000%

CGB II SPA

10,908,002,836

2.1300%
(*)
SIERRA NEVADA INVESTMENTS CHILE DOS LTDA

9,817,092,180

1.9200%

BOLSA DE COMERCIO DE SANTIAGO BOLSA DE VALORES

9,394,008,435

1.8300%

LARRAIN VIAL S A CORREDORA DE BOLSA

6,767,755,931

1.3200%

MONEDA SA AFI PARA PIONERO FONDO DE INVERSION

6,215,000,000

1.2100%

Deutsche Bank Trust Company Americas (ADRS)

5,508,798,500

1.0800%

BTG PACTUAL CHILE S A C DE B

4,776,696,832

0.9300%

BANCHILE C DE B S A

4,344,021,387

0.8500%

SANTANDER CORREDORES DE BOLSA LIMITADA

4,070,279,257

0.7900%

MBI CORREDORES DE BOLSA S A

3,591,497,546

0.7000%

BICE INVERSIONES CORREDORES DE BOLSA S A

3,165,903,988

0.6200%

CIA DE SEGUROS DE VIDA CONSORCIO NACIONAL DE SEGUROS SA

2,917,592,780

0.5700%

BCI C DE B S A

2,895,637,765

0.5700%

CREDICORP CAPITAL SA CORREDORES DE BOLSA

2,869,055,927

0.5600%

CONSORCIO C DE B S A

2,766,317,093

0.5400%

INMOB E INVERSIONES BOQUINENI LTDA

2,353,758,526

0.4600%

MBI ARBITRAGE FONDO DE INVERSION

2,340,829,105

0.4600%

BOLSA ELECTRONICA DE CHILE BOLSA DE VALORES

2,015,270,526

0.3900%

INV LAS NIEVES S A

1,890,725,224

0.3700%

CGB III SPA

1,800,000,000

0.3500%
(*)
VALORES SECURITY S A C DE B

1,719,455,989

0.3400%

ITAU CORPBANCA CORREDORES DE BOLSA SA

1,708,710,397

0.3300%

CRN INMOBILIARIA LIMITADA

1,535,239,055

0.3000%

OTROS

28,110,554,167

5.4700%

TOTAL

512,406,760,091

100.00000%

~~(*) The controlling group Itaú Unibanco Holding S.A. has a total interest of 36.06%.~~
~~(**) CorpGroup has an interest of 30.65%, which includes 182,125,023 shares of Saga under custody.~~
~~As of December 31, 2016 the shareholder composition was as follows:~~
(20) The accounting acquiree, Corpbanca, with respect to its profits for the year 2015, at the Ordinary Shareholders’ Meeting held on March 11, 2016, agreed to distribute earnings of MCh$100,886 corresponding to 50% of the profit in addition to retained earnings, to distribute MCh$3,196, equivalent to $0.3058171 per share.
F-~~101~~

~~Table of Contents~~

Common Stock

Year 2016

N° of Shares

Share %

CORP GROUP BANKING SA

136,127,850,073

26.5700%
(**)
ITAU UNIBANCO HOLDING SA

115,039,610,411

22.4500%
(*)
ITB HOLDING BRASIL PARTICIPACOES LTDA

57,008,875,206

11.1300%
(*)
BANCO SANTANDER POR CUENTA DE INV EXTRANJEROS

23,969,149,414

4.6800%

BANCO DE CHILE POR CUENTA DE TERCEROS NO RESIDENTES

21,005,216,549

4.1000%

COMPANIA INMOBILIARIA Y DE INVERSIONES SAGA SPA

20,918,245,555

4.0800%
(**)
BANCO ITAU CORPBANCA POR CTA DE INVERSIONISTAS EXTRANJEROS

14,855,609,437

2.9000%

CGB II SPA

10,908,002,836

2.1300%

SIERRA NEVADA INVESTMENTS CHILE DOS LTDA

9,817,092,180

1.9200%
(*)
BOLSA DE COMERCIO DE SANTIAGO BOLSA DE VALORES

9,394,008,435

1.8300%

LARRAIN VIAL S A CORREDORA DE BOLSA

6,767,755,931

1.3200%

MONEDA SA AFI PARA PIONERO FONDO DE INVERSION

6,215,000,000

1.2100%

Deutsche Bank Trust Company Americas (ADRS)

5,508,798,500

1.0800%

BTG PACTUAL CHILE S A C DE B

4,776,696,832

0.9300%

BANCHILE C DE B S A

4,344,021,387

0.8500%

SANTANDER CORREDORES DE BOLSA LIMITADA

4,070,279,257

0.7900%

MBI CORREDORES DE BOLSA S A

3,591,497,546

0.7000%

BICE INVERSIONES CORREDORES DE BOLSA S A

3,165,903,988

0.6200%

CIA DE SEGUROS DE VIDA CONSORCIO NACIONAL DE SEGUROS SA

2,917,592,780

0.5700%

BCI C DE B S A

2,895,637,765

0.5700%

CREDICORP CAPITAL SA CORREDORES DE BOLSA

2,869,055,927

0.5600%

CONSORCIO C DE B S A

2,766,317,093

0.5400%

INMOB E INVERSIONES BOQUINENI LTDA

2,353,758,526

0.4600%

MBI ARBITRAGE FONDO DE INVERSION

2,340,829,105

0.4600%

BOLSA ELECTRONICA DE CHILE BOLSA DE VALORES

2,015,270,526

0.3900%

INV LAS NIEVES S A

1,890,725,224

0.3700%

CGB III SPA

1,800,000,000

0.3500%

VALORES SECURITY S A C DE B

1,719,455,989

0.3400%

ITAU CORPBANCA CORREDORES DE BOLSA SA

1,708,710,397

0.3300%

CRN INMOBILIARIA LIMITADA

1,535,239,055

0.3000%

COMPANIA DE SEGUROS CONFUTURO S.A.

—

0.0000%

OTROS

28,110,554,167

5.4700%

TOTAL

512,406,760,091

100.00000%

~~(*) The controlling group Itaú Unibanco Holding S.A. has a total interest of 35.71%.~~
~~(**) CorpGroup has an interest of 31.00%, which includes 182,125,023 shares of Saga under custody.~~
c)         ~~Dividends~~
~~The distribution of dividends of the Bank was as follows(21)~~:

Income
attributable to
equity holders

To reservesor
retained
earnings

Intended
Dividends

Percentage
distributed

N° of shares

N° of shares
restated (*)

Dividend per
share in Ch$

Year

MCh$

MCh$

MCh$

%

2016 (Shareholders Meeting, March 2017)

2,059

1,441

618

30.00

512,406,760,091

N/A

0,0012

2015 (Shareholders Meeting, March 2016)

104,336

52,168

52,168

50.00

1,433,690

115,039,690,651

36,387

2014 (Shareholders Meeting, June 2015)

85,693

59,245

26,448

30.86

1,433,690

115,039,690,651

18,448

~~(*) This corresponds to the total number of shares of Banco Itaú Chile restated based on the exchange ratio for the business combination that gave rise to Itaú-Corpbanca.~~
~~(21) Figures are presented as required by local regulations.~~
F-~~102~~

~~Table of Contents~~
d)        ~~Basic and diluted earnings.~~
~~As of the years ended December 31, 2017 and 2016, basic earnings and diluted earnings, attributable to the equity holders of the bank, were as follows:~~

As of December 31,

2017

2016

2015

N° of Shares

Total

N° of Shares

Total

N° of Shares

Total

Millions

MCh$

Millions

MCh$

Millions

MCh$

Basic and diluted earnings per share

Basic earnings per share

Net income attributable to the equity holders

—

67,821

—

14,407

—

105,757

Weighted average number of shares outsatnding

512,407

—

415,165

—

115,040

—

Assumed Convertible Debt Conversion

—

—

—

—

—

—

Adjusted number of shares

—

—

415,165

—

115,040

—

Basic earning per share (Chilean pesos)

—

0.132

—

0.035

—

0.919

Diluted earnings per share

Net income attributable to the equity holders

—

67,821

—

14,407

—

105,757

Weighted average number of shares outsatnding

512,407

415,165

115,040

—

Diluted effect

Assumed Convertible Debt Conversion

—

—

—

—

—

—

Conversion of common shares

—

—

—

—

—

—

Options rights

—

—

—

—

—

—

Adjusted number of shares

512,407

415,165

115,040

—

Diluted earning per share (Chilean pesos)

0.132

0.035

—

0.919

e)         ~~Reserves presented in other comprehensive income.~~
~~Fair Value Reserve:~~sale investments: ~~This~~It includes accumulated net changes in the fair value of investments at FVTOVI in 2018 and available for sale investment up to December 31, 2017 until ~~the~~de investment is disposed of or there is a significant or prolonged decline in value.
Hedge of net investment in foreign operations:Corresponds to adjustments for hedges of net investments in foreign operations.
~~Translation Reserve:~~Cash flow hedge:It includes the effects of hedges on the Bank’s exposure to variations in cash flows that are attributed to a particular risk related to a recognized asset and/or liability, which may affect the results of the period.
Exchange differences on investments in Colombia and New York branch: ~~This~~It includes the effects of converting the financial statements of the New York Branch and Colombian subsidiaries, whose functional currencies are the US dollar and Colombian peso, respectively, to the presentation currency of ~~Banco~~Bank Itaú Corpbanca ~~(the Chilean~~(Chilean peso).
~~Cash Flow Hedge Reserve:~~ ~~This includes the effects of hedges on the Bank’s exposure to variations in cash flows that are attributed to a particular risk related to a recognized asset and/or liability.~~
~~Foreign Investment Accounting Hedge Reserve:~~ ~~Corresponds to adjustments for hedges of net investments in foreign operations.~~
Defined ~~Benefit Obligation Reserve:~~benefits obligations: This includes the effects of complying with IAS ~~19.~~19 “Employees Benefit”.

Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-116
F-~~103~~

~~Table of Contents~~
f)          ~~Other comprehensive income.~~Note 22 – Equity, continued

The following ~~table presents movements in~~are the equity effects and income taxes ~~attributable to the equity holders of the Bank~~ for ~~the~~ years ended December 31, ~~2017, 2016~~2018 and ~~2015:~~2017:

2017

2016

2015

Other Comprehensive Income

MCh$

MCh$

MCh$

Financial instruments available for sale

Balance as of January 1,

10,372

(1,170
)
(1,834
)
Gains (losses) on remeasuring financial instruments available for sale, before tax

6,220

11,542

664

Total

16,592

10,372

(1,170
)
Hedges of net investment in foreign operations

Balance as of January 1,

14,917

—

—

Gains (losses) on hedges of net investment in foreign operations, before tax

49,824

14,917

—

Total

64,741

14,917

—

Cash Flow Hedges

Balance as of January 1,

(5,603
)
—

—

Gains (losses) on cash flow hedges, before tax

(127
)
(5,603
)
—

Total

(5,730
)
(5,603
)
—

Exchange differences on translation

Balance as of January 1,

2,380

—

—

Gains (losses) on exchange differences on translation, before tax

(59,865
)
2,380

—

Total

(57,485
)
2,380

—

Remeasurement of defined benefit obligation

Balance as of January 1,

(2,598
)
—

—

Gains (losses) on remeasurement of defined benefit obligation, before tax

(138
)
(2,598
)
—

Total

(2,736
)
(2,598
)
—

Other Comprehensive Income, before tax

15,382

19,468

(1,170
)
Income tax relating to components of other comprehensive income

Income tax relating to instruments available for sale

Balance as of January 1,

(2,764
)
226

444

Income Tax Income and Loss Related to Available-for-Sale Instruments

(2,173
)
(2,990
)
(218
)
Total

(4,937
)
(2,764
)
226

Income tax relating to hedges of net investment in foreign operation

Balance as of January 1,

(3,219
)
—

—

Losses and gains from Income Tax relative to Foreign Coverage

(14,068
)
(3,219
)
—

Total

(17,287
)
(3,219
)
—

Income tax relating to cash flow hedges

Balance as of January 1,

1,345

—

—

Losses and gains from income tax related to hedges

44

1,345

—

Total

1,389

1,345

—

Income tax relating to defined benefit obligation

Balance as of January 1,

722

—

—

Income tax gains and losses on recognition of defined benefit obligations

(4
)
722

—

Total

718

722

—

Totals Income tax in valuation accounts

(20,117
)
(3,916
)
226

Other comprehensive income after tax

(4,735
)
15,552

(944
)
   Investments
at FVTOCI Hedge of net
investments
in foreign
operations Cash flow
hedge Exchange
differences
on
investment
in Colombia
and New
York
branch Defined
benefits
obligations Totals
As of December 31, 2018
   MCh$ MCh$ MCh$ MCh$ MCh$ MCh$
Other comprehensive income (loss) before income taxes

Balances as of January 1, 2018
   16,592 (5,730 ) 64,741 (57,485 ) (2,736 ) 15,382
Changes due initial adoption IFRS 9
   1,496 —   —   —   —   1,496
Restated balances as of January 1, 2018
   18,088 (5,730 ) 64,741 (57,485 ) (2,736 ) 16,878
Effects for the year
   (295 ) 11,289 (35,338 ) 38,366 (500 ) 13,522


Balances as of December 31, 2018
   17,793 5,559 29,403 (19,119 ) (3,236 ) 30,400


Income taxes related to components of other comprehensive income (loss)

Balances as of January 1, 2018
   (4,937 ) 1,389 (17,287 ) —   718 (20,117 )
Changes due initial adoption IFRS 9
   (499 ) —   —   —   —   (499 )
Restated balances as of January 1, 2018
   (5,436 ) 1,389 (17,287 ) —   718 (20,616 )
Effects for the year
   (1,468 ) (1,669 ) 9,541 —   (29 ) 6,375


Balances as of December 31, 2018
   (6,904 ) (280 ) (7,746 ) —   689 (14,241 )


Net balances as of December 31, 2018
   10,889 5,279 21,657 (19,119 ) (2,547 ) 16,159


   Available for
sale
investments Hedge of net
investments in
foreign
operations Cash flow
hedge Exchange
differences on
investment in
Colombia and
New York
branch Defined
benefits
obligations Totals
As of December 31, 2017
   MCh$ MCh$ MCh$ MCh$ MCh$ MCh$
Other comprehensive income (loss) before income taxes

Balances as of January 1, 2017
   10,372 (5,603 ) 14,917 2,380 (2,598 ) 19,468
Effects for the period
   6,220 (127 ) 49,824 (59,865 ) (138 ) (4,086 )


Balances as of December 31, 2017
   16,592 (5,730 ) 64,741 (57,485 ) (2,736 ) 15,382


Income taxes related to components of other comprehensive income (loss)

Balances as of January 1, 2017
   (2,764 ) 1,345 (3,219 ) —   722 (3,916 )
Effects for the period
   (2,173 ) 44 (14,068 ) —   (4 ) (16,201 )
Balances as of December 31, 2017
   (4,937 ) 1,389 (17,287 ) —   718 (20,117 )


Net balances as of December 31, 2017
   11,655 (4,341 ) 47,454 (57,485 ) (2,018 ) (4,735 )


F-~~104~~
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-117

~~Table of Contents~~Note 22 – Equity, continued

   Available for
sale investments Net
investments in
foreign
operations
hedges Cash
flows
hedges Exchange
differences on
investment in
Colombia
and New
York branch    Defined
benefits
obligations Totals
As of December 31, 2016
   MCh$ MCh$ MCh$ MCh$    MCh$ MCh$
Other comprehensive income (loss) before income taxes


Balances as of January 1, 2016
   (1,170 ) —   —   —      —   (1,170 )
Effects for the period
   11,542 (5,603 ) 14,917 2,380    (2,598 ) 20,638




Balances as of December 31, 2016
   10,372 (5,603 ) 14,917 2,380    (2,598 ) 19,468




Income taxes related to components of other comprehensive income loss)





Balances as of January 1, 2016
   226 —   —   —      —   226
Effects for the period
   (2,990 ) 1,345 (3,219 ) —      722 (4,142 )




Balances as of December 31, 2016
   (2,764 ) 1,345 (3,219 ) —      722 (3,916 )




Net balances as of December 31, 2016
   7,608 (4,258 ) 11,698 2,380    (1,876 ) 15,552




a)
Reserves
This item corresponds to “Otherg)non-earnings ~~Rollforward~~reserves” corresponding to the adjustments recorded as a result of the business combination between Itaú Chile and Corpbanca for MCh$839,120 as of December 31, 2018 and 2017, and reserves from Itaú Chile before the business combination for MCh$451,011 as of December 31, 2018 and 2017.
b)
Retained earnings from prior years
Corresponds to accumulated losses for the year ended ~~(OCI).~~
~~(i) Rollforward~~December 31, 2018 for a total of MCh$69,355 and retained earnings for the year ended ~~(OCI) — Available-for-sale.~~December 31, 2017 for a total of MCh$12,668, not distributed to shareholders.

12/31/2017

12/31/2016

12/31/2015

MCh$

MCh$

MCh$

Opening Balance, Accumulated other comprehensive income

10,372

(1,170
)
(1,834
)
Amount recognized in other comprehensive income for de period

12,022

18,411

654

Amount reclassified from equity to profit or loss for the period

(5,802
)
(6,869
)
10

Ending balance, accumulated other comprehensive income

16,592

10,372

(1,170
)

Itaú Corpbanca and Subsidiaries – Consolidated Financial Statements – December 31, 2018
F-118
~~(ii) Rollforward for the year ended (OCI) - Cash flow hedges.~~
~~ii) Rollforward for the year ended (OCI) - Cash flow hedges.~~Note 22 – Equity, continued

12/31/2017

12/31/2016

12/31/2015

MCh$

MCh$

MCh$

Opening Balance, Accumulated other comprehensive income

(5,603
)
—

—

Amount recognized in other comprehensive income for de period

(55
)
(5,603
)
—

Amount reclassified from equity to profit or loss for the period

(72
)
—

—

Ending balance, accumulated other comprehensive income

(5,730
)
(5,603
)
—

h)        ~~Reserves.~~
~~This item is made up of Other Reserves not from profits(22)~~ ~~of MCh$843,097 and Reserves from profits(23)~~ ~~of MCh$451,011.~~
i)            ~~Non-controlling interest:~~
c)
Non-controlling interest:
This corresponds to the net amount of equity in the consolidated subsidiaries attributable to capital that does not belong, directly or indirectly, to the Bank, including the part of profit for the period that is attributed to them.
Non-controlling interest in the subsidiary’s equity and profit for the ~~period~~year is detailed as follows:

Other Comprehensive Income

As of December 31, 2017

Non-controlling

Equity

Net income

Defined benefit
obligation

Financial
instruments
available for sale

Exchange
differences on
trnaslation

Effect hedge
Accounting
Foreign
Investment

Cash Flow
hedges

Deferred
Tax

Other
comprehensive
income

Comprehensive
income

Subsidiaries

%

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

Itaú Corredor de Seguros S.A (ex-Helm Corredor de Seguros S.A)

20.00
%
380

(5
)
—

—

—

—

—

—

—

(5
)
Itaú CorpBanca Colombia S.A (ex-Banco CorpBanca Colombia S.A.)

33.72
%
216,883

(5,001
)
(70
)
3,746

(18,437
)
(627
)
—

(1,305
)
(16,693
)
(21,694
)
Itaú Chile C. de Seguros Ltda.

0.10
%
12

10

—

—

—

—

—

—

—

10

Itaú Administradora General de Fondos S.A.

0.01
%
1

—

—

—

—

—

—

—

—

—

Itaú BBA Corredor de Bolsa Ltda.

0.01
%
4

—

—

—

—

—

—

—

—

—

217,280

(4,996
)

(16,693
)
(21,689
)
As of December 31, 2018 Other Comprehensive Income
Subsidiaries
Non-controlling Equity Net
income Financial
instruments
at FVTOCI Exchange
differences
on
translation Hedge of
net
investment
in foreign
operations Cash
flow
hedge Defined
benefits
obligations Deferred
Tax Total other
comprehensive
income Total
comprehensive
income
% MCh$ MCh$ MCh$ MCh$ MCh$ MCh$

MCh$ MCh$ MCh$
Itaú Corredor de Seguro Colombia S.A.
20.000 % 409 15 —   —   —   —   —   —   15
Itaú Corpbanca Colombia S.A. y filiales
33.721 % 217,673 (4,500 ) (664 ) 10,244 (1,195 ) —   (254 ) 305 8,436 3,936
Itaú Corredores de Seguros S.A. (Ex -Corpbanca Corredores de Seguros S.A.) (*)
0.000 % —   8 —   —   —   —   —   —   8
Itaú Administradora General de Fondos S.A. (**)
0.000 % —   —   —   —   —   —   —   —   —
Itaú Corpbanca Corredores de Bolsa Limitada (***)
0.000 % —   —   —   —   —   —   —   —   —

Totals
218,082 (4,477 ) (664 ) 10,244 (1,195 ) —   (254 ) 305 8,436 3,959

Other Comprehensive Income

As of December 31, 2016

Non-controlling

Equity

Net income

Defined benefit
obligation

Financial
instruments
available for sale

Exchange
differences on
trnaslation

Effect hedge
Accounting
Foreign
Investment

Cash Flow
hedges

Deferred
Tax

Other
comprehensive
income

Comprehensive
income

Subsidiaries

%

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

SMU CORP S.A.

49.00
%
437

—

—

—

—

—

—

—

—

—

Itaú Corredor de Seguros S.A (ex-Helm Corredor de Seguros S.A)

20.00
%
601

78

—

—

—

—

—

—

—

78

Itaú CorpBanca Colombia S.A (ex-Banco CorpBanca Colombia S.A.)

33.72
%
237,917

(527
)
(1,322
)
3,876

(9,481
)
(1,459
)
—

(133
)
(8,519
)
(9,046
)
Itaú Chile C. de Seguros Ltda.

0.10
%
13

10

—

—

—

—

—

—

—

10

Itaú Administradora General de Fondos S.A.

0.01
%
1

1

—

—

—

—

—

—

—

1

Itaú BBA Corredor de Bolsa Ltda.

0.02
%
—

—

—

—

—

—

—

—

—

—

238,969

(438
)

(8,519
)
(8,957
)
(*)
On April 1, 2018, the merger of Corpbanca Corredores de Seguro S.A. and Itaú Chile Corredora de Seguros Limitada through the absorption of this last entity in the first took place, being its new name Itaú Corredores de Seguros S.A. On September 10, 2018, Itaú Corpbanca acquired 127,901 shares from minority investors. As a result, the Bank and its subsidiaries own a 100% of the Company shares.
(**)
On December 10, 2018, Itaú Corpbanca acquired 1 share from minority investors. As a result, the Bank and its subsidiaries own a 100% of the Company shares.
(***)
On July 4, 2018, Itaú Asesorías Financieras S.A. acquired 2 shares from minority investors. As a result, the Bank and its subsidiaries own a 100% of the Company shares.

As of December 31, 2017 Other Comprehensive Income
Non-controlling Equity Net
income Available
for sale
investments Exchange
differences
on
translation Hedge of
net
investment
in foreign
operations Cash
Flow
hedges Defined
benefits
obligations Deferred
Tax Total other
comprehensive
income Comprehensive
income
Subsidiaries
% MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$
Itaú Corredor de Seguros S.A(ex-Helm Corredor de Seguros S.A)
20.000 % 380 (5 ) —   —   —   —   —   —   —   (5 )
Itaú Corpbanca Colombia S.A(ex-Banco Corpbanca Colombia S.A.)
33.721 % 216,883 (5,001 ) 3,746 (18,437 ) (627 ) —   (70 ) (1,305 ) (16,693 ) (21,694 )
Itaú Chile Corredores de Seguros Ltda.
0.029 % 12 10 —   —   —   —   —   —   —   10
Itaú Administradora General de Fondos S.A.
0.600 % 1 —   —   —   —   —   —   —   —   —
Itaú Corpbanca Corredores de Bolsa Ltda.
0.000 % 4 —   —   —   —   —   —   —   —   —

Totals
217,280 (4,996 ) 3,746 (18,437 ) (627 ) —   (70 ) (1,305 ) (16,693 ) (21,689 )

As of December 31, 2016 Other Comprehensive Income
Non-controlling Equity Net
income Available
for sale
investments Exchange
differences
on
translation Hedge of
net
investment
in foreign
operations Cash
flow
hedges Defined
benefits
obligations Deferred
Tax Total Other
Comprehensive
income Comprehensive
income
Subsidiaries
% MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$
SMU CORP S.A.
49.00 % 437 —   —   —   —   —   —   —   —   —
Itaú Corredor de Seguros S.A(ex-Helm Corredor de Seguros S.A)
20.00 % 601 78 —   —   —   —   —   —   —   78
Itaú Corpbanca Colombia S.A(ex-Banco Corpbanca Colombia S.A.)
33.72 % 237,917 (527 ) 3,876 (9,481 ) (1,459 ) —   (1,322 ) (133 ) (8,519 ) (9,046 )
Itaú Chile C. de Seguros Ltda.
0.100 % 13 10 —   —   —   —   —   —   —   10
Itaú Administradora General de Fondos S.A.
0.010 % 1 1 —   —   —   —   —   —   —   1
Itaú BBA Corredor de Bolsa Ltda.
0.020 % —   —   —   —   —   —   —   —   —   —

Totals
238,969 (438 ) 3,876 (9,481 ) (1,459 ) —   (1,322 ) (133 ) (8,519 ) (8,957 )

~~(22)~~ The ~~amounts presented in this item correspond to~~following table shows the ~~adjustments made as a result of~~non-controlling interest movements for the ~~business combination between Banco Itaú Chile~~year ended December 31, 2018, 2017 and ~~Corpbanca.~~
~~(23) Coming from Banco Itaú Chile.~~2016:

F-~~105~~

~~Table of Contents~~
   As of December 31,
   2018    2017    2016
   MCh$    MCh$    MCh$
Balances as of January 1,
   217,280    238,969    59
Changes due to initial application of IFRS 9
   (3,157 )    —      —
Restated balances as of January 1,
   214,123    238,969    59
Integration Itaú Corpbanca
   —      —      247,867
Comprehensive income
   3,959    (21,689 )    (8,957 )






Balances as of December 31,
   218,082    217,280    238,969






Other Comprehensive Income

As of December 31, 2015

Non-controlling

Equity

Net income

Defined benefit
obligation

Financial
instruments
available for sale

Exchange
differences on
trnaslation

Effect hedge
Accounting
Foreign
Investment

Cash Flow
hedges

Deferred
Tax

Other
comprehensive
income

Comprehensive
income

Subsidiaries

%

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

Itaú Chile C. de Seguros Ltda.

99.90
%
51

8

—

—

—

—

—

—

—

8

Itaú Chile Adm. General de Fondos S.A.

99.99
%
4

1

—

—

—

—

—

—

—

1

Itaú BBA Corredor de Bolsa Ltda.

99.98
%
4

—

—

—

—

—

—

—

—

—

59

9

—

9

Itaú Corpbanca and Subsidiaries – Consolidated Financial Statements – December 31, 2018
F-119
~~Amounts recorded for non-controlling interest movement were as follows:~~
Note 22 – Equity, continued

As of December 31,

2017

2016

2015

MCh$

MCh$

MCh$

Balances as of January 1,

238,969

59

50

Integration Itaú Corpbanca

—

247,867

—

Comprehensive income

(21,689
)
(8,957
)
9

Total

217,280

238,969

59

The main subsidiary withnon-controlling interest of Itaú Corpbanca, is the following:

Entity name

Country

Group participation

Non-controlilling participation

Main Activity

Itaú Corpbanca Colombia

Colombia

66.28
%
33.72
%
Bank

Entity Name
   Country    Group
participation Non-controlling
participation Main
activity
Itaú Corpbanca Colombia S.A. and subsidiaries
   Colombia    66.28 % 33.72 % Bank


~~Information representing~~Summarized financial information for the main subsidiary withnon-controlling interest, ~~of the above-named company, before consolidation and elimination adjustments was~~is as follows:

As of December 31,

2017

2016

Summary of Financial Statements

MCh$

MCh$

Current assets

4,589,487

5,502,852

Current liabilities

3,939,253

4,813,426

Net current assets

650,234

689,426

Non-current assets

1,690,890

1,780,581

Non-current liabilities

1,697,961

1,764,461

Net non-current assets

(7,071
)
16,120

Net assets

643,163

705,546

Non-controlling interests accumulated

216,883

237,917

   As of December 31,
   2018    2017    2016
Summary Statements of Financial Position
   MCh$    MCh$    MCh$
Current assets
   4,669,275    4,589,487    5,502,852
Current liabilities
   (3,523,186 )    (3,939,253 )    (4,813,426 )






Net current assets (liabilities)
   1,146,089    650,234    689,426
Non-current assets
   1,664,700    1,690,890    1,780,581
Non-current liabilities
   (2,160,781 )    (1,697,961 )    (1,764,461 )






Net non-current assets (liabilities)
   (496,081 )    (7,071 )    (16,120 )






Total net assets (liabilities)
   650,008    643,163    673,306






Accumulatednon-controlling interest
   217,673    216,883    237,917






   For the years ended December 31,
   2018    2017    2016
Summary Income Statements
      MCh$    MCh$
Interest income and readjustments
   553,937    579,176    482,806
Income of the period
   (13,087 )    (14,830 )    (1,563 )
Non-controlling interests income
   (4,500 )    (5,001 )    (527 )
   For the years ended December 31,
   2018    2017    2016
Summary Cash Flows Statements
   MCh$    MCh$    MCh$
Net cash flows provided by (used in) operating activities
   232,480    16,822    (35,057 )
Net cash flows provided by (used in) investing activities
   (145,665 )    (158,402 )    93,018
Net cash flows provided by (used in) financing activities
   (24,122 )    35,937    (4,400 )






Net increase (decrease) in cash flows
   62,693    (105,643 )    53,561






As of December 31,

2017

2016

Summary of Income Statement

MCh$

MCh$

Interest income and readjustments

579,176

482,806

Income of the period

(14,830
)
(1,563
)
Non-controlling interests income

(5,001
)
(527
)

As of December 31,

2017

2016

Statement of Cash Flow Statement

MCh$

MCh$

Cash flow from operating activities

16,822

(35,057
)
Cash flow from investing activities

(158,402
)
93,018

Cash flow from financing activities

35,937

(4,400
)
Net increse (decrese) in cash flow

(105,643
)
53,561

Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-120
F-~~106~~

~~Table of Contents~~Note 22 – Equity, continued

j)           ~~Consolidated comprehensive income for the period was~~
d)
Consolidated comprehensive income for the years ended December 31, 2018, 2017 and 2016 is as follows:
   2018
Concepts
   Equity holders of
the Bank    Non-controlling
interest    Totals
   MCh$    MCh$    MCh$
Income (loss) for the year
   171,331    (4,477 )    166,854
Other comprehensive income (loss) before income taxes

Financial instruments at fair value through other comprehensive income
   (295 )    (664 )    (959 )
Hedge of net investment in foreign operations
   (35,338 )    (1,195 )    (36,533 )
Cash flow hedge
   11,289    —      11,289
Exchange differences
   38,366    10,244    48,610
Defined benefits obligations
   (500 )    (254 )    (754 )






Subtotals
   13,522    8,131    21,653






Income taxes

Financial instruments at fair value through other comprehensive income
   (1,468 )    (704 )    (2,172 )
Hedge of net investment in foreign operations
   9,541    1,024    10,565
Cash flow hedge
   (1,669 )    —      (1,669 )
Defined benefits obligations
   (29 )    (15 )    (44 )






Subtotals
   6,375    305    6,680






Other comprehensive income for the year
   19,897    8,436    28,333






Comprehensive income for the year
   191,228    3,959    195,187






   2017
Concepts
   Equity holders of
the Bank    Non-controlling
interest    Totals
   MCh$    MCh$    MCh$
Income (loss) for the year
   67,821    (4,996 )    62,825
Other comprehensive income (loss) before income taxes

Available for sale investments
   6,220    3,746    9,966
Net investment in foreign operations hedges
   49,824    (627 )    49,197
Cash flow hedges
   (127 )    —      (127 )
Exchange differences
   (59,865 )    (18,437 )    (78,302 )
Defined benefits obligations
   (138 )    (70 )    (208 )






Subtotals
   (4,086 )    (15,388 )    (19,474 )






Income taxes

Available for sale investments
   (2,173 )    (1,160 )    (3,333 )
Net investment in foreign operations hedges
   (14,068 )    (143 )    (14,211 )
Cash flows hedges
   44    —      44
Defined benefits obligations
   (4 )    (2 )    (6 )






Subtotals
   (16,201 )    (1,305 )    (17,506 )






Other comprehensive income (loss) for the year
   (20,287 )    (16,693 )    (36,980 )






Comprehensive income (loss) for the year
   47,534    (21,689 )    25,845






Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-121
Note 22 – Equity, continued

2017

Holders of the
Bank

Non-controlilling
Interest

Total

Concepts

MCh$

MCh$

MCh$

Consolidated Income of the Period

67,821

(4,996
)
62,825

Other Comprehensive Income Before Taxes

Instruments available for sale

6,220

3,746

9,966

Hedge in foreing operation

49,824

(627
)
49,197

Cash flow hedge

(127
)
—

(127
)
Exchange differences on traslation

(59,865
)
(18,437
)
(78,302
)
Defined benefit obligation

(138
)
(70
)
(208
)
Total

63,735

(20,384
)
43,351

Income taxes

Instruments available for sale

(2,173
)
(1,160
)
(3,333
)
Hedge in foreing operation

(14,068
)
(143
)
(14,211
)
Cash flow hedge

44

—

44

Defined benefit obligation

(4
)
(2
)
(6
)
Total

(16,201
)
(1,305
)
(17,506
)
Comprehensive Income of the period

47,534

(21,689
)
25,845

   2016
Concepts
   Equity holders
of the Bank    Non-controlling
interest    Totals
   MCh$    MCh$    MCh$
Income (loss) for the year
   14,407    (438 )    13,969
Other comprehensive income (loss) before income taxes

Available for sale investments
   11,542    3,876    15,418
Net investment in foreign operations hedges
   14,917    (1,459 )    13,458
Cash flow hedges
   (5,603 )    —      (5,603 )
Exchange differences
   2,380    (9,481 )    (7,101 )
Defined benefits obligations
   (2,598 )    (1,322 )    (3,920 )






Subtotals
   20,638    (8,386 )    12,252






Income taxes

Available for sale investments
   (2,990 )    (1,035 )    (4,025 )
Net investment in foreign operations hedges
   (3,219 )    534    (2,685 )
Cash flows hedges
   1,345    —      1,345
Defined benefits obligations
   722    368    1,090






Subtotals
   (4,142 )    (133 )    (4,275 )






Other comprehensive income (loss) for the year
   16,496    (8,519 )    7,977






Comprehensive income (loss) for the year
   30,903    (8,957 )    21,946






2016

Holders of the
Bank

Non-controlilling
Interest

Total

Concepts

MCh$

MCh$

MCh$

Consolidated Income of the Period

14,407

(438
)
13,969

Other Comprehensive Income Before Taxes

Instruments available for sale

11,542

3,876

15,418

Hedge in foreing operation

14,917

(1,459
)
13,458

Cash flow hedge

(5,603
)
—

(5,603
)
Exchange differences on traslation

2,380

(9,481
)
(7,101
)
Defined benefit obligation

(2,598
)
(1,322
)
(3,920
)
Total

35,045

(8,824
)
26,221

Income taxes

Instruments available for sale

(2,990
)
(1,035
)
(4,025
)
Hedge in foreing operation

(3,219
)
534

(2,685
)
Cash flow hedge

1,345

—

1,345

Defined benefit obligation

722

368

1,090

Total

(4,142
)
(133
)
(4,275
)
Comprehensive Income of the period

30,903

(8,957
)
21,946

2015

Holders of the
Bank

Non-controlilling
Interest

Total

Concepts

MCh$

MCh$

MCh$

Consolidated Income of the Period

105,757

9

105,766

Other Comprehensive Income Before Taxes

Instruments available for sale

664

—

664

Total

106,421

9

106,430

Income taxes

Instruments available for sale

(218
)
—

(218
)
Total

(218
)
—

(218
)
Comprehensive Income of the period

106,203

9

106,212

Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-122
F-~~107~~

~~Table of Contents~~
~~NOTE~~Note 23 ~~INTEREST INCOME AND EXPENSE~~- Interest Income and Interest Expense
This item comprises interest ~~and readjustments~~ accrued in the ~~period~~year by all financial assets and liabilities, interest income and expenses, whose implicit or explicit performance is ~~obtained~~measured by applying the effective interest rate method, independently if these are ~~valued~~measured at fair value, as well as the effects from accounting hedges, which are part of the ~~effect from accounting hedges.~~interest income and expenses included in the Consolidated Statement of Income for the year.
a)   a. The composition of interest income and inflation-indexing for the years ended December 31, 2018, 2017 and 2016 ~~and 2015 was~~is as follows:

2017

2016

2015

For the years ended December 31,

Interest

Inflation (1)

Total

Interest

Inflation (1)

Total

Interest

Inflation (1)

Total

2018 2017 2016

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

Interest Inflation
adjustments
(1) Totals Interest Inflation
adjustments
(1) Totals Interest Inflation
adjustments
(1) Totals

MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$
Investments under agreements to resell

6,643

2

6,645

25,550

—

25,550

916

—

916

4,988 —   4,988 6,643 2 6,645 25,550 —   25,550
Loans and receivables to banks

5,460

—

5,460

8,180

—

8,180

1,459

—

1,459

5,013 —   5,013 5,460 —   5,460 8,180 —   8,180
Commercial loans

872,416

68,729

941,145

772,704

100,381

873,085

198,585

67,977

266,562

816,193 115,468 931,661 872,416 68,729 941,145 772,704 100,381 873,085
Mortgage loans

188,094

59,149

247,243

155,101

79,655

234,756

60,188

58,433

118,621

196,598 107,364 303,962 188,094 59,149 247,243 155,101 79,655 234,756
Consumer loans

360,268

64

360,332

283,005

31

283,036

98,684

195

98,879

372,148 194 372,342 360,268 64 360,332 283,005 31 283,036
Financial investmens

70,556

8,274

78,830

67,683

11,032

78,715

9,576

11,305

20,881

Financial investments
101,274 19,060 120,334 70,556 8,274 78,830 67,683 11,032 78,715
Other interest income

9,656

545

10,201

8,427

466

8,893

4,557

1,488

6,045

10,882 9,850 20,732 9,656 545 10,201 8,427 466 8,893
Gain (loss) from accounting hedges (*)

(3,527
)
—

(3,527
)
(3,012
)
—

(3,012
)
(11,381
)
—

(11,381
)
(19,715 ) —   (19,715 ) (3,527 ) —   (3,527 ) (3,012 ) —   (3,012 )
Total

1,509,566

136,763

1,646,329

1,317,638

191,565

1,509,203

362,584

139,398

501,982

Totals
1,487,381 251,936 1,739,317 1,509,566 136,763 1,646,329 1,317,638 191,565 1,509,203

b)        ~~The amount recorded as of interest expenses for~~b. For the years ended December 31, 2018, 2017 and 2016, the detail of the amount of interest and ~~2015 was~~inflation-indexing expense is as follows:

2017

2016

2015

Interest

Inflation (1)

Total

Interest

Inflation (1)

Total

Interest

Inflation (1)

Total

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

Demand deposits

(72,732
)
(139
)
(72,871
)
(78,147
)
(173
)
(78,320
)
—

—

—

Investment under agreements to repurchase

(32,677
)
—

(32,677
)
(48,086
)
—

(48,086
)
(1,772
)
—

(1,772
)
Deposuts and time deposits

(420,190
)
(13,047
)
(433,237
)
(419,661
)
(39,720
)
(459,381
)
(122,326
)
(38,575
)
(160,901
)
Borrowings from financial institutions

(51,922
)
(2,463
)
(54,385
)
(45,801
)
—

(45,801
)
(16,790
)
—

(16,790
)
Debt issued

(210,104
)
(72,780
)
(282,884
)
(156,168
)
(79,126
)
(235,294
)
(45,468
)
(50,274
)
(95,742
)
Other financial obligations

(114
)
—

(114
)
(142
)
(197
)
(339
)
(204
)
(291
)
(495
)
Other interest expenses

(556
)
(1,962
)
(2,518
)
(905
)
(2,261
)
(3,166
)
—

(2,992
)
(2,992
)
Gain (loss) from accounting hedges (*)

15,339

—

15,339

359

—

359

—

—

—

Total interest expenses

(772,956
)
(90,391
)
(863,347
)
(748,551
)
(121,477
)
(870,028
)
(186,560
)
(92,132
)
(278,692
)
   For the years ended December 31,
   2018 2017 2016
   Interest Inflation
adjustments
(1) Totals Interest Inflation
adjustments
(1) Totals Interest Inflation
adjustments
(1) Totals
   MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$
Deposits and other demand liabilities
   (49,536 ) (141 ) (49,677 ) (72,732 ) (139 ) (72,871 ) (78,147 ) (173 ) (78,320 )
Obligations under repurchase agreements
   (29,660 ) (4 ) (29,664 ) (32,677 ) —   (32,677 ) (48,086 ) —   (48,086 )
Time deposits and other time liabilities
   (370,206 ) (15,528 ) (385,734 ) (420,190 ) (13,047 ) (433,237 ) (419,661 ) (39,720 ) (459,381 )
Interbank borrowings
   (69,054 ) (206 ) (69,260 ) (51,922 ) (2,463 ) (54,385 ) (45,801 ) —   (45,801 )
Debt instruments issued
   (199,420 ) (122,832 ) (322,252 ) (210,104 ) (72,780 ) (282,884 ) (156,168 ) (79,126 ) (235,294 )
Other financial liabilities
   (752 ) —   (752 ) (114 ) —   (114 ) (142 ) (197 ) (339 )
Other Interest expense
   (397 ) (4,292 ) (4,689 ) (556 ) (1,962 ) (2,518 ) (905 ) (2,261 ) (3,166 )
Gain (loss) from hedge accounting (*)
   10,374 —   10,374 15,339 —   15,339 359 —   359


Totals
   (708,651 ) (143,003 ) (851,654 ) (772,956 ) (90,391 ) (863,347 ) (748,551 ) (121,477 ) (870,028 )


(1)
The inflation indexing is the result of changes in the Unidades de Fomento (“UF”). The UF is an inflation-index Chilean monetary unit with a value in Chilean pesos that changes daily to reflect changes in the Official Consumer Price Index (“CPI”) of the Instituto Nacional de Estadísticas (the Chilean National Institute of Statistics) for the previous month. The effect of any changes in the nominal peso value of ourUF-denominated interest earning assets and interest bearing liabilities is reflected in our results of operations as an increase (or decrease, in the event of deflation) in interest income and expense respectively.
(*)
The mark to market adjustments are presented in this line for hedging derivatives used in hedging of assets except in the case of foreign currency hedges and cash flow hedges (cross-currency), theirall-in mark to market adjustment is included in the foreign exchange gain (losses) (see Note 26 “Net foreign exchange income (losses)”).
(1) The inflation indexing is the result of changes in the Unidades de Fomento (“UF”). The UF is an inflation-index Chilean monetary unit with a value in Chilean pesos that changes daily to reflect changes in the Official Consumer Price Index (“CPI”) of the Instituto Nacional de Estadísticas (the Chilean National Institute of Statistics) for the previous month. The effect of any changes in the nominal peso value of our UF-denominated interest earning assets and interest bearing liabilities is reflected in our results of operations as an increase (or decrease, in the event of deflation) in interest income and expense respectively.
(*) The mark to market adjustments are presented in this line for hedging derivatives used in hedging of assets except in the case of foreign currency hedges and cash flow hedges (cross-currency), their all-in mark to market adjustment is included in the foreign exchange gain (losses) (see Note 26 “Net foreign exchange income (losses)”).

Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-123
F-~~108~~

~~Table of Contents~~
~~NOTE~~Note 24 ~~FEES AND INCOME FROM SERVICES~~– Fee and Commission Income and Expense
This item comprises the amount of all commissions accrued and paid in the ~~period,~~year, except for those that form an integral part of the effective interest rate of the financial ~~instruments, corresponds mainly to the following items:~~instruments.

a)             ~~Commissions income:~~
a.
Fee and commission income
This item ~~comprised of~~comprises the financial income offor the ~~period~~year corresponding to remunerations generated by the services rendered by the ~~entity~~Bank and its subsidiaries ~~mainly with regard~~and corresponds to the following items:

2017

2016

2015

MCh$

MCh$

MCh$

Lines of credit and overdrafts

3,306

4,911

1,537

Letters of credit and guarantees

14,776

13,562

5,228

Card services

63,388

52,775

24,296

Account administration

12,024

10,171

2,014

Collection, billings and payments

25,359

24,813

2,271

Management and brokerage commisions for securities

13,183

9,454

6,940

Invetsments in mutual funds and others

25,965

23,614

11,760

Inssurance brokerage

26,096

21,477

6,230

Financial advisory

8,162

8,951

5,389

Commissions for student loan credits

4,680

3,354

965

Commissions for credit operations

2,560

2,572

56

Commissions for mortgage loans

1,112

1,023

1,192

Other payments for services rendered

12,088

12,768

4,319

Other fees earnes

3,721

4,356

9,178

Total income from services fees

216,420

193,801

81,375

   For the years ended December 31,
   2018    2017    2016
   MCh$    MCh$    MCh$
Fees and commissions from lines of credits and overdrafts
   5,292    3,306    4,911
Fees and commissions from guarantees and letters of credit
   15,317    14,776    13,562
Fees and commissions from card services
   72,932    63,388    52,775
Fees and commissions from accounts management
   11,512    12,024    10,171
Fees and commissions from collections and payments
   20,359    25,359    24,813
Fees and commissions from brokerage and securities management
   10,966    13,183    9,454
Fees and commissions from asset management
   24,718    25,965    23,614
Compensation for insurance brokerage
   36,693    26,096    21,477
Investment banking and advisory fees
   19,403    8,162    8,951
Fees and commissions from student loans ceded
   5,300    4,680    3,354
Commissions on loan transactions
   651    2,560    2,572
Commissions for mortgage loans
   1,486    1,112    1,023
Other fees from services rendered
   10,982    12,088    12,768
Other commissions earned
   2,345    3,721    4,356






Totals
   237,956    216,420    193,801






b)             ~~Commissions expenses:~~
b.
Fee and commission expense:
This item includes expenses for commissions accrued during the year ~~for~~from operations, ~~with regard~~and corresponds to the following items:

2017

2016

2015

MCh$

MCh$

MCh$

Credit card transactions

(23,439
)
(29,376
)
(8,021
)
Securities transactions

(4,855
)
(3,328
)
—

Commision paid through Chilean clearing house (ACC)

(2,449
)
(1,348
)
—

Foreign trade transactions

(1,439
)
(1,309
)
—

Customer loyalty program benefits

(3,157
)
(3,232
)
—

Loan services to customers

(2,912
)
(4,385
)
—

Other paid commissions

(598
)
(27
)
(2,266
)
Total expenses from services fees

(38,849
)
(43,005
)
(10,287
)
   For the years ended December 31,
   2018    2017    2016
   MCh$    MCh$    MCh$
Compensation for cards transactions
   (35,676 )    (23,439 )    (29,376 )
Fees and commissions for securities transactions
   (2,963 )    (4,855 )    (3,328 )
Commissions paid for foreign trade transactions
   (2,550 )    (2,449 )    (1,348 )
Commissions paid for customer loyalty program benefits
   (2,607 )    (1,439 )    (1,309 )
Commissions paid for services to customers management
   (3,455 )    (3,157 )    (3,232 )
Other commissions paid
   (4,576 )    (3,510 )    (4,412 )






Totals
   (51,827 )    (38,849 )    (43,005 )






Commissions earned on loans with ~~letters of credit~~mortgage finance bonds are recorded in the Consolidated Statement of Income under “Interest income.”

Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-124
F-~~109~~

~~Table of Contents~~Note 24 – Fee and Commission Income and Expense, continued

c.
Below are the income and expenses for commissions generated by segment and the revenue recognition calendar for ordinary activities, for the year ended December 31, 2018 according to IFRS 15.
   Segments Revenue recognition calendar
for ordinary activities
   Chile Colombia Total Transferred
over time    Transferred
at a point in
time Accrual
model
   MCh$ MCh$ MCh$ MCh$    MCh$ MCh$
Fees and commissions from lines of credits and overdrafts
   5,180 112 5,292 5,292    —   —
Fees and commissions from guarantees and letters of credit
   12,267 3,050 15,317 12,267    3,050 —
Fees and commissions from card services
   47,238 25,694 72,932 —      72,932 —
Fees and commissions from accounts management
   8,471 3,041 11,512 —      11,512 —
Fees and commissions from collections and payments
   12,834 7,525 20,359 —      9,560 10,799
Fees and commissions from brokerage and securities management
   6,212 4,754 10,966 —      10,966 —
Fees and commissions from asset management
   15,417 9,301 24,718 —      24,718 —
Compensation for insurance brokerage
   36,693 —   36,693 —      —   36,693
Investment banking and advisory fees
   19,403 —   19,403 —      19,403 —
Fees and commissions from student loans ceded
   5,300 —   5,300 —      5,300 —
Commissions on loan transactions
   651 —   651 —      651 —
Commissions for mortgage loans
   1,486 —   1,486 —      1,486 —
Other commissions earned
   2,767 10,560 13,327 —      13,327 —




Totals
   173,919 64,037 237,956 17,559    172,905 47,492




   Segments Revenue recognition calendar
for ordinary activities
   Chile Colombia Total Transferred
over time    Transferred
at a point in
time Accrual
model
   MCh$ MCh$ MCh$ MCh$    MCh$ MCh$
Compensation for cards transactions
   (11,734 ) (23,942 ) (35,676 ) —      (35,676 ) —
Fees and commissions for securities transactions
   (1,744 ) (1,219 ) (2,963 ) —      (2,963 ) —
Commissions paid for foreign trade transactions
   (2,550 ) —   (2,550 ) —      (2,550 ) —
Commissions paid for customer loyalty program benefits
   —   (2,607 ) (2,607 ) —      (2,607 ) —
Commissions paid for services to customers management
   —   (3,455 ) (3,455 ) —      (3,455 ) —
Other commissions paid
   (3,805 ) (771 ) (4,576 ) —      (4,576 ) —




Totals
   (19,833 ) (31,994 ) (51,827 ) —      (51,827 ) —




Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-125
~~NOTE~~Note 25 ~~NET TRADING AND INVESTMENT INCOME~~– Net Income (Expense) from Financial Operations
This item includes the amount of ~~adjustments for variation~~changes in the fair value of financial instruments, except those attributable to interest accrued by applying the effective interest rate method, ~~of value adjustments of assets,~~ as well as the results obtained in the purchase and sale ~~of such assets.~~thereof.
~~Trading and investment~~Net income ~~recognized on~~(expense) from financial operations in the Consolidated Statements of Income for the ~~years ended December 31, 2017, 2016 and 2015 was~~year is as follows:

2017

2016

2015

MCh$

MCh$

MCh$

Trading instruments (securities)

43,323

40,893

1,762

Trading instruments (derivatives) (1)

(63,992
)
44,499

(47,769
)
Other financial investments at fair value with effect on profit or loss

15,121

18,863

11,416

Financial investments available-for-sale realized gain (loss) (*)

13,641

7,998

1,409

Other

175

699

—

Total

8,268

112,952

(33,182
)
   For the years ended December 31,
   2018    2017    2016
   MCh$    MCh$    MCh$
Trading instruments (securities)
   2,527    43,323    40,893
Financial derivative contracts (trading)
   152,732    (63,992 )    44,499
Sale of loans and accounts receivable from customers (*)
   1,602    15,121    18,863
Net gain on sale of financial instruments at fair value through other comprehensive income
   13,765    —      —
Net gain on sale of available for sale investments
   —      13,641    7,998
Others
   2,129    175    699






Total
   172,755    8,268    112,952






(*) See details Note 10, letter d.

Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-126
~~(*) Results generated by instruments available for sale mainly composed by the following:~~
· ~~Fair value adjustments recognized in the results. This includes transfers to results, generated on exercise, of the fair value adjustments by selling of those instruments available for sale.~~
· ~~Results generated from sales and / or liquidation, corresponding to the difference between the value obtained as compensation and the fair value of the instruments transferred.~~
~~(1)~~ ~~The gains (losses) on trading instruments (derivatives) as of December 31, 2017, 2016 and 2015 was as follows:~~

As of December 31,

2017

2016

2015

Gain / (Loss)

MCh$

MCh$

MCh$

Foreign currency forwards

(60,164
)
38,992

(34,906
)
Interest rate swaps

10,446

9,796

2,605

Foreign currency swaps

1,520

(1,896
)
(15,468
)
Foreign currency call options

1,312

(1,954
)
—

Foreign currency put options

(17,106
)
(439
)
—

Total

(63,992
)
44,499

(47,769
)
F-~~110~~

~~Table of Contents~~
~~NOTE~~Note 26 ~~NET FOREIGN EXCHANGE INCOME (LOSSES)~~– Net Foreign Exchange Gain (Loss)
This item includes the income earned from foreign currency trading, ~~the~~ differences arising from converting monetary items in a foreign currency to the functional currency, and those generated bynon-monetary assets in a foreign currency at the time of their disposal.
~~The detail of net~~ Net foreign exchange gains (losses) ~~for the years ended December 31, 2017, 2016 and 2015 was~~details are as follows:

2017

2016

2015

MCh$

MCh$

MCh$

Gains (losses) of foreign currency exchange differences

Net gains (losses) of foreign currency exchange positions

131,196

(30,191
)
75,873

Other foreign currency exchange gains (losses)

1,537

1,202

(1,412
)
Subtotal

132,733

(28,989
)
74,461

Gains (losses) of exchange rate readjustments

Adjustment to loan to customers

(82
)
14

—

Adjustment to investment instruments

(824
)
(121
)
—

Adjustments to deposits and saving account

—

10

—

Adjustments to other liabilities

1,385

—

—

Fair value gains (losses) on foreign currency hedging derivatives (1) (*)

(87,047
)
(19,762
)
—

Subtotal

(86,568
)
(19,859
)
—

Total

46,165

(48,848
)
74,461

   For the years ended December 31,
   2018    2017    2016
   MCh$    MCh$    MCh$
Net foreign exchange gain (loss)

Gain (loss) on net foreign currency exchange positions
   (64,278 )    131,196    (30,191 )
Other foreign currency exchange gains (losses)
   5,421    1,537    1,202






Subtotals
   (58,857 )    132,733    (28,989 )






Net exchange rate adjustments gain (loss)

Adjustments for loans and accounts receivable from customers
   93    (82 )    14
Adjustment for investment instruments
   105    (824 )    (121 )
Adjustments to deposits and saving account
   (322 )    —      10
Adjustment for other assets and liabilities
   —      1,385    —
Net gain (loss) from hedge accounting
   41,016    (87,047 )    (19,762 )






Subtotals
   40,892    (86,568 )    (19,859 )






Totals
   (17,965 )    46,165    (48,848 )






Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-127
~~(1) Correspond to current earnings related to hedging foreign currency assets and liabilities. Different information is disclosed in~~ Note ~~23 “Interest Income and Expense” and Note 25 “Net Trading and Investment Income”.~~27 – Provisions for Impairment of Financial Assets

a.
The movement registered in income for the year related to allowances and impairment due to credit risk, for the year ended December 31, 2018 and 2017, is summarized as follows:
~~(*) The fair value gains (losses) on hedging derivatives as~~

Loans and accounts receivable at amortized cost
Interbank
loans Commercial Mortgage Consumer Financial
instruments
at FVTOCI Financial
instruments at
amortized cost Contingent
loans Totals
2018
MCh$ MCh$ MCh$ MCh$ MCh$
Loss for provisions established
(344 ) (634,886 ) (78,185 ) (562,620 ) (25 ) —   (14,511 ) (1,290,571 )(*)
Income for provisions released
131 474,192 78,873 380,294 411 50 28,354 962,305 (*)
Recovery of loans previously charged-off
—   19,921 2,588 25,959 —   —   —   48,468

Net charge to income
(213 ) (140,773 ) 3,276 (156,367 ) 386 50 13,843 (279,798 )

   Loans and accounts receivable from customers
   Interbank
loans Commercial
loans Mortgage
loans Consumer
loans Totals
2017
   MCh$ MCh$ MCh$ MCh$ MCh$
Provisions established

Individually assessed
   (226 ) (338,701 ) —   —   (338,927 )
Collectively assessed
   —   (104,171 ) (63,699 ) (312,697 ) (480,567 )


(Loss) for provisions established
   (226 ) (442,872 ) (63,699 ) (312,697 ) (819,494 )(*)


Provisions released

Individually assessed
   209 302,504 —   —   302,713
Collectively assessed
   —   33,538 31,310 104,953 169,801


Income for provisions released
   209 336,042 31,310 104,953 472,514 (*)


Recovery of loans previouslycharged-off
   —   13,236 1,908 16,419 31,563


Net charge to income
   (17 ) (93,594 ) (30,481 ) (191,325 ) (315,417 )


   Loans and accounts receivable from customers
   Interbank
loans Commercial
loans Mortgage
loans Consumer
loans Totals
2016
   MCh$ MCh$ MCh$ MCh$ MCh$
Provisions established

Individually assessed
   (307 ) (387,737 ) —   —   (388,044 )
Collectively assessed
   —   (49,218 ) (38,837 ) (198,242 ) (286,297 )


(Loss) for provisions established
   (307 ) (436,955 ) (38,837 ) (198,242 ) (674,341 )(*)


Provisions released

Individually assessed
   286 251,582 —   —   251,868
Collectively assessed
   —   22,242 34,589 96,381 153,212


Income for provisions released
   286 273,824 34,589 96,381 405,080 (*)


Recovery of loans previouslycharged-off
   —   8,898 1,285 13,088 23,271


Net charge to income
   (21 ) (154,233 ) (2,963 ) (88,773 ) (245,990 )


(*)
The amounts disclosed in the Consolidated Statements of Cash Flows are detailed below:
   For the years ended December 31,
   2018    2017    2016
   MCh$    MCh$    MCh$
Charge to income for provisions established
   1,290,571    819,494    674,341
Credit to income for provisions used
   (962,305 )    (472,514 )    (405,080 )






   328,266    346,980    269,261






Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-128
Note 27 – Provisions for Impairment of ~~December 31, 2017, 2016 and 2015 was as follows:~~Financial Assets, continued

As of December 31,

2017

2016

2015

MCh$

MCh$

MCh$

Fair value hedges

(1,032
)
(17,281
)
—

Cash flow hedges

(80,968
)
20,687

—

Net investment in foreign operation

(5,047
)
(23,168
)
—

Total

(87,047
)
(19,762
)
—

b.
The detail by type of loans, analyzed collectively and individually, which were constituted and released by way of provision, is as follows:

F-~~111~~

~~Table of Contents~~
   As of December 31, 2018
   Note Provisions established Provisions released    Totals
   MCh$ MCh$    MCh$
Commercial
                                (634,886 )                   474,192    (160,694 )
Mortgage
      (78,185 )       78,873    688
Consumer
      (562,620 )       380,294    (182,326 )






Subtotals
   10    (1,275,691 )       933,359    (342,332 )






Interbank loans, net
   9    (344 )       131    (213 )






Totals
      (1,276,035 )       933,490    (342,545 )






   As of December 31, 2017
   Note Provisions established Provisions released
   Individual Group Totals Individual    Group    Totals
   MCh$ MCh$ MCh$ MCh$    MCh$    MCh$
Commercial loans
   (338,701 ) (104,171 ) (442,872 ) 302,504    33,538    336,042
Mortgage loans
   —   (63,699 ) (63,699 ) —      31,310    31,310
Consumer loans
   —   (312,697 ) (312,697 ) —      104,953    104,953






Subtotals
   10 (338,701 ) (480,567 ) (819,268 ) 302,504    169,801    472,305






Interbank loans, net
   9 (226 ) —   (226 ) 209    —      209






Totals
   (338,927 ) (480,567 ) (819,494 ) 302,713    169,801    472,514






   As of December 31, 2016
   Note Provisions established Provisions released
   Individual Group Totals Individual    Group    Totals
   MCh$ MCh$ MCh$ MCh$    MCh$    MCh$
Commercial loans
   (387,737 ) (49,218 ) (436,955 ) 251,582    22,242    273,824
Mortgage loans
   —   (38,837 ) (38,837 ) —      34,589    34,589
Consumer loans
   —   (198,242 ) (198,242 ) —      96,381    96,381






Subtotals
   10 (387,737 ) (286,297 ) (674,034 ) 251,582    153,212    404,794






Interbank loans, net
   9 (307 ) —   (307 ) 286    —      286






Totals
   (388,044 ) (286,297 ) (674,341 ) 251,868    153,212    405,080






Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-129
~~NOTE 27 PROVISION FOR LOAN LOSSES~~
a)   ~~The changes in provision for loan losses recorded on the Statement of Income for the years ended December 31, 2017, 2016~~Note 28 – Personnel Salaries and ~~2015 was as follows:~~

Loans and

Loans and receivables from customers

receivables
from banks

Commercial
loans

Mortgage
loans

Consumer
loans

Total

2017

MCh$

MCh$

MCh$

MCh$

MCh$

Recognized provision

Individually evaluated

(226
)
(338,701
)
—

—

(338,927
)
Collectively evaluated

—

(104,171
)
(63,699
)
(312,697
)
(480,567
)
Charge to income for provisions recognized

(226
)
(442,872
)
(63,699
)
(312,697
)
(819,494
)(*)
Released provisions

Individually evaluated

209

302,504

—

—

302,713

Collectively evaluated

—

33,538

31,310

104,953

169,801

Charge to income for provisions used

209

336,042

31,310

104,953

472,514
(*)
Recovery of assets previously written-off

—

13,236

1,908

16,419

31,563

Net charge to income

(17
)
(93,594
)
(30,481
)
(191,325
)
(315,417
)

Loans and

Loans and receivables from customers

receivables
from banks

Commercial
loans

Mortgage
loans

Consumer
loans

Total

2016

MCh$

MCh$

MCh$

MCh$

MCh$

Recognized provision

Individually evaluated

(307
)
(387,737
)
—

—

(388,044
)
Collectively evaluated

—

(49,218
)
(38,837
)
(198,242
)
(286,297
)
Charge to income for provisions recognized

(307
)
(436,955
)
(38,837
)
(198,242
)
(674,341
)(*)
Released provisions

Individually evaluated

286

251,582

—

—

251,868

Collectively evaluated

—

22,242

34,589

96,381

153,212

Charge to income for provisions used

286

273,824

34,589

96,381

405,080
(*)
Recovery of assets previously written-off

—

8,898

1,285

13,088

23,271

Net charge to income

(21
)
(154,233
)
(2,963
)
(88,773
)
(245,990
)

Loans and

Loans and receivables from customers

receivables
from banks

Commercial
loans

Mortgage
loans

Consumer
loans

Total

2015

MCh$

MCh$

MCh$

MCh$

MCh$

Recognized provision

Individually evaluated

(255
)
(80,424
)
—

—

(80,679
)
Collectively evaluated

—

(20,953
)
(12,827
)
(85,149
)
(118,929
)
Charge to income for provisions recognized

(255
)
(101,377
)
(12,827
)
(85,149
)
(199,608
)(*)
Released provisions

Individually evaluated

238

71,558

—

—

71,796

Collectively evaluated

—

13,388

8,403

54,787

76,578

Charge to income for provisions used

238

84,946

8,403

54,787

148,374
(*)
Recovery of assets previously written-off

—

1,871

616

5,818

8,305

Net charge to income

(17
)
(14,560
)
(3,808
)
(24,544
)
(42,929
)
~~(*)The amounts disclosed in the Consolidated Statements of Cash Flows are detailed below:~~
F-~~112~~

~~Table of Contents~~

2017

2016

2015

MCh$

MCh$

MCh$

Charge to income for provisions recognized

819,494

674,341

199,608

Credit to income for provisions used

(472,514
)
(405,080
)
(148,374
)

346,980

269,261

51,234

b)   ~~The break down by type of loan, whether assessed collectively or individually, for established and released provision amounts, respectively, was as follows:~~

As of December 31, 2017

Established Provision

Released Provision

Individual
analysis

Group
Analysis

Total

Individual
analysis

Group
Analysis

Total

Note

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

Commercial Loans

(338,701
)
(104,171
)
(442,872
)
302,504

33,538

336,042

Mortgage Loans

—

(63,699
)
(63,699
)
—

31,310

31,310

Consumer Loans

—

(312,697
)
(312,697
)
—

104,953

104,953

Subtotal

10

(338,701
)
(480,567
)
(819,268
)
302,504

169,801

472,305

Banks

9

(226
)
—

(226
)
209

—

209

Total

(338,927
)
(480,567
)
(819,494
)
302,713

169,801

472,514

As of December 31, 2016

Established Provision

Released Provision

Individual
analysis

Group
Analysis

Total

Individual
analysis

Group
Analysis

Total

Note

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

Commercial Loans

(387,737
)
(49,218
)
(436,955
)
251,582

22,242

273,824

Mortgage Loans

—

(38,837
)
(38,837
)
—

34,589

34,589

Consumer Loans

—

(198,242
)
(198,242
)
—

96,381

96,381

Subtotal

10

(387,737
)
(286,297
)
(674,034
)
251,582

153,212

404,794

Banks

9

(307
)
—

(307
)
286

—

286

Total

(388,044
)
(286,297
)
(674,341
)
251,868

153,212

405,080

As of December 31, 2015

Established Provision

Released Provision

Individual
analysis

Group
Analysis

Total

Individual
analysis

Group
Analysis

Total

Note

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

Commercial Loans

(80,424
)
(20,953
)
(101,377
)
71,558

13,388

84,946

Mortgage Loans

—

(12,827
)
(12,827
)
—

8,403

8,403

Consumer Loans

—

(85,149
)
(85,149
)
—

54,787

54,787

Subtotal

10

(80,424
)
(118,929
)
(199,353
)
71,558

76,578

148,136

Banks

9

(255
)
—

(255
)
238

—

238

Total

(80,679
)
(118,929
)
(199,608
)
71,796

76,578

148,374

In management’s opinion, the credit risk provisions established cover all losses that may arise from estimated incurred loan losses, based on the information examined by the Bank and its subsidiaries.
F-~~113~~

~~Table of Contents~~
~~NOTE 28 PERSONNEL SALARIES EXPENSES~~Expenses
Personnel ~~salary~~salaries expenses for the years ended December 31, 2018, 2017 and 2016 ~~and 2015 were~~are as follows:

2017

2016

2015

MCh$

MCh$

MCh$

Personnel remunerations

(174,029
)
(148,073
)
(54,129
)
Bonus and gratifications/awards

(68,946
)
(53,669
)
(22,660
)
Severances indemnities

(18,803
)
(32,704
)
(3,458
)
Training expenses

(734
)
(1,050
)
(543
)
Life and health insurance

(3,487
)
(1,576
)
(391
)
Other personnel expenses

(15,324
)
(8,593
)
(5,530
)
Total

(281,323
)
(245,665
)
(86,711
)
   For the years ended December 31,
   2018    2017    2016
   MCh$    MCh$    MCh$
Personnel compensation
   (176,083 )    (174,029 )    (148,073 )
Bonuses or gratifications
   (84,754 )    (68,946 )    (53,669 )
Compensation for years of service
   (12,477 )    (18,803 )    (32,704 )
Health and life insurance
   (804 )    (734 )    (1,050 )
Training expenses
   (2,590 )    (3,487 )    (1,576 )
Other personnel expenses
   (18,039 )    (15,324 )    (8,593 )






Totals
   (294,747 )    (281,323 )    (245,665 )






Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-130
F-~~114~~
Note 29 – Administrative Expenses

~~Table~~For the years ended as of ~~Contents~~December 31, 2018, 2017 and 2016, the composition of this item is as follows:

   For the years ended December 31,
   2018    2017    2016
   MCh$    MCh$    MCh$
Administrative expenses
   (214,666 )    (217,130 )    (164,294 )
Maintenance and repair of fixed assets
   (31,673 )    (34,754 )    (23,226 )
Office lease
   (36,201 )    (36,482 )    (26,308 )
Equipment lease
   (2,925 )    (2,890 )    (2,649 )
Insurance payments
   (20,704 )    (22,624 )    (14,953 )
Office supplies
   (1,885 )    (2,228 )    (2,004 )
IT and communications expenses
   (43,667 )    (41,872 )    (25,860 )
Utilities and other services
   (4,443 )    (5,022 )    (4,240 )
Security and transportation of securities services
   (5,250 )    (4,691 )    (3,469 )
Representation and personnel travel expenses
   (3,612 )    (3,347 )    (2,427 )
Legal and notarial expenses
   (15,112 )    (9,546 )    (7,232 )
Technical report fees
   (11,626 )    (11,274 )    (7,096 )
Professional services fees
   (1,825 )    (2,358 )    (2,535 )
Fees for classification of titles
   (134 )    (1,613 )    (888 )
Fines
   (6,059 )    (75 )    (728 )
ATM maintenance and management services
   (2,630 )    (5,837 )    (5,855 )
Temporary external services
   (545 )    (812 )    (201 )
Postage and mailing expenses
   (1,341 )    (1,397 )    (2,864 )
Internal events
   (248 )    (666 )    (237 )
Commercial programs
   (1,242 )    (1,253 )    (732 )
Credit card management services
   (3,102 )    (4,363 )    (2,609 )
Other administrative expenses
   (20,442 )    (24,026 )    (28,181 )
Subcontracted services
   (22,303 )    (24,724 )    (23,609 )
Data processing
   (13,044 )    (14,733 )    (14,369 )
Products sales
   (275 )    (832 )    (435 )
Others
   (8,984 )    (9,159 )    (8,805 )
Board of Directors compensation
   (1,529 )    (1,394 )    (1,056 )
Marketing and advertising
   (14,384 )    (16,268 )    (8,322 )
Real estate taxes, contributions and levies
   (38,854 )    (46,106 )    (37,923 )
Real estate taxes
   (393 )    (671 )    (443 )
Patents
   (1,121 )    (1,430 )    (1,665 )
Other taxes (*)
   (29,324 )    (36,031 )    (29,591 )
Contributions to SBIF
   (8,016 )    (7,974 )    (6,224 )






Totals
   (291,736 )    (305,622 )    (235,204 )






(*)
These amounts primarily correspond to taxes other than income taxes that affect Itaú Corpbanca Colombia and its subsidiaries (Colombian segment). These are taxes on local financial transactions, ongoing performance of commercial activities or services,non-discountable value added tax and equity tax, among others.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-131
~~NOTE 29 ADMINISTRATION EXPENSES~~Note 30 – Depreciation, Amortization, and Impairment

a.
Depreciation and amortization
~~Administration expenses~~The amounts corresponding to charges to results for depreciation and amortization for the years ended December 31, 2018, 2017 and 2016, ~~and 2015 were as follows:~~are detailed below:

2017

2016

2015

MCh$

MCh$

MCh$

Maintenance and repair of fixed assets

(34,754
)
(23,226
)
(5,209
)
Office rental

(36,482
)
(26,308
)
(6,987
)
Equipment rentals

(2,890
)
(2,649
)
(461
)
Inssurance premiums

(22,624
)
(14,953
)
(1,373
)
Office supplies

(2,228
)
(2,004
)
(663
)
IT and communications expense

(41,872
)
(25,860
)
(14,354
)
Lighting, heating and other services

(5,022
)
(4,240
)
(935
)
Security Service and transportation of securities

(4,691
)
(3,469
)
(916
)
Public relations expense and staff travel expenses

(3,347
)
(2,427
)
(973
)
Legal and Notary Costs

(9,546
)
(7,232
)
(1,899
)
Technical report fees

(11,274
)
(7,096
)
(1,167
)
Professional services fees

(2,358
)
(2,535
)
(434
)
Securities classification fees

(1,613
)
(888
)
(561
)
Fines

(75
)
(728
)
(8
)
Comprehensive management ATMs

(5,837
)
(5,855
)
—

Management of outsourced temp services

(812
)
(201
)
—

Postage and mailing expenses

(523
)
(2,864
)
—

Internal events

(666
)
(237
)
—

Miscellaneous contributions

(62
)
(732
)
—

Credit card management

(1,253
)
(2,609
)
—

Other administration expenses

(29,201
)
(28,181
)
(17,883
)
Subtotal

(217,130
)
(164,294
)
(53,823
)
Subcontracted services

Data processing

(14,733
)
(14,369
)
(3,153
)
Sales

(832
)
(435
)
—

Others

(9,159
)
(8,805
)
(2,179
)
Subtotal

(24,724
)
(23,609
)
(5,332
)
Board of Directors Expenses

Remunerations

(1,394
)
(1,056
)
(72
)
Subtotal

(1,394
)
(1,056
)
(72
)

Marketing and advertising

(16,268
)
(8,322
)
(2,586
)

Real estate taxes, contributions and levies

Real estate taxes

(671
)
(443
)
(228
)
Patents

(1,430
)
(1,665
)
(805
)
Other taxes (*)

(36,031
)
(29,591
)
(1,720
)
Contributions to SBIF

(7,974
)
(6,224
)
(2,265
)
Subtotal

(46,106
)
(37,923
)
(5,018
)
Total

(305,622
)
(235,204
)
(66,831
)
      For the years ended December 31,
      2018    2017    2016
   Notes    MCh$    MCh$    MCh$
Depreciation of property, plant and equipment
   13    (20,659 )    (19,370 )    (13,834 )
Amortization of intangible assets
   12    (66,158 )    (62,475 )    (49,858 )






Totals
      (86,817 )    (81,845 )    (63,692 )






b.
Impairment:
(*) This amount corresponds primarily to taxes other than income taxes that affect Banco Itaú Corpbanca Colombia and its subsidiaries (Colombian segment). They are taxes on local financial transactions, ongoing performance of commercial activities or services, non-discountable value added tax and equity tax, among others.
F-~~115~~

~~Table of Contents~~
~~NOTE 30 DEPRECIATION, AMORTIZATION AND IMPAIRMENT~~
a)        ~~Depreciation and amortization expenses as of December 31, 2017, 2016 and 2015 were as follows:~~

2017

2016

2015

Notes

MCh$

MCh$

MCh$

Depreciation and amortization

Depreciation of property,plant and equipment

13

(19,370
)
(13,834
)
(4,404
)
Amortization of intangible assets

12

(62,475
)
(49,858
)
(5,381
)
Balances

(81,845
)
(63,692
)
(9,785
)
b)        ~~Impairment losses for~~For the years ended December 31, 2018 and 2017, ~~2016 and 2015 are detailed below:~~the composition of this item is as follows:

2017

2016

2015

MCh$

MCh$

MCh$

Impairment of financial investments available-for-sale

—

—

—

Impairment of financial investments held-to-maturity

—

—

—

Subtotal financial assets (i)

—

—

—

Impairment of property, plant and equipment (*)

(27
)
(351
)
—

Impairment of goodwill and intangibles

—

—

—

Subtotal Non-financial assets (ii)

(27
)
(351
)
—

Total

(27
)
(351
)
—

   For the years ended December 31,
   2018    2017    2016
   MCh$    MCh$    MCh$
Impairment of financial investmentsavailable-for-sale
      —      —
Impairment of financial investmentsheld-to-maturity
      —      —
Subtotal financial assets
   —      —      —
Impairment of property, plant and equipment (1)
   (28 )    (27 )    (351 )
Impairment of goodwill and intangibles
   —      —      —
SubtotalNon-financial assets
   (28 )    (27 )    (351 )






Totals
   (28 )    (27 )    (351 )






(1)
Corresponds to impairment for due to technological obsolescence caused by the current regulations (Decree N°222 of October 30, 2013 of the Ministry of the Interior and Public Security) applied to ATMs, which is in accordance with stipulated by IAS 36 Impairment of assets.
(*) Impairment for technological obsolescence as a result of regulations on ATMs (Decree 222 dated October 30, 2013 from the Ministry of Internal Affairs and Public Safety of Chile), are accounted for in accordance with IAS 36 “Impairment of Assets”. See Note 13 “Property, Plant and Equipment”, letter c).
At each reporting date, Banco Itaú Corpbanca evaluate whether there is any indication of impairment of any asset. Should any such indication exist, or when impairment testing is required, the entity will estimate the asset’s recoverable amount.
The Bank has defined two CGUs: CGU Chile~~(24)~~ (Itaú Corpbanca and its Chileans subsidiaries and subsidiary allocated in New York) and CGU Colombia~~(25)~~ (Itaú Corpbanca Colombia and its subsidiaries and Itaú Corredores de Seguros S.A.). These CGUs were defined based on their main geographic areas. Their cash flow generation and performance are analyzed separately by ~~senior~~Top management because their contributions to the consolidated entity ~~can~~may be identified independently. ~~These~~It is worth mentioning that these CGUs are consistent with the Bank’s operating segments (see Note 4).
~~The CGUs’ Carrying~~Book Value ~~was~~of these CGUs is as follows:

As of December 31,

2017

2016

2015

UGE

MCh$

MCh$

MCh$

CGU
   As of December 31,
2018    2017
MCh$    MCh$
Chile

2,563,799

2,477,726

—

   2,600,114    2,563,799
Colombia

864,958

945,986

—

   843,943    864,958




~~(24)~~ ~~CGU Chile is comprised of Banco~~ Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-132
Note 30 – Depreciation, Amortization, and ~~its Chilean subsidiaries plus the New York branch.~~Impairment, continued

1.
Allocation of goodwill
~~(25)~~ ~~CGU Colombia is comprised of Banco Itaú Corpbanca Colombia and its Colombian subsidiaries plus Helm Corredor de Seguros S.A.~~
F-~~116~~

~~Table of Contents~~
1.~~Goodwill impairment testing~~
The Goodwill generated in the reverse acquisition mentioned in Note 1, section “General ~~Information —~~information background of Itaú Corpbanca and ~~Subsidiaries”,~~subsidiaries” was allocated ~~as follows(26)~~in the following manner to the two identified CGUs²:

As of December 31,

2017

2016

2015

Goodwill
   As of December 31,
2018    2017

MCh$

MCh$

MCh$

MCh$    MCh$
Chile

904,868

904,868

—

   904,868    904,868
Colombia

221,795

240,440

—

   230,524    221,795
Total

1,126,663

1,145,308

—





2.
2.Methodology used by the Bank
Consistent with the ~~methodology used in the previous~~prior year, the recoverable amounts of ~~the CGUs in~~CGU Chile and CGU Colombia have been determined ~~based on~~using the dividend discount model. This methodology considers the cash flows that would ~~generate the~~be generated by dividends distributed to ~~its~~ shareholders ~~in a perpetual forecast projection,~~with at perpetuity, discounted atto their ~~rate of~~ cost of capital atrate as of the valuation date. ~~In this way,~~Therefore, the economic value of equity ~~value~~ can be estimated using ~~projections of~~ cash ~~flows~~flow projections derived from financial budgets and other assumptions approved by ~~the~~ management.
In testing goodwill for impairment, management considered different sources of information, including:

~~In its process to test the impairment of goodwill, management considered several~~Historical information ~~sources, including the following:~~
·             ~~The~~ existing ~~historical information~~ for both Banks post-merger ~~banks~~ and, if relevant, ~~also~~ pre-merger. ~~The historical~~ Historical information for events assessed asone-time andnon-recurringwas ~~reconciled considering those events judged as one-time and non-recurring.~~excluded.
·             ~~The budgets~~
Assumptions approved by management.
·
Information from external sources such as analyst reports, ~~from analysts, supervisors, Central~~regulators, central Banks and press releases.
·
Observable market information such as rate curves, inflation and growth projections.
·
The competitive strategy defined for both ~~banks.~~Banks.
·The projected ~~financing~~funding structure and its impact on the Bank’s capital requirements and internal policy ~~of the Bank.~~

3.~~Key assumptions used in calculating the recoverable amount~~
3.
Key assumptions used in calculating the recoverable amount.
The key assumptions used in ~~the calculation of the~~calculating recoverable amount, defined as those variables to which the calculation is ~~most~~more sensitive, are presented below:

31/12/2017

31/12/2016

Key assumptions

Chile

Colombia

Chile

Colombia

Growth rates Perpetuity

(%)

5.2

6.5

4.0

5.6

Projected inflation rates

(%)

2.8 - 3.0

3.0 - 3.4

2.4 - 3.0

3.0 - 4.0

Discount rate

(%)

10.5

11.5

12.0

12.4

Loans growth rate

(%)

8.4 - 9.9

6.2 - 13.4

8.4 - 9.9

6.2 - 13.4

Solvency index limit

(%)

10 - 12

9 - 10.8

10 - 12

9 - 10.8

   As of December 31,
   2018    2017
   Chile    Colombia    Chile    Colombia
Perpetuity rate
   ( %) 5.20    6.50    5.20    6.50
Projected inflation rate
   ( %) 3.00    3.00    2.80 – 3.00    3.00 – 3.40
Discount rate
   ( %) 10.59    11.99    10.50    11.50
Loans growth
   ( %) 9.65 – 11.10    8.60- 10.40    8.40 – 9.90    6.20 – 13.40
Solvency index limit
   ( %) 12.50 – 14.70    11.50 – 4.00    10.00 – 12.00    9.00 – 10.80


²
Goodwill generated by the acquisition of a business abroad (Colombia case) is expressed in the functional currency of the aforementioned business (Colombian peso), converted at the closing exchange rate (exchange rate COP to CLP for the purpose of accounting registration. In Chile in accordance with IAS 21 “Effects of Changes in Exchange Rates of the Foreign Currency”. (See Note 13).
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-133
~~(26)~~ The goodwill arising from the acquisition of a business abroad (Colombia case) is expressed in the functional currency of the aforementioned business (Colombian Peso), converting to the closing exchange rate (COP of CLP for accounting registration purposes in Chile) in accordance with IAS 21. See Note ~~12.~~30 – Depreciation, Amortization, and Impairment, continued

i.
Period of Projection and Perpetuity
F-~~117~~

~~Table of Contents~~
a.~~Period of projection and perpetuity~~
~~The~~When performing the goodwill impairment in 2018, cash flow projections ~~were~~are prepared for a period of ~~six~~5 years from ~~2018~~2019 to ~~2023 (seven years from 2016).~~2023. After this period, the present value of ~~the~~ cash flows offor the year 2023 ~~was~~are calculated, projected into perpetuity using GDP growth ~~rates of the gross domestic product aligned with those~~ rates expected for the markets in which the ~~described~~aforementioned CGUs operate.
~~The definition of projecting six~~In 2017, management defined to project 6 years ~~(seven years from 2016) is~~as it was consistent with the time ~~necessary~~needed to deploy the ~~corporate integration~~Corporate Integration plan, ~~the~~whose objective ~~of which is~~was to better capture the opportunities for creating value for the Bank. In this way, the strategy being implemented ~~implies,~~implied, in addition to the changes in the managerial staff and the operating models of ~~operation of~~ both ~~banks,~~Banks, the change ~~toward~~towards a new product mix, customer segmentation and medium ~~to long term objectives.~~
and long-term objectives, consistent with the vision of becoming the third largest Bank in Chile.
This transformation ~~results~~involved certain costs and other economic efforts in ~~implied additional costs with the expectation of capturing~~order to harness synergies ~~beginning~~starting in 2018.

ii.
Considering the above, management decided to project the results over a period of six years (seven years from 2016), to achieve and accurate representation of the Bank before calculating the perpetuity flows.
b.Loans and deposits
Loans were projected considering an increase of around ~~9.26% annually for~~10.43% per year in Chile and ~~10.31% for~~9.42% in Colombia. ~~Expected~~Anticipated changes in the product mix ~~was~~were also modeled for both countries. The deposit portfolio was projected ~~in relation to the reciprocity established as a goal.~~using target reciprocity.

iii.
Both concepts were modeled in line with the expectations of market growth and target market share. For the particular case of the Colombian market, the growth of the recovery portfolio was modeled in a way that considers the recovery of the market share that the Bank had before the merger will occur until 2023.
c.Income
Interest income and commissions were estimated based on the sensitivities of GDP growth and the effects of inflation with respect to the Banking industry (both in Chile and Colombia), which resulted in the projected growth rate based on the mix of products (consumer, housing and commercial placements) and in ~~a consistent way with loans, modeling~~ the ~~interest rates and commissions projected for each portfolio and type of product. In addition, other important macroeconomic issues were considered, such as inflation and basic interest rate.~~market share objective proposed by the administration.

iv.
d.Costs of funding
The cost projections are mainly determined based on demand deposits and term deposits ~~and~~ balances, considering an annual average ratio of ~~5.0%~~3.2% for Chile and ~~3.5%~~4.3% for Colombia.

v.
Discount rate
e.~~Discount rate~~
~~The~~Estimated as the discount rate of the ~~cost~~Cost of ~~capital (“Ke”)~~Capital (Ke) in local currency, which was used to discount the cash flows of each CGU. This calculation considers a premium for the risk of the country for each CGU.

vi.
f.Perpetuity rate
The perpetuity growth rates are aligned with the growth of the economy in both jurisdictions. Consequently, these were built considering local inflation and GDP growth ~~projections.~~projections

vii.
Dividend payment
g.~~Dividend~~The payment
~~Dividend payments were used to maximize~~ of dividends was made by maximizing the cash flows ~~to shareholders with~~of the shareholder taking as a restriction that the solvency ~~ratio (technical capital to~~indicator (ratio of technical equity with risk-weighted assets) ~~did~~does not ~~exceed~~fall below the minimum limits required by the regulatory ~~bodies, plus an additional 20%.~~entities. In this way, a dividend for the CGU of ~~30% was considered~~Chile of 40% for the first ~~six~~5 years and 50% in ~~perpetuity.~~perpetuity was considered; and for the CGU Colombia of 50% and 55% respectively.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-134
Note 30 – Depreciation, Amortization, and Impairment, continued

F-~~118~~

~~Table~~4. Outcome of ~~Contents~~
~~4. Results of assessment~~
impairment testing
As a ~~consequence~~result of the impairment ~~assessment~~testing process described above, management ~~concluded~~concludes that the recoverable amount ~~recoverable from~~of the CGUs ~~exceed~~exceeds their carrying ~~value (“CV”) according to~~amount, as shown in the ~~following:~~following table:

31/12/2017

31/12/2016

31/12/2016

Chile

Colombia

Chile

Colombia

Chile

Colombia

Recoverable Amount / Carrying Value

(%)

118.30

102.00

127.70

109.5

—

—

   As of December 31,
   2018    2017
   Chile    Colombia    Chile    Colombia
Recoverable Amount / Carrying Value
   ( %) 113.00    102.90    118.30    102.00








Consequently, management has not identified an impairment impact that has to be recognized in the financial statements.
5. ~~Sensitivity~~Uncertainty and sensitivity of calculation to changes in ~~the~~ key assumptions ~~used~~
~~Estimates~~The estimates and judgments included in the calculations of recoverable ~~amounts~~amount are based on historical experience and other factors, including ~~the~~management’s expectations of ~~management regarding~~ future events ~~that are~~ considered reasonable ~~under~~based on current circumstances. ~~Due~~However, the assumptions used are subject to ~~the inherent~~a large degree of uncertainty ~~associated with considering these estimates,~~and actual future results could differ from those estimates. Future events and changing market conditions may impact the Bank’s assumptions as to future interest and commissions’ revenue, net interest margin growth rates or discount rates that may result in changes in the estimates of the Bank’s future cash flows.projections. For example:

The ~~following factors, among others, could significantly impact~~Bank considers that the ~~impairment analysis and may result in future goodwill impairment charges that, if incurred, could have a material adverse effect on the Company’s financial condition and results of operations:~~
·              ~~The macroeconomic factors in both, the Chilean and Colombian markets, may not recover and evolve from 2018 onwards in line with current expectations.~~
·              ~~The~~ operational integration of the Banks in Chile ~~is not~~will be completed byin 2019.

·The ~~operational integration, introduction~~model for estimating the recoverable amount of the Itaú brand and client segmentation in the Colombian market may not have the expected impact. Additionally, the Bank may not achieve the change in the product mix as stated in its formal budgets and plans. As a result, the Colombian CGU ~~may not be able to achieve breakeven result during 2018 and~~assumed a ~~business recovery from 2019 onwards.~~
·              ~~The~~ recovery of the ~~Bank´s pre-merger market share~~business from 2019 onward.
This, together with other measures, will result in ~~Colombia expected to occur by 2023, depends on the achievement~~growth of the ~~projection of an annual composed average growth rate for the loans portfolio, during the first years.~~various loan portfolios above industry averages.
~~Management~~The Bank has ~~performed a sensitivity analysis of the discount rates and growth in perpetuity of the CGU Colombia, separately, which would cause recoverable amount (“RA”) of the CGU Colombia to equal its CV:~~

31/12/2017

31/12/2016

31/12/2015

Discount rates

(%)

11.6

13.1

—

Perpetuity growth rate

(%)

6.4

4.3

—

~~In addition, management performed a sensitivity analysis for the~~sensitized discount and growth rates at perpetuity separately for CGU Colombia so that the Recoverable Amount (AR) of ~~60 basis points for the perpetuity of the Colombian~~ CGU ~~separately considering in both cases, as follows:~~Colombia is equal to its Carrying Amount (CA):

F-~~119~~

~~Table of Contents~~

31/12/2017

31/12/2016

31/12/2015

Discount rates

(%)

11.5

12,4

—

Range

(%)

10.9 - 12.1

11.8 - 13.0

—

Range (RA/CV)

(%)

91.8 - 115.0

99.8 - 121.2

—

Perpetuity growth rate

(%)

6.5

5,6

—

Range

(%)

5.9 - 7.1

5.0 - 6.2

—

Range (RA/CV)

(%)

91.5 - 115.4

103.8 - 116.3

—

   As of
December 31,
   2018    2017
Discount rates
   ( %) 12.21    11.60
Perpetuity growth rate
   ( %) 6.29    6.40
Management has considered and analyzed ~~any~~ possible reasonable changes ~~for~~in key assumptions and has not identified other situations in which the ~~CV would exceed~~Carrying Amount exceeds the ~~RA.~~Recoverable Amount.
Additionally, the ranges of the discount and growth rates in perpetuity of the CGU Colombia have been sensitized, separately, in both cases of 60 basis points
   As of December 31,
   2018    2017
Discount rates
   ( %) 11.99    11.50
Range
   ( %) 11.39 – 12.59    10.90 – 12.10
Range (RA/CV)
   ( %) 93.01 – 118.21    91.80 – 115.00




Perpetuity growth rate
   ( %) 6.50    6.50
Range
   ( %) 5.90 – 7.10    5.90 – 7.10
Range (RA/CV)
   ( %) 94.72 – 116.05    91.50 – 115.40
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-135
Note 30 – Depreciation, Amortization, and Impairment, continued

6. Reconciliation of before and after taxes
The Bank has used the Kecost of own capital (Ke) rate as ~~the~~a discount rate ~~of discount~~ in its calculation of the recoverable amount, ~~which~~a rate that is observable after taxes. The following table shows the effect of considering the ~~cash~~ flows and the discount rate before taxes.

   As of December 31,

31/12/2017

31/12/2016

31/12/2015

   2018    2017

Chile

Colombia

Chile

Colombia

Chile

Colombia

   Chile    Colombia    Chile    Colombia
Discount rates

(%)

12.78

17.93

17.77

20.85

—

—

   ( %) 13.22    18.08    12.78    17.93
Recoverable amount/Carrying value

(%)

150.5

118.06

133.42

116.43

—

—

   ( %) 126.50    111.90    150.50    118.06

Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-136
F-~~120~~

~~Table of Contents~~
~~NOTE~~Note 31 ~~OTHER OPERATING INCOME AND EXPENSES~~
a)– Other operating income and expenses

a)
Other operating income
The detail of other operating income is as follows:

2017

2016

2015

Notes

MCh$

MCh$

MCh$

Revenues for assets received in lieu of payment

Gain on sales of assets received in lieu of payment

5,566

1,176

116

Others

2,578

75

169

Subtotal

8,144

1,251

285

Contingency provisions used

Other contingency provisions

19b)

—

—

5

Subtotal

—

—

5

Other revenues

Gain on sales of property, plant and equipment

14,119

37

—

Subtotal

14,119

37

—

Leasing contibutions revenue

522

514

—

Income tax Leasing assets

—

144

—

Other operatong income - Subsidiaries

3,092

2,572

—

Gain on sales of leased assets

19

349

274

Other operating income - Leasing

173

598

3,499

Insurance reimbursement

21

742

—

Minor Revenue

7,244

7,151

4,095

Provision Reimbursement

2,352

4,997

—

Other income

5,846

1,092

603

Subtotal

19,269

18,159

8,471

Total

41,532

19,447

8,761

   For the years ended December 31,
   2018    2017    2016
   MCh$    MCh$    MCh$
Income from assets received in lieu of payment

Gain on sales of assets received in lieu of payment
   8,562    5,566    1,176
Other income
   30    2,578    75






Subtotals
   8,592    8,144    1,251






Other income

Compensations from insurance companies
   53    —
Gain on sale of property, plant and equipment
   5,519    14,119    37
Recovery of leased assets
   1,349    522    514
Other operating income, subsidiaries
   2,158    3,092    2,572
Gain on sale of leased assets
   1,447    19    349
Other operating income
   199    173    598
Marketing contribution, insurance companies
   3,626    4,128    7,893
Other operating income, leases
   724    446    —
Other income for recovery foreign expenses
   620    420    —
Recoveries from expenses provisions
   1,166    2,352    4,997
Other income
   1,203    8,117    1,236






Subtotals
   18,064    33,388    18,196






Totals
   26,656    41,532    19,447






Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-137
b)
Note 31 – Other operating income and expenses, continued

b)
Other operating expenses
During the years ended December 31, 2018, 2017 and 2016, the Bank presents other operating expenses ~~are~~according to the following:

2017

2016

2015

Notes

MCh$

MCh$

MCh$

Provisions and expenses for assets received in lieu of payment

Provisions for assets received in lieu of payment

(14,472
)
(9,463
)
(409
)
Expenses for maintenance of goods received in payment

(714
)
(596
)
(72
)
Subtotal

(15,186
)
(10,059
)
(481
)
Provisions for contingencies

Other provisions for contingencies

19b)

(586
)
(8,952
)
(81
)
Subtotal

(586
)
(8,952
)
(81
)
Other expenses.

Loss on sale of fixed assets

(1,099
)
(71
)
(615
)
Subtotal

(1,099
)
(71
)
(615
)
Business Report Expense

—

(176
)
—

Spend benefits points cards

(13,238
)
(26,303
)
(7,330
)
Expenses for operating losses

(8,098
)
(2,661
)
(1,970
)
Insurance expense law 20,027

(1,205
)
(1,420
)
(1,418
)
Provisions for assets received in lieu of payment from leasing

(4,835
)
(11,327
)
—

Bank expenditure

(3,482
)
(2,184
)
—

Pronexo Spending

—

(439
)
—

Fines and penalties

(2,025
)
(880
)
—

Lost property

(2,026
)
(962
)
—

Other expenses

(10,550
)
(6,281
)
(3,238
)
Subtotal

(45,459
)
(52,633
)
(13,956
)
Total

(62,330
)
(71,715
)
(15,133
)
   For the years ended December 31,
   2018    2017    2016
   MCh$    MCh$    MCh$
Provisions for assets received in lieu of payment
   (16,132 )    (14,472 )    (9,463 )
Maintenance expenses for assets received in lieu of payment
   (1,301 )    (714 )    (596 )






Subtotal
   (17,433 )    (15,186 )    (10,059 )






Provisions for contingencies

Other provisions for contingencies
   (1,998 )    (586 )    (8,952 )






Subtotals
   (1,998 )    (586 )    (8,952 )






Other expenses.

Loss on sale of property, plant and equipment
   (307 )    (1,099 )    (71 )
Credit card loyalty point benefits expenses
   (14,306 )    (13,238 )    (26,303 )
Operating loss expenses
   (10,589 )    (8,098 )    (2,661 )
Insurance expense (law 20,027)
   (622 )    (1,205 )    (1,420 )
Provision expense for recovered leased assets
   (4,170 )    (4,835 )    (11,327 )
Banking expenses
   (2,450 )    (3,482 )    (2,184 )
Fines and penalties
   (13,110 )    (2,025 )    (880 )
Loss on damaged assets
   (2,311 )    (2,026 )    (962 )
Other expenses
   (903 )    (10,550 )    (6,896 )






Subtotals
   (48,768 )    (46,558 )    (52,704 )






Totals
   (68,199 )    (62,330 )    (71,715 )






Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-138
F-~~121~~
Note 32 – Related Party Transactions

~~Table~~In accordance with the provisions set forth in the Chilean General Banking Law and the instructions issued by the Chilean Superintendency of ~~Contents~~Banks and Financial Institutions, related parties are those individuals or corporations related to the ownership or management of the Institution directly or through third parties.
~~NOTE 32 RELATED PARTY TRANSACTIONS~~
~~As defined in IAS 24,~~Article 89 of the Ley de Sociedades Anónimas (Chilean Companies Law), which also applies to Banks, establishes that any transaction with a related party ~~is: (a) a person~~must be carried out on an arm’s length basis.
In the case of sociedades anónimas abiertas (publicly traded companies) and their subsidiaries, transactions with related parties involve any negotiation, act, contract or ~~a close member of that person’s family~~transaction in which the company must intervene; the following are considered as parties related to ~~a reporting entity if that person (i) has control or joint control~~them: those entities of the ~~reporting entity; (ii)~~corporate Bank to which the company belongs; the corporations that, with respect to the company, have the status as parent, controlling entity, affiliate, subsidiary; the Directors, Managers, Administrators, Chief Executive Officer or Liquidators of the company, acting in their own names or on behalf of individuals other than the company, and their respective spouses or their relatives up to the second degree of consanguinity, as well as any entity controlled either directly or indirectly, through any of them; and any person who either acting individually or jointly with others with whom it has ~~significant influence over the reporting entity; or (iii) is~~executed a joint operation agreement, may appoint at least one member of the ~~key~~ management ~~personnel~~ of the ~~reporting entity~~company or controls 10% or more of its capital stock, with the right to vote, in the case of a ~~parent~~sociedad por acciones (stock corporation); those established by the bylaws of the ~~reporting entity. (b) An entity is related to a reporting entity if (i)~~company, or justifiably identified by the ~~entity~~Directors’ Committee; and ~~the reporting entity are members~~those in which it has acted as Director, Manager, Administrator, Chief Executive Officer or Liquidator of the ~~same group; (ii) one entity is an associate or joint venture~~company, during the last eighteen months. Article 147 of the ~~other entity (or an associate or joint venture of~~Ley de Sociedades Anónimas (Chilean Companies Law) sets forth that a member of a group of which the other entity is a member); (iii) both entities are joint ventures of the same third party; (iv) one entity is a joint venture of a third entity and the other entity is an associate of the third entity; (v) the entity is a post-employment benefit plan for the benefit of employees of either the reporting entity or an entity related to the reporting entity; (vi) the entity is controlled or jointly controlled by a person identified in (a) or; (vii) a person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).
~~Transactions that the Bank entered into~~sociedad anónima abierta (publicly traded company) may only carry out transactions with related parties aswhen they are intended to contribute to the corporate interest, are adjusted in the price, terms and conditions to those prevailing in the market at the time of ~~December 31, 2017, 2016~~their approval and ~~2015 are specified below:~~
a)        ~~Loans granted to related parties~~
~~Loan~~comply with the requirements and the procedure indicated by it. Moreover, Article 84 of the Chilean General Banking Law establishes limits for the loans that may be granted to related parties asand the prohibition to grant loans to the Directors, Managers or General Attorneys of the Bank.
a.
Loans granted to related parties.
As of December 31, 2018 and 2017, ~~and 2016~~the loans granted to related persons are ~~as follows:~~detailed below:

Operating
Companies

Investment
Companies

Individuals

As of December 31, 2017

MCh$

MCh$

MCh$

Loan and receivables to customer

Commercial Loans

113,202

79,715

3,730

Mortgages Loans

—

—

19,273

Consumer Loans

—

—

5,081

Loans and receivables to customers - gross

113,202

79,715

28,084

Provision for loan losses

(1,323
)
(5,688
)
(98
)
Loans and receivables to customers, net

111,879

74,027

27,986

   As of December 31, 2018 As of December 31, 2017
   Productive
companies Investment
companies Individuals Productive
companies Investment
companies Individuals
   MCh$ MCh$ MCh$ MCh$ MCh$ MCh$
Loans and accounts receivable from customers

Commercial loans
   170,873 64,073 3,960 113,202 79,715 3,730
Mortgage loans
   —   —   21,154 —   —   19,273
Consumer loans
   —   —   5,961 —   —   5,081


Gross loans and accounts receivable from customers
   170,873 64,073 31,075 113,202 79,715 28,084


Allowance for loan losses
   (2,550 ) (70 ) (63 ) (1,627 ) (5,252 ) (96 )


Loans and receivables to customers, net
   168,323 64,003 31,012 111,575 74,463 27,988


Operating
Companies

Investment
Companies

Individuals

As of December 31, 2016

MCh$

MCh$

MCh$

Loan and receivables to customer

Commercial Loans

117,362

93,170

3,070

Mortgages Loans

—

—

19,568

Consumer Loans

—

—

3,493

Loans and receivables to customers - gross

117,362

93,170

26,131

Provision for loan losses

(2,398
)
(396
)
(197
)
Loans and receivables to customers, net

114,964

92,774

25,934

Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-139
F-~~122~~

~~Table of Contents~~Note 32 – Related Party Transactions, continued

b.
b)Other transactions with related parties.
For the years ended December 31, 2018, 2017 ~~2016~~ and ~~2015,~~2016, the Bank entered into the following transactions with related parties for amounts ~~exceeding UF 1,000.~~are detailed below:

~~As of December 31, 2017:~~

Balance Assets

Effect on statement
of Income

(Liability)

Income

(Expense)

Company

Description

Notes

MCh$

MCh$

MCh$

Redbanc S.A.

Automatic teller machine administration

—

—

3,355

Transbank S.A.

Credit Card processing

—

—

14,586

Combanc S.A.

Data transmission services

—

—

378

Itaú Chile Cía. de Seguros de Vida S.A.

Life insurance

—

7,819

948

Asesorias Cumelen S.A.

Advisory services

—

—

—

Corp Research S.A.

Management advisory services

—

—

453

Recuperadora de Créditos S.A.

Credit collection

—

—

—

Itaú Chile Inv. Serv. y Administración S.A.

Leases

—

—

650

Compañia de Seguros Confuturo S. A. (*)

Insurance

—

—

—

Instituto de Estudios Bancarios Guillermo Subercaseaux

Education services

—

—

143

Opina S.A.

Publishing services

—

—

—

VIP Asesorias y Servicios Integrales Ltda.

Advisory services

—

—

415

Everis Chile S.A.

Advisory services

—

—

607

CAI Gestion Inmobiliaria S.A.

Commercial home (Department stores)

—

—

115

Compañia de Seguros Corp Seguros S.A (*)

Insurance

—

—

—

Universidad Andres Bello

Education services

—

—

—

Promoservice S.A.

Promotion services

—

—

267

Comder Contraparte Central S.A

Banking services

—

—

1,067

Sinacofi S.A (*)

Data transmission services

—

—

—

Operadora de Tarjeta de Crédito Nexus S.A.

Credit Card processing

—

—

3,836

Pulso Editorial S.A

Publishing services

—

—

509

Inmobiliaria Edificio Corpgroup S.A.

Corporate office rent and building cost

—

—

4,725

Grupo de Radios Dial S.A.

Publicity

—

—

—

Hotel Corporation of Chile S.A.

Accomodation, events

—

—

265

Corp Imagen y diseños S.A.

Other services

—

—

196

Asesorias e Inversiones Rapelco Limitada S.A.

Other services

—

—

—

Corp Group Holding Inversiones Limitada

Advisory services

—

—

398

SMU S.A., Rendic Hnos. S.A.

Prepaid rent for space for ATMs

15

7,960

—

2,221

Inversiones Corp Group Interhold Ltda.

Management advisory services

—

—

3,097

Bcycle Latam SPA

Other services

—

—

552

~~(*)These companies at the end of December 2017 are no considered related parties.~~
F-~~123~~

~~Table of Contents~~
~~As of December 31, 2016~~

Balance Assets

Effect on statement
of Income

(Liability)

Income

(Expense)

Company

Description

Notes

MCh$

MCh$

MCh$

Redbanc S.A.

Automatic teller machine administration

—

—

3,754

Transbank S.A.

Credit Card processing

—

—

10,882

Combanc S.A.

Data transmission services

—

—

291

Itaú Chile Cía. de Seguros de Vida S.A.

Life insurance

—

5,653

2,782

Asesorias Cumelen S.A.

Advisory services

—

—

450

Corp Research S.A.

Management advisory services

—

—

443

Recuperadora de Créditos S.A.

Credit collection

—

—

540

Itaú Chile Inv. Serv. y Administración S.A.

Leases

—

—

422

Compañia de Seguros Confuturo S. A.

Insurance

—

—

1,418

Instituto de Estudios Bancarios Guillermo Subercaseaux

Education services

—

—

69

Opina S.A.

Publishing services

—

—

110

VIP Asesorias y Servicios Integrales Ltda.

Advisory services

—

—

185

Itaú Unibanco S.A.

Advisory services

—

—

—

CAI Gestion Inmobiliaria S.A.

Commercial home (Department stores)

—

—

90

Compañia de Seguros Corp Seguros S.A

Insurance

—

—

3,263

Universidad Andres Bello

Education services

—

—

32

Promoservice S.A.

Promotion services

—

—

1,431

Comder Contraparte Central S.A

Banking services

—

—

697

Sinacofi S.A

Data transmission services

—

—

918

Operadora de Tarjeta de Crédito Nexus S.A.

Credit Card processing

—

—

1,896

Pulso Editorial S.A

Publishing services

—

—

521

Inmobiliaria Edificio Corpgroup S.A.

Corporate office rent and building cost

—

—

5,010

Grupo de Radios Dial S.A.

Publicity

—

—

107

Hotel Corporation of Chile S.A.

Accomodation, events

—

—

64

Corp Imagen y diseños S.A.

Other services

—

—

82

Asesorias e Inversiones Rapelco Limitada S.A.

Other services

—

—

37

Corp Group Holding Inversiones Limitada

Advisory services

—

—

394

SMU S.A., Rendic Hnos. S.A.

Prepaid rent for space for ATMs

15

10,181

—

2,152

Inversiones Corp Group Interhold Ltda.

Management advisory services

—

—

2,172

The Bank, during 2016, purchased credit from Itaú Unibanco S.A. - Nassau Branch, for US$152,263,397 and Itaú Unibanco S.A. - New York Branch for US$25,875,000, through its New York Branch. This purchase was made at the par value of the loan portfolio and did not generate any impact on the financial statements.
~~As of December 31, 2015~~
      As of December 31, 2018
      Balances receivable    Effect on income (loss)
      (payable)    Income    Expense
Name or Corporate Name

Description
   MCh$    MCh$    MCh$
Redbanc S.A.
   ATM management    —      —      3,002
Transbank S.A.
   Credit card management    —      —      15,469
Combanc S.A.
   Data transmission services    —      —      350
Itaú Chile Cía. de Seguros de Vida S.A.
   Life insurance    —      93    706
Corp Research S.A.
   Advisory services    —      —      463
Itaú Chile Inv. Serv. y Administración S.A.
   Leases    —      204    141
Instituto de Estudios Bancarios Guillermo Subercaseaux
   Education services    —      —      121
VIP Asesorias y Servicios Integrales Ltda.
   Advisory services    —      —      129
Everis Chile S.A.
   Advisory services    —      —      906
CAI Gestion Inmobiliaria S.A.
   Department stores    —      —      103
Promoservice S.A.
   Promotional services    —      —      —
Comder Contraparte Central S.A
   Banking services    —      —      902
Operadora de Tarjeta de Crédito Nexus S.A.
   Credit card management    —      —      2,909
Pulso Editorial S.A
   Publishing services    —      —      471
Inmobiliaria Edificio Corpgroup S.A.
   Office lease and building fees    —      —      4,693
Hotel Corporation of Chile S.A.
   Hotel, events    —      —      94
Corp Imagen y diseños S.A.
   Marketing    —      —      99
Corp Group Holding Inversiones Limitada
   Advisory services    —      —      408
SMU S.A., Rendic Hnos. S.A.
   Lease of ATM space 6)    5,698    —      2,262
Inversiones Corp Group Interhold Ltda.
   Administrative consulting    —      —      2,476
Bcycle Latam SPA
   Administrative consulting    —      —      4,048
Bolsa de Comercio de Santiago
   Other services    —      —      204
Adexus S.A.
   Data transmission services    —      —      254
      As of December 31, 2017
      Balances receivable    Effect on income (loss)
Name or Corporate Name

Description
   (payable)    Income    Expense
      MCh$    MCh$    MCh$
      MCh$    MCh$    MCh$
Redbanc S.A.
   ATM management    —      —      3,355
Transbank S.A.
   Credit card management    —      —      14,586
Combanc S.A.
   Data transmission services    —      —      378
Itaú Chile Cía. de Seguros de Vida S.A.
   Life insurance    —      7,819    948
Asesorias Cumelen S.A.
   Advisory services    —      —      —
Corp Research S.A.
   Management advisory services    —      —      453
Recuperadora de Créditos S.A.
   Credit collection    —      —      —
Itaú Chile Inv. Serv. y Administración S.A.
   Leases    —      —      650
Compañia de Seguros Confuturo S. A. (*)
   Insurance    —      —      —
Instituto de Estudios Bancarios Guillermo Subercaseaux
   Education services    —      —      143
Opina S.A.
   Publishing services    —      —      —
VIP Asesorias y Servicios Integrales Ltda.
   Advisory services    —      —      415
Everis Chile S.A.
   Advisory services    —      —      607
CAI Gestion Inmobiliaria S.A.
   Commercial home (Department stores)    —      —      115
Compañia de Seguros Corp Seguros S.A (*)
   Insurance    —      —      —
Universidad Andres Bello
   Education services    —      —      —
Promoservice S.A.
   Promotion services    —      —      267
Comder Contraparte Central S.A
   Banking services    —      —      1,067
Sinacofi S.A (*)
   Data transmission services    —      —      —
Operadora de Tarjeta de Crédito Nexus S.A.
   Credit Card processing    —      —      3,836
Pulso Editorial S.A
   Publishing services    —      —      509
Inmobiliaria Edificio Corpgroup S.A.
   Corporate office rent and building cost    —      —      4,725
Grupo de Radios Dial S.A.
   Publicity    —      —      —
Hotel Corporation of Chile S.A.
   Accommodation, events    —      —      265
Corp Imagen y diseños S.A.
   Other services    —      —      196
Asesorias e Inversiones Rapelco Limitada S.A.
   Other services    —      —      —
Corp Group Holding Inversiones Limitada
   Advisory services    —      —      398
SMU S.A., Rendic Hnos. S.A.
   Prepaid rent for space for ATMs    7,960    —      2,221
Inversiones Corp Group Interhold Ltda.
   Management advisory services    —      —      3,097
Bcycle Latam SPA
   Other services    —      —      552

~~Balance Assets~~
~~Effect on statement~~
~~of Income~~
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
~~(Liability)~~
~~Income~~
~~(Expense)~~
~~Company~~
~~Description~~
~~Notes~~
~~MCh$~~
~~MCh$~~
~~MCh$~~
~~Redbanc S.A.~~

~~Automatic teller machine administration~~
—
—
~~888~~
~~Transbank S.A.~~
~~Credit Card processing~~
—
—
~~5,572~~
~~Combanc S.A.~~
~~Data transmission services~~
—
—
~~164~~
~~Itaú Chile Cía. de Seguros~~
~~Insurance~~
—
—
~~2,168~~
~~Itaú Chile Cía. de Seguros~~
~~Credit collection~~
—
—
53
~~Itaú Chile Cía. de Seguros~~
~~Leases~~
—
—
15
~~Recuperadora de Créditos S.A.~~
~~Credit collection~~
—
—
~~1,030~~
~~Itaú Chile Inv. Serv. y Administración S.A.~~
~~Leases~~
—
—
~~587~~
~~Itaú Unibanco S.A.~~
~~Advisory services~~
—
—
~~6,610~~
F-140
Note 32 – Related Party Transactions, continued

   As of December 31, 2016
Name or Corporate Name

Description
   Balances receivable
(payable)    Effect on income (loss)
   Income    Expense
   MCh$    MCh$    MCh$
Redbanc S.A.
ATM management    —      —      3,754
Transbank S.A.
Credit card management    —      —      10,882
Combanc S.A.
Data transmission services    —      —      291
Itaú Chile Cía. de Seguros de Vida S.A.
Life insurance    —      5,653    2,782
Asesorias Cumelen S.A.
Advisory services    —      —      450
Corp Research S.A.
Management advisory services    —      —      443
Recuperadora de Créditos S.A.
Credit collection    —      —      540
Itaú Chile Inv. Serv. y Administración S.A.
Leases    —      —      422
Compañia de Seguros Confuturo S. A.
Insurance    —      —      1,418
Instituto de Estudios Bancarios Guillermo Subercaseaux
Education services    —      —      69
Opina S.A.
Publishing services    —      —      110
VIP Asesorias y Servicios Integrales Ltda.
Advisory services    —      —      185
Itaú Unibanco S.A.
Advisory services    —      —      —
CAI Gestion Inmobiliaria S.A.
Commercial home (Department stores)    —      —      90
Compañia de Seguros Corp Seguros S.A
Insurance    —      —      3,263
Universidad Andres Bello
Education services    —      —      32
Promoservice S.A.
Promotion services    —      —      1,431
Comder Contraparte Central S.A
Banking services    —      —      697
Sinacofi S.A
Data transmission services    —      —      918
Operadora de Tarjeta de Crédito Nexus S.A.
Credit Card processing    —      —      1,896
Pulso Editorial S.A
Publishing services    —      —      521
Inmobiliaria Edificio Corpgroup S.A.
Corporate office rent and building cost    —      —      5,010
Grupo de Radios Dial S.A.
Publicity    —      —      107
Hotel Corporation of Chile S.A.
Accommodation, events    —      —      64
Corp Imagen y diseños S.A.
Other services    —      —      82
Asesorias e Inversiones Rapelco Limitada S.A.
Other services    —      —      37
Corp Group Holding Inversiones Limitada
Advisory services    —      —      394
SMU S.A., Rendic Hnos. S.A.
Prepaid rent for space for ATMs    10,181    —      2,152
Inversiones Corp Group Interhold Ltda.
Management advisory services    —      —      2,172
These transactions were carried out at normal market prices prevailing onat the ~~days~~day of the transactions.

c.
Donations.
~~In accordance with IAS 24, the relationship of all listed companies in the above table falls under the category “other related parties.”~~
Name or corporate name

Description
   For the years ended December 31,
   2018    2017    2016
   MCh$    MCh$    MCh$
Fundación Corpgroup Centro Cultural
Donations    1,225    1,302    1,373
Fundación Descúbreme
Donations    194    200    173
Fundación Itaú
Donations    157    167    152
Fundación de Inclusión Social Aprendamos
Donations    —    5    5

d.
Other assets and liabilities with related parties.
   As of December 31,
   2018    2017
   MCh$    MCh$
ASSETS
   26,854    23,962
Derivative financial instruments
   25,708    21,687
Other assets
   1,146    2,275
LIABILITIES
   188,057    185,056
Derivative financial instruments
   860    1,935
Current accounts and demand deposits
   30,466    37,464
Time deposits and saving accounts
   145,995    131,409
Other liabilities
   10,736    14,248
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-141
Note 32 – Related Party Transactions, continued

e.
Results of transactions with related parties
F-~~124~~

   For the years ended December 31,
   2018    2017    2016
Type of recognized income or expense
   Income    Expenses    Income    Expenses    Income    Expenses
   MCh$    MCh$    MCh$    MCh$    MCh$    MCh$
Income and interest expenses and readjustments
   3,748    2,970    10,146    4,902    11,370    5,913
Income and expenses for commissions and services
   829    —      5,227    —      5,483    —
Profit and loss from trading
   1,146    501    2,333    1,534    3,399    7,810
Operational support expenses
   1,075    —      537    99    324    438
Other income and expenses
   84    222    216    390    70    303












Totals
   6,882    3,693    18,459    6,925    20,646    14,464












~~Table~~
f.
Payments to Board of Directors and key management personnel.
Compensation received by key personnel of ~~Contents~~Management correspond to the following categories:

c)         ~~Donations~~
   As of December 31,
   2018    2017    2016
   MCh$    MCh$    MCh$
Short-term employee benefits
   31,892    27,759    35,762
Post-employment benefits
   —      —      —
Other long-term benefits
   —      —      —
Compensation for termination of contract
   1,337    3,471    14,893






Totals
   33,229    31,230    50,655






As of December 31, ~~2017:~~
~~Balance Assets~~
~~Effect on Statement of~~
~~Income~~
~~(Liability)~~
~~Income~~
~~(Expense)~~
~~Company~~
~~Description~~
~~MCh$~~
~~MCh$~~
~~MCh$~~
~~Fundación Corpgroup Centro Cultural~~
~~Donations~~
—
—
~~1,302~~
~~Fundación Descúbreme~~
~~Donations~~
—
—
~~200~~
~~Fundación Itaú~~
~~Donations~~
—
—
~~167~~
~~Fundación de Inclusión Social Aprendamos~~
~~Donations~~
—
—
5
~~As of December 31, 2016:~~
~~Balance Assets~~
~~Effect on Statement of~~
~~Income~~
~~(Liability)~~
~~Income~~
~~(Expense)~~
~~Company~~
~~Description~~
~~MCh$~~
~~MCh$~~
~~MCh$~~
~~Fundación Corpgroup Centro Cultural~~
~~Donations~~
—
—
~~1,373~~
~~Fundación Descúbreme~~
~~Donations~~
—
—
~~173~~
~~Fundación Itaú~~
~~Donations~~
—
—
~~152~~
~~Fundación de Inclusión Social Aprendamos~~
~~Donations~~
—
—
5
~~As of December 31, 2015:~~
~~Balance Assets~~
~~Effect on Statement of~~
~~Income~~
~~(Liability)~~
~~Income~~
~~(Expense)~~
~~Company~~
~~Description~~
~~MCh$~~
~~MCh$~~
~~MCh$~~
~~Fundación Itaú~~
~~Donations~~
—
—
~~336~~
d)        ~~Other assets and liabilities with related parties~~

As of December 31,

2017

2016

2015

MCh$

MCh$

MCh$

ASSETS

23,962

44,790

2,251

Derivative financial instruments

21,687

33,951

1,807

Other assets

2,275

10,839

444

LIABILITIES

185,056

249,741

33,866

Derivative financial instruments

1,935

14,227

6,270

Demand deposits

37,464

69,473

3,757

Deposits and other time deposits

131,409

155,251

23,645

Other liabilities

14,248

10,790

194

F-~~125~~

~~Table of Contents~~
e)         ~~Operating income / expenses from related party transactions~~

2017

2016

2015

Income

Expenses

Income

Expenses

Income

Expenses

Type of recognized income or expense

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

Interest revenue

10,146

4,902

11,370

5,913

167

1,817

Income and expenses on fees and services

5,227

—

5,483

—

1,632

—

Gain and loss on trading

2,333

1,534

3,399

7,810

1,887

6,303

Operating support expense

537

99

324

438

—

40

Other income and expense

216

390

70

303

225

382

Total

18,459

6,925

20,646

14,464

3,911

8,542

f)          ~~Contracts with related parties~~
~~As of December 31, 2017:~~
~~Company~~
~~Description~~
~~Redbanc S.A.~~
~~Automatic teller machine administration~~
~~CAI Gestión Inmobiliaria S.A.~~
~~Commercial home (Department stores)~~
~~Unired S.A.~~
~~Payment management~~
~~Corp Imagen y Diseño S.A~~
~~Other services~~
~~Corp Research S.A~~
~~Advisory~~
~~Copesa S.A.~~
~~Advertising~~
~~Transbank S.A.~~
~~Credit card processing~~
~~Inversiones Santa Valentina S.A.~~
~~Administrative consulting~~
~~Combanc S.A.~~
~~Data transmission services~~
~~Servicios de Información Avanzada Comercial Financiera S.A~~
~~Advisory~~
~~Comder Contraparte Central S.A.~~
~~Advisory~~
~~Promoservice S.A.~~
~~Promotion services~~
~~Inversiones Corp Group Interhold S.A.~~
~~Administrative consulting~~
~~Nexus S.A.~~
~~Credit card processing~~
~~Rendic Hnos S.A.~~
~~Publishing services~~
~~Corp Group Holding Inversiones Limitada~~
~~Advisory~~
~~Inmobiliaria Edificio Corpgroup S.A.~~
~~Corporate office rent and building cost~~
~~Empresa Periodística La Tercera S.A.~~
~~Publishing services~~
~~As of December 31, 2016:~~
~~Company~~
~~Description~~
~~Redbanc S.A.~~
~~Automatic teller machine administration~~
~~Pulso Editorial S.A~~
~~Publishing services~~
~~SMU S.A., Rendic Hnos S.A.~~
~~Prepaid rent for space for ATMs~~
~~CAI Gestión Inmobiliaria S.A.~~
~~Commercial home (Department stores)~~
~~Unired S.A.~~
~~Payment management~~
~~Corp Imagen y Diseño S.A~~
~~Other services~~
~~Corp Research S.A~~
~~Advisory~~
~~Compañía de Seguros Vida Corp S.A.~~
~~Brokerage of insurance premiums and office lease~~
~~Instituto profesional AIEP S.A~~
~~Advertising services~~
~~Distribución y Servicios META S.A.~~
~~Other services~~
~~Transbank S.A.~~
~~Credit card processing~~
~~Inversiones Santa Valentina S.A.~~
~~Administrative consulting~~
~~Opina S.A.~~
~~Advisory~~
~~Compañia de Seguros CorpSeguros S.A.~~
~~Office rent~~
~~Itaú Chile Inversiones, Servicios y Administración S.A.~~
~~Office rent~~
~~Combanc S.A.~~
~~Data transmission services~~
~~Servicios de Información Avanzada Comercial Financiera S.A~~
~~Advisory~~
~~Sinacofi S.A.~~
~~Data transmission services~~
~~Comder Contraparte Central S.A.~~
~~Advisory~~
~~Promoservice S.A.~~
~~Promotion services~~
~~Inversiones Corp Group Interhold S.A.~~
~~Administrative consulting~~
~~Operadora de Tarjeta de Crédito Nexus S.A.~~
~~Credit card processing~~
~~Laborum.com Chile S.A.~~
~~Publishing services~~
~~Corp Group Holding Inversiones Limitada~~
~~Advisory~~
~~Inmobiliaria Edificio Corpgroup S.A.~~
~~Corporate office rent and building cost~~
~~Empresa Periodística La Tercera S.A.~~
~~Publishing services~~
F-~~126~~

~~Table of Contents~~
~~As of December 31, 2015:~~
~~Company~~
~~Description~~
~~Itaú Chile Inversiones Servicios y Administración S.A.~~
~~Corporate office rent~~
g)         ~~Remunerations to members of~~2018, the ~~board and key management personnel~~
~~Remunerations paid to key management personnel are set forth in the table below:~~

As of December 31

2017

2016

2015

MCh$

MCh$

MCh$

Short term benefits

27,759

35,762

18,523

Post-employment benefits

—

—

—

Other long-term benefits

—

—

72

Severance indemnities

3,471

14,893

—

Total

31,230

50,655

18,595

~~2017~~
~~The~~ total ~~remuneration~~compensation received during ~~the year 2017~~2018 by the managers and ~~chief~~top executives of Itaú Corpbanca ~~amounted~~amounts to MCh$~~21,505.~~
~~2016~~
~~The total remuneration received during the year 2016 by the managers and chief executives of Itaú Corpbanca amounted to MCh$23,878.~~
~~2015~~
~~The total remuneration received during the year 2016 by the managers and chief executives of Itaú Corpbanca amounted to MCh$18,523.~~
h)        ~~Key management personnel~~
As22,185 (MCh$21,505 million as of December 31, ~~2017, 2016~~2017).
g.
Conformation of key personnel
Compensation received by directors and ~~2015, the composition of the Bank’s~~ key management personnel ~~was~~is categorized as follows:

Number of executives

   Number of executives

As of December 31,

   As of December 31,
Position

2017

2016

2015

   2018    2017
Directors

11

11

—

   12    11
Chief Executive Officers-at the Subsidiaries

7

10

1

   11    7
Corporative Manager

11

9

8

   10    11
Area manager

94

102

3

   145    94
Deputy Managers

155

149

—

   163    155
Vicepresident

2

2

—

Vice-president
   14    2

h.
Transactions with key personnel
i)            ~~Transactions with key management personnel~~
~~During 2017, 2016 and 2015~~The following transactions with key personnel ~~were carried out as follows:~~have been performed during the years ended December 31, 2018 and 2017:

Income

2017

2016

2015

   As of December 31,

MCh$

MCh$

MCh$

   2018    2017
Credit Cards

390

307

392

   MCh$    MCh$
Credits cards
   89    390
Consumer loans

793

868

717

   339    793
Commercial loans

815

700

646

   536    815
Mortgages loans

3,541

3,554

4,337

Mortgage loans
   2,325    3,541

Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-142
F-~~127~~

~~Table~~Note 33 – Fair Value of ~~Contents~~
~~NOTE 33 FINANCIAL ASSETS AND LIABILITIES MEASURED AT FAIR VALUE~~Financial Assets and Liabilities
This disclosure was prepared based on the guidelines “Fair Value of Financial Instruments” from the IFRS 13 “Fair Value Measurements.”
The following section details the main guidelines and definitions used by the ~~Group:~~
Bank:
Fair value: The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date ~~(i.e..~~(i.e. an exit price). The transaction is carried out in the principal~~(27)~~³ or most advantageous~~(28)~~⁴ market and is not forced ~~(i.e..~~(i.e. it does not consider factors specific to the ~~Group~~Bank that may influence a real transaction).
Market participants: Buyers and sellers in the principal (or most advantageous) market for the asset or liability that have all of the following characteristics:

a.   They are independent of each other, i.e. they are not related parties as defined in IAS 24 “Related Party Disclosures,” although the price in a related party transaction may be used as an input to a fair value measurement if the entity has evidence that the transaction was entered into at market terms.

b.   They are knowledgeable, having a reasonable understanding about the asset or liability and the transaction using all available information, including information that might be obtained through due diligence efforts that are usual and customary.

c.   They are able to enter into a transaction for the asset or liability.

d.   They are willing to enter into a transaction for the asset or liability ~~(i.e..~~(i.e. they are motivated, but not forced or otherwise compelled, to do so).
Fair value measurement: When measuring fair value, the ~~Group~~Bank takes into account the same characteristics of the asset or liability that market participants would consider in pricing that asset or liability on the measurement date.
Aspects of the transaction: A fair value measurement assumes that the asset or liability is exchanged in an orderly transaction between market participants to sell the asset or transfer the liability at the measurement date under current market conditions. The measurement assumes that the transaction to sell the asset or transfer the liability takes place: (a) on the principal market for the asset or liability; or (b) in the absence of a principal market, on the most advantageous market for the asset or liability.
Market participants: The fair value measurement measures the fair value of the asset or liability using the assumptions that the market participants would use in pricing the asset or liability, assuming that the participants act in their best economic interest.
Prices: Fair value is the price that will be received for the sale of an asset or paid for the transfer of a liability in an orderly transaction on the main (or most advantageous) market as of the measurement date under current market conditions ~~(i.e..~~(i.e. exit price) regardless of whether that price is directly observable or estimated using another valuation technique.
Highest and best use ofnon-financial assets: The fair value measurement of these assets takes into account the market participant’s ability to generate economic benefits through the highest and best use of the asset or through the sale of the asset to another market participant that would maximize the value of the asset.
~~(27) The market with the greatest volume and level of activity for the asset or liability.~~
(28) The market that maximizes the amount that would be received to sell the asset or minimizes the amount that would be paid to transfer the liability, after taking into account transaction costs and transport costs.
F-~~128~~

~~Table of Contents~~
~~Group’s~~Bank’s own liabilities and equity instruments: The fair value measurement assumes that these items are transferred to a market participant on the date of measurement. The transfer of these items assumes that:
³
The market with the greatest volume and level of activity for the asset or liability.
⁴
The market that maximizes the amount that would be received to sell the asset or minimizes the amount that would be paid to transfer the liability, after taking into account transaction costs and transport costs.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-143
Note 33 – Fair Value of Financial Assets and Liabilities, continued

a. A liability would remain outstanding and the market participant transferee would be required to fulfill the obligation. The liability would not be settled with the counterparty or otherwise extinguished on the measurement date.
b. An entity’s own equity instrument would remain outstanding and the market participant transferee would take on the rights and responsibilities associated with the instrument. The instrument would not be cancelled or otherwise extinguished on the measurement date.
Default risk: The fair value of a liability reflects the effect of the default risk. This risk includes, but is not limited to, the entity’s own credit risk. This risk is assumed to be the same before and after the liability is transferred.
Initial recognition: When an asset is acquired or a liability assumed in an exchange transaction involving that asset or liability, the transaction price is the price paid to acquire the asset or received to assume the liability (the entry price). In contrast, the fair value of the asset or liability is the price received to sell the asset or paid to transfer the liability (the exit price). Entities do not necessarily sell assets at the prices paid to acquire them. Likewise, they do not necessarily transfer liabilities at the price received to assume them.
Valuation techniques: The Bank will use techniques that are appropriate for the circumstances and for which sufficient data is available to measure the fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs. The following approaches deserve mention:
a.Market approach. Uses prices and other relevant information generated by market transactions involving identical or comparable (similar) assets, liabilities, or a ~~group~~Bank of assets and liabilities ~~(e.g..~~(e.g. a business).
b.Income approach. Converts future amounts (cash flows or income and expenses) to a single current (discounted) amount, reflecting current market expectations about those future amounts. The fair value measurement is determined based on the value indicated by the current market expectations about those future amounts.
c.Cost approach. Reflects the amount that would be required currently to replace the service capacity of an asset (current replacement cost).
Present value techniques: Technique to adjust the discount rate and expected cash flows (expected present value). The present value technique used to measure the fair value will depend on the specific facts and circumstances of the asset or liability being measured and the availability of sufficient data.
Components of the present value measurement: Present value is the tool used to link future amounts ~~(e.g..~~(e.g. cash flows or values) to a present amount using a discount rate. A fair value measurement of an asset or a liability using a present value technique captures all the following elements from the perspective of market participants at the measurement date:
a. An estimate of future cash flows for the asset or liability being measured.
b. Expectations about possible variations in the amount and timing of the cash flows representing the uncertainty inherent in the cash flows.
c. The time value of money, represented by the rate on risk-free monetary assets that have maturity dates or durations that coincide with the period covered by the cash flows and pose neither uncertainty in timing nor risk of default to the holder (i.e. a risk-free interest rate).
d. The price for bearing the uncertainty inherent in the cash flows ~~(i.e..~~(i.e. a risk premium).
F-~~129~~

~~Table of Contents~~
e. Other factors that market participants would take into account in the circumstances.
f. For a liability, thenon-performance risk relating to that liability, including the entity’s ~~(i.e..~~(i.e. the debtor’s) own credit risk.
Fair value hierarchy: Gives the highest priority to quoted prices (unadjusted) in active markets for identical assets and liabilities (Level 1 inputs) and lowest priority to unobservable inputs (Level 3 inputs). Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-144
~~1.1~~
Note 33 – Fair Value of Financial Assets and Liabilities, continued
The following table summarizes the fair values of the Bank’s main financial assets and liabilities as of December 31, 2018, including those that are not recorded at fair value in the Consolidated Statement of Financial Position.
Determination of the fair value as of ~~financial instruments~~December 31, 2018 - under IFRS 9

   As of December 31,
   2018
   Book value    Estimated fair value
   Recurring    Non-recurring
   MCh$    MCh$    MCh$
ASSETS

Cash and deposits in banks
   987,680    —      987,680
Cash items in process of collection
   318,658    —      318,658
Financial instruments at fair value through profit or loss
   96,943    96,943    —
Financial instruments at fair value through other comprehensive income
   2,657,154    2,657,154    —
Loans and accounts receivable at amortized cost
   20,714,370    —      20,827,852
Financial instruments at amortized cost
   198,923    —      199,561
Investments under resale agreements
   109,467    —      109,467
Financial derivative contracts
   1,368,957    1,368,957
Interbank loans, net
   341,244    —      341,244






Totals
   26,793,396    4,123,054    22,784,462






LIABILITIES

Deposits and other demand liabilities
   4,300,475    —      4,300,475
Cash in process of being cleared
   247,165    —      247,165
Obligations under repurchase agreements
   1,015,614    —      1,015,614
Time deposits and other time liabilities
   10,121,111    —      10,135,722
Financial derivative contracts
   1,112,806    1,112,806    —
Interbank borrowings
   2,327,723    —      2,335,509
Debt instruments issued
   6,010,124    —      6,311,527
Other financial liabilities
   12,400    —      12,400






Totals
   25,147,418    1,112,806    24,358,412






Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-145
Note 33 – Fair Value of Financial Assets and Liabilities, continued

The following table summarizes the fair values of the Bank’s main financial assets and liabilities as of December 31, 2017, ~~2016 and 2015,~~ including those that are not recorded at fair value in the Consolidated Statement of Financial Position.
Determination of the fair value as of December 31, 2017 - under IAS 39

As of December 31,

2017

2016

2015

Carrying
Amount

Estimated
Fair Value

Carrying
Amount

Estimated
Fair Value

Carrying
Amount

Estimated
Fair Value

Note

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

ASSETS

Cash and deposits in banks

5

964,030

964,030

1,487,137

1,487,137

477,809

477,809

Cash in the process of collection

5

157,017

157,017

145,769

145,769

62,095

62,095

Trading portfolio financial assets

6

415,061

415,061

632,557

632,557

17,765

17,765

Investments under agreements to resell

7

28,524

28,524

170,242

170,242

10,293

10,291

Derivative financial instruments

8

1,248,775

1,248,775

1,102,769

1,102,769

227,984

227,984

Loans and receivables from banks

9

70,077

70,077

150,568

150,568

99,398

99,493

Loans and receivables from customers

10

19,764,078

19,893,448

20,444,648

20,480,706

6,705,492

7,228,761

Financial investments available-for-sale

11

2,663,478

2,663,478

2,074,077

2,074,077

514,985

514,985

Held to maturity investments

11

202,030

201,283

226,433

200,615

—

—

LIABILITIES

Current accounts and demand deposits

16

4,141,667

4,141,667

4,453,191

4,453,191

981,349

981,998

Transaction in the course of payment

5

109,496

109,496

67,413

67,413

26,377

26,377

Obligations under repurchase agreements

7

420,920

420,920

373,879

373,879

43,727

46,933

Time deposits and saving accounts

16

10,065,243

10,099,251

11,581,710

11,603,528

3,952,573

4,069,435

Derivative financial instruments

8

1,095,154

1,095,154

907,334

907,334

253,183

253,183

Borrowings from financial institutions

17

2,196,130

2,216,507

2,179,870

2,190,715

658,600

660,721

Debt issued

18

5,950,038

6,185,043

5,460,253

5,419,646

1,504,335

1,723,689

Other financial obligations

18

17,066

17,066

25,563

25,563

20,733

21,457

   As of December 31,
   2017
      Estimated fair value
   Book value    Recurring    Non-recurring
   MCh$    MCh$    MCh$
ASSETS

Cash and deposits in banks
   964,030    —      964,030
Cash items in process of collection
   157,017    —      157,017
Investments under resale agreements
   28,524    —      28,524
Financial derivative contracts
   1,248,775    1,248,775    —
Interbank loans, net
   70,077    —      70,077
Trading investments
   415,061    415,061    —
Loans and accounts receivable from customers, net
   19,764,078    —      19,893,448
Available for sale instruments
   2,663,478    2,663,478    —
Held to maturity investments
   202,030    —      201,283






Totals
   25,513,070    4,327,314    21,314,379






LIABILITIES

Deposits and other demand liabilities
   4,141,667    —      4,141,667
Cash in process of being cleared
   109,496    —      109,496
Obligations under repurchase agreements
   420,920    —      420,920
Time deposits and other time liabilities
   10,065,243    —      10,099,251
Financial derivative contracts
   1,095,154    1,095,154    —
Interbank borrowings
   2,196,130    —      2,216,507
Debt instruments issued
   5,950,038    —      6,185,043
Other financial liabilities
   17,066    —      17,066






Totals
   23,995,714    1,095,154    23,189,950






In addition, the fair value estimates presented above do not attempt to estimate the value of the ~~Group’s~~Bank’s profits generated by its business, nor future business activities, and, therefore, do not represent the value of the ~~Group~~Bank as a going concern.

Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-146
F-~~130~~

~~Table~~Note 33 – Fair Value of ~~Contents~~Financial Assets and Liabilities, continued

The following section describes the methods used to estimate fair value:
~~1.1.1.~~ Fair Value Measurements of assets and liabilities only for disclosure purposes(non-recurring): - under IFRS 9:

Non-Recurring Fair Value
Measurement of Items

As of December 31,

2017

2016

2015

Notes

MCh$

MCh$

MCh$

ASSETS

Cash and deposits in banks

5

964,030

1,487,137

477,809

Cash in the process of collection

5

157,017

145,769

62,095

Investments under agreements to resell

7

28,524

170,242

10,291

Loans and receivables from banks

9

70,077

150,568

99,493

Loans and receivables from customers

19,893,448

20,480,706

7,228,761

Held to maturity investments

201,283

200,615

—

21,314,379

22,635,037

7,878,449

LIABILITIES

Current accounts and demand deposits

16

4,141,667

4,453,191

981,998

Transaction in the course of payment

5

109,496

67,413

26,377

Obligations under repurchase agreements

7

420,920

373,879

46,933

Time deposits and saving accounts

10,099,251

11,603,528

4,069,435

Borrowings from financial institutions

2,216,507

2,190,715

660,721

Debt issued

6,185,043

5,419,646

1,723,689

Other financial obligations

18

17,066

25,563

21,457

23,189,950

24,133,935

7,530,610

Non-recurring fair value measurement
As of December 31,
2018
MCh$
ASSETS
Cash and deposits in banks
987,680
Cash items in process of collection
318,658
Loans and accounts receivable at amortized cost
20,827,852
Investments under resale agreements
109,467
Interbank loans, net
341,244
Financial instruments at amortized cost
199,561
Totals
22,784,462
LIABILITIES
Deposits and other demand liabilities
4,300,475
Cash in process of being cleared
247,165
Obligations under repurchase agreements
1,015,614
Time deposits and other time liabilities
10,135,722
Interbank borrowings
2,335,509
Debt instruments issued
6,311,527
Other financial obligations
12,400
Totals
24,358,412
Fair Value Measurements of assets and liabilities only for disclosure purposes(non-recurring) - under IAS 39:
Non-recurring fair value measurement
As of December 31,
2017
MCh$
ASSETS
Cash and deposits in banks
964,030
Cash items in process of collection
157,017
Investments under resale agreements
28,524
Interbank loans, net
70,077
Loans and accounts receivable from customers, net
19,893,448
Held to maturity investments
201,283
Totals
21,314,379
LIABILITIES
Deposits and other demand liabilities
4,141,667
Cash in process of being cleared
109,496
Obligations under repurchase agreements
420,920
Time deposits and other time liabilities
10,099,251
Interbank borrowings
2,216,507
Debt instruments issued
6,185,043
Other financial obligations
17,066
Totals
23,189,950
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-147
Note 33 – Fair Value of Financial Assets and Liabilities, continued

Cash, short-term assets and short-term liabilities
The fair value of these items approximates their book value given their short-term nature. These items include:

·Cash and deposits in ~~banks~~Banks
·
Cash in the process of collection
·             ~~Investments under agreements to resell~~
·Financial instruments at fair value through profit or loss
Trading investments
Current accounts and demand deposits
·
Other financial obligations
Loans
The fair value of loans is determined using a discounted cash flow analysis, using a risk-free interest rate adjusted for expected losses from debtors based on their credit quality. The credit risk adjustment is based on the ~~Group’s~~Bank’s credit risk policies and methodologies: These items include:

·             ~~Loans and receivables from banks~~Interbank loans
·
Loans and receivables from customers
Financial instruments held to maturity
The estimated fair value of these financial instruments is determined using quotes and transactions observed in the main market for identical instruments, or in their absence, for similar instruments. Fair value estimates of debt instruments or securities representative of debt take into account additional variables and inputs to the extent that they apply, including estimates of prepayment rates and the credit risk of issuers.
Financial instruments held to maturity
F-~~131~~

~~Table~~The estimated fair value of ~~Contents~~these financial instruments is determined using quotes and transactions observed in the main market for identical instruments, or in their absence, for similar instruments. Fair value estimates of debt instruments or securities representative of debt take into account additional variables and inputs to the extent that they apply, including estimates of prepayment rates and the credit risk of issuers.
Medium and long-term liabilities
The fair value of medium and long-term liabilities is determined using a discounted cash flow analysis, using an interest rate curve that reflects current market conditions at which the entity’s debt instruments are traded. Medium and long-term liabilities include:

·Time deposits and saving accounts
·
Borrowings from financial institutions
·
Debt issued
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-148
Note 33 – Fair Value of Financial Assets and Liabilities, continued

~~1.1.2.~~Fair Value measurement of financial assets and liabilities (recurring): - under IFRS 9:

Fair value measurement of recurring items

As of December 31,

2017

2016

2015

Note

MCh$

MCh$

MCh$

ASSETS

Trading portfolio financial assets

6

415,061

632,557

17,765

From the Chilean Government and Central Bank

7,126

26,204

6,411

Other instruments issued in Chile

5

13,394

—

Foreign government and Central Bank instruments

381,262

547,499

—

Other instruments issued abroad

8,147

11,727

—

Mutual fund investments

18,521

33,733

11,354

Financial investments available for sale

11

2,663,478

2,074,077

514,985

From the Chilean Government and Central Bank

1,783,877

1,173,973

250,869

Other instruments issued in Chile

147,762

432,811

261,641

Foreign government and Central Bank instruments

420,687

284,444

—

Other instruments issued abroad

300,740

162,882

—

Other investments

10,412

19,967

2,475

Derivative financial instruments

8

1,248,775

1,102,769

227,984

Forwards

316,901

177,590

35,874

Swaps

930,744

923,871

192,110

Call Options

421

977

—

Put Options

709

331

—

Others

—

—

—

Total

4,327,314

3,809,403

760,734

LIABILITIES

Derivative financial instruments

8

1,095,154

907,334

253,183

Forwards

333,482

147,783

54,016

Swaps

759,216

757,499

199,167

Call Options

86

941

—

Put Options

2,370

1,111

—

Others

—

—

—

Total

1,095,154

907,334

253,183

Fair value measurement of recurring items
As of December 31,
2018
MCh$
ASSETS
Financial instruments at fair value through profit or loss
96,943
Chilean Central Bank and Government securities
36,608
Other securities issued in Chile
4,017
Foreign government and central bank instruments
23,276
Other instruments issued abroad
19,505
Investments in mutual funds
3,532
Other investments at FVTPL
10,005
Financial instruments at fair value through other comprehensive income
2,657,154
Chilean Central Bank and Government securities
1,352,084
Other securities issued in Chile
196,439
Foreign government and central bank instruments
769,693
Other instruments issued abroad
332,560
Other investments at FVOCI
6,378
Financial derivative contracts
1,368,957
Forwards
342,993
Swaps
1,021,701
Call options
4,217
Put options
46
Total
4,123,054
LIABILITIES
Financial derivative contracts
1,112,806
Forwards
322,241
Swaps
788,133
Call options
1,493
Put options
939
Total
1,112,806
Fair Value measurement of financial assets and liabilities (recurring) – under IAS 39:
Fair value measurement of recurring items
As of December 31,
2017
MCh$
ASSETS
Trading investments
415,061
Chilean Central Bank and Government securities
7,126
Other securities issued in Chile
5
Foreign government and central bank instruments
381,262
Other instruments issued abroad
8,147
Investments in mutual funds
18,521
Other investments
—
Available for sale instruments
2,663,478
Chilean Central Bank and Government securities
1,783,877
Other securities issued in Chile
147,762
Foreign government and central bank instruments
420,687
Other instruments issued abroad
300,740
Other investments
10,412
Financial derivative contracts
1,248,775
Forwards
316,901
Swaps
930,744
Call options
421
Put options
709
Total
4,327,314
LIABILITIES
Financial derivative contracts
1,095,154
Forwards
333,482
Swaps
759,216
Call options
86
Put options
2,370
Total
1,095,154
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-149
Note 33 – Fair Value of Financial Assets and Liabilities, continued

Financial Instruments
The estimated fair value of these financial instruments is determined using quotes and transactions observed in the main market for identical instruments, or in their absence, for similar instruments. Fair value estimates of debt instruments or securities representative of debt take into account additional variables and inputs to the extent that they apply, including estimates of prepayment rates and the credit risk of issuers. These financial instruments are classified as follows:

·Trading portfolio financial assets
·
Financial investments available for sale
F-~~132~~

~~Table of Contents~~
Financial Derivative Instruments
The estimated fair value of derivative instruments is calculated using prices quoted onin the market for financial instruments ofwith similar characteristics. ~~The~~Therefore, the methodology ~~therefore,~~ recognizes the credit risk of each counterparty.
The adjustments are known internationally as the counterparty value adjustment (“CVA”), which consists of an adjustment for debtor risk (credit value adjustment or CVA) and for creditor risk (debit value adjustment or “DVA”). The sum of these adjustments gives the effective counterparty risk that the derivative contract must have.
These adjustments are recorded periodically in the financial statements. As of December 2018, 2017 ~~2016~~ and ~~2015,~~2016, the portfolio of derivative contracts in both Chile and Colombia ~~had an aggregate effect of (MCh$52,029), MCh$(50,750) and MCh$(97) respectively~~is detailed as follows:

As of December 31,

2017

2016

2015

CVA

DVA

CVA

DVA

CVA

DVA

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

Derivatives held for hedging

(2
)
815

(36
)
244

—

—

Fair value

(11
)
783

(12
)
274

—

—

Currency Forwards

—

—

—

—

—

—

Currency Swaps

(5
)
222

9

37

—

—

Interest Rate Swaps

(6
)
561

(21
)
237

—

—

Cash flow

1

54

(18
)
(6
)
—

—

Currency Forwards

(1
)
(13
)
(17
)
—

—

—

Currency Swaps

—

27

(1
)
5

—

—

Interest Rate Swaps

2

40

—

(11
)
—

—

Foreign investment

8

(22
)
(6
)
(24
)
—

—

Currency Forwards

8

(22
)
(6
)
(24
)
—

—

Currency Swaps

—

—

—

—

—

—

Interest Rate Swaps

—

—

—

—

—

—

Derivatives held for trading

(53,396
)
554

(51,961
)
1,003

(97
)
—

Currency Forwards

(258
)
(724
)
(1,161
)
(72
)
(477
)
—

Currency Swaps

(42,829
)
367

(28,951
)
526

537

—

Interest Rate Swaps

(10,244
)
911

(21,860
)
549

(157
)
—

Currency Call Options

—

—

(10
)
—

—

—

Currency Put Options

(65
)
—

21

—

—

—

Total financial derivatives

(53,398
)
1,369

(51,997
)
1,247

(97
)
—

   As of December 31,
   2018    2017 2016
   CVA DVA    CVA DVA CVA DVA
   MCh$ MCh$    MCh$ MCh$ MCh$ MCh$
Derivatives held for hedging
   —   —      (2 ) 815 (36 ) 244




Fair value hedge
   —   —      (11 ) 783 (12 ) 274




Currency forwards
   —   —      —   —   —   —
Currency swaps
   —   —      (5 ) 222 9 37
Interest rate swaps
   —   —      (6 ) 561 (21 ) 237




Cash flow hedge
   —   —      1 54 (18 ) (6 )




Currency forwards
   —   —      (1 ) (13 ) (17 ) —
Currency swaps
   —   —      —   27 (1 ) 5
Interest rate swaps
   —   —      2 40 —   (11 )




Hedge of net investments in a foreign operation
   —   —      8 (22 ) (6 ) (24 )




Currency forwards
   —   —      8 (22 ) (6 ) (24 )
Currency swaps
   —   —      —   —   —   —
Interest rate swaps
   —   —      —   —   —   —




Derivatives held for trading
   (37,821 ) 340    (53,396 ) 554 (51,961 ) 1,003




Currency forwards
   (127 ) 65    (258 ) (724 ) (1,161 ) (72 )
Currency swaps
   (31,167 ) 127    (42,829 ) 367 (28,951 ) 526
Interest rate swaps
   (6,527 ) 148    (10,244 ) 911 (21,860 ) 549
Call currency options
   —   —    —   —   (10 ) —
Call currency options
   —   —    (65 ) —   21 —




Total financial derivative contracts
   (37,821 ) 340    (53,398 ) 1,369 (51,997 ) 1,247




Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-150
Note 33 – Fair Value of Financial Assets and Liabilities, continued

1.2 Fair value hierarchy~~(29)~~
IFRS 13 establishes a fair value hierarchy that classifies assets and liabilities based on the characteristics of the data that the technique requires for its valuation:
Level 1:
·    ~~Level 1: inputs~~Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the ~~entity~~Entity can access at the measurement date. The inputs needed to value the instruments in this category are available daily and used directly.
In the case of currency, shares and mutual funds, prices are observed directly inover-the-counter ~~(“OTC”)~~ (OTC) markets and the stock exchange. These prices correspond to the values at which the exact same assets are traded. As a result, the portfolio valuation does not require assumptions or models of any type.
For instruments issued by the Chilean Central Bank and the Chilean Treasury, a price provider is used, which corresponds to a public quotation. The comparative prices are defined under the criterion of similarity in duration, type of currency and they are traded equivalently on a daily basis. The valuation of these instruments is identical to the Stock Exchange Comercio de Santiago, which is a standard and international methodology. This methodology uses the rate of internal return to discount the flows of the instrument.
~~(29)~~ Level 2 ~~and level 1 hierarchy instruments are not subject to adjustments of liquidity and credit spread because prices for such instruments are observed on active markets.~~:
F-~~133~~

~~Table of Contents~~
·    ~~Level 2: the~~The specific instrument does not have daily quotes. However, similar instruments can be observed ~~(e.g..~~(e.g. same issuer, different maturity; or different issuer, same maturity and risk rating). In general, they are diverse combinations of pseudo-arbitration. Although the inputs are not directly observable, observable inputs are available with the needed periodicity.
In this category, instruments are valued by discounting contractual cash flows based on azero-coupon curve determined through the price of instruments with similar characteristics and a similar issuer risk. The income approach is used, which converts future amounts to present amounts.
For derivative instruments within this category, quotes fromover-the-counter ~~(“OTC”)~~ (OTC) transactions reported by the most important brokers in the Chilean market and the Bloomberg platform are used. The inputs observed include forward prices, interest rates and volatilities. Based on these inputs, market curves are modeled. They are a numerical representation of the opportunity costs of the instrument’s cash flows or the price volatility of an asset. Finally, cash flows are discounted.
The Black and Scholes model is used for options based on prices of brokers in the ~~OTC~~Over-The-Counter market.
For money market instruments, prices of transactions on the Santiago Stock Exchange are observed and used to model market curves.
For corporate or ~~bank~~Bank bonds, given the lack of market depth, the Bank uses transactions (if any) in the Chilean market, on foreign markets,zero-coupon curves of risk-free instruments, adjustment curves, spread modeling, correlation with similar financial instruments, etc. and creates market curves for use in the final result. These market curves are provided by a pricing supplier and are widely accepted by the market, regulators and scholars.

Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-151
·
Note 33 – Fair Value of Financial Assets and Liabilities, continued
Level ~~3: inputs~~ 3:
Inputs are unobservable inputs for the asset or liability.
This is used when prices, data or necessary inputs are not directly or indirectly observable for similar instruments for the asset or liability as of the valuation date. These fair value valuation models are subjective in nature. Therefore, they base their estimate of prices on a series of assumptions that are widely accepted by the market. The ~~Group~~Bank has two products in this category.
Due to the lack of liquidity of the active ~~banking~~Banking rate ~~(“TAB”)~~(TAB), the price is not observable and, therefore, models must be used to estimate the future cash flows of the contract. This spread is calculated on a historical basis using the Interest Rate Swap with the greatest market depth.
In addition, the Bank develops American forwards to meet its customers’ needs. They do not have a secondary market and, therefore, their value is estimated using an extension of the Hull-White model, used widely by the financial services industry.
None of these products generate significant impacts on the Bank’s results as a result of recalibration. The TAB swap does not have significant impacts on the valuation as the parameters are stable and the reversal to a historic average is empirically quick, which this model reflects correctly. On the other hand, the American forward behaves like a traditional forward when there is an important curve differential, which is the case between the Chileanpeso-US dollar curve. Also, the model’s parameters are very stable.
The table below summarizes the impacts on the portfolio of a recalibration of the models based on a stress scenario, recalibrating parameters with the shock incorporated.

F-~~134~~

~~Table of Contents~~
Impact calibration
   As of December 31, 2018    As of December 31, 2017
   Forward
Americano
USD-CLP    Basis TAB
CLP    Basis TAB
CLF    Forward
Americano
USD-CLP    Basis TAB
CLP    Basis TAB
CLF
   MCh$    MCh$    MCh$    MCh$    MCh$    MCh$
Volatility exchange rate

USD-CLP
   —      —      —      —      —      —
TAB 30
   —      116    —      —      157    —
TAB 90
   —      26    —      —      46    —
TAB 180
   —      50    21    —      —      30
TAB 360
   —      3    5    —      —      8












Totals
   —      195    26    —      203    38












Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-152
As
Note 33 – Fair Value of ~~December 31, 2017:~~Financial Assets and Liabilities, continued

As of December 31, 2017

Impact of Calibration in MCh$

Total

Volatility of
American
Forwards

TAB 30

TAB 90

TAB 180

TAB 360

American Forward USD-CLP

—

—

—

—

—

—

Basis TAB CLP

292

—

157

46

84

5

Basis TAB CLF

38

—

—

—

30

8

Total

330

—

157

46

114

13

~~As of December 31, 2016:~~

As of December 31, 2016

Impact of Calibration in MCh$

Total

Volatility of
American
Forwards

TAB 30

TAB 90

TAB 180

TAB 360

American Forward USD-CLP

—

—

—

—

—

—

Basis TAB CLP

399

—

221

70

99

9

Basis TAB CLF

61

—

—

—

43

18

Total

460

—

221

70

142

27

~~As of December 31, 2015:~~

As of December 31, 2015

Impact of Calibration in MCh$

Total

Volatility of
American
Forwards

TAB 30

TAB 90

TAB 180

TAB 360

Basis TAB CLP

48

—

—

—

46

2

Basis TAB CLF

5

—

—

—

5

—

Total

53

—

—

—

51

2

The following table summarizes the fair value hierarchy for the ~~Group’s~~Bank’s recurring valuation of financial instruments:

Level
Instrument
~~Instrument~~Issuer
Price Source
~~Issuer~~
~~Price Source~~
Model
1I
~~Foreign Exchange~~
Currencies
Not Applicable
OTC, Bloomberg
Directly observable price.
Shares
Various
~~Santiago~~ Stock Exchange
Directly observable price.
Mutual Funds
Asset Managers
~~SVS~~
CMF (formerly the SVS)
Directly observable price.
Bonds
Chilean Central Bank and Chilean Treasury
~~Santiago~~ Stock Exchange
Internal rate of return (“IRR”) based on prices.
2II
Derivatives
Not Applicable
OTC (brokers), Bloomberg
Interest rate curves based on forward prices and coupon rates.
Money market instruments
Chilean Central Bank and Chilean Treasury
~~Santiago~~ Stock Exchange
Interest rate curves based on prices.
Money market instruments
Banks
~~Santiago~~ Stock Exchange
Interest rate curves based on prices.
Bonds
~~Bonds~~
Companies, Banks
~~Companies,~~
Pricing provider
~~Pricing supplier~~
Interest rate curves based on
F-~~135~~

~~Table of Contents~~
~~banks~~
correlations, spreads, ~~extrapolations,~~interpolations, etc.
3III
Derivatives, active ~~banking~~Banking rate (TAB)
Not Applicable
OTC (brokers)
Interest rate curves based on modeling ofTAB-Chamber spread.
Derivatives, American forwards
Not Applicable
Bloomberg
Black and Scholes with inputs from European options.
The following table classifies assets and liabilities measured at fair value on a recurring basis, in accordance with the fair value hierarchy established in IFRS 13 as of December 31, 2018 – under IFRS 9:
   As of December 31, 2018
Measurement at fair value of instruments on a recurring
basis using
   Fair value    Market value of the
asset for identified assets
(Level 1)    Other observable
significant inputs
(Level 2)    Non-observable
significant inputs
(Level 3)
   MCh$    MCh$    MCh$    MCh$
ASSETS

Financial instruments at fair value through profit or loss
   96,943    67,430    29,513    —








Chilean Central Bank and Government securities
   36,608    36,608    —      —
Other securities issued locally
   4,017    4,014    3    —
Foreign government and central bank instruments
   23,276    23,276    —      —
Other securities issued abroad
   19,505    —      19,505    —
Investments in mutual funds
   3,532    3,532    —      —
Other investments at FVTPL
   10,005    —    10,005    —








Financial instruments at fair value through other comprehensive income
   2,657,154    2,458,410    198,744    —








Chilean Central Bank and Government securities
   1,352,084    1,352,084    —      —
Other securities issued locally
   196,439    5,979    190,460    —
Foreign government and central bank instruments
   769,693    769,693    —      —
Other securities issued abroad
   332,560    330,654    1,906    —
Other investments at FVOCI
   6,378    —      6,378    —








Financial derivative contracts
   1,368,957    —      1,341,801    27,156








Forwards
   342,993    —      342,375    618
Swaps
   1,021,701    —      995,163    26,538
Call options
   4,217    —      4,217    —
Put options
   46    —      46    —








Totals
   4,123,054    2,525,840    1,570,058    27,156








LIABILITIES

Financial derivative contracts
   1,112,806    —      1,112,237    569








Forwards
   322,241    —      322,192    49
Swaps
   788,133    —      787,613    520
Call options
   1,493    —      1,493    —
Put options
   939    —      939    —








Totals
   1,112,806    —      1,112,237    569








Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-153
Note 33 – Fair Value of Financial Assets and Liabilities, continued

The following table classifies assets and liabilities measured at fair value on a recurring basis, in accordance with the fair value hierarchy established in IFRS 13 ~~for~~as of December 31, 2017 ~~2016~~– under IAS 39:
   As of December 31, 2017
Measurement at fair value of instruments on a recurring basis
using
   Fair value    Market value of
the asset for
identified assets
(Level 1)    Other observable
significant inputs
(Level 2)    Non-observable
significant inputs
(Level 3)
   MCh$    MCh$    MCh$    MCh$
ASSETS

Trading investments
   415,061    409,197    5,864    —








Chilean Central Bank and Government securities
   7,126    7,126    —      —
Other securities issued locally
   5    —      5    —
Foreign government and central bank instruments
   381,262    378,636    2,626    —
Other securities issued abroad
   8,147    4,914    3,233    —
Investments in mutual funds
   18,521    18,521    —      —








Available for sale instruments
   2,663,478    2,204,564    458,914    —








Chilean Central Bank and Government securities
   1,783,877    1,783,877    —      —
Other securities issued locally
   147,762    —      147,762    —
Foreign government and central bank instruments
   420,687    420,687    —      —
Other securities issued abroad
   300,740    —      300,740    —
Other investments
   10,412    —      10,412








Financial derivative contracts
   1,248,775    —      1,218,247    30,528








Forwards
   316,901    —      316,848    53
Swaps
   930,744    —      900,269    30,475
Call options
   421    —      421    —
Put options
   709    —      709    —








Totals
   4,327,314    2,613,761    1,683,025    30,528








LIABILITIES

Financial derivative contracts
   1,095,154    —      1,094,549    605








Forwards
   333,482    —      333,482    —
Swaps
   759,216    —      758,611    605
Call options
   86    —      86    —
Put options
   2,370    —      2,370    —








Totals
   1,095,154    —      1,094,549    605








Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-154
Note 33 – Fair Value of Financial Assets and ~~2015.~~Liabilities, continued

~~As of December 31, 2017:~~

Recurring Fair Value Measurement of Items Using

Fair Value

Quoted prices
in Active
Markets for
identical assets
(Level 1)

Significant
Other
observable
inputs (Level 2)

Significant
unobservable
inputs (Level 3)

Note

MCh$

MCh$

MCh$

MCh$

ASSETS

Trading portfolio financial assets

6

415,061

409,197

5,864

—

From the Chilean Government and Central Bank

7,126

7,126

—

—

Others instruments issued in Chile

5

—

5

—

Foreign government and Central Bank instruments

381,262

378,636

2,626

—

Others instruments issued abroad

8,147

4,914

3,233

—

Mutual fund investments

18,521

18,521

—

—

Financial investments available for sale

11

2,663,478

2,505,304

158,174

—

From the Chilean Government and Central Bank

1,783,877

1,783,877

—

—

Others instruments issued in Chile

147,762

—

147,762

—

Foreign government and Central Bank instruments

420,687

420,687

—

—

Others instruments issued abroad

300,740

300,740

—

—

Others investments

10,412

—

10,412

—

Derivative financial instruments

8

1,248,775

—

1,218,247

30,528

Forwards

316,867

—

316,814

53

Swaps

930,745

—

900,270

30,475

Call Options

419

—

419

—

Put Options

709

—

709

—

Others

35

—

35

—

Total

4,327,314

2,914,501

1,382,285

30,528

LIABILITIES

Derivative financial instruments

8

1,095,154

—

1,094,549

605

Forwards

333,481

—

333,481

—

Swaps

759,216

—

758,611

605

Call Options

87

—

87

—

Put Options

2,370

—

2,370

—

Others

—

—

—

—

Total

1,095,154

—

1,094,549

605

F-~~136~~

~~Table of Contents~~
~~As of December 31, 2016:~~

Recurring Fair Value Measurement of Items Using

Fair Value

Quoted prices
in Active
Markets for
identical assets
(Level 1)

Significant
Other
observable
inputs (Level 2)

Significant
unobservable
inputs (Level 3)

Note

MCh$

MCh$

MCh$

MCh$

ASSETS

Trading portfolio financial assets

6

632,557

607,436

25,121

—

From the Chilean Government and Central Bank

26,204

26,204

—

—

Others instruments issued in Chile

13,394

—

13,394

—

Foreign government and Central Bank instruments

547,499

547,499

—

—

Others instruments issued abroad

11,727

—

11,727

—

Mutual fund investments

33,733

33,733

—

—

Financial investments available for sale

11

2,074,077

1,484,145

589,932

—

From the Chilean Government and Central Bank

1,173,973

1,173,973

—

—

Others instruments issued in Chile

432,811

—

432,811

—

Foreign government and Central Bank instruments

284,444

150,009

134,435

—

Others instruments issued abroad

162,882

156,045

6,837

—

Others investments

19,967

4,118

15,849

—

Derivative financial instruments

8

1,102,769

—

1,061,645

41,124

Forwards

177,590

—

177,590

—

Swaps

923,871

—

882,747

41,124

Call Options

977

—

977

—

Put Options

331

—

331

—

Others

—

—

—

—

Total

3,809,403

2,091,581

1,676,698

41,124

LIABILITIES

Derivative financial instruments

8

907,334

—

905,994

1,340

Forwards

147,783

—

147,174

609

Swaps

757,499

—

756,768

731

Call Options

941

—

941

—

Put Options

1,111

—

1,111

—

Others

—

—

—

—

Total

907,334

—

905,994

1,340

~~As of December 31, 2015:~~

Recurring Fair Value Measurement of Items Using

Fair Value

Quoted prices
in Active
Markets for
identical assets
(Level 1)

Significant
Other
observable
inputs (Level 2)

Significant
unobservable
inputs (Level 3)

Note

MCh$

MCh$

MCh$

MCh$

ASSETS

Trading portfolio financial assets

6

17,765

17,765

—

—

From the Chilean Government and Central Bank

6,411

6,411

—

—

Others instruments issued in Chile

—

—

—

—

Foreign government and Central Bank instruments

—

—

—

—

Others instruments issued abroad

—

—

—

—

Mutual fund investments

11,354

11,354

—

—

Financial investments available for sale

11

514,985

514,679

306

—

From the Chilean Government and Central Bank

250,869

250,869

—

—

Others instruments issued in Chile

261,641

261,641

—

—

Foreign government and Central Bank instruments

—

—

—

—

Others instruments issued abroad

—

—

—

—

Others investments

2,475

2,169

306

—

Derivative financial instruments

8

227,984

—

227,230

754

Forwards

35,873

—

35,873

—

Swaps

192,111

—

191,357

754

Call Options

—

—

—

—

Put Options

—

—

—

—

Others

—

—

—

—

Total

760,734

532,444

227,536

754

LIABILITIES

Derivative financial instruments

8

253,183

—

253,183

—

Forwards

54,016

—

54,016

—

Swaps

199,167

—

199,167

—

Call Options

—

—

—

—

Put Options

—

—

—

—

Others

—

—

—

—

Total

253,183

—

253,183

—

F-~~137~~

~~Table of Contents~~
~~1.2.1~~d. Transfers between level 1 and 2
As of December 31, 2018 no transfers were observed between Level 1 and Level 2, as shown below – under IFRS 9:

Measurement at fair value of instruments that are valued recurrently
As of December 31,
2018
Fair value Level 1 to 2 Level 2 to 1
MCh$ MCh$ MCh$
ASSETS
Financial instruments at fair value through profit or loss
96,943 —   —
Financial instruments at fair value through other comprehensive income
2,657,154 —   —
Financial derivative contracts
1,368,957 —   —
Totals
4,123,054 —   —
LIABILITIES
Financial derivative contracts
1,112,806 —   —
Totals
1,112,806 —   —
As of December 31, 2018 no transfers were observed between Level 1 and Level 2, as shown below – under IAS 39:
Measurement at fair value of instruments that are valued recurrently
As of December 31,
2017
Fair value Level 1 to 2 Level 2 to 1
MCh$ MCh$ MCh$
ASSETS
Trading investments
415,061 —   —
Available for sale instruments
2,663,478 —   —
Financial derivative contracts
1,248,775 —   —
Totals
4,327,314 —   —
LIABILITIES
—
Financial derivative contracts
1,095,154 —   —
Totals
1,095,154 —   —
e. Disclosures regarding level 3 assets and liabilities
During ~~2017~~2018 and ~~2016,~~2017, no assets were transferred between levels 1 and 2.

~~1.2.2 Disclosures regarding level 3 assets and liabilities~~
a.
Disclosures Regarding Level 3 Assets and Liabilities
Level 3 assets and liabilities are valued using techniques that require inputs that are not observable on the market, for which the income approach is used to convert future amounts to present amounts.
This category includes:
·             ~~Derivative financial~~Financial derivative instruments indexed to the TAB rate. This rate is comprised of an interbank rate and a liquidity premium charged to financial institutions and is determined using a short-rate model with mean reversion.
·American forward options.
As none of these products has a market, the Bank uses financial engineering valuation techniques ~~which incorporate~~that use unobservable ~~input.~~
variables.
These techniques use the following inputs: transaction prices from the main financial instrument markets and assumptions that are widely accepted by the financial services industry. Using this information, unobservable variables are constructed such as: adjustment curves, spreads, volatilities and other variables necessary for the valuation. Lastly, all of the models are subject to internal contrasts by independent areas and have been reviewed by internal auditors and regulators.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-155
Note 33 – Fair Value of Financial Assets and Liabilities, continued

None of these products generate significant impacts on the Bank’s results as a result of recalibration. The American forward is only offered for the US dollar-Chilean peso market and until now, given the important differential between these interest rates, the product behaves like a traditional forward. The TAB swap does not have significant impacts on the valuation as the modeled liquidity premiums have a quick mean reversion for the short part and low volatility for the long part, concentrating on the book’s sensitivity in the longest part of the curve. The following table reconciles assets and liabilities measured at fair value on a recurring basis as of ~~year-end 2017, 2016~~December 31, 2018 and ~~2015.~~2017.

Level 3 Reconciliation

Opening
balance

Gain (loss)
recognized in
profit or loss

Gain (loss)
recognized in
equity

Net of
purchases,
sales and
agreements

Transfes
from level 1
or level 2

Closing
balance

2017

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

ASSETS

Trading portfolio financial assets

—

—

—

—

—

—

Financial investments available for sale

—

—

—

—

—

—

Derivative financial instruments

41,124

4,849

—

(15,445
)
—

30,528

Forwards

—

209

—

(156
)
—

53

Swaps

41,124

4,640

—

(15,289
)
—

30,475

Call Option

—

—

—

—

—

—

Put Option

—

—

—

—

—

—

Total

41,124

4,849

—

(15,445
)
—

30,528

LIBILITIES

Derivative financial instruments

1,340

(325
)
—

(410
)
—

605

Forwards

609

(465
)
—

(144
)
—

—

Swaps

731

140

—

(266
)
—

605

Call Option

—

—

—

—

—

Put Option

—

—

—

—

—

Total

1,340

(325
)
—

(410
)
—

605

   As of December 31, 2018
Level 3 reconciliation
   Opening
balance    Gain (loss)
recognized in
profit or loss Gain (loss)
recognized
in equity    Purchases,
sales and
agreements Transfers from
level 1 or
level 2    Ending
balance
   MCh$    MCh$ MCh$    MCh$ MCh$    MCh$
ASSETS

Financial derivative contracts
   30,528    5,863 —      (9,235 ) —      27,156
Forwards
   53    716 —      (151 ) —      618
Swaps
   30,475    5,147 —      (9,084 ) —      26,538
Call options
   —      —   —      —   —      —
Put options
   —      —   —      —   —      —








Totals
   30,528    5,863 —      (9,235 ) —      27,156








LIABILITIES

Financial derivative contracts
   605    1,223 —      (1,259 ) —      569
Forwards
   —      831 —      (782 ) —      49
Swaps
   605    392 —      (477 ) —      520
Call options
   —      —   —      —      —
Put options
   —      —   —      —      —








Totals
   605    1,223 —      (1,259 ) —      569








   As of December 31, 2017
Level 3 reconciliation
   Opening
balance    Gain (loss)
recognized in
profit or loss Gain (loss)
recognized
in equity    Purchases,
sales and
agreements Transfers from
level 1 or
level 2    Ending
balance
   MCh$    MCh$ MCh$    MCh$ MCh$    MCh$
ASSETS

Financial derivative contracts
   41,124    4,849 —      (15,445 ) —      30,528
Forwards
   —      209 —      (156 ) —      53
Swaps
   41,124    4,640 —      (15,289 ) —      30,475
Call options
   —      —   —      —   —      —
Put options
   —      —   —      —   —      —








Totals
   41,124    4,849 —      (15,445 ) —      30,528








LIABILITIES

Financial derivative contracts
   1,340    (325 ) —      (410 ) —      605
Forwards
   609    (465 ) —      (144 ) —      —
Swaps
   731    140 —      (266 ) —      605
Call options
   —      —   —      —      —
Put options
   —      —   —      —      —








Totals
   1,340    (325 ) —      (410 ) —      605








Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-156
F-~~138~~

~~Table~~Note 33 – Fair Value of ~~Contents~~
Level 3 Reconciliation

Opening
balance

Gain (loss)
recognized in
profit or loss

Gain (loss)
recognized in
equity

Net of
purchases,
sales and
agreements

Transfes
from level 1
or level 2

Closing
balance

2016

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

ASSETS

Trading portfolio financial assets

—

—

—

—

—

—

Financial investments available for sale

—

—

—

—

—

—

Derivative financial instruments

754

646

—

39,724

—

41,124

Forwards

—

221

—

(221
)
—

—

Swaps

754

425

—

39,945

—

41,124

Call Option

—

—

—

—

—

—

Put Option

—

—

—

—

—

—

Total

754

646

—

39,724

—

41,124

LIBILITIES

Derivative financial instruments

—

2,715

—

(1,375
)
—

1,340

Forwards

—

738

—

(129
)
—

609

Swaps

—

1,977

—

(1,246
)
—

731

Call Option

—

—

—

—

—

Put Option

—

—

—

—

—

Total

—

2,715

—

(1,375
)
—

1,340

Level 3 Reconciliation

Opening
balance

Gain (loss)
recognized in
profit or loss

Gain (loss)
recognized in
equity

Net of
purchases,
sales and
agreements

Transfes
from level 1
or level 2

Closing
balance

2015

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

ASSETS

Trading portfolio financial assets

—

—

—

—

—

—

Financial investments available for sale

—

—

—

—

—

—

Derivative financial instruments

173

581

—

—

—

754

Forwards

—

—

—

—

—

—

Swaps

173

581

—

—

—

754

Call Option

—

—

—

—

—

—

Put Option

—

—

—

—

—

—

Total

173

581

—

—

—

754

LIBILITIES

Derivative financial instruments

—

—

—

—

—

—

Forwards

—

—

—

—

—

—

Swaps

—

—

—

—

—

—

Call Option

—

—

—

—

—

—

Put Option

—

—

—

—

—

—

Total

—

—

—

—

—

—

F-~~139~~

~~Table of Contents~~Financial Assets and Liabilities, continued

~~1.2.3~~f. Hierarchy for remaining assets and liabilities
The following table classifies assets and liabilities measured at fair value on anon-recurring basis, in accordance with the fair value hierarchy as of December 31, ~~2017, 2016~~2018 and ~~2015.~~2017.

Measurement at fair value of items not valued on recurrent

Estimated
fair value

Quoted
prices in
Active
Markets for
identical
assets
(Level 1)

Significant
Other
observable
inputs (Level 2)

Significant
unobservable
inputs (Level 3)

As of December 31, 2017

Note

MCh$

MCh$

MCh$

MCh$

ASSETS

Cash and deposits in banks

5

964,030

964,030

—

—

Cash in the process of collection

5

157,017

157,017

—

—

Investments under agreements to resell

7

28,524

28,524

—

—

Loans and receivables from banks

9

70,077

70,077

—

—

Loans and receivables from customers

19,893,448

—

—

19,893,448

Held to maturity investments

201,283

—

201,283

—

21,314,379

1,219,648

201,283

19,893,448

LIABILITIES

Current accounts and demand deposits

16

4,141,667

4,141,667

—

—

Transaction in the course of payment

5

109,496

109,496

—

—

Obligations under repurchase agreements

7

420,920

420,920

—

—

Time deposits and saving accounts

10,099,251

—

10,099,251

—

Borrowings from financial institutions

2,216,507

2,216,507

—

—

Debt issued

6,185,043

—

6,185,043

—

Other financial obligations

18

17,066

17,066

—

—

23,189,950

6,905,656

16,284,294

—

   As of December 31, 2018
Measurement at fair value of items on anon-recurring basis
   Estimated fair
value    Market value of the
asset for identified
assets (Level 1)    Other observable
significant inputs
(Level 2)    Non-observable
significant inputs
(Level 3)
   MCh$    MCh$    MCh$    MCh$
ASSETS

Cash and deposits in banks
   987,680    987,680    —      —
Cash items in process of collection
   318,658    318,658    —      —
Loans and accounts receivable at amortized cost
   20,827,852    —      —      20,827,852
Financial instruments at amortized cost
   199,561    —      199,561    —
Investments under resale agreements
   109,467    109,467    —      —
Interbank loans, net
   341,244    341,244    —      —








Totals
   22,784,462    1,757,049    199,561    20,827,852








LIABILITIES

Deposits and other demand liabilities
   4,300,475    4,300,475    —      —
Cash in process of being cleared
   247,165    247,165    —      —
Obligations under repurchase agreements
   1,015,614    1,015,614    —      —
Time deposits and other time liabilities
   10,135,722       10,135,722    —
Borrowings from financial institutions
   2,335,509    2,335,509    —      —
Debt instruments issued
   6,311,527       6,311,527    —
Other financial obligations
   12,400    12,400    —      —








Totals
   24,358,412    7,911,163    16,447,249    —








   As of December 31, 2017
Measurement at fair value of items on anon-recurring basis
   Estimated fair
value    Market value of the
asset for identified
assets (Level 1)    Other observable
significant inputs
(Level 2)    Non-observable
significant inputs
(Level 3)
   MCh$    MCh$    MCh$    MCh$
ASSETS

Cash and deposits in banks
   964,030    964,030    —      —
Cash items in process of collection
   157,017    157,017    —      —
Investments under resale agreements
   28,524    28,524    —      —
Interbank loans, net
   70,077    70,077    —      —
Loans and accounts receivable from customers, net
   19,893,448    —      —      19,893,448
Held to maturity investments
   201,283    —      201,283    —








Totals
   21,314,379    1,219,648    201,283    19,893,448








LIABILITIES

Deposits and other demand liabilities
   4,141,667    4,141,667    —      —
Cash in process of being cleared
   109,496    109,496    —      —
Obligations under repurchase agreements
   420,920    420,920    —      —
Time deposits and other time liabilities
   10,099,251    —      10,099,251    —
Borrowings from financial institutions
   2,216,507    2,216,507    —      —
Debt instruments issued
   6,185,043    —      6,185,043    —
Other financial obligations
   17,066    17,066    —      —








Totals
   23,189,950    6,905,656    16,284,294    —








Measurement at fair value of items not valued on recurrent

Estimated
fair value

Quoted
prices in
Active
Markets for
identical
assets
(Level 1)

Significant
Other
observable
inputs (Level 2)

Significant
unobservable
inputs (Level 3)

As of December 31, 2016

Note

MCh$

MCh$

MCh$

MCh$

ASSETS

Cash and deposits in banks

5

1,487,137

1,487,137

—

—

Cash in the process of collection

5

145,769

145,769

—

—

Investments under agreements to resell

7

170,242

170,242

—

—

Loans and receivables from banks

9

150,568

150,568

—

—

Loans and receivables from customers

20,480,706

—

—

20,480,706

Held to maturity investments

200,615

—

200,615

—

22,635,037

1,953,716

200,615

20,480,706

LIABILITIES

Current accounts and demand deposits

16

4,453,191

4,453,191

—

—

Transaction in the course of payment

5

67,413

67,413

—

—

Obligations under repurchase agreements

7

373,879

373,879

—

—

Time deposits and saving accounts

11,603,528

—

11,603,528

—

Borrowings from financial institutions

2,190,715

2,190,715

—

—

Debt issued

5,419,646

—

5,419,646

—

Other financial obligations

18

25,563

25,563

—

—

24,133,935

7,110,761

17,023,174

—

Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-157
F-~~140~~

~~Table of Contents~~

Measurement at fair value of items not valued on recurrent

Estimated
fair value

Quoted
prices in
Active
Markets for
identical
assets
(Level 1)

Significant
Other
observable
inputs (Level 2)

Significant
unobservable
inputs (Level 3)

As of December 31, 2015

Note

MCh$

MCh$

MCh$

MCh$

ASSETS

Cash and deposits in banks

5

477,809

477,809

—

—

Cash in the process of collection

62,086

62,086

—

—

Investments under agreements to resell

10,291

10,291

—

—

Loans and receivables from banks

99,493

99,493

—

—

Loans and receivables from customers

7,228,761

—

—

7,228,761

Held to maturity investments

—

—

—

—

7,878,440

649,679

—

7,228,761

LIABILITIES

Current accounts and demand deposits

981,998

981,998

—

—

Transaction in the course of payment

5

26,377

26,377

—

—

Obligations under repurchase agreements

46,933

46,933

—

—

Time deposits and saving accounts

4,069,435

—

4,069,435

—

Borrowings from financial institutions

660,721

660,721

—

—

Debt issued

1,723,689

—

1,723,689

—

Other financial obligations

21,457

21,457

—

—

7,530,610

1,737,486

5,793,124

—

F-~~141~~

~~Table of Contents~~
~~NOTE~~Note 34 ~~RISK MANAGEMENT~~
a.~~Introduction:~~– Risk management
~~As a result of~~The Bank and its ~~activities, the Group is~~subsidiaries, through their activity, are exposed to several types of ~~risks~~risk mainly related to ~~its loan~~loans portfolio and financial instruments.
Risk management policies are established ~~with the objective of identifying~~in order to identify and ~~analyzing~~analyze the risks faced by the Bank, ~~setting adequate~~set limits and adequate controls, ~~and monitoring~~monitor risks and ~~compliance~~comply with limits. ~~Risk~~The risk management policies and risk administration structures are reviewed ~~regularly~~periodically in order to reflect changes in the ~~Bank’s~~institution’s activities. The Bank, through its ~~standards~~rules and procedures, ~~aims~~intends to develop an appropriate control environment, in which all ~~associates~~employees understand their roles and responsibilities.
The following ~~sections describe~~is a description of the ~~Bank’s~~ main business activities and policies ~~as they relate to~~of the Bank in terms of risk management.
Risk Management Structure:
Board of Directors
~~Within~~At the ~~Group,~~Bank and its Subsidiaries, the Board of Directors plays a leading role in corporate governance. It is responsible for establishing and monitoring the Bank’s risk management structure, for which it has a corporate governance system aligned with international best practices and Chilean regulations, mainly from the SBIF. One of the principal functions of the Board of Directors is to ensure that measures are in place to monitor, evaluate and guide senior management to ensure that their actions are in line with best practices and defined risk appetite levels. To accomplish this, a governance structure made up of various committees has been ~~formed.~~created. These committees lay out behavioral guidelines for the Bank’s associates and assist them in carrying out their functions related to controlling and managing the Bank’s risks.
Audit Committee
The Audit Committee’s objective is to monitor the Bank’s internal control systems and its compliance with regulations and other internal standards. It is also responsible for the oversight of the different aspects of maintenance, application and functioning of the Bank’s internal controls, monitoring compliance with standards and procedures regulating its practices, and having aan understanding of the risks that can arise from the business conducted by the Bank.
The committee is linked to the Board of Directors through the participation of at least two board members named by the Board itself. These members must report to the Board situations and events analyzed by the Committee, thus holding the Bank’s board members responsible for complying with both self-control policies established and practiced by the entity as well as laws and regulations to which it is subject.
The Audit Committee must reinforce and support ~~internal audit functions~~Internal Audit function including its independence from management and serve, at the same time, as a link between the internal audit department and the independent auditors as well as between these two ~~groups~~Banks and the Board of Directors.
Directors’ Committee
The Directors’ Committee’s objective is to strengthen the self-regulation of the Bank and other entities under its control, making the Board’s work more efficient through increased oversight of management’s activities.
Likewise, responsible for making the agreements necessary to protect shareholders, especially minority shareholders, examining executive compensation systems and analyzing and issuing a report on the transactions referenced in title XVI of Law 18,046. A copy of this report is sent to the Board, which must read the report and approve or reject each respective transaction.
F-~~142~~

~~Table of Contents~~
In its role as overseer of corporate activity, the committee must inform the market of any violations or major corporate events as well as transactions that the company carries out with related parties of the controlling shareholder or takeovers of any form.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-158
Note 34 – Risk management, continued

Corporate Governance Committee
For the purposes of this committee, which is aware of how difficult it is to bring together all aspects of good corporate governance under one definition, corporate governance shall be defined as the set of bodies and institutional practices that impact a company’s decision making process, contributing to sustainable value creation in a framework of transparency, proper management, risk control and corporate responsibility towards the market.
Therefore, appropriate corporate governance in a ~~bank~~Bank must align organizational incentives and promote the rights of shareholders and other direct or indirect stakeholders.
The Corporate Governance Committee is a consultation body of the Board of Directors whose mission is to ensure the existence and development within the Bank of the best corporate governance practices for financial entities. To this end, it will evaluate the current practices and policies, propose and make recommendations to the Board of Directors on improvements, reforms and adjustments that it deems appropriate and work to ensure proper implementation and application of these corporate governance practices and policies defined by the Board of Directors.
~~Executive Loan Committees~~
The Executive Loan Committee’s objective is to approve transactions and matters submitted to it in accordance with defined limits and procedures, ensuring application and compliance of credit risk policies defined by the Bank and in strict adherence of current regulations.
Asset-Liability Committee ~~(“ALCO”)~~
(ALCO)
After the Board and its specialized committees, the Asset-Liability Committee (hereinafter also “ALCO”) is the next highest body involved in managing the institution’s financial policies.
The committee’s main purpose is to comply with the financial guidelines set by the Board of Directors. In this spirit, it must approve and monitor the financial strategies that guide the Bank with respect to the composition of its assets and liabilities, cash inflows and outflows and transactions with financial instruments.
It will consider the diverse alternatives available to make decisions that ensure the highest and most sustainable returns with financial risk levels that are compatible with the business, current regulations and internal standards.|
Anti-Money Laundering and Anti-Terrorism Finance Prevention Committee
This committee’s main purpose is to plan and coordinate activities to comply with policies and procedures to prevent asset laundering, terrorism financing and bribery, to maintain itself informed of the work carried out by the ~~Bank’s compliance officer,~~Compliance Officer, who has also been designated as the head of prevention in conformity with Law No. 20,393, as well as to adopt agreements to improve prevention and control measures proposed by the ~~compliance officer.~~Compliance Officer.
Operational Risk Committee
This committee’s objective is to evaluate the status of critical processes that are directly related to the Bank’s Operational Risk and Internal Controls, in accordance with current Superintendency of Banks and Financial Institutions standards in order to improve any weaknesses that the Bank may present and ensure proper implementation of regulatory changes. It is also responsible for attaining critical processes under an internal
F-~~143~~

~~Table of Contents~~
control environment that enables the Bank to operate stably and consistently, thus procuring desired levels of reliability, integrity and availability for information resources.
Compliance Committee
The Compliance Committee’s main purpose is to define, promote and ensure that the conduct of all Itaú Corpbanca employees meets the highest possible standards of personal and professional excellence. Employee conduct should, at all times, be guided by the principles and values that embody our organization’s spirit, philosophy and good business practices. It is also responsible for ensuring that the ~~Bank’s regulatory compliance model~~Regulatory Compliance Model is properly applied in accordance with definitions set by this committee, and for maintaining itself informed of the work carried out by the ~~compliance officer~~Compliance Officer on such matters, as well as adopting agreements to improve control measures proposed by the ~~compliance officer.~~Compliance Officer.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-159
Note 34 – Risk management, continued

Committee on Risk Methodologies
The objective of the Risk Methodologies Committee is to ensure the quality of all methodologies for estimating the Bank’s provisions for all business areas.
This Committee - which exercises its functions with respect to the Bank, its ~~divisions~~Divisions and ~~subsidiaries~~Subsidiaries - deals with certain corporate aspects such as policies, manuals and procedures related to the methodologies of ~~group~~Bank provisions, as well as the statistical models of admission, behavior and provisions.
Its main members are: Corporate Risk Manager, Risk Control Manager, Retail Credit Manager, Financial Risk Manager, Responsible for Monitoring and Control of Retail and Responsible for Risk Models.
Portfolio Committee
The objective of the Portfolio Committee is to monitor the evolution of the Bank’s wholesale and retail portfolios in terms of their risk-return ratio, their adjustment to the defined risk appetite and the progress made in materializing short-term ~~and long-term~~ strategies or instructions.
Also, long term that this committee has defined.
As a result, it considers in its analysis the competition, the movements of its most relevant actors and the main risks that affect the management of the portfolios, as well as the projects that have an impact on the matter.
Its main members are: General Manager, Corporate Risk Manager, Risk Control Manager, Wholesale Credit Manager, Wholesale Banking Manager, Retail Credit Manager, Retail Banking Manager, Financial Planning and Control Manager and Product Manager and ~~Marketing.~~Marketing
Internal Audit
The main function of Internal Audit is to support the Board of Directors and senior management to independently ~~assess~~asses the maintenance, application and proper functioning of the Bank’s internal control system, which also entails supervising compliance with rules and procedures.
Code of Conduct and Market Information Manual
The objective ~~of the Code of Conduct and Market Information Manual~~ is to continue progressing to become the best ~~bank~~Bank and have first-rate human capital. All associates, directors and ~~subsidiaries~~Subsidiaries must adhere to ethical standards based on principles and values designed to guide and maintain the highest possible standards.
In response to our clients’ trust and recognition, which are vital to our success, all associates and directors should strive to retain this trust, strictly complying with the General Code of Conduct.
F-~~144~~

~~Table of Contents~~
b.Main Risks and Requirements Affecting the Bank and its Subsidiaries:
~~b.1~~ Credit ~~Risk~~
~~The Corporate Risk Division is responsible for identifying, analyzing and monitoring~~ risk ~~at the Bank.~~
Credit risk is the risk ~~of potential loss faced by the Bank if~~that a customer or counterparty ~~in a financial instrument does not comply with~~will default on its contractual obligations resulting in financial loss to the Bank.
·             ~~Quantitative~~ The Bank’s main income generating activity is lending to customers and ~~Qualitative Disclosures about Credit Risk~~
~~For Itaú Corpbanca, proper risk management in all areas, particularly regarding~~therefore credit risk is ~~one~~a principal risk. Credit risk mainly arises from loans and advances to customers and other Banks (including related commitments to lend such as loan or credit card facilities), investments in debt securities and derivatives that are an asset position. The Bank considers all elements of ~~the core pillars of the Bank’s portfolio~~credit risk exposure such as counterparty default risk, geographical risk and sector risk for risk management ~~efforts, striving to maintain a proper risk/return ratio.~~purposes.

~~The Bank’s risk philosophy outlines three lines of defense: first, its business areas; second, the credit risk areas and third, the internal auditing area.~~
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-160
~~The credit risk areas are fully autonomous from the business areas. Their size and organizational structure are in accordance with the size of their portfolio and the complexity of their transactions.~~
Each credit risk area uses tools and methodologies tailored to the particular segments it serves to manage and monitor credit risk. This allows them to properly control risk based on the size and complexity of the transactions carried out by the Bank.Note 34 – Risk management, continued

Credit risk management
The Bank’s credit committee is responsible for managing the Bank’s credit risk by:
Ensuring that the Bank has appropriate credit risk practices, including an effective system of internal control, to consistently determine adequate allowances in accordance with the Bank’s stated policies and procedures, IFRS and relevant supervisory guidance.
Identifying, assessing and measuring credit risk across the Bank, from an individual instrument to a portfolio level.
Creating credit policies to protect the Bank against the identified risks including the requirements to obtain collateral from borrowers, to perform robust ongoing credit assessment of borrowers and to continually monitor exposures against internal risk limits.
Limiting concentrations of exposure by type of asset, counterparties, industry, credit rating, geographic location etc.
Establishing a robust control framework regarding the authorization structure for the approval and renewal of credit facilities.
Developing and maintaining the Bank’s risk grading to categorize exposures according to the degree of risk of default. Risk grades are subject to regular reviews.
Developing and maintaining the Bank’s processes for measuring ECL including monitoring of credit risk, incorporation of forward looking information and the method used to measure ECL.
Ensuring that the Bank has policies and procedures in place to appropriately maintain and validate models used to assess and measure ECL.
Establishing a sound credit risk accounting assessment and measurement process that provides it with a strong basis for common systems, tools and data to assess credit risk and to account for ECL. Providing advice, guidance and specialist skills to business units to promote best practice throughout the Bank in the management of credit risk.
The internal audit function performs regular audits making sure that the established controls and procedures are adequately designed and implemented.
Significant increase in credit risk
The Bank analyzes all data collected using statistical models and estimates the remaining lifetime PD of exposures and how these are expected to change over time. The factors taken into account in this process include macro-economic data such as GDP growth, unemployment, benchmark interest rates and house prices. The Bank generates a ‘base case’ scenario of the future direction of relevant economic variables as well as a representative range of other possible forecast scenarios. The Bank then uses these forecasts, which are probability-weighted, to adjust its estimates of PDs.
Under the Bank’s monitoring procedures a significant increase in credit risk is identified before the exposure has defaulted, and at the latest when the exposure becomes 30 days past due, unless the Bank has reasonable and supportable information that demonstrates otherwise.
The Bank uses different criteria to determine whether credit risk has increased significantly per portfolio of assets. The criteria used are both quantitative changes in PDs as well as qualitative. The table below summarizes per type of asset the range above which an increase in lifetime PD is determined to be significant, as well as some indicative qualitative indicators assessed.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-161
Note 34 – Risk management, continued
Criteria used for Chile

Type of portfolio
   Debtor category PD ranges per
debtor
category % of
absolute
increase
in lifetime
PD Stages
Days of arrears to the end of the month
   A1
   A2 0.04 – 0.25% 0.13% Stage 1    Up to 29 days



   A3
   A4 2.00% 1.62%



   A5 (*) 4.75 – 10% 3.52% Stage 2    From 30 to 89 days



   A6
   B1
   B2 15 -45% 23.05%
Corporate
   B3
   B4
   C1
   C2
   C3 100% 100% Stage 3    90 days or more
   C4
   C5
   C6
(*)
Loans originated in A5 are considered Stage 1 at inception. Loans that were originated in a higher category and subsequently downgraded to A5 are considered Stage 2.
Type of portfolio
Stages Days of arrears to the end of the month Probability of default (PD) and
qualitative considerations
Stage 1 Up to 29 days Difference between Referential
Life Time PD and PD Life Time
at origination < 20%
Group
Stage 2 From 30 to 89 days Difference between Referential
Life Time PD and PD Life Time
at origination >= 20%
Stage 3 90 days or more Restructured loans with 60 days in
arrears before restructuring
The quantitative criteria is used to identify where an exposure has increased in credit risk and it is applied based on whether an increase in the lifetime PD since the recognition date exceeds the threshold set in absolute and relative terms. The following formulas are used to determine such thresholds:
Relative comparison formula
Threshold =Lifetime PD (at reporting date) - 1
                      Lifetime PD (at origination)
Absolute comparison formula
Threshold = Lifetime PD (at reporting date) – Lifetime PD (at origination)
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-162
Note 34 – Risk management, continued
Criteria used for Colombia

   % of absolute increase
in lifetime PD % of relative increase
in lifetime PD
Qualitative
indicators assessed
Corporate portfolio

Without information
   34.39 % 86.90 %
Small company
   22.26 % 1314.07 %
Small company
   33.91 % 1326.89 %
Medium company
   22.53 % 64.23 % • Debt restructuring
Medium company
   25.67 % 1203.61 % • Increase in credit risk of other financial instruments
Large company
   10.28 % 99.15 %
Low default
   0.46 % 0.48 %
Low default (Government and Financial)
   0.00 % 324.00 %
Group portfolio

Leasing
   33.23 % 82.04 %
Payroll deductible loan
   2.79 % 77.14 %
Revolving line of credit
   35.22 % 85.65 %
Overdraft limit
   0.70 % 241.11 %
Credit card
   29.44 % 175.32 %
Mortgage loan
   2.55 % 151.19 %
Personal debt restructuring
   44.04 % 101.64 % • Increase in credit risk of other financial instruments
Other loans
   26.53 % 174.02 %
Loan commitments are assessed along with the category of loan the Bank is committed to provide, i.e. commitments to provide mortgages are assessed using similar criteria to mortgage loans, while commitments to provide a corporate loan are assessed using similar criteria to corporate loans.
The Bank has monitoring procedures in place to make sure that the criteria used to identify significant increases in credit are effective, meaning that significant increase in credit risk is identified before the exposure is defaulted or when the asset becomes 30 days past due. The Bank performs periodic back-testing of its ratings to consider whether the drivers of credit risk that led to default were accurately reflected in the rating in a timely manner.
Incorporation of forward-looking information
The Bank uses forward-looking information that is available without undue cost or effort in its assessment of significant increase of credit risk as well as in its measurement of ECL. The Bank employs experts who use external and internal information to generate a ‘base case’ scenario of future forecast of relevant economic variables along with a representative range of other possible forecast scenarios. The external information used includes economic data and forecasts published by governmental bodies and monetary authorities.
The Bank applies probabilities to the forecast scenarios identified. The base case scenario is the single most-likely outcome and consists of information used by the Bank for strategic planning and budgeting. The Bank has identified and documented key drivers of credit risk and credit losses for each portfolio of financial instruments and, using a statistical analysis of historical data, has estimated relationships between macro-economic variables and credit risk and credit losses. The Bank has not made changes in the estimation techniques or significant assumptions made during the reporting period.
The table below summarizes the principal macroeconomic indicators included in the economic scenarios used as of December 31, 2018 until December 31, 2023 in the countries where the Bank and its subsidiaries operate and therefore are the countries that have a material impact on ECLs.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-163
Note 34 – Risk management, continued
Criteria for Chile

Indicators

Portfolio
2019 2020 2021
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Unemployment rate
   Base scenario 7.16 % 7.42 % 7.13 % 6.86 % 7.15 % 7.43 % 7.16 % 6.91 % 7.21 % 7.49 % 7.21 % 6.96 %
   Range of upside scenarios 7.20 % 7.53 % 7.28 % 7.04 % 7.33 % 7.59 % 7.30 % 7.02 % 7.29 % 7.54 % 7.23 % 6.94 %
   Range of downside scenarios 7.12 % 7.32 % 6.98 % 6.69 % 6.98 % 7.26 % 7.02 % 6.80 % 7.13 % 7.43 % 7.20 % 6.98 %
Consumer’s price index (IPC)
   Base scenario 108.52 109.33 110.24 110.93 112.05 112.66 113.48 114.23 115.41 116.01 116.86 117.63
   Range of upside scenarios 108.56 109.47 110.51 111.17 112.29 112.83 113.72 114.43 115.59 116.16 117.09 117.84
   Range of downside scenarios 108.48 109.19 109.96 110.68 111.81 112.48 113.23 114.02 115.23 115.87 116.62 117.43
Interbank interest rate
   Base scenario 3.00 % 3.25 % 3.50 % 3.75 % 4.00 % 4.50 % 4.50 % 4.50 % 4.50 % 4.50 % 4.50 % 4.50 %
   Range of upside scenarios 3.75 % 4.50 % 5.00 % 5.25 % 5.50 % 6.25 % 6.00 % 5.50 % 5.00 % 4.50 % 4.50 % 4.50 %
   Range of downside scenarios 2.25 % 2.00 % 2.00 % 2.25 % 2.50 % 2.75 % 3.00 % 3.50 % 4.00 % 4.50 % 4.50 % 4.50 %
Copper
   Base scenario 2.78 2.81 2.83 2.86 2.87 2.88 2.88 2.89 2.90 2.91 2.92 2.93
   Range of upside scenarios 2.58 2.40 2.22 2.10 2.68 2.88 2.88 2.89 2.90 2.91 2.92 2.93
   Range of downside scenarios 2.99 3.22 3.45 3.61 3.06 2.88 2.88 2.89 2.90 2.91 2.92 2.93
Criteria for Colombia
   As of December 31,
   2019    2020    2021
GDP growth

Base scenario
   3.11    2.66    2.63
Range of upside scenarios
   4.33    4.20    4.25
Range of downside scenarios
   3.72    3.43    3.44
Unemployment rates

Base scenario
   9.84    9.84    9.84
Range of upside scenarios
   9.50    9.40    9.34
Range of downside scenarios
   10.21    10.29    10.35
Benchmark interest rates

Base scenario
   4.75    4.75    4.75
Range of upside scenarios
   5.75    5.75    5.75
Range of downside scenarios
   3.75    3.75    3.75
currency exchange rate

Base scenario
   3,180    3,180    3,150
Range of upside scenarios
   3,104    3,071    3,025
Range of downside scenarios
   3,256    3,289    3,335
Consumer’s Price Index

Base scenario
   3.40    3.00    3.00
Range of upside scenarios
   3.95    3.91    4.27
Range of downside scenarios
   2.74    1.86    1.38
Predicted relationships between the key indicators and default and loss rates on various portfolios of financial assets have been developed based on analyzing historical data over the past 3 years.
Sensitivity analysis
The most significant assumptions affecting the ECL allowance, as indicated in the tables above by country, are as follows:
Chile:
Unemployment rate, given its impact on secured and unsecure borrowers’ ability to meet their contractual repayments.
Consumer’s Price Index (IPC), given its impact on housing prices, mortgage collateral valuations, and consumers acquisition power
Interbank interest rate, given its impact on companies’ likelihood of default
Cooper, given its impact on the Chilean economy as a whole
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-164
Note 34 – Risk management, continued
Colombia:
-
GDP growth, given the significant impact on companies’ performance and collateral valuations
-
Unemployment rates, given its impact on secured and unsecure borrowers’ ability to meet their contractual repayments.
-
Interest rate, given its impact on companies’ likelihood of default
-
Exchange rates, given its impact on companies’ financial position and debt
-
Consumer’s Price Index (IPC), given its impact on housing prices and consumers acquisition power
Set out below are the changes to ECL as of December 31, 2018 that would result from reasonably possible changes in these parameters from the actual assumptions used in the Bank’s economic variable assumptions as set forth in the tables above for Base scenarios, upside scenarios, and downside scenarios.

ECL coverage of loans and accounts receivable at amortized cost subject to significant measurement
uncertainty as of December 31, 2018
   Chile    Colombia
   MCh$    MCh$
Reported ECL
      502,943    279,770
Loans and accounts receivable at amortized cost
      16,783,609    4,698,881
Reported Coverage (Reported ECL/ loans and accounts receivable at amortized cost)
   %    3.00    5.95
Consensus upside scenario (Upside scenario for ECL/ loans and accounts receivable at amortized cost)
   %    2.94    6.03
Consensus central scenario (Base scenario for ECL/ loans and accounts receivable at amortized cost)
   %    3.00    5.95
Consensus downside scenario (Downside scenario for ECL/ loans and accounts receivable at amortized cost)
   %    3.04    5.84
ECL coverage rates reflect the underlying observed credit defaults, the sensitivity to economic environment, extent of collateral and the effective maturity of the book.
Measurement of ECL
The key inputs used for measuring ECL are:
-
probability of default (PD);
-
loss given default (LGD); and
-
exposure at default (EAD).
As explained above these figures are generally derived from internally developed statistical models and other historical data and they are adjusted to reflect probability-weighted forward-looking information.
PD is an estimate of the likelihood of default over a given time horizon. It is estimated as at a point in time. The calculation is based on statistical rating models, and assessed using rating tools tailored to the various categories of counterparties and exposures. These statistical models are based on market data (where available), as well as internal data comprising both quantitative and qualitative factors. PDs are estimated considering the contractual maturities of exposures and estimated prepayment rates. The estimation is based on current conditions, adjusted to take into account estimates of future conditions that will impact PD.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-165
Note 34 – Risk management, continued
LGD is an estimate of the loss arising on default. It is based on the ~~following key elements:~~difference between the contractual cash flows due and those that the lender would expect to receive, taking into account cash flows from any collateral. The LGD models for secured assets consider forecasts of future collateral valuation taking into account sale discounts, time to realization of collateral, cross-collateralization and seniority of claim, cost of realization of collateral and cure rates (i.e. exit fromnon-performing status). LGD models for unsecured assets consider time of recovery, recovery rates and seniority of claims. The calculation is on a discounted cash flow basis, where the cash flows are discounted by the current interest rate.
·             ~~Loan policies.~~
·             ~~Loan approval processes.~~
·             ~~Sound risk culture that~~EAD is ~~consistent with~~an estimate of the ~~Bank’s strategy.~~
·             ~~Regulatory and preventative outlook on risk.~~
·             ~~Human resources with considerable expertise in loan-related decision making.~~
·             ~~Active participation from Credit Risk Division~~exposure at a future default date, taking into account expected changes in the ~~approval process, using a market segmented structure.~~
·             ~~Defined monitoring~~exposure after the reporting date, including repayments of principal and ~~collections processes with involvement from~~interest, and expected drawdowns on committed facilities. The Bank’s modelling approach for EAD reflects expected changes in the ~~commercial~~balance outstanding over the lifetime of the loan exposure that are permitted by the current contractual terms, such as amortization profiles, early repayment or overpayment, changes in utilization of undrawn commitments and ~~risk areas.~~
·             ~~Dissemination~~credit mitigation actions taken before default. The Bank uses EAD models that reflect the characteristics of ~~a risk culture throughout~~ the ~~Bank with internal and external training programs for the commercial and risk areas.~~
portfolios.
The Bank ~~also has credit committees,~~measures ECL considering the risk of default over the maximum contractual period (including extension options) over which ~~include risk managers that determine debtor risk ratings.~~
~~These committees define individual and group exposure levels with customers as well as mitigating conditions such as collateral, loan agreements, etc. As part of~~ the ~~policies it defines that all customers must be analyzed at least once a year when the credit line~~entity is ~~renewed or when a warning is activated, whichever occurs first.~~
~~The Bank’s risk management tool divides its portfolio into the following categories:~~
·             ~~Normal risk portfolio.~~
·             ~~Substandard portfolio.~~
·             ~~Default portfolio.~~
F-~~145~~

~~Table of Contents~~
~~Normal Risk Portfolio~~~~(30)~~
~~This includes debtors with payment capacity to comply normally with their obligations and commitments whose economic and financial situation shows no signs that this may change.~~
They are evaluated by analyzing a general parametric model with three qualitative factors (industry, shareholders and access to credit) and three quantitative financial rating parameters, which are weighted based on the Bank’s total sales.
~~Substandard Portfolio~~~~(31)~~
This portfolio includes debtors with financial difficulties that significantly affect their payment capacity and about which there are reasonable doubts regarding repayment of all principal and interest in the contractually agreed-upon terms, showing low flexibility to meet its financial obligations in the short term. Among other customers, this portfolio includes debtors with recent balances between 30 and 89 days past due that can be attributed to the company’s performance.
~~They are evaluated by analyzing a default parametric model that includes payment behavior and also considers the impact of negative results (losses).~~
~~Default Portfolio~~~~(32)~~
This portfolio consists of debtors managed by the normalization area, including customers with individual default ratings and all customers that have defaulted on any loan as a result of payment capacity problems, regardless of their rating.
~~The rating and asset control area reviews compliance with this provision on a monthly basis.~~
~~Contingent Commitments~~
~~The Bank operates with diverse instruments that, although they are~~ exposed to credit risk ~~are~~and not ~~reflected in~~a longer period, even if contact extension or renewal is common business practice. However, for financial instruments such as credit cards, revolving credit facilities and overdraft facilities that include both a loan and an undrawn commitment component, the ~~balance sheet. These include co-signatures~~Bank’s contractual ability to demand repayment and ~~guarantees, documentary letters of credit, performance and bid bonds and commitments to grant loans, among others.~~
~~Collaterals and guarantees represent an irrevocable payment obligation. In~~cancel the ~~event that a customer with a co-signer~~undrawn commitment does not ~~fulfill its obligations with third parties guaranteed by~~limit the ~~Bank, this will affect the corresponding payments so that these transactions represent the same~~Bank’s exposure to credit ~~risk as a common loan.~~
~~The letters of credit are commitments documented by~~losses to the ~~Bank on behalf of a customer that are guaranteed by merchandise on board, which therefore have less risk than direct indebtedness. Performance and bid bonds~~ ~~are contingent commitments that take effect only if the customer does not comply with a commitment made with a third party, guaranteed by them.~~
~~Financial Instruments~~
contractual notice period. For ~~this type of asset,~~such financial instruments the Bank measures ECL over the period that it is exposed to credit risk and ECL would not be mitigated by credit risk management actions, even if that period extends beyond the maximum contractual period. These financial instruments do not have a fixed term or repayment structure and have a short contractual cancellation period. However, the Bank does not enforce in the normalday-to-day management the contractual right to cancel these financial instruments. This is because these financial instruments are managed on a collective basis and are canceled only when the Bank becomes aware of an increase in credit risk at the facility level. This longer period is estimated taking into account the credit risk management actions that the Bank expects to take to mitigate ECL, e.g. reduction in limits or cancellation of the loan commitment.
The measurement of ECL is based on probability weighted average credit loss. As a result, the measurement of ~~not being able~~the loss allowance should be the same regardless of whether it is measured on an individual basis or a collective basis (although measurement on a collective basis is more practical for large portfolios of items). In relation to ~~collect from issuers using internal and external ratings such~~the assessment of whether there has been a significant increase in credit risk it can be necessary to perform the assessment on a collective basis as ~~risk rating agencies that are independent from the Bank.~~noted below.

Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-166
~~(30) Corresponding to amounts presented in~~ Note 34 ~~“Credit Quality by Financial Asset Class”, detail in Normal Portfolio (letter A1 to A6).~~
~~(31) Corresponding to amounts presented in Note 34 section Credit Quality by Financial Asset Class, detail in Impaired Portfolio (letter B1 to B2).~~
~~(32) Corresponding to amounts presented in Note 34 section Credit Quality by Financial Asset Class, detail in Impaired Portfolio (Impaired column)~~
F-~~146~~

~~Table of Contents~~– Risk management, continued

Credit quality
A detail by credit quality, which includes loans and accounts receivable from customers and interbank loans, under IFRS 9 as of December 31, 2018 and under IAS 39 as of December 31, 2017, is summarized as follows:

As of December 31, 2018
Corporate
Stage 1 Stage 2 Stage 3 Totals
corporate Percentage Stage 1 Stage 2 Stage 3 Totals
allowance Percentage
MCh$ MCh$ MCh$ MCh$ % MCh$ MCh$ MCh$ MCh$ %
A1
115,422 —   —   115,422 0.53 % 899 —   —   899 0.12 %
A2
681,792 —   —   681,792 3.12 % 1,477 —   —   1,477 0.19 %
A3
3,033,770 —   —   3,033,770 13.90 % 5,901 —   —   5,901 0.77 %
A4
4,007,691 —   —   4,007,691 18.36 % 37,650 —   —   37,650 4.90 %
A5
2,727,643 —   —   2,727,643 12.50 % 96,956 —   —   96,956 12.61 %
A6
—   837,283 —   837,283 3.84 % —   14,829 —   14,829 1.93 %
B1
—   377,954 —   377,954 1.73 % —   10,116 —   10,116 1.32 %
B2
—   104,513 —   104,513 0.48 % —   5,479 —   5,479 0.71 %
B3
—   84,197 —   84,197 0.39 % —   8,830 —   8,830 1.15 %
B4
—   297,570 —   297,570 1.36 % —   37,422 —   37,422 4.87 %
C1
—   —   137,216 137,216 0.63 % —   —   2,344 2,344 0.30 %
C2
—   —   79,134 79,134 0.36 % —   —   6,758 6,758 0.88 %
C3
—   —   34,263 34,263 0.16 % —   —   7,317 7,317 0.95 %
C4
—   —   62,242 62,242 0.29 % —   —   21,265 21,265 2.77 %
C5
—   —   63,181 63,181 0.29 % —   —   47,576 47,576 6.19 %
C6
—   —   127,874 127,874 0.59 % —   —   84,475 84,475 11.00 %

Subtotals corporate

10,566,318

1,701,517 503,910 12,771,745 58.53 % 142,883 76,676 169,735 389,294 50.66 %

As of December 31, 2018
Group
Stage 1 Stage 2 Stage 3 Total group Percentage Stage 1 Stage 2 Stage 3 Totals
allowance Percentage
MCh$ MCh$ MCh$ MCh$ % MCh$ MCh$ MCh$ MCh$ %
Commercial loans
1,710,659 95,045 131,158 1,936,862 8.87 % 39,864 20,622 35,390 95,876 12.47 %
Mortgage loans
3,626,811 659,119 159,897 4,445,827 20.37 % 5,756 37,800 22,561 66,117 8.60 %
Consumer loans
2,135,693 444,058 90,012 2,669,763 12.23 % 70,765 84,842 61,689 217,296 28.27 %

Subtotals group
7,473,163 1,198,222 381,067 9,052,452 41.47 % 116,385 143,264 119,640 379,289 49.34 %

Totals portfolio
18,039,481 2,899,739 884,977 21,824,197 100 % 259,268 219,940 289,375 768,583 100 %

Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-167
Note 34 – Risk management, continued

   As of December 31, 2017
Categories
   Individual    % over total portfolio Allowances    Cover range ratio
   MCh$    % MCh$    %
A1
   65,511    0.32 % 21    0.03 %
A2
   248,736    1.22 % 273    0.11 %
A3
   2,950,482    14.43 % 2,285    0.08 %
A4
   3,861,377    18.88 % 22,819    0.59 %
A5
   2,926,634    14.31 % 52,874    1.81 %
A6
   683,049    3.33 % 16,509    2.42 %






Normal portfolio
   10,735,789    52.49 % 94,781    0.88 %






B1
   205,536    1.00 % 6,087    2.96 %
B2
   120,640    0.59 % 2,315    1.92 %
Impaired
   779,828    3.81 % 195,177    25.03 %






Non-compliant portfolio
   1,106,004    5.40 % 203,579    18.41 %






Subtotals
   11,841,793    57.89 % 298,360    2.52 %












   As of December 31, 2017
Categories
   Group    % over total portfolio Allowance    Cover range ratio
   MCh$    % MCh$    %
Normal risk portfolio
   1,751,232    8.56 % 57,057    3.26 %
Non-compliant portfolio
   193,806    0.95 % 91,705    47.32 %






Commercial loans
   1,945,038    9.51 % 148,762    7.65 %






Normal risk portfolio
   3,975,744    19.44 % 22,730    0.57 %
Non-compliant portfolio
   177,009    0.87 % 12,289    6.94 %






Mortgage loans
   4,152,753    20.31 % 35,019    0.84 %






Normal risk portfolio
   2,396,246    11.72 % 93,255    3.89 %
Non-compliant portfolio
   117,060    0.57 % 43,339    37.02 %






Consumer loans
   2,513,306    12.29 % 136,594    5.43 %






Subtotals
   8,611,097    42.11 % 320,375    3.72 %












Totals
   20,452,890    100 % 618,735    3.03 %






The table below provides an analysis of the gross carrying amount of loans and advances to customers by past due status under IFRS 9:
   As of December 31, 2018
   Current    Less than 30
days overdue    Between 30
and 89 days
overdue    More than 90
days overdue    Totals    Total overdue
   MCh$    MCh$    MCh$    MCh$    MCh$    MCh$
Interbank loans
   341,707    —    —    —    341,707    —
Loans and accounts receivable from customers

Commercial loans
   13,683,048    251,596    117,386    314,870    14,366,900    683,852
Mortgage loans
   4,181,849    108,783    64,088    91,107    4,445,827    263,978
Consumer loans
   2,493,765    69,412    59,616    46,970    2,669,763    175,998












Totals
   20,700,369    429,791    241,090    452,947    21,824,197    1,123,828












The table below provides an analysis of the gross carrying amount of loans and advances to customers by overdue status under IAS 39:
   As of December 31, 2017
   Current    Less than 30
days overdue    Between 30
and 89 days
overdue    More than 90
days overdue    Totals    Total overdue
   MCh$    MCh$    MCh$    MCh$    MCh$    MCh$
Interbank loans
   70,285    —    —    —    70,285    —
Loans and accounts receivable from customers

Commercial loans
   13,526,944    211,535    143,063    319,377    14,200,919    673,975
Mortgage loans
   3,893,786    115,688    61,890    93,786    4,165,150    271,364
Consumer loans
   2,521,397    68,955    52,854    48,852    2,692,058    170,661












Totals
   20,012,412    396,178    257,807    462,015    21,128,412    1,116,000












An analysis for the movement of the allowance for losses during the year by individual and group portfolio is included in Note 10, letter c.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-168
Note 34 – Risk management, continued
Maximum Exposure to Credit Risk
The following table shows the Bank’s maximum credit risk exposure by financial asset as of December 31, 2018, 2017, 2016 ~~and 2015~~ for different balance sheet items, including derivatives, without deducting real guarantees or other credit enhancements received:

Maximum Exposure

12/31/2017

12/31/2016

12/31/2015

Notes

MCh$

MCh$

MCh$

Loans and receivables from banks, net

9

70,077

150,568

99,398

Loans and receivables from customers, net

10

19,764,078

20,444,648

6,705,492

Derivative financial instruments

8

1,248,775

1,102,769

227,984

Investments under agreements to resell

7

28,524

170,242

10,293

Financial investments available-for-sale

11

2,663,478

2,074,077

514,985

Held to maturity investments

11

202,030

226,433

—

Other assets

15

429,025

427,394

135,742

Total

24,405,987

24,596,131

7,693,894

Maximum Exposure as of December 31, 2018
Balance sheet asset Off-balance sheet Collateral Net exposure
Notes Gross
amounts Allowances Net amounts Gross
amounts Allowances Net
amounts Cash Non-cash
MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$ MCh$
Financial instruments at fair value through other comprehensive income
11 2,657,154 —   2,657,154 —   —   —   2,657,154
Loans and accounts receivable at amortized cost
10 21,482,490 768,120 20,714,370 5,383,914 45,848 5,338,066 —   13,143,140 12,909,296
Commercial loans
14,366,900 484,707 13,882,193 5,383,914 45,848 5,338,066 —   5,527,419 13,692,840
Mortgage loans
4,445,827 66,117 4,379,710 —   —   —   —   7,257,682 (2,877,972 )
Consumer loans
2,669,763 217,296 2,452,467 —   —   —   —   358,039 2,094,428
Financial instruments at amortized cost
11 198,923 —   198,923 —   —   —   —   —   198,923
Investments under resale agreements
7 109,467 —   109,467 —   —   —   —   109,467 —
Financial derivative contracts
8 1,368,957 —   1,368,957 —   —   —   91,223 —   1,277,734
Interbank loans, net
9 341,707 463 341,244 —   —   —   —   —   341,244
Other assets
15 467,806 —   467,806 —   —   —   —   —   467,806

Totals
26,626,504 768,583 25,857,921 5,383,914 45,848 5,338,066 91,223 13,252,607 17,852,157

      Maximum Exposure
      as of December 31,
   Notes    2017
      MCh$
Investments under resale agreements
   7    28,524
Financial derivative contracts
   8    1,248,775
Interbank loans, net
   9    70,077
Loans and accounts receivable from customers, net
   10    19,764,078
Available for sale instruments
   11    2,663,478
Held to maturity investments
   11    202,030
Other assets
   15    429,025


Totals
      24,405,987


A summary for the allowances for loan losses according to IFRS 9 is as follows:
As of December 31,
2018
MCh$
Loans and accounts receivable at amortized cost
782,713
Interbank loans, net
463
Provisions for contingent loans risk
20,942
Total allowances
804,118
For more detail on maximum credit risk exposure and concentration by type of financial instrument, see the specific Notes.

Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-169
Note 34 – Risk management, continued
The following table displays the concentration of credit risk by industry for financial assets:

   As of December 31,

12/31/2017

12/31/2016

12/31/2015

   2018 2017

Maximum
gross
exposure

Maximum
net
exposure (1)

%

Maximum
gross
exposure

Maximum
net
exposure (1)

%

Maximum
gross
exposure

Maximum
net
exposure (1)

%

   Note Maximum
gross
exposure    Maximum
net
exposure (1)    % Maximum
gross
exposure    Maximum
net
exposure (1)    %

Note

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$    MCh$ MCh$    MCh$
Manufacturing

1,040,491

960,774

7.24%

1,221,396

1,175,746

8.27%

444,647

432,418

9.74%

   1,097,211    994,246    7.64 % 1,040,491    960,774    7.24 %
Mining

644,061

419,582

3.16%

703,440

660,238

4.64%

203,501

202,984

4.46%

   677,777    675,973    4.72 % 644,061    419,582    3.16 %
Electricity, gas and water

936,483

466,008

3.51%

1,135,329

1,101,118

7.75%

323,299

323,961

7.08%

   957,373    769,643    6.66 % 936,483    466,008    3.51 %
Agriculture and Livestock

415,930

289,826

2.18%

427,745

415,040

2.92%

118,839

114,863

2.60%

Agriculture and livestock
   346,369    341,018    2.41 % 415,930    289,826    2.18 %
Forestry and wood extraction

38,807

32,165

0.24%

35,347

34,621

0.24%

25,146

25,036

0.55%

   29,683    24,362    0.21 % 38,807    32,165    0.24 %
Fishing

13,912

8,688

0.07%

58,770

50,014

0.35%

30,433

20,798

0.67%

   3,475    2,621    0.02 % 13,912    8,688    0.07 %
Transport

668,477

450,949

3.40%

694,353

670,160

4.71%

310,530

307,912

6.80%

   700,401    602,973    4.88 % 668,477    450,949    3.40 %
Communications

94,439

28,201

0.21%

80,160

77,433

0.54%

13,954

13,710

0.31%

   86,077    84,135    0.60 % 94,439    28,201    0.21 %
Construction

1,638,120

1,357,343

10.23%

1,624,794

1,596,341

11.23%

296,322

292,737

6.49%

   1,746,626    1,729,426    12.16 % 1,638,120    1,357,343    10.23 %
Commerce

1,712,850

998,567

7.54%

1,714,589

1,629,316

11.46%

480,645

469,286

10.53%

   1,620,108    1,599,435    11.27 % 1,712,850    998,567    7.53 %
Services

3,780,733

2,578,863

19.43%

4,287,373

4,183,200

29.42%

1,522,177

1,515,440

33.33%

   3,872,060    3,869,613    26.95 % 3,780,733    2,578,863    19.43 %
Others

2,732,243

5,678,666

42.79%

2,651,175

2,622,316

18.47%

796,973

785,326

17.44%

   3,229,740    3,188,748    22.48 % 2,732,243    5,678,666    42.79 %
Subtotal Commercial Loans

10 a)

13,716,546

13,269,632

100.00%

14,634,471

14,215,543

100.00%

4,566,466

4,504,471

100.00%

Consumer Loans

10 a)

2,513,306

2,376,712

2,480,964

2,364,060

700,757

673,424

Mortgage Loans

10 a)

4,152,753

4,117,734

3,888,517

3,865,045

1,533,848

1,527,597

Total

20,382,605

19,764,078

21,003,952

20,444,648

6,801,071

6,705,492











Subtotal commercial loans
   10 a ) 14,366,900    13,882,193    100 % 13,716,546    13,269,632    100.00 %
Consumer loans
   10 a ) 4,445,827    4,379,710    2,513,306    2,376,712
Mortgage loans
   10 a ) 2,669,763    2,452,467    4,152,753    4,117,734









Totals
   21,482,490    20,714,370    20,382,605    19,764,078










(1)
Net of allowances
~~(1)~~~~Net of allowances~~
Guarantees
In order to mitigate credit risk, guarantees have been established in the Bank’s favor. The main guarantees provided by customers are detailed as follows:

~~For loans to companies, the main guarantees are:~~
·             ~~Machinery and/or equipment~~
·             ~~Projects under construction, buildings with specific purposes and~~
·             ~~Urban plots or land.~~
~~For loans to individuals, the main guarantees are:~~
·             ~~Houses and~~
·             ~~Apartments.~~
For loans to individuals, the main guarantees are:
For loans to companies, the main guarantees are:
• Machinery and/or equipment
• Buildings for specific purposes under construction
• Agricultural land
• Maritime ships and aircrafts
• Mining infrastructure
• Inventory
• Agricultural assets
• Industrial assets
• Biological assets
• Other warranties
• Urban plots or land

Guarantees taken by the Bank to secure collections of rights reflected in its loan portfolios are ~~real~~ mortgage-type guarantees (urban and rural property, farm land, ships and aircraft, mining claims and other assets) and pledges (inventory, farm assets, industrial assets, plantings and other pledged assets). ~~As of~~
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-170
Note 34 – Risk management, continued

F-~~147~~

~~Table of Contents~~
~~2017, 2016 and 2015, the fair value of guarantees taken corresponds to 126.89%, 116.97% and 107.40% of the assets covered, respectively.~~
In the case of mortgage guarantees, as of December 31, 2017, 2016 and 2015, the fair value of the guarantees taken corresponds to 85.46%, 78.35% and 69.98% of the balance receivable on loans, respectively.
F-~~148~~

~~Table of Contents~~
~~Credit Quality by Financial Asset Class~~
~~A detail by credit quality is summarized as follows:~~

Normal Portfolio

Impaired Portfolio (*)

Group Portfolio

Normal

Impaired

A1

A2

A3

A4

A5

A6

B1

B2

Impaired

Subtotal

Total

Portfolio

Portfolio

Subtotal

General Total

12/31/2017

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

Loans and receivables from banks

862

42,105

23,025

4,293

—

—

—

—

—

—

70,285

—

—

—

70,285

Provisions

—

76

132

—

—

—

—

—

—

—

208

—

—

—

208

% Provisions

0.00
%
0.18
%
0.57
%
0.00
%
0.00
%
0.00
%
0.00
%
0.00
%
0.00
%
0.00
%
0.30
%
0.00
%
0.00
%
0.00
%
0.30
%
Loans and receivables from customers Commercial Loans:

General Commercial loans

34,371

188,865

2,651,517

3,263,945

2,423,298

593,069

158,313

106,093

606,942

871,348

10,026,413

980,093

109,570

1,089,663

11,116,076

Foreign Trade loans

—

—

150,154

244,954

145,609

13,995

17,078

8,085

85,032

110,195

664,907

27,168

8,658

35,826

700,733

Lines of credit and overdrafts

633

922

13,317

25,229

24,647

5,443

4,345

640

4,447

9,432

79,623

48,594

11,131

59,725

139,348

Factored receivables

27,456

9,726

17,735

50,559

18,656

3,443

598

—

298

896

128,471

12,202

65

12,267

140,738

Student loans

—

—

—

—

—

—

—

—

—

—

—

598,717

54,286

653,003

653,003

Leasing contracts

2,186

7,059

94,226

269,425

310,915

66,536

25,076

5,783

82,231

113,090

863,437

70,641

6,711

77,352

940,789

Other outstanding loans

3

59

508

2,972

3,509

563

126

39

878

1,043

8,657

13,817

3,385

17,202

25,859

Subtotal Commercial loans

64,649

206,631

2,927,457

3,857,084

2,926,634

683,049

205,536

120,640

779,828

1,106,004

11,771,508

1,751,232

193,806

1,945,038

13,716,546

Provisions

21

197

2,153

22,819

52,874

16,509

6,087

2,315

195,177

203,579

298,152

57,057

91,705

148,762

446,914

% Provisión

0.03
%
0.10
%
0.07
%
0.59
%
1.81
%
2.42
%
2.96
%
1.92
%
25.03
%
18.41
%
2.53
%
3.26
%
47.32
%
7.65
%
3.26
%
Consumer loans

—

—

—

—

—

—

—

—

—

—

—

2,396,246

117,060

2,513,306

2,513,306

Provisions

—

—

—

—

—

—

—

—

—

—

—

93,255

43,339

136,594

136,594

% Provisión

—

—

—

—

—

—

—

—

—

—

—

3.89
%
37.02
%
5.43
%
5.43
%
Mortgage loans

—

—

—

—

—

—

—

—

—

—

—

3,975,744

177,009

4,152,753

4,152,753

Provisions

—

—

—

—

—

—

—

—

—

—

—

22,730

12,289

35,019

35,019

% Provisión

—

—

—

—

—

—

—

—

—

—

—

0.57
%
6.94
%
0.84
%
0.84
%
Total loans and receivable from customers

64,649

206,631

2,927,457

3,857,084

2,926,634

683,049

205,536

120,640

779,828

1,106,004

11,771,508

8,123,222

487,875

8,611,097

20,382,605

Provisions

21

197

2,153

22,819

52,874

16,509

6,087

2,315

195,177

203,579

298,152

173,042

147,333

320,375

618,527

% Provisión

0.03
%
0.10
%
0.07
%
0.59
%
1.81
%
2.42
%
2.96
%
1.92
%
25.03
%
18.41
%
2.53
%
2.13
%
30.20
%
3.72
%
3.03
%
Financial investments

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

~~(*) B1 and B2: Customers who have financial difficulties but still are not impaired.~~
~~Impaired: Customers who have financial difficulties and are impaired.~~
F-~~149~~

~~Table of Contents~~

Normal Portfolio

Impaired Portfolio (*)

Total

Group Portfolio

12/31/2016

A1

A2

A3

A4

A5

A6

B1

B2

Impaired

Subtotal

Normal
Portfolio

Impaired
Portfolio

Subtotal

General Total

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

Loans and receivables from banks

37,960

76,834

33,751

2,235

—

—

—

—

—

—

150,780

—

—

—

150,780

Provisions

14

85

74

39

—

—

—

—

—

—

212

—

—

—

212

% Provisions

0.04
%
0.11
%
0.22
%
1.74
%
0.00
%
0.00
%
0.00
%
0.00
%
0.00
%
0.00
%
0.14
%
0.00
%
0.00
%
0.00
%
0.14
%
Loans and receivables from customers Commercial Loans:

General Commercial loans

47,699

204,313

2,647,749

3,852,211

2,438,286

509,927

288,559

124,372

533,585

946,516

10,646,701

1,195,886

113,777

1,309,663

11,956,364

Foreign Trade loans

—

727

150,548

337,499

113,418

34,313

21,950

7,419

67,299

96,668

733,173

20,198

773

20,971

754,144

Lines of credit and overdrafts

2

407

10,443

19,249

20,847

7,218

2,140

914

3,452

6,506

64,672

65,640

3,389

69,029

133,701

Factored receivables

11,811

9,550

20,040

15,093

11,729

2,903

128

—

835

963

72,089

3,713

339

4,052

76,141

Student loans

—

—

—

—

—

—

—

—

—

—

—

583,776

26,539

610,315

610,315

Leasing contracts

4,234

6,064

107,786

307,019

325,678

62,920

54,327

6,998

87,025

148,350

962,051

104,279

7,176

111,455

1,073,506

Other outstanding loans

111

312

2,101

3,264

3,318

664

493

51

826

1,370

11,140

17,446

1,714

19,160

30,300

Subtotal Commercial loans

63,857

221,373

2,938,667

4,534,335

2,913,276

617,945

367,597

139,754

693,022

1,200,373

12,489,826

1,990,938

153,707

2,144,645

14,634,471

Provisions

—

28

5,463

33,775

47,643

23,149

14,663

21,760

219,577

256,000

366,058

21,337

31,533

52,870

418,928

% Provisión

0.00
%
0.01
%
0.19
%
0.74
%
1.64
%
3.75
%
3.99
%
15.57
%
31.68
%
21.33
%
2.93
%
1.07
%
20.52
%
2.47
%
2.86
%
Consumer loans

—

—

—

—

—

—

—

—

—

—

—

2,387,009

93,955

2,480,964

2,480,964

Provisions

—

—

—

—

—

—

—

—

—

—

—

65,934

50,970

116,904

116,904

% Provisión

—

—

—

—

—

—

—

—

—

—

—

2.76
%
54.25
%
4.71
%
4.71
%
Mortgage loans

—

—

—

—

—

—

—

—

—

—

—

3,755,370

133,147

3,888,517

3,888,517

Provisions

—

—

—

—

—

—

—

—

—

—

—

12,494

10,978

23,472

23,472

% Provisión

—

—

—

—

—

—

—

—

—

—

—

0.33
%
8.25
%
0.60
%
0.60
%
Total loans and receivable from customers

63,857

221,373

2,938,667

4,534,335

2,913,276

617,945

367,597

139,754

693,022

1,200,373

12,489,826

8,133,317

380,809

8,514,126

21,003,952

Provisions

—

28

5,463

33,775

47,643

23,149

14,663

21,760

219,577

256,000

366,058

99,765

93,481

193,246

559,304

% Provisión

0.00
%
0.01
%
0.19
%
0.74
%
1.64
%
3.75
%
3.99
%
15.57
%
31.68
%
21.33
%
2.93
%
1.23
%
24.55
%
2.27
%
2.66
%
Financial investments

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

~~(*) B1 and B2: Customers who have financial difficulties but still are not impaired.~~
~~Impaired: Customers who have financial difficulties and are impaired.~~
F-~~150~~

~~Table of Contents~~

Normal Portfolio

Impaired Portfolio (*)

Group Portfolio

A1

A2

A3

A4

A5

A6

B1

B2

Impaired

Subtotal

Total

Normal
Portfolio

Impaired
Portfolio

Subtotal

General Total

12/31/2015

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

Loans and receivables from banks

35,506

60,395

3,567

—

—

—

—

—

—

—

99,468

—

—

—

99,468

Provisions

13

49

8

—

—

—

—

—

—

—

70

—

—

—

70

% Provisions

0.04
%
0.08
%
0.22
%
0.00
%
0.00
%
0.00
%
0.00
%
0.00
%
0.00
%
0.00
%
0.07
%
0.00
%
0.00
%
0.00
%
0.07
%
Loans and receivables from customers Commercial Loans:

General Commercial loans

12,155

162,931

1,259,304

1,059,879

152,478

231,136

12,627

29,873

37,617

80,117

2,958,000

598,460

48,061

646,521

3,604,521

Foreign Trade loans

—

70,317

186,081

92,216

25,507

22,099

2,933

6,057

18,748

27,738

423,958

5,351

11

5,362

429,320

Lines of credit and overdrafts

2

2,865

3,735

5,443

1,268

1,315

528

47

948

1,523

16,151

21,977

986

22,963

39,114

Factored receivables

5,559

5,740

21,619

15,119

2,053

1,430

112

—

717

829

52,349

4,854

29

4,883

57,232

Student loans

—

—

—

—

—

—

—

—

—

—

—

167,195

9,828

177,023

177,023

Leasing contracts

—

11,614

90,037

63,768

21,626

15,527

3,322

2,167

22,175

27,664

230,236

18,088

431

18,519

248,755

Other outstanding loans

52

93

1,487

640

180

215

12

12

77

101

2,768

7,718

15

7,733

10,501

Subtotal Commercial loans

17,768

253,560

1,562,263

1,237,065

203,112

271,722

19,534

38,156

80,282

137,972

3,683,462

823,643

59,361

883,004

4,566,466

Provisions

9

254

1,691

5,297

3,984

4,615

1,681

4,905

28,590

35,176

51,026

5,350

5,619

10,969

61,995

% Provisión

0.05
%
0.10
%
0.11
%
0.43
%
1.96
%
1.70
%
8.61
%
12.86
%
35.61
%
25.50
%
1.39
%
0.65
%
9.47
%
1.24
%
1.36
%
Consumer loans

—

—

—

—

—

—

—

—

—

—

—

662,936

37,821

700,757

700,757

Provisions

—

—

—

—

—

—

—

—

—

—

—

13,721

13,612

27,333

27,333

% Provisión

—

—

—

—

—

—

—

—

—

—

—

2.07
%
35.99
%
3.90
%
3.90
%
Mortgage loans

—

—

—

—

—

—

—

—

—

—

—

1,469,501

64,347

1,533,848

1,533,848

Provisions

—

—

—

—

—

—

—

—

—

—

—

2,846

3,405

6,251

6,251

% Provisión

—

—

—

—

—

—

—

—

—

—

—

0.19
%
5.29
%
0.41
%
0.41
%
Total loans and receivable from customers

17,768

253,560

1,562,263

1,237,065

203,112

271,722

19,534

38,156

80,282

137,972

3,683,462

2,956,080

161,529

3,117,609

6,801,071

Provisions

9

254

1,691

5,297

3,984

4,615

1,681

4,905

28,590

35,176

51,026

21,917

22,636

44,553

95,579

% Provisión

0.05
%
0.10
%
0.11
%
0.43
%
1.96
%
1.70
%
8.61
%
12.86
%
35.61
%
25.50
%
1.39
%
0.74
%
14.01
%
1.43
%
1.41
%
Financial investments

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

~~(*) B1 and B2: Customers who have financial difficulties but still are not impaired.~~
~~Impaired: Customers who have financial difficulties and are impaired.~~
F-~~151~~

~~Table of Contents~~
~~An analysis of the age of past-due loans by class of financial asset is provided below(33)~~:

As of December 31, 2017

Up to date

From 1 to 29
days

From 30 to
89 days

Over 90 days
or more

Loans and
receivables to
customers

Total
overdue
debt

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

Loans and receivables to banks

70,285

—

—

—

70,285

—

Loans and receivables to customers:

Commercial loans

13,526,944

211,535

143,063

319,377

14,200,919

673,975

Mortgage loans

3,893,786

115,688

61,890

93,786

4,165,150

271,364

Consumer loans

2,521,397

68,955

52,854

48,852

2,692,058

170,661

Total

20,012,412

396,178

257,807

462,015

21,128,412

1,116,000

As of December 31, 2016

Up to date

From 1 to 29
days

From 30 to
89 days

Over 90 days
or more

Loans and
receivables to
customers

Total
overdue
debt

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

Loans and receivables to banks

150,780

—

—

—

150,780

—

Loans and receivables to customers:

Commercial loans

14,438,474

103,689

247,807

284,774

15,074,744

636,270

Mortgage loans

3,881,940

2,137

1,532

12,611

3,898,220

16,280

Consumer loans

2,418,789

9,408

10,309

169,690

2,608,196

189,407

Total

20,889,983

115,234

259,648

467,075

21,731,940

841,957

As of December 31, 2015

Up to date

From 1 to 29
days

From 30 to
89 days

Over 90 days
or more

Loans and
receivables to
customers

Total
overdue
debt

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

Loans and receivables to banks

98,398

—

—

—

98,398

—

Loans and receivables to customers:

Commercial loans

4,527,939

27,487

13,600

48,101

4,617,127

89,188

Mortgage loans

1,533,536

446

429

1,864

1,536,275

2,739

Consumer loans

697,182

1,906

3,587

56,190

758,865

61,683

Total

6,857,055

29,839

17,616

106,155

7,010,665

153,610

(33) This information includes obligations with interest and indexation accrued as agreed and excludes penalty interest for default. Consequently, the tables do not consider the values of the mentioned assets but rather the debts due, which excludes those obligations for transferred assets that have not been derecognized for financial or accounting reasons and of which the bank or its subsidiaries are not creditors, and includes those obligations for acquired loan titles that are calculated as financing for the transferor in the Statement of Financial Position.
F-~~152~~

~~Table of Contents~~
~~Assets and liabilities by currency~~
~~The following tables detail assets and liabilities by currency as of December 31, 2017, 2016 and 2015:~~
~~As of December 31, 2017:~~

US$

Euro

Yen

Sterlin
pounds

Colombian
Pesos

Other
currencies

UF

Pesos

ER (*)

Total

Notes

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

Cash and deposits in banks

5

377,014

10,340

16

38

354,751

834

—

221,037

—

964,030

Cash in the process of collection

5

22,202

9,286

—

1,067

48

—

124,414

—

157,017

Trading portfolio financial assets

6

—

—

—

—

389,409

—

—

25,652

—

415,061

Investments under agreements to resell

7

218

—

—

—

26,232

—

—

2,074

—

28,524

Derivative financial instruments

8

119,997

—

—

—

90,773

—

70,174

967,831

—

1,248,775

Loans and receivables from banks, net

9

35,287

—

—

—

862

—

—

33,928

—

70,077

Loans and receivables from customers, net

10

2,204,036

—

—

—

4,234,024

—

7,693,789

5,625,571

6,658

19,764,078

Financial investments available-for-sale

11

14,053

—

—

—

725,568

—

999,540

914,657

9,660

2,663,478

Held to maturity investments

11

95,652

—

—

—

106,378

—

—

—

—

202,030

Intangible assets

12

1,422

��

—

—

183,712

—

—

1,377,520

—

1,562,654

Property, plant and equipment, net

13

1,043

—

—

—

48,098

—

—

81,438

—

130,579

Current income taxes

14

—

—

—

—

36,359

—

—

202,093

—

238,452

Deferred income taxes

14

24,885

—

—

—

—

—

—

115,800

—

140,685

Other assets

15

95,806

677

2

80

80,308

—

12,844

239,308

—

429,025

Non-current assets held for sale

15

—

—

—

—

—

—

—

18,308

—

18,308

Total Assets

2,991,615

20,303

18

118

6,277,541

882

8,776,347

9,949,631

16,318

28,032,773

Current accounts and demand deposits

16

432,253

6,076

—

8

1,742,508

44

7,803

1,952,975

—

4,141,667

Transaction in the course of payment

5

53,097

—

—

—

—

—

—

56,399

—

109,496

Obligations under repurchase agreements

7

—

—

—

—

376,656

—

—

44,264

—

420,920

Time deposits and saving accounts

16

1,013,235

6,429

—

—

2,196,671

—

814,336

6,034,571

1

10,065,243

Derivative financial instruments

8

82,231

—

—

—

59,130

—

84,530

869,263

—

1,095,154

Borrowings from financial institutions

17

1,516,717

2,269

4,869

—

650,987

587

21,958

(1,257
)
—

2,196,130

Debt issued

18

923,718

—

—

—

465,476

—

3,381,318

1,179,526

—

5,950,038

Other financial obligations

18

—

—

—

—

811

—

—

16,255

—

17,066

Current income tax provision

14

—

—

—

—

—

—

—

624

—

624

Deferred income taxes

14

—

—

—

—

26,301

—

—

53

—

26,354

Provisions

19

25,772

—

—

—

56,851

—

—

35,266

—

117,889

Other liabilities

20

86,648

—

—

—

63,675

—

166,867

145,598

647

463,435

Liabilities directly associated with non-currente assets held for sale

20

—

—

—

—

—

—

—

—

—

—

Total Liabilities

4,133,671

14,774

4,869

8

5,639,066

631

4,476,812

10,333,537

648

24,604,016

Net Assets (Liabilities)

(1,142,056
)
5,529

(4,851
)
110

638,475

251

4,299,535

(383,906
)
15,670

3,428,757

Contingent loans

455,991

3,919

3,537

—

1,015,275

—

—

3,813,073

—

5,291,795

Net Assets (Liabilities) position

(686,065
)
9,448

(1,314
)
110

1,653,750

251

4,299,535

3,429,167

15,670

8,720,552

~~(*) Exchange rate~~
F-~~153~~

~~Table of Contents~~
~~As of December 31, 2016:~~

US$

Euro

Yen

Sterlin
pounds

Colombian
Pesos

Other
currencies

UF

Pesos

ER (*)

Total

Notes

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

Cash and deposits in banks

5

450,282

11,255

28

75

670,955

780

—

353,762

—

1,487,137

Cash in the process of collection

5

40,289

842

—

3,216

—

—

101,422

—

145,769

Trading portfolio financial assets

6

—

—

—

—

567,850

—

10,603

54,104

—

632,557

Investments under agreements to resell

7

—

—

—

—

136,422

—

—

33,820

—

170,242

Derivative financial instruments

8

121,377

—

—

—

92,635

—

63,946

824,811

—

1,102,769

Loans and receivables from banks, net

9

91,261

—

—

—

59,310

—

—

(3
)
—

150,568

Loans and receivables from customers, net

10

2,458,017

—

—

—

4,773,065

—

7,508,358

5,697,061

8,147

20,444,648

Financial investments available-for-sale

11

28,724

—

—

—

447,126

—

461,067

1,126,737

10,423

2,074,077

Held to maturity investments

11

94,258

—

—

—

132,164

—

—

11

—

226,433

Intangible assets

12

76

—

—

—

211,021

—

—

1,403,378

—

1,614,475

Property, plant and equipment, net

13

1,227

—

—

—

38,921

—

—

80,895

—

121,043

Current income taxes

14

770

—

—

—

25,354

—

—

138,172

—

164,296

Deferred income taxes

14

23,340

—

—

—

26

—

—

87,399

—

110,765

Other assets

15

168,198

375

—

—

93,233

—

6,371

159,215

2

427,394

Non-current assets held for sale

15

—

—

—

—

—

—

—

37,164

—

37,164

Total Assets

3,477,819

12,472

28

75

7,251,298

780

8,050,345

10,097,948

18,572

28,909,337

Current accounts and demand deposits

16

410,288

7,571

2

98

2,121,456

31

8,490

1,905,255

—

4,453,191

Transaction in the course of payment

5

28,543

917

—

108

3

313

—

37,529

—

67,413

Obligations under repurchase agreements

7

—

—

—

—

368,409

—

—

5,470

—

373,879

Time deposits and saving accounts

16

1,449,128

244

—

—

2,691,969

—

1,314,902

6,125,462

5

11,581,710

Derivative financial instruments

8

83,779

—

—

—

52,903

—

95,381

675,271

—

907,334

Borrowings from financial institutions

17

1,639,878

400

39

—

539,734

9

—

(190
)
—

2,179,870

Debt issued

18

1,013,595

—

—

—

585,600

—

3,610,708

250,350

—

5,460,253

Other financial obligations

18

—

—

—

—

2,265

—

—

23,298

—

25,563

Current income tax provision

14

—

—

—

—

1,411

—

—

475

—

1,886

Deferred income taxes

14

—

—

—

—

57,607

—

—

29

—

57,636

Provisions

19

5,975

—

—

—

37,625

—

—

56,448

—

100,048

Other liabilities

20

54,666

4,318

—

—

65,343

—

—

145,483

—

269,810

Liabilities directly associated with non-currente assets held for sale

20

—

—

—

—

—

—

—

7,032

—

7,032

Total Liabilities

4,685,852

13,450

41

206

6,524,325

353

5,029,481

9,231,912

5

25,485,625

Net Assets (Liabilities)

(1,208,033
)
(978
)
(13
)
(131
)
726,973

427

3,020,864

866,036

18,567

3,423,712

Contingent loans

21

578,432

2,972

431

—

948,343

—

—

3,779,958

—

5,310,136

Net Assets (Liabilities) position

(629,601
)
1,994

418

(131
)
1,675,316

427

3,020,864

4,645,994

18,567

8,733,848

~~(*) Exchange rate~~
F-~~154~~

~~Table of Contents~~
~~As of December 31, 2015:~~

US$

Euro

Yen

Sterlin
pounds

Colombian
Pesos

Other
currencies

UF

Pesos

ER (*)

Total

Notes

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

Cash and deposits in banks

5

174,423

3,505

—

19

—

35

—

299,827

—

477,809

Cash in the process of collection

5

22,777

700

—

—

—

18

—

38,600

—

62,095

Trading portfolio financial assets

6

—

—

—

—

—

—

2,678

15,087

—

17,765

Investments under agreements to resell

7

—

—

—

—

—

—

—

10,293

—

10,293

Derivative financial instruments

8

61,102

—

—

—

—

—

36,695

130,187

—

227,984

Loans and receivables from banks, net

9

99,158

—

—

—

—

—

—

240

—

99,398

Loans and receivables from customers, net

10

1,241,249

7,675

52

—

—

—

3,312,378

2,127,269

16,869

6,705,492

Financial investments available-for-sale

11

—

—

—

—

—

—

290,254

224,731

—

514,985

Held to maturity investments

11

—

—

—

—

—

—

—

—

—

—

Intangible assets

12

—

—

—

—

—

—

—

51,809

—

51,809

Property, plant and equipment, net

13

—

—

—

—

—

—

—

33,970

—

33,970

Current income taxes

14

—

—

—

—

—

—

8,275

—

8,275

Deferred income taxes

14

—

—

—

—

—

—

—

13,930

—

13,930

Other assets

15

74,820

5

—

—

—

—

—

60,917

—

135,742

Non-current assets held for sale

15

—

—

—

—

—

—

—

1,785

—

1,785

Total Assets

1,673,529

11,885

52

19

—

53

3,642,005

3,016,920

16,869

8,361,332

Current accounts and demand deposits

16

158,456

3,092

—

13

—

11

—

819,777

—

981,349

Transaction in the course of payment

5

8,114

108

—

—

—

—

—

18,155

—

26,377

Obligations under repurchase agreements

7

—

—

—

—

—

—

—

43,727

—

43,727

Time deposits and saving accounts

16

572,304

—

—

—

—

—

1,200,423

2,179,846

—

3,952,573

Derivative financial instruments

8

48,164

—

—

—

—

—

51,883

153,136

—

253,183

Borrowings from financial institutions

17

658,070

467

52

—

—

11

—

—

—

658,600

Debt issued

18

—

—

—

—

—

—

1,473,174

31,161

—

1,504,335

Other financial obligations

18

—

—

—

—

—

—

7,722

13,011

—

20,733

Current income tax provision

14

—

—

—

—

—

—

—

543

—

543

Deferred income taxes

14

—

—

—

—

—

—

—

67

—

67

Provisions

19

—

—

—

—

—

—

—

75,924

—

75,924

Other liabilities

20

1,049

—

—

—

—

16

—

51,415

—

52,480

Liabilities directly associated with non-currente assets held for sale

20

—

—

—

—

—

—

—

—

—

—

Total Liabilities

1,446,157

3,667

52

13

—

38

2,733,202

3,386,762

—

7,569,891

Net Assets (Liabilities)

227,372

8,218

—

6

—

15

908,803

(369,842
)
16,869

791,441

Contingent loans

21

132,521

5,057

11

719

—

—

—

2,153,773

—

2,292,081

Net Assets (Liabilities) position

359,893

13,275

11

725

—

15

908,803

1,783,931

16,869

3,083,522

~~(*) Exchange rate~~
F-~~155~~

~~Table of Contents~~
b.2 Financial Risk
a.Definition and Principles of Financial Risk Management
~~While there is no single definition of financial risk, the~~The Bank defines this risk as the possibility of an event having unexpected financial consequences on the institution. Although this definition involves a strong adversity component, it also involves an important opportunity component. Therefore, the purpose of financial risk management is not to eliminate this risk, but rather to limit its exposure to negative events in line with the risk appetite of the Bank’s shareholders and the regulations that govern the institution. The main financial risks to which the Bank is exposed are: ~~market risk, liquidity risk~~Market Risk, Liquidity Risk and ~~counterparty risk.~~Counterparty Risk.
~~a.1)~~b.2.1)    Market Risk
Market ~~risk~~Risk is the exposure to economic gains or losses caused by movements in prices and market variables. This risk stems from the activities of the ~~trading~~Trading and ~~banking books(34)~~.Banking Books. In the first case, it comes from activities intended to obtain short-term gains and from the intensive use of fair value instruments. In the second case, with a more long-term vision, it stems from commercial activities with products valued at amortized cost.
The following section describes the main market risk factors to which the Bank and its subsidiaries are exposed:
b.2.1.1) Currency Risk
·~~Foreign Exchange Risk~~
~~Foreign exchange~~Currency risk is the exposure to adverse movements in the exchange rates of currencies other than ~~the~~their base currency (CLP in the case of operations in Chile and COP in the case of operations in Colombia) for all ~~balance sheet~~those positions inside and ~~off-balance sheet positions.~~outside of balance. The main sources of ~~foreign~~ exchange risk are:

·Positions in foreign currency ~~(“FX”)~~(MX) within the ~~trading book.~~attributions of the Trading Book.
·
Currency mismatches between the assets and liabilities inof the ~~banking book.~~Banking Book.
·    ~~Cash~~
Currency flow ~~mismatches in different currencies.~~mismatches.
·
Structural positions, ~~produced from~~generated by consolidating our financial statements, assets and liabilities ~~from our foreign branches and subsidiaries~~ denominated in currencies other than the Chilean ~~peso. As a result,~~peso registered in our branches and subsidiaries abroad.
The foregoing means that movements in exchange rates can generate volatility ~~within~~in both the result and the Bank’s ~~income statement and~~ equity. This effect is known as “translation ~~risk.”~~risk”.
b.2.1.2) Inflation and other indexes adjustments Risk
·~~Indexation Risk~~
~~Indexation~~The inflation and other indexes adjustment risk is the exposure due to changes in ~~indexed~~ units ~~(e.g.. Unidad de Fomento (“UF”), Unidad de Valor Real (“UVR”)~~or indexes of readjustment (such as UF, UVR or others) ~~linked to domestic~~defined in national or foreign currency, in which ~~any~~some of the instruments, contracts or other transactions ~~recorded~~registered in the ~~Statement of Financial Position may be denominated.~~balance with such characteristics.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-171
Note 34 – Risk management, continued

·b.2.1.3)Interest Rate Risk
Interest ~~rate risk~~Rate Risk is the exposure to movements in market interest rates. Changes in market interest rates can affect both the price of instruments recorded at fair value and the financial margin and other gains from the ~~banking book~~Banking Book such as fees. Fluctuations in interest rates also affect the Bank’s economic value.
Interest rate risk can be represented by sensitivities to parallel and/ornon-parallel yield shifts with the effects reflected in the prices of instruments, the financial margin, equity and economic value.
~~(34)~~ The ~~trading book includes non-derivative financial instruments that have been classified as trading instruments~~measurement of the structural interest rate risk is carried out through the representation by risk factor of the cash flows expressed in fair value, assigned on the dates of repricing and ~~all derivative positions that have not been classified as hedging instruments, according to accounting standards.~~by currency. This methodology facilitates the detection of concentrations of interest risk in the different terms.
~~The banking book includes all positions~~All the balance sheet and off balance sheet items are unbundled in ~~derivative~~their flows and ~~non-derivative instruments~~placed at the repricing/maturity. In the case of those accounts that do not ~~form part~~have a contractual maturity, an internal model of analysis and estimation of their durations and sensitivities is used.
The following are the Banking Book items (products valued at amortized cost and FVTOCI / instruments available for sale and derivatives valued at fair value) for the most relevant currencies in which the Bank trades at the end of the ~~trading book.~~year ended December 31, 2018 and 2017:

   As of December 31, 2018
Positions    Up to 1 month Between 1 and 3
months More than 3 months
and less 1 year Between 1 and
3 years More than
3 years Totals

   MCh$ MCh$ MCh$ MCh$ MCh$ MCh$
ASSETS
   7,361,827 2,732,465 5,510,072 4,787,052 8,314,688 28,706,104


CLP
   3,519,009 1,000,478 1,753,132 1,800,011 1,181,157 9,253,787
CLF
   466,115 447,398 1,329,598 1,845,604 6,182,033 10,270,748
USD
   1,469,457 623,505 1,197,716 126,122 102,349 3,519,149
COP
   1,907,246 661,084 1,229,626 1,015,315 849,149 5,662,420


LIABILITIES
   (14,009,676 ) (2,685,555 ) (4,724,403 ) (2,206,000 ) (5,849,673 ) (29,475,307 )


CLP
   (8,733,561 ) (1,463,211 ) (2,101,205 ) (560,099 ) (330,000 ) (13,188,076 )
CLF
   (214,266 ) (181,744 ) (190,917 ) (1,072,879 ) (5,201,884 ) (6,861,690 )
USD
   (1,319,813 ) (643,544 ) (1,750,434 ) (173,922 ) —   (3,887,713 )
COP
   (3,742,036 ) (397,056 ) (681,847 ) (399,100 ) (317,789 ) (5,537,828 )


Derivatives
   (729,147 ) 444,096 251,673 (21,576 ) 784,784 729,830


CLP
   (209,799 ) 1,521,695 394,300 209,804 65,913 1,981,913
CLF
   (366,332 ) (1,221,035 ) (469,699 ) (330,428 ) 762,022 (1,625,472 )
USD
   (50,293 ) 263,381 452,557 (38,395 ) (8,123 ) 619,127
COP
   (102,723 ) (119,945 ) (125,485 ) 137,443 (35,028 ) (245,738 )


F-~~156~~
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-172

~~Table of Contents~~Note 34 – Risk management, continued

   As of December 31, 2017
Positions
   Up to 1
month Between 1
and 3
months More than 3
months and
less 1 year Between 1
and 3 years More than 3
years Totals
   MCh$ MCh$ MCh$ MCh$ MCh$ MCh$
ASSETS
   7,436,586 2,246,446 5,019,349 4,535,451 5,162,137 24,399,969


CLP
   4,256,811 892,701 1,688,269 1,315,539 665,015 8,818,335
CLF
   481,000 510,095 2,008,605 2,172,278 3,891,622 9,063,600
USD
   702,899 263,710 547,828 33,258 11,851 1,559,546
COP
   1,995,876 579,940 774,647 1,014,376 593,649 4,958,488


LIABILITIES
   (11,817,755 ) (2,349,046 ) (4,811,419 ) (3,107,492 ) (4,272,956 ) (26,358,668 )


CLP
   (6,418,945 ) (1,147,278 ) (3,162,828 ) (1,204,044 ) (221,116 ) (12,154,211 )
CLF
   (352,331 ) (255,086 ) (423,122 ) (968,507 ) (3,748,085 ) (5,747,131 )
USD
   (1,861,588 ) (318,197 ) (539,389 ) (450,818 ) —   (3,169,992 )
COP
   (3,184,891 ) (628,485 ) (686,080 ) (484,123 ) (303,755 ) (5,287,334 )


Derivatives
   256,630 (35,782 ) (808,002 ) 186,303 80,255 (320,596 )


CLP
   819,878 456,293 268,834 (324,113 ) (152,389 ) 1,068,503
CLF
   (1,209,472 ) (508,032 ) (817,140 ) (226,061 ) 321,390 (2,439,315 )
USD
   879,996 (47,020 ) 70,834 361,999 6,409 1,272,218
COP
   (233,772 ) 62,977 (330,530 ) 374,478 (95,155 ) (222,002 )
The expositions presented above correspond to the present values resulting from:
Model contract flows according to their behaviors that affect market risk exposure. Example: prepayment, renewal, etc.
Discount the flows of the items recorded to accrual at a rate that represents the opportunity cost of the liability/ asset.
Discount the flows of items accounted to the market at the market rate.
·b.2.1.4)Volatility Risk
In addition to the exposure related to the underlying asset, issuing options has other risks. These risks arise from thenon-linear relationship between the gain generated by the option and the price and level of the underlying factors, as well as exposure to changes in the price volatility of the underlying asset.
~~a.2) Funding~~ b.2.1.5)Liquidity Risk
~~Funding liquidity risk~~Liquidity Risk is the exposure of the Bank’s and its subsidiaries to events that affect their ability to meet, in a timely manner and at reasonable costs, cash payment obligations arising from maturities of time deposits that are not renewed, withdrawals from demand accounts, maturities or settlements of derivatives, liquidations of investments or any other payment obligation.
Financial institutions are exposed to funding liquidity risk that is intrinsic to the role of intermediary that they play in the economy. In general, in financial markets demand for medium or long-term financing is usually much greater than the supply of funds for those terms while short-term financing is in considerable supply. In this sense, the role of intermediary played by financial institutions, which assume the risk of satisfying the demand for medium and long-term financing by brokering short-term available funds, is essential for the economy to function properly.
Appropriately managing funding liquidity risk not only allows contractual obligations to be met in a timely manner, but also enables:

·    ~~the~~The liquidation of positions, when it so decides, to occur without significant losses.
·    ~~the~~
The commercial and treasury activities of the Bank and its subsidiaries to be financed at competitive rates.
·    ~~the~~
The Bank to avoid fines or regulatory penalties for not complying with regulations.

Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-173
~~a.3) Counterparty~~
Note 34 – Risk management, continued

~~Counterparty risk is~~b.3 Financial Risk Management
Continuous and interconnected process that originates in the ~~risk of loss arising from non-compliance by a given counterparty, for whatever reason, in paying all or part of its obligations~~first instance with the ~~Bank under contractually agreed-upon conditions. This risk also includes a given counterparty’s inability to comply with obligations to settle derivative operations with bilateral risk.~~
~~The Bank diversifies credit risk by placing concentration limits on different groups. Exposure to credit risk is evaluated using an individual analysis~~identification of ~~the payment capacity of debtors and potential debtors to meet their obligations on time and as agreed.~~
b.~~Financial Risk Management~~
~~The process of managing financial risks is an ongoing, interlinked process that begins by identifying~~ the risks to which the ~~institution~~Institution is ~~exposed. After that, the Bank calculates~~exposed, in order to then quantify the potential impact as a result of ~~that~~said exposure ~~on its profit or loss~~ and ~~limits~~to limit it to athe level desired ~~level. This involves actively~~by the Bank. The above implies an active monitoring ~~risk and~~of the risks, studying ~~how it evolves over time.~~their temporal evolution. The risk management process can be subdivided into the following stages:
~~b.1)~~b.3.1) Identification of Financial Risks
The ~~financial risk division~~Financial Risk Management has a ~~highly~~high-level technical team that is constantly ~~monitoring~~monitors the activities of the Bank transfer and its subsidiaries toin search ~~for~~of potential ~~risks that have not been quantified~~unquantified and ~~controlled. The Bank’s treasury division serves~~controlled risks. In addition, the Bank Treasury as athe first line of defense ~~and~~also plays ~~an essential~~a fundamental role in ~~risk detection.~~the detection of risks. Itaú ~~Corpbanca’s~~Corpbanca provides a structure that facilitates this risk identification role ~~of identifying risks~~ by ~~preserving the division’s~~maintaining independence in its tasks and ensuring the active participation ~~from~~of management in ~~creating/modifying~~the creation / modification of products. After a risk is identified, it is quantified to see the potential impact on the creation of value ~~creation within~~of the ~~institution.~~Institution.
F-~~157~~

~~Table of Contents~~
~~b.2)~~b.3.2) Quantification and Control of Exposure to Financial Risk ~~Exposure~~
Once athe risk has been identified, the ~~financial risk division~~Financial Risk Management is ~~responsible for~~in charge of mapping ~~the risk using~~it into the appropriate ~~quantification metrics.~~metrics for its quantification. The ~~Board and senior management are aware of the methods used~~way to measure the exposure is the knowledge of top management and ~~are responsible~~the Board of Directors from which the appetite for ~~setting~~risk desired for the ~~institution’s desired risk appetite levels (by business~~Institution and the different openings thereof (business unit, ~~associate,~~manager, risk factor, area, etc.), always taking ~~care~~into account not to ~~adhere to~~transgress the current ~~regulations.~~norms. The ~~limit setting~~ process of establishing limits is the instrument used to establish the ~~equity~~assets available to each activity. ~~Limit~~The determination of limits is ~~by design,~~conceived as a dynamic process that responds to the level of risk ~~level~~ considered acceptable by ~~senior~~top management.
The ~~financial risk division~~Financial Risk Management requests and proposes a ~~system~~framework of limits and warnings, quantitative and qualitative ~~limits and warning levels~~ that affect the liquidity and market risk; this request must be authorized by the ALCO and the ~~Board. It also regularly measures~~Board of Directors.
In addition, it carries out periodic measurements of the risk incurred, develops ~~valuation~~ tools and valuation models, ~~performs~~conducts periodic stress ~~testing,~~analysis, measures the degree of concentration with ~~interbank counterparties, drafts~~inter-Bank counterparts, draws up the policy and ~~procedure handbooks and monitors~~procedures manual, as well as the monitoring of authorized limits and ~~warning levels,~~alerts, which are reviewed at least ~~once per year.~~
annually.
The ~~limit~~ structure ~~the division is required to carry~~of limits requires carrying out a process that ~~includes~~takes into account, among others, the following ~~steps:~~aspects:

·    ~~Efficiently~~Identify and delimit efficiently and comprehensively ~~identify and outline~~ the ~~main types of~~ financial risks incurred, so that they are consistent with the ~~running~~management of the business and with the defined strategy.
·
Quantify and communicate to the business areas the ~~risk~~ levels and the risk profile that ~~senior~~Top management considers acceptable, in order to avoid incurring ~~undesired~~unwanted risks.
·
Give flexibility to the business areas ~~flexibility to take on~~in the taking of financial risks in an efficient and timely manner ~~based on~~according to changes in the market and in business strategies, ~~and~~ always within the levels of risk ~~levels~~that are considered acceptable by the entity.
·    ~~Enable~~
Allowing business generators to take ~~on a cautious yet~~prudent but sufficient ~~level of risk in order~~risks to achieve the budgeted results.
·    ~~Outline~~
Delimit the range of products and underlying assets ~~with~~in which each ~~treasury~~Treasury unit can operate, ~~based on~~taking into account characteristics ~~like~~such as the model, valuation systems and the liquidity of the instruments involved, among ~~other factors.~~others.
The metrics, by type of risk, used to quantify ~~exposure~~the exposures or demonstrate ~~that~~ a ~~risk has been materialized~~materialization of the same are detailed below:
·~~Market Risk~~ Metrics and ~~Limits~~limits of Market Risk
~~Given~~According to the complexity and relevance of the portfolios managed by Itaú Corpbanca, ~~diverse~~different instruments have been ~~chosen~~established to control market ~~risk based on~~risks, according to the characteristics of the financial products inof the ~~trading~~Trading Book and ~~banking books:~~ Banking Book.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-174
Note 34 – Risk management, continued
The following ~~regulatory~~are the normative and internal metrics ~~are~~ used ~~to monitor~~for the monitoring and control of market risk:
~~Regulatory~~Normative Risk ~~Measurements~~Measures for the ~~Trading~~Negotiation Book and Banking ~~Books~~
Book
The Bank measures regulatory exposure ~~using~~in line with the standardized methodology ~~provided~~set forth by the ~~Chilean~~ Central Bank ~~(Chapter~~ of Chile
(ChapterIII-B-2.2 “Standards on ~~Measuring~~the measurement and ~~Controlling Market Risks in~~control of market risks of Banking ~~Companies”~~companies” of the Compendium
of Financial ~~Standards)~~Regulations) and complemented by the ~~SBIF~~Superintendency of Banks and Financial Institutions (Chapter12-21 ~~“Standards~~ “Norms on ~~Measuring~~measurement and ~~Controlling Market Risks”~~control of market risks”), which iscorresponds to a risk ~~measurement~~measure based on the standard methodology of the Basel Committee, which ~~is designed to~~look for quantify exposure to market risks for the ~~banking~~Negotiation Book and ~~trading books.~~
the Banking Book.
The ~~regulatory~~normative measurement of the market risk inof the ~~trading book~~Trading Book allows estimating the potential loss that the Bank ~~to estimate its potential losses~~could face from fluctuations standardized by the regulator. The regulatory limit iscorresponds to the sum of this risk (also ~~known as market risk exposure~~called Market Risk Exposure or ~~“MRE”)~~MRE) and 10% of the ~~credit risk weighted assets;~~Weighted Assets for Credit Risk; Said sum may in no case ~~may this sum~~ be greater than once the ~~Bank’s regulatory capital.~~
effective Equity of the Bank.
The Bank, ~~on an individual level,~~ must ~~continuously~~permanently observe ~~those~~these limits and ~~report~~the data in turn to the ~~SBIF~~Superintendency of Banks and Financial Institutions on ~~a weekly basis regarding its~~the positions atin the risk and compliance with ~~those~~said limits ~~(see regulatory~~(regulatory report SBIF ~~C41~~
F-~~158~~

~~Table of Contents~~
~~“Weekly information on market risk using standardized methodology”)~~C41). It must also inform the ~~SBIF each month on~~Superintendency monthly about the positions in the consolidated ~~positions at~~ risk ofwith the subsidiaries and foreign ~~subsidiaries (see regulatory~~branches (regulatory report SBIF ~~C43 “Consolidated information on market risk using standardized methodology”)~~C43).
The ~~following table details~~consumption of regulatory limit ~~consumption for~~of market risk, specifically for the ~~trading book~~Trading Book as of December 31, 2018, 2017 and 2016, ~~and 2015.~~is presented below:

~~Trading Book~~

As of December 31,

Limit Consumption

2017

2016

2015

Market risk exposure (MRE)

71.3%

60.4%

71.8%

Limit consumption
   As of December 31,
   2018 2017 2016
Market risk exposure (MRE)
   71.80 % 71.30 % 60.40 %
The regulatory risk measurement for the ~~banking book (see~~Banking Book (SBIF C40 regulatory ~~report SBIF C40 “Cash flows related to interest rate and indexation risk in the Banking Book”)~~report) is used to estimate the Bank’s potential losses from standardized adverse movements in interest and exchange rates. It is important to specify that for regulatory reporting purposes, the ~~trading book~~Trading Book includes the interest rate risk of derivatives managed in the ~~banking book.~~
Banking Book.
The standardized regulatory report for the ~~banking book (see~~Banking Book (SBIF C40 regulatory ~~report SBIF C40)~~report) is used to estimate the Bank’s potential economic losses from standardized adverse movements in interest rates defined by the SBIF. Currently, limits for short-term exposure ~~(“STE”)~~(STE) to interest rate and indexation risk in the ~~banking book~~Banking Book must not exceed 35% of annual operating income (LTM moving period) and long-term limit consumption ~~(“LTE”)~~(LTE) must be less than 20% of the Bank’s regulatory capital.
The following table details regulatory limit consumption for market risk, specifically for the ~~banking book~~Banking Book as of December 31, 2018, 2017 and 2016:
Limit consumption
   As of December 31,
   2018 2017 2017
Short-term exposure to interest rate risk
   51.40 % 45.00 % 60.60 %
Long-term exposure to interest rate risk
   50.30 % 43.20 % 13.18 %
As of December 31, 2018 and 2017 and for the years ended December 31, 2018, 2017 and 2016 the Bank has complied with all regulatory requirements and ~~2015:~~limits, as well as with all financial covenants, such as risk weighed capital adequacy ratio, single borrower exposure, aggregate large exposure, concentration risk, equity to assets ratio, coverage ratio of provisions, among others.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-175
Note 34 – Risk management, continued

~~Banking Book~~Value at risk (VaR)

As of December 31,

Limit Consumption

2017

2016

2015

Short-term exposure to interest rate risk (STE)

45.0%

51.8%

60.6%

Long-term exposure to interest rate risk (LTE)

43.2%

60.1%

13.8%

Calculation of Historical Value at Risk ~~(“VaR”)~~(Non-parametric).
·    ~~Calculation of historical VaR (non-parametric).~~ This measurement provides the maximum potential economic loss at a certain confidence level and a given time horizon. Historical VaR, as opposed to ~~statistical~~Statistical or ~~parametric~~Parametric VaR, is based on the observed distribution of past returns, does not need to make assumptions of probability distributions (frequently normal distribution) and, therefore, does not need a mean (assumed 0), standard deviation orand correlations across returns (parameters). The ~~Bank~~Bank’s uses a 99% confidence level and a time horizon of ~~one~~1 day.

·Calculation of ~~volatility-adjusted historical VaR (non-parametric)~~Volatility-Adjusted Historical Value at Risk(Non-parametric). This measurement is based on the above and the profit and loss vector is adjusted according to whether it is facing a period of greater or less volatility.
The Board ~~of Directors defines~~and Top Management define limits on the Value at Risk (as of the end of the first half of 2016 it uses the volatility-adjusted ~~historical~~Historical VaR method) that can be maintained, which is monitored on a daily basis. The measurement is also subjected to ~~backtesting~~back testing to verify that the daily losses that effectively occurred do not exceed VaR more than once every 100 days. The result is monitored daily to confirm the validity of the assumptions, hypothesis and the adequacy of the parameters and risk factors used in the VaR calculation.
The Bank in turn calculates VaR for sub/portfolios and risk factors, which allows it to quickly detect pockets
F-~~159~~

~~Table of Contents~~
of risk. Since VaR does not consider stress scenarios, it is complemented by stress testing. Specifically, the Bank uses metrics that take into account prospective, historical and standardized scenarios.
Although the Value at Risk model is one of the models most frequently used by the local financial industry, like any model it has limitations that must be considered:

·It does not take into account the expected loss in the event that the portfolio return is above the confidence level defined in the VaR. In other words, in the Bank’s case it does not reflect what happens in the 1% of the tail. This is mitigated with the stress measures detailed below.
·
It does not consider intraday results, but only reflects the potential loss given current positions.
·
It does not take into account potential changes in the dynamics of movements in market variables ~~(i.e..~~(i.e. potential changes in the matrix of variance and covariance).
Sensitivity Measurements
~~Sensitivity measurements are based on estimated scenarios for positions in the trading and banking books.~~
·~~Trading Book Positions by Risk Factor:~~
~~Trading book positions as of December 31, 2017, 2016 and 2015, are detailed as follows:~~

Position

2017

2016

2015

Risk Factor / Products

MCh$

MCh$

MCh$

CLP rates

Derivatives

(738,006
)
(131,852
)
(77,875
)
Investments

263,964

344,390

3,733

CLF rates

Derivatives

694,368

319,785

175,245

Investments

171,330

72,668

2,678

COP rates

Derivatives

(223,400
)
4,275

—

Investments

384,244

381,848

—

UVR rates

Derivatives

—

—

—

Investments

—

164,828

—

USD rates

256,495

44,211

7,835

OM rates

10

(1,061
)
52

FX (exchange rate)

15,620

14,089

7,887

Inflation (CLF)

—

—

—

Optionality (Gamma, Vega)

120

6

1

~~OM = Other money or currencies~~
Trading book positions by risk factor correspond to the fair and equivalent nominal value (exchange rate or “FX,” inflation and optionality) of the portfolios within the trading book. The trading book is made up of the financial assets presented in Notes 6 and 8, and financial liabilities presented in Note 8. The currency position incorporates the amortized cost positions from the Statement of Financial Position, excluding the positions related to the foreign investment with their respective hedges. The currency positions in the trading book have limits for each currency.
F-~~160~~

~~Table of Contents~~
·~~Banking Book Positions by Risk Factor:~~
~~FX and Inflation Positions in Banking Book:~~
~~Foreign currency and inflation positions in the banking book as of December 31, 2017, 2016 and 2015, are detailed as follows:~~

Year-End 2017

Year-End 2016

Year-End 2015

CLF Position

877,152

1,118,526

448,256

FX Position

(889,075
)
(684,938
)
(52,231
)
Positions in currencies other than Chilean pesos (FX) and exposure to indexation is classified by book and by their effect on the Bank’s financial statements, reflecting the spot exposure to each risk factor. It is important to highlight the impact of structural exchange rate risk arising from the Bank’s positions in currencies other than the Chilean peso related primarily to the consolidation of investments in subsidiaries or affiliates and the results and hedges of these investments. The process of managing structural exchange rate risk is dynamic and attempts to limit the impact of currency depreciation, thus optimizing the financial cost of hedges. The general policy for managing this risk is to finance them in the currency of the investment provided that the depth of the market so allows and the cost is justified by the expected depreciation. One-time hedges are also taken out when the Bank considers that any currency may weaken beyond market expectations with respect to the Chilean peso. As of December 2017, greater ongoing exposure was concentrated in Colombian pesos (approximately MUS$ 1,000). The Bank hedges part of these positions on a permanent basis using currency derivatives. The currency positions in the banking book have limits for each currency.
~~Structural Interest Rate Position in Banking Book (Interest Rate Gap):~~
Structural interest rate risk is measured using representation by risk factor of cash flows expressed at fair value, assigned at the repricing date and by currency. This methodology facilitates the detection of concentrations of interest rate risk over different time frames. All positions inside and outside the Statement of Financial Position must be ungrouped into cash flows and placed at the repricing / maturity point. For those accounts that do not have contractual maturities, an internal model is used to analyze and estimate their durations and sensitivities.
The following table shows the banking book positions (products valued at amortized cost and available-for-sale instruments and derivatives valued at fair value) for the most important currencies in which the Bank does business as of year-end 2017, 2016 and 2015.
~~The exposures presented are the present values resulting from:~~
·    ~~Modeling contractual cash flows based on behaviors that affect market risk exposure. Example: prepayment, renewal, etc.~~
·    ~~Discounting cash flows from items accounted for on an accrual basis at a rate that represents the opportunity cost of the liability/asset.~~
·    ~~Discounting cash flows from items accounted for at market value at the market rate.~~
F-~~161~~

~~Table of Contents~~

Year-End 2017

CLP Position

1 Month

1 - 3 Months

3 Months to 1
Year

1 to 3 Years

More than 3 Years

ASSETS

4,256,811

892,701

1,688,269

1,315,539

665,015

Cash

387,847

—

—

—

—

Repurchase agreements

5,956

—

—

—

—

Loans to customers, net

2,162,363

859,897

1,614,115

1,080,663

427,787

Financial assets available for sale

67,735

32,804

74,154

234,876

237,228

Financial assets held to maturity

—

—

—

—

—

PP&E and intangible assets

703,689

—

—

—

—

Other assets

929,221

—

—

—

—

LIABILITIES

(6,418,945
)
(1,147,278
)
(3,162,828
)
(1,204,044
)
(221,116
)
Current accounts and demand deposits

(577,488
)
(83,941
)
(484,133
)
(901,810
)
(114
)
Savings accounts and time deposits

(2,229,619
)
(989,646
)
(2,633,395
)
(194,706
)
—

Debt issued

(831
)
(7,952
)
(45,081
)
(107,528
)
(221,002
)
Other liabilities

(374,333
)
(30,483
)
—

—

—

Capital and reserves

(3,207,101
)
(30,483
)
—

—

—

Resell agreements

(29,573
)
(4,773
)
(219
)

DERIVATIVES

819,878

456,293

268,834

(324,113
)
(152,389
)
Financial derivative instruments

819,878

456,293

268,834

(324,113
)
(152,389
)

Year-End 2017

CLF Position

1 Month

1 - 3 Months

3 Months to 1
Year

1 to 3 Years

More than 3 Years

ASSETS

481,000

510,095

2,008,605

2,172,278

3,891,622

Cash

—

—

—

—

—

Repurchase agreements

—

—

—

—

—

Loans to customers, net

520,449

422,096

1,786,914

1,767,416

3,804,979

Financial assets available for sale

22,633

87,999

221,691

404,862

86,643

PP&E and intangible assets

—

—

—

—

—

Other assets

(62,082
)
—

—

—

—

LIABILITIES

(352,331
)
(255,086
)
(423,122
)
(968,507
)
(3,748,085
)
Other liabilities

(189,476
)
—

(36,335
)
(47,686
)
(6,925
)
Capital and reserves

—

—

—

—

Debt issued

(48,724
)
(10,387
)
(262,792
)
(878,854
)
(3,319,434
)
Current accounts and demand deposits

(98,353
)
(244,699
)
(123,995
)
(41,967
)
(421,726
)
Savings accounts and time deposits

(15,778
)
—

—

—

—

DERIVATIVES

(1,209,472
)
508,032

(817,140
)
(226,061
)
(321,390
)
Financial derivative instruments

(1,209,472
)
508,032

(817,140
)
(226,061
)
(321,390
)

Year-End 2017

COP and UVR Position

1 Month

1 - 3 Months

3 Months to 1
Year

1 to 3 Years

More than 3 Years

Assets

1,995,876

579,940

774,647

1,014,376

593,649

Cash

165,848

—

—

—

—

Repurchase agreements

21,263

—

—

—

—

Loans to customers, net

1,237,941

522,042

633,470

619,269

531,424

Financial assets available for sale

3,885

—

141,177

395,107

62,225

Financial assets held to maturity

25,145

57,898

—

—

—

PP&E and investments

—

—

—

—

—

Other assets

541,794

—

—

—

—

Liabilities

(3,184,891
)
(628,485
)
(686,080
)
(484,123
)
(303,755
)
Current accounts and demand deposits

(1,490,776
)
—

—

—

—

Savings accounts and time deposits

(350,584
)
(578,115
)
(635,840
)
(376,758
)
(140,162
)
Debt issued

—

(50,370
)
(50,240
)
(107,365
)
(163,593
)
Other liabilities

(669,363
)
—

—

—

—

Capital and reserves

(674,168
)
—

—

—

—

Derivatives

(233,772
)
62,977

(330,530
)
374,478

(95,155
)
Financial derivative instruments

(233,772
)
62,977

(330,530
)
374,478

(95,155
)
F-~~162~~

~~Table of Contents~~
FX Position

1 Month

1 - 3 Months

3 Months to 1
Year

1 to 3 Years

More than 3 Years

ASSETS

702,899

263,710

547,828

33,258

11,851

Cash

392,669

—

—

—

—

Repurchase agreements

—

—

—

—

—

Loans to customers, net

132,850

263,597

547,358

20,963

10,761

Financial assets available for sale

173

79

439

12,283

1,078

Financial assets held to maturity

—

—

—

—

—

PP&E and investments

—

—

—

—

—

Other assets

177,207

34

31

12

12

LIABILITIES

(1,861,588
)
(318,197
)
(539,389
)
(450,818
)
—

Current accounts and demand deposits

(388,722
)
—

—

—

—

Savings accounts and time deposits

(837,274
)
(202,181
)
(526,101
)
(2,215
)
—

Debt issued

(452,157
)
(116,016
)
(13,288
)
(448,603
)
—

Other liabilities

(116,183
)
—

—

—

—

Capital and reserves

(66,994
)
—

—

—

Resell agreements

(258
)
—

—

—

DERIVATIVES

879,996

(47,020
)
70,834

361,999

6,409

Financial derivative instruments

879,996

(47,020
)
70,834

361,999

6,409

Year-End 2016

CLP Position

1 Month

1 - 3 Months

3 Months to 1
Year

1 to 3 Years

More than 3 Years

ASSETS

3,501,743

870,778

2,160,430

1,290,116

543,713

Cash

456,753

—

—

—

—

Repurchase agreements

82,146

—

—

—

—

Loans to customers, net

2,103,570

823,545

2,126,992

1,126,147

459,420

Financial assets available for sale

320,536

47,233

33,438

163,969

84,293

Financial assets held to maturity

—

—

—

—

—

PP&E and intangible assets

214,411

—

—

—

—

Other assets

324,327

—

—

—

—

LIABILITIES

(6,504,266
)
(1,196,757
)
(2,361,334
)
(227,588
)
(158,564
)
Current accounts and demand deposits

(1,890,606
)
—

(58,425
)
—

—

Savings accounts and time deposits

(3,042,768
)
(1,190,542
)
(2,286,425
)
(157,934
)
(255
)
Debt issued

(831
)
(4,710
)
(15,982
)
(69,654
)
(158,309
)
Other liabilities

(302,491
)
(1,505
)
(502
)
—

—

Capital and reserves

(1,267,570
)
—

—

—

—

DERIVATIVES

(136,936
)
(204,005
)
548,898

(117,704
)
48,800

Financial derivative instruments

(136,936
)
(204,005
)
548,898

(117,704
)
48,800

Year-End 2016

CLF Position

1 Month

1 - 3 Months

3 Months to 1
Year

1 to 3 Years

More than 3 Years

ASSETS

460,596

467,103

2,112,730

1,828,020

3,977,336

Cash

—

—

—

—

—

Repurchase agreements

—

—

—

—

—

Loans to customers, net

498,761

453,798

2,019,088

1,751,321

3,931,531

Financial assets available for sale

3,792

13,305

93,642

76,699

45,805

PP&E and intangible assets

—

—

—

—

—

Other assets

(41,957
)
—

—

—

—

LIABILITIES

(366,933
)
(158,745
)
(1,087,649
)
(892,317
)
(3,218,064
)
Other liabilities

(86,149
)
—

(46,944
)
(66,944
)
(21,856
)
Capital and reserves

—

—

—

—

—

Debt issued

(41,651
)
(12,178
)
(542,146
)
(649,782
)
(2,773,046
)
Current accounts and demand deposits

(17,596
)
—

—

—

—

Savings accounts and time deposits

(221,537
)
(146,567
)
(498,559
)
(175,591
)
(423,162
)
DERIVATIVES

(633,500
)
(290,901
)
(864,344
)
(448,301
)
233,496

Financial derivative instruments

(633,500
)
(290,901
)
(864,344
)
(448,301
)
233,496

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~~Table of Contents~~

Year-End 2016

COP and UVR Position

1 Month

1 - 3 Months

3 Months to 1
Year

1 to 3 Years

More than 3 Years

Assets

2,777,361

610,840

667,891

761,052

690,494

Cash

328,871

—

—

—

—

Repurchase agreements

152,665

—

—

—

—

Loans to customers, net

1,697,264

602,867

629,102

695,626

508,008

Financial assets available for sale

44,235

7,973

38,789

65,426

182,486

Financial assets held to maturity

107,541

—

—

—

—

PP&E and investments

—

—

—

—

—

Other assets

446,785

—

—

—

—

Liabilities

(4,229,588
)
(581,868
)
(765,798
)
(461,681
)
(309,997
)
Current accounts and demand deposits

(1,759,415
)
—

—

—

—

Savings accounts and time deposits

(930,983
)
(570,126
)
(631,854
)
(342,199
)
(101,967
)
Debt issued

(24,653
)
(11,742
)
(133,944
)
(119,482
)
(208,030
)
Other liabilities

(740,891
)
—

—

—

—

Capital and reserves

(773,646
)
—

—

—

—

Derivatives

(41,422
)
(24,828
)
220,845

(8,233
)
(83,679
)
Financial derivative instruments

(41,422
)
(24,828
)
220,845

(8,233
)
(83,679
)

Year-End 2016

FX Position

1 Month

1 - 3 Months

3 Months to 1
Year

1 to 3 Years

More than 3 Years

ASSETS

979,846

774,212

1,123,227

31,486

34,326

Cash

349,543

—

—

—

—

Repurchase agreements

39,172

—

—

—

—

Loans to customers, net

645,830

774,108

1,122,529

22,872

22,093

Financial assets available for sale

287

104

698

8,614

12,233

Financial assets held to maturity

—

—

—

—

—

PP&E and investments

—

—

—

—

—

Other assets

(54,986
)
—

—

—

—

LIABILITIES

(1,880,468
)
(785,961
)
(1,179,179
)
(545,528
)
—

Current accounts and demand deposits

(317,104
)
—

(7,959
)
—

—

Savings accounts and time deposits

(923,035
)
(264,542
)
(322,601
)
—

—

Debt issued

(7,529
)
(125,397
)
(469,452
)
(540,348
)
—

Other liabilities

(610,230
)
(396,022
)
(379,167
)
(5,180
)
—

Capital and reserves

(22,570
)
—

—

—

—

DERIVATIVES

329,880

264,544

461,844

543,063

(57,615
)
Financial derivative instruments

329,880

264,544

461,844

543,063

(57,615
)

Year-End 2015

CLP Position

1 Month

1 - 3 Months

3 Months to 1
Year

1 to 3 Years

More than 3
Years

ASSETS

1,375,771

433,059

740,858

377,601

102,765

Cash

227,450

—

—

—

—

Repurchase agreements

58,296

—

—

—

—

Loans to customers, net

639,202

408,002

701,133

365,287

102,720

Financial assets available for sale

147,925

25,057

39,725

12,314

45

Financial assets held to maturity

—

—

—

—

—

PP&E and intangible assets

97,349

—

—

—

—

Other assets

205,549

—

—

—

—

LIABILITIES

(1,823,957
)
(518,933
)
(1,046,280
)
(278,441
)
(10,960
)
Current accounts and demand deposits

(375,365
)
(47,417
)
(151,741
)
(110,807
)
(10,960
)
Savings accounts and time deposits

(658,190
)
(471,444
)
(892,462
)
(137,889
)
—

Debt issued

—

—

(2,077
)
(29,745
)
—

Repurchase agreements

(88,328
)
(72
)
—

—

—

Other liabilities

(178,329
)
—

—

—

—

Capital and reserves

(523,745
)
—

—

—

—

DERIVATIVES

313,295

157,511

414,040

(130,308
)
(92,492
)
Financial derivative instruments

313,295

157,511

414,040

(130,308
)
(92,492
)
F-~~164~~

~~Table of Contents~~

Year-End 2015

CLF Position

1 Month

1 - 3 Months

3 Months to 1
Year

1 to 3 Years

More than 3
Years

ASSETS

340,027

265,914

957,214

627,247

2,133,207

Cash

—

—

—

—

—

Repurchase agreements

—

—

—

—

—

Loans to customers, net

248,695

217,467

874,598

546,211

2,133,207

Financial assets available for sale

81,786

48,447

82,616

81,036

—

Financial assets held to maturity

—

—

—

—

—

PP&E and intangible assets

—

—

—

—

—

Other assets

9,546

—

—

—

—

LIABILITIES

(214,234
)
(88,779
)
(609,756
)
(542,924
)
(1,756,897
)
Current accounts and demand deposits

(371
)
—

—

—

—

Savings accounts and time deposits

(171,613
)
(80,000
)
(494,159
)
(171,808
)
(373,648
)
Debt issued

(4,173
)
(8,776
)
(59,318
)
(285,780
)
(1,331,970
)
Repurchase agreements

—

—

—

—

—

Other liabilities

(38,077
)
(3
)
(56,279
)
(85,336
)
(51,279
)
Capital and reserves

—

—

—

—

—

DERIVATIVES

88,477

(202,459
)
(189,140
)
(55,062
)
(304,577
)
Financial derivative instruments

88,477

(202,459
)
(189,140
)
(55,062
)
(304,577
)

Year-End 2015

FX Position

1 Month

1 - 3 Months

3 Months to 1
Year

1 to 3 Years

More than 3
Years

ASSETS

535,528

426,188

548,729

22,657

16,207

Cash

143,224

—

—

—

—

Repurchase agreements

—

—

—

—

—

Loans to customers, net

335,312

426,188

548,729

22,657

16,207

Financial assets available for sale

—

—

—

—

—

Financial assets held to maturity

—

—

—

—

—

PP&E and investments

—

—

—

—

—

Other assets

56,992

—

—

—

—

LIABILITIES

(445,017
)
(499,406
)
(452,259
)
(30,098
)
(5,389
)
Current accounts and demand deposits

(65,134
)
(10,675
)
(34,114
)
(24,691
)
(5,389
)
Savings accounts and time deposits

(241,110
)
(159,131
)
(169,009
)
—

—

Debt issued

—

—

—

—

—

Repurchase agreements

—

—

—

—

—

Other liabilities

(138,773
)
(329,600
)
(249,136
)
(5,407
)
—

Capital and reserves

—

—

—

—

—

DERIVATIVES

(229,775
)
74,931

9,984

(630
)
(23,882
)
Financial derivative instruments

(229,775
)
74,931

9,984

(630
)
(23,882
)
~~Cash presented in the above tables correspond term deposits. The remaining portion of the cash and cash equivalents is considered readily available.~~
~~The following table summarizes the aforementioned exposures:~~

2017 Exposure

2016 Exposure

2015 Exposure

Currency

MCh$

MCh$

MCh$

CLP

(2,267,374
)
(1,942,677
)
13,530

CLF

877,152

1,118,526

448,256

COP-UVR

(550,847
)
(778,611
)
—

FX

(338,228
)
93,673

(52,231
)
·~~Sensitivity Analysis for Financial Risks~~
The Bank uses stress testing as a sensitivity analysis tool in order to control financial risk. This measurement is performed separately for ~~each class of financial instruments.~~
the Trading and Banking Books.
Sensitivity is estimated using the DV01 indicator, which is a measure of sensitivity of ~~the~~ portfolio results ~~considering the increase by 1 basis point (0.01%) of~~if the zero coupon interest rate of the ~~financial~~ risk factor increases by 1 basis point (0.01%) for different maturities and in annualized terms. Although the use of DV01 to estimate potential impacts on the economic, book and equity value is easy to understand and implement, it excludes both correlations among risk factors and second-order effects.
F-~~165~~

~~Table of Contents~~
~~The~~In accordance with IFRS 7, the following table presents an estimate of the likely, but reasonable impact of ~~the~~ fluctuations in interest rates, exchange rates and implicit volatilities (market factors) that would ~~have an~~ impact the ~~based on a scenario of each class of financial instrument.~~
Trading and Banking Book.
The ~~estimated economic impact derived from the scenarios of changes~~fluctuations in market factors presents effects in profit and loss for trading instruments and instruments measured at amortized cost, as well as impacts in other comprehensive income relating the available for sale, cash flow hedges and foreign investments portfolios.
~~The scenarios presented below~~ correspond to ~~the~~highly probable ~~worst-case~~ scenarios chosen from among a set of scenarios agreed upon based on the opinions of specialists in economics and financial risk and ~~traders.~~operators. In order to estimate ~~the economic impact, sensitivities~~sensitivity, sensitivity (DV01) and ~~scenario related changes~~the reasonably likely scenarios must be multiplied ~~for each~~by market factor.

Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-176
~~Scenarios are presented separately for Chile and Colombia.~~
Note 34 – Risk management, continued

a)~~Chile~~
Interest ~~Rate Scenarios~~rate scenarios - Chile (basis points —– 0.01%)
The table below presents a sensitivity analysis for changes of 0.01% in interest rates by term and type of interest rate, and its corresponding impact on profit and loss (net interest margin) and equity (valuation accounts for financial instruments at FVTOCI).

Scenarios for impact on financial trading instruments

Scenarios for impact on Available-for-Sale Assets(AFS)

Scenarios for impact on instruments
measured at amortized cost

Term

Overnight
CLP

Gov’t
CLP

Overnight
CLF

Gov’t
CLF

Curve
USD

Curves
MX

Term

Overnight
CLP

Gov’t
CLP

Overnight
CLF

Gov’t
CLF

Curve USD

Curves MX

Term

Overnight
CLP

Overnight
CLF

Curve USD

1D

(35
)
48

116

314

122

(122
)
1D

(35
)
48

(116
)
314

122

122

1D

35

116

122

3M

(35
)
48

116

314

122

(122
)
3M

(35
)
48

(116
)
314

122

122

1M

35

116

122

6M

(35
)
48

116

314

122

(122
)
6M

(35
)
48

(116
)
314

122

122

3M

35

116

122

9M

(39
)
49

97

202

99

(99
)
9M

(39
)
49

(97
)
202

99

99

6M

35

116

122

1Y

(43
)
49

77

79

75

(75
)
1Y

(43
)
49

(77
)
79

75

75

9M

39

97

99

2Y

(40
)
39

59

75

49

(49
)
2Y

(40
)
39

(59
)
75

49

49

1Y

43

77

75

3Y

(46
)
41

57

67

58

(58
)
3Y

(46
)
41

(57
)
67

58

58

4Y

(56
)
42

55

59

67

(67
)
4Y

(56
)
42

(55
)
59

67

67

5Y

(66
)
43

54

51

75

(75
)
5Y

(66
)
43

(54
)
51

75

75

7Y

(63
)
56

58

57

82

(82
)
7Y

(63
)
56

(58
)
57

82

82

10Y

(59
)
74

65

67

93

(93
)
10Y

(59
)
74

(65
)
67

93

93

20Y

(59
)
75

70

58

93

(93
)
20Y

(59
)
75

(70
)
58

93

93

Term
Scenarios for impacts on P&L Scenarios for impacts on FVTOCI
Chamber
CLP Government
CLP Chamber
CLF Government
CLF Curve
USD Curve
MX Chamber
CLP Government
CLP Chamber
CLF Government
CLF Curve
USD Curve
MX
1 day
(35 ) 52 139 140 (101 ) 101 (35 ) 52 (139 ) 140 101 101
3 months
(35 ) 52 139 140 (101 ) 101 (35 ) 52 (139 ) 140 101 101
6 months
(35 ) 52 139 140 (101 ) 101 (35 ) 52 (139 ) 140 101 101
9 months
(35 ) 57 111 116 (86 ) 86 (35 ) 57 (111 ) 116 86 86
1 year
(35 ) 62 81 89 (70 ) 70 (35 ) 62 (81 ) 89 70 70
2 years
(46 ) 52 86 56 (64 ) 64 (46 ) 52 (86 ) 56 64 64
3 years
(47 ) 48 83 60 (65 ) 65 (47 ) 48 (83 ) 60 65 65
4 years
(48 ) 43 79 64 (66 ) 66 (48 ) 43 (79 ) 64 66 66
5 years
(48 ) 39 75 68 (67 ) 67 (48 ) 39 (75 ) 68 67 67
7 years
(45 ) 43 67 68 (65 ) 65 (45 ) 43 (67 ) 68 65 65
10 years
(39 ) 50 55 68 (63 ) 63 (39 ) 50 (55 ) 68 63 63
20 years
(39 ) 50 42 48 (63 ) 63 (39 ) 50 (42 ) 48 63 63
~~Exchange Rate Scenarios - Chile~~
Exchange
Rate

Scenarios for impact on
financial trading instruments

Scenario for
Impact on AFS

Scenario for Impact on
Amortized Cost Book

USD-CLP

8.1%

-8.1%

-8.1%

USD-COP

8.0%

8.0%

8.0%

b)~~Colombia~~
Interest ~~Rate Scenarios~~rate scenarios - Colombia (basis points —– 0.01%)
The table below presents a sensitivity analysis for changes of 0.01% in interest rates by term and type of interest rate, and its corresponding impact on profit and loss (net interest margin) and equity (valuation accounts for financial instruments at FVTOCI).

Scenarios for impact on financial trading
instruments

Scenarios for impact on Available-for-Sale Assets(AFS)

Scenarios for impact on instruments
measured at amortized cost

Term

Gov’t COP

Swap
IBR

Curve
USD

Term

Gov’t
COP

Swap
IBR

Curve
USD

Term

Curves
MX

Swap IBR

Curve
USD

1D

91

59

(15
)
1D

91

59

(15
)
1D

—

59

14

3M

91

37

(18
)
3M

91

37

(18
)
1M

122

35

13

6M

91

48

(8
)
6M

91

48

(8
)
3M

122

37

11

9M

91

54

(16
)
9M

91

54

(16
)
6M

122

48

26

1Y

91

60

(24
)
1Y

91

60

(24
)
9M

99

54

22

2Y

77

43

(33
)
2Y

77

43

(33
)
1Y

75

60

19

3Y

67

36

(44
)
3Y

67

36

(44
)

4Y

62

39

(49
)
4Y

62

39

(49
)

5Y

67

43

(54
)
5Y

67

43

(54
)

7Y

75

40

(60
)
7Y

75

40

(60
)

10Y

85

36

(69
)
10Y

85

36

(69
)

20Y

41

23

(99
)
20Y

41

23

(99
)

Tenor
   Scenarios for impacts on P&L Scenarios for impacts on FVTOCI
   Government COP Swap IBR    Curve USD Government COP Swap IBR    Curve USD
1 day
   (18 ) 44    (1 ) (18 ) 44    (1 )
3 months
   (13 ) 31    (2 ) (13 ) 31    (2 )
6 months
   (8 ) 37    (6 ) (8 ) 37    (6 )
9 months
   (3 ) 40    (9 ) (3 ) 40    (9 )
1 year
   2 43    (12 ) 2 43    (12 )
2 years
   22 48    (19 ) 22 48    (19 )
3 years
   42 46    (22 ) 42 46    (22 )
4 years
   53 55    (24 ) 53 55    (24 )
5 years
   54 63    (26 ) 54 63    (26 )
7 years
   56 58    (26 ) 56 58    (26 )
10 years
   58 50    (27 ) 58 50    (27 )
20 years
   49 23    (29 ) 49 23    (29 )

Tenor
   Scenarios for impacts on accrual book
   Government COP    Curve USD
1 day
   44    28
1 month
   31    29
3 months
   31    32
6 months
   37    40
9 months
   40    35
1 year
   43    31
F-~~166~~
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-177

~~Table of Contents~~Note 34 – Risk management, continued

Exchange ~~Rate Scenarios — Colombia~~rate scenarios Chile
The table below presents a sensitivity analysis for changes in the relevant exchanges rates, and its corresponding impact on profit and loss (net income from financial operations and net foreign exchange gain/loss) and equity (valuation accounts for financial instruments at FVTOCI).

Exchange
Rate

Scenarios for impact on
financial trading instruments

Scenario for
Impact on AFS

Scenario for Impact on
Amortized Cost Book

USD-COP

-8.4%

8.4%

8.4%

Exchange rate
   Change in scenario impacting
P&L    Change in scenario impacting
FVTOCI    Change in scenario impacting
accrual book
   %    %    %
USD - CLP
   (0.0718 )    (0.0718 )    (0.0718 )
USD - COP
   (0.0717 )    (0.0717 )    (0.0717 )
Exchange rate scenarios Colombia
c)                  ~~Consolidated effects~~The table below presents a sensitivity analysis for changes in the relevant exchanges rates, and its corresponding impact on profit orand loss ~~of the scenarios~~(net income from financial operations and exchange differences) and equity (valuation accounts for financial instruments at FVTOCI).

Exchange rate
   Change in scenario impacting
P&L    Change in scenario impacting
FVTOCI    Change in scenario impacting
accrual book
   %    %    %
USD - COP
   (0.0466 )    (0.0466 )    (0.0466 )
i)Impact on P&L derived from sensitivity analysis
The following table presents the impact ~~profit~~of movements or reasonably likely scenarios explained above applied to positions in the Trading Book that affect P&L (net income from financial operations, net foreign exchange gain/losses, and ~~loss (P&L)~~net interest margin as applicable) as of December 31, 2018, 2017 and 2016:
Potential impact on P&L
   As of December 31,
   2018    2017    2016
   MCh$    MCh$    MCh$
CLP rate risk
   (5,019 )    (849 )    (2,812 )
Derivatives
   (5,018 )    (847 )    (2,604 )
Debt instruments
   (1 )    (2 )    (208 )
CLF rate risk
   (5,942 )    (7,839 )    (8,069 )
Derivatives
   (5,942 )    (7,839 )    (8,069 )
Debt instruments
   —      —      —
COP rate risk
   (29,182 )    (14,895 )    (11,622 )
Derivatives
   (29,094 )    (9,909 )    (10,439 )
Debt instruments
   (88 )    (4,986 )    (1,183 )
UVR rate risk
   (375 )    —      (404 )
Derivatives
   (364 )    —      —
Debt instruments
   (11 )    —      (404 )
USD rate risk
   (2,810 )    (2,001 )    (2,658 )
Other currencies rate risk
   (42 )    (50 )    (9 )






Total rate risk
   (43,370 )    (25,634 )    (25,574 )






Exchange rate risk
   150    (755 )    (1,921 )
Options risk
   156    66    (87 )






Total impact
   (43,064 )    (26,323 )    (27,582 )






Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-178
Note 34 – Risk management, continued
The following table presents the impact on the net interest margin of movements or reasonably likely scenarios on positions in the Accrual Book for the years ended December 31, 2018, 2017 ~~2016~~ and ~~2015 derived from the aforementioned scenarios applied to our financial trading instruments as of year-end:~~2016:

2017

2016

2015

Potential Impact on P&L

MCh$

MCh$

MCh$

CLP Rate Risk

(849
)
(2,812
)
(1,865
)
Derivatives

(847
)
(2,604
)
(1,823
)
Investments

(2
)
(208
)
(42
)
CLF Rate Risk

(7,839
)
(8,069
)
(2,662
)
Derivatives

(7,839
)
(8,069
)
(2,635
)
Investments

—

—

(27
)
COP Rate Risk

(14,895
)
(11,622
)
—

Derivatives

(9,909
)
(10,439
)
—

Investments

(4,986
)
(1,183
)
—

UVR Rate Risk

—

(404
)
—

Derivatives

—

—

—

Investments

—

(404
)
—

USD Rate Risk

(2,001
)
(2,658
)
(778
)
Other Currencies Rate Risk

(50
)
(9
)
(2
)
Total Rate Risk

(25,634
)
(25,574
)
(5,307
)
Foreign Exchange Risk

(755
)
(1,921
)
(131
)
Options Risk (1)

66

(87
)
—

Total Impact

(26,323
)
(27,582
)
(5,438
)
~~(1) Option Risk includes the (Vega) and Gamma volatility risks.~~
~~ii)~~                  The following table presents the consolidated impact on the net interest income derived from the aforementioned scenarios on the financial instruments measured at amortized cost for the periods ended December 31, 2017, 2016 and 2015.
Potential impact on instruments
measured at amortized cost

2017

2016

2015

MCh$

MCh$

MCh$

Impact of Interbamk Rate Risk

(9,432
)
(7,096
)
(4,673
)
Potential impact on Accrual Book
   For the years ended December 31,
   2018    2017    2016
Interest rate shock sensitivity impact
   (12,359 )    (9,432 )    (7,906 )
The impact on the ~~banking book~~Banking Book does not necessarily mean a gain/loss but it does mean smaller/larger net income from the generation of funds (net funding income, which is the net interest from the ~~financial instruments measured at amortized cost~~accrual portfolio) for the next 12 months.
Impact on Equity derived from sensitivity analysis
~~iii)~~               ~~Changes~~In line with the effects on P&L of positions accounted for at fair value and amortized cost, the changes in market factors ~~derived from the aforementioned scenarios~~because of reasonably possible movements in interest and exchange rates also generate ~~an impact~~impacts on equity accounts as a result of the potential change in market value of the portfolio of investments at FVTOCI/available-for-sale instruments ~~portfolio~~ and the portfolios of cash flow and net foreign investment hedges, ~~portfolios,~~ which are presented in the following table:

F-~~167~~

~~Table of Contents~~
   For the years ended December 31,
   2018 2017 2016
   DV01
(+1 bp) Impact of Change in
Interest Rate DV01
(+1 bp) Impact of Change in
Interest Rate DV01
(+1 bp) Impact of Change in
Interest Rate
Potential Impact on FVTOCI
   US$ MUS$ MCh$ US$ MUS$ MCh$ US$ MUS$ MCh$
CLP
   (254,636 ) (11.73 ) (8,180 ) (386,979 ) (37.01 ) (22,745 ) (293,337 ) (14.00 ) (9,211 )
CLF
   (177,471 ) (26.29 ) (18,328 ) (245,812 ) (47.62 ) (29,261 ) 41,167 (15.00 ) (10,029 )
COP
   (189,242 ) (5.74 ) (3,988 ) (225,321 ) (17.50 ) (10,766 ) (152,241 ) (8.00 ) (5,588 )
UVR
   (29,763 ) (0.55 ) (380 ) —   —   —   —   —   —
USD
   (33,769 ) (2.44 ) (1,701 ) (48,791 ) (2.77 ) (1,700 ) (77,927 ) (3.00 ) (2,094 )
Other
   —   —   —   —   —   —   (159 ) —   (7 )


Total interest rate impact
   (684,881 ) (46.75 ) (32,577 ) (906,903 ) (105 ) (64,472 ) (482,497 ) (40 ) (26,929 )


   Impact due to changes in prices
   As of December 31, 2018    As of December 31, 2017
Exchange rate
   ThUS$    MCh$    ThUS$    MCh$
USD
   (3.77 )    (2,624 )    (7.93 )    (4,875 )
COP
   (3.72 )    (2,494 )    (9.15 )    (5,621 )








Total risk exchange rate
   (7.49 )    (5,118 )    (17.08 )    (10,496 )








Total impact
   (7.49 )    (5,118 )    (122.08 )    (74,968 )








~~As of December 31, 2017:~~

Potential Impact on Equity

As of December 31, 2017

DV01 (+1 bp)

Impact of Change in Interest
Rate

Interest Rate

US$

MUS$

MCh$

CLP

(386,979
)
(37.01
)
(22,745
)
CLF

(245,812
)
(47.62
)
(29,261
)
COP

(225,321
)
(17.50
)
(10,766
)
UVR

—

—

—

USD

(48,791
)
(2.77
)
(1,700
)
Other

—

—

—

Total Rate Impact

(906,903
)
(105
)
(64,472
)

Impact of Change in Prices

Exchange Rate

MUS$

MCh$

USD

(8
)
(4,875
)
COP

(9
)
(5,621
)
Total Impact on Exchange Rate

(17
)
(10,496
)
Total Impact

(122
)
(74,968
)
~~As of December 31, 2016:~~

Potential Impact on Equity

As of December 31, 2016

DV01 (+1 bp)

Impact of Change in Interest
Rate

Interest Rate

US$

MUS$

MCh$

CLP

(293,337
)
(14.00
)
(9,211
)
CLF

41,167

(15.00
)
(10,029
)
COP

(152,241
)
(8.00
)
(5,588
)
UVR

—

—

—

USD

(77,927
)
(3.00
)
(2,094
)
Other

(159
)
—

(7
)
Total Rate Impact

(482,497
)
(40
)
(26,929
)

Impact of Change in Prices

Exchange Rate

MUS$

MCh$

USD

(1
)
(269
)
COP

(150
)
(100,390
)
Total Impact on Exchange Rate

(151
)
(100,659
)
Total Impact

(191
)
(127,588
)
F-~~168~~

~~Table of Contents~~
~~As of December 31, 2015:~~

Potential Impact on Equity

DV01 (+1 bp)

Impact of Change in Interest
Rate

Interest Rate

USD

MUS$

MCh$

CLP

(9,665
)
(1
)
(242
)
CLF

(30,919
)
(2
)
(1,725
)
USD

—

—

—

Other

—

—

—

Total Rate Impact

(40,584
)
(3
)
(1,967
)

Impact of Change in Prices

Foreign Exchange

MUS$

MCh$

USD

—

—

Other

—

—

Total Impact on Exchange Rate

—

—

Total Impact

(3
)
(1,967
)
Hedging
The Bank uses accounting hedges to manage efficiently ~~manage~~the accounting asymmetries present in financial risk exposure.
The use of accounting hedges is ~~dependent on~~subject to the limits defined by the Board of Directors, the definitions ~~from~~of the ~~ALCO~~Assets and Liabilities Committee (ALCO) and the ~~hedging policy.~~ Hedging Policy.
The ~~ALM division~~Treasury is responsible for designing and implementing the strategies and the ~~financial risk management division~~Financial Risk Management is responsible for measuring and monitoring the effectiveness of the hedges, generating indicators of effectiveness ~~indicators~~ that are ~~continuously~~constantly monitored. (For more detail on the accounting hedging strategies, review Note 8).
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-179
Note 34 – Risk management, continued

~~See Note 8 for more information on accounting hedge strategies.~~
·~~Liquidity~~C) Operational Risk ~~Metrics and Limits~~
Liquidity risk measurements are focused mainly on quantifying whether the institution has sufficient resources to meet its intraday and intraday obligations under both normal and stressed conditions. They also include a framework of indicators to forecast the occurrence of liquidity stress scenarios and clarity as to the steps to follow once the risk has occurred.
~~The following regulatory and internal metrics are used to monitor and control liquidity risk:~~
~~Regulatory Measurement of Liquidity Risk~~
Adjusted liquidity gap: the same chapter (SBIF 12-20 “Management and Measurement of Liquidity Position”) establishes that, with prior authorization from the regulator, cash outflows to retail counterparties may be assigned a different maturity than their contractual maturity based on their statistical behavior. Adjusted mismatches (local consolidated) are restricted to a maximum of:
·             ~~30-day mismatches in consolidated and foreign currency: 100% of Core Capital.~~
·             ~~90-day mismatches in consolidated currency: 200% of Core Capital.~~
The Bank ~~on a local consolidated level, must continuously observe those limits~~ and ~~periodically report to~~its subsidiaries define operational risk as the ~~SBIF its positions at~~possibility of occurrence of losses resulting from failures, deficiencies or inadequacies in internal processes, people, and systems or external events, including in this definition the legal risk and ~~compliance with those limits using the C46 regulatory report “Liquidity Situation.”~~
~~The use of the liquidity regulatory limit as of December 31, 2017, 2016~~excluding strategic risks and ~~2015,~~reputational. Operational risk is ~~detailed as follows:~~
F-~~169~~

~~Table of Contents~~

As of December 31,

2017

2016

2015

Regulatory Liquidity Indicator

%

%

%

At 30 days

18

4

(2
)
At 30 days in foreign currency

25

12

6

At 90 days

11

16

15

~~Note: Negative percentage (-2%) means that cash inflows exceed cash outflows at that maturity.~~
~~Regulatory Measurement of Contractual Liquidity Gap~~
~~In accordance with SBIF Chapter 12-20, all cash flows in and outside the Statement of Financial Position are analyzed provided that they contribute cash flows at their contractual maturity point.~~
~~Balances of the Bank’s consolidated undiscounted contractual cash flows from financial assets and liabilities as of December 31, 2017, 2016 and 2015, are detailed as follows in MCh$:~~

December 31, 2017

1 Month

1 - 3 Months

3 Months to 6
month

6 month to 1
Year

1 year to 3
years

3 years to 5
years

More than 5
years

Total

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

Assets

4,224,228

1,661,208

2,030,492

2,507,437

4,605,863

2,979,975

8,739,115

26,748,318

Cash

964,030

—

—

—

—

—

—

964,030

Financial instruments recorded at market value

1,031,730

1,214

230

15,516

15,448

6,634

13,339

1,084,111

Loans to other domestic banks without lines of credit

23,723

—

—

—

93,955

—

—

117,678

Lines of credit granted to other domestic banks

—

—

—

—

—

—

—

—

Commercial loans without lines of credit

1,746,846

1,401,225

1,663,302

1,489,772

2,656,850

1,677,277

4,455,127

15,090,399

Commercial lines of credit and overdrafts

(325,031
)
10,376

(3,633
)
97,780

49

—

—

(220,459
)
Consumer loans without lines of credit

141,002

148,208

205,219

355,677

1,053,399

519,643

209,134

2,632,282

Consumer lines of credit and overdrafts

36,763

21,558

(13,488
)
425,016

4,092

—

—

473,941

Residential mortgage loans

34,318

65,946

96,918

194,677

769,201

719,814

4,046,511

5,927,385

Financial instruments recorded based on issuer’s flow

18,891

250

31,240

35,122

—

—

—

85,503

Other transactions or commitments without lines of credit

703,120

—

—

—

2,599

—

—

705,719

Other lines of credit granted

—

—

—

—

—

—

—

—

Derivative instruments

(151,164
)
12,431

50,704

(106,123
)
10,270

56,607

15,004

(112,271
)
Liabilities

(8,239,221
)
(2,164,508
)
(2,393,760
)
(3,255,779
)
(2,859,785
)
(1,094,157
)
(5,255,700
)
(25,262,910
)
Current accounts and other demand deposits

(4,141,667
)
—

—

—

—

—

—

(4,141,667
)
Term savings accounts - unconditional withdrawal

(2,708
)
—

—

—

—

—

—

(2,708
)
Term savings accounts - deferred withdrawal

(25,702
)
—

—

—

—

—

—

(25,702
)
Obligations with Chilean Central Bank without lines of credit

(397,707
)
—

—

—

—

—

—

(397,707
)
Lines of credit secured from Chilean Central Bank

—

—

—

—

—

—

—

—

Obligations with other domestic banks without lines of credit

—

—

—

—

—

—

—

—

Lines of credit secured from other domestic banks

—

—

—

—

—

—

—

—

Savings accounts and time deposits

(1,910,317
)
(1,938,606
)
(2,106,012
)
(2,356,981
)
(905,369
)
(125,129
)
(789,883
)
(10,132,297
)
Foreign loans without lines of credit

(460,289
)
(147,694
)
(224,952
)
(646,167
)
(362,455
)
(95,084
)
(240,690
)
(2,177,331
)
Lines of credit from foreign banks

—

—

—

—

—

—

—

—

Letter of credit obligations

(3,120
)
(582
)
(3,191
)
(6,257
)
(21,623
)
(16,323
)
(24,732
)
(75,828
)
Bonds payable

(599,615
)
(78,780
)
(63,087
)
(231,538
)
(1,511,971
)
(839,412
)
(4,200,119
)
(7,524,522
)
Other obligations or payment commitments without lines of credit

(698,096
)
1,154

3,482

(14,836
)
(58,367
)
(18,209
)
(276
)
(785,148
)
Other lines of credit secured

—

—

—

—

—

—

—

—

Net band

(4,014,993
)
(503,300
)
(363,268
)
(748,342
)
1,746,078

1,885,818

3,483,415

1,485,408

F-~~170~~

~~Table of Contents~~

December 31, 2016

1 Month

1 - 3 Months

3 Months to 1
Year

1 to 3 Years

More than 3
Years

Total

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

Assets

4,437,895

2,112,587

4,778,259

5,251,810

17,824,808

34,405,359

Cash

1,119,862

—

—

—

—

1,119,862

Financial instruments recorded at market value

1,004,424

359,123

118,864

494,925

1,159,907

3,137,243

Loans to other domestic banks without lines of credit

167,076

4,092

—

—

—

171,167

Lines of credit granted to other domestic banks

—

—

—

—

—

—

Commercial loans without lines of credit

1,969,379

1,525,530

3,364,118

2,816,369

9,368,578

19,043,975

Commercial lines of credit and overdrafts

(276,662
)
2,781

58,006

45

45

(215,785
)
Consumer loans without lines of credit

62,325

131,324

525,925

1,038,327

1,744,874

3,502,775

Consumer lines of credit and overdrafts

94,515

4,484

325,597

3,248

3,248

431,093

Residential mortgage loans

37,140

66,144

283,201

739,403

5,314,672

6,440,560

Financial instruments recorded based on issuer’s flow

30,967

470

75,868

—

—

107,305

Other transactions or commitments without lines of credit

238,207

6,092

16,098

112,494

117,408

490,299

Other lines of credit granted

—

—

—

—

—

—

Derivative instruments

(9,338
)
12,547

10,582

46,999

116,076

176,865

Liabilities

(8,454,693
)
(2,799,978
)
(5,214,372
)
(2,960,247
)
(8,655,131
)
(28,084,422
)
Current accounts and other demand deposits

(4,318,821
)
—

—

—

—

(4,318,821
)
Term savings accounts - unconditional withdrawal

(2,901
)
—

—

—

—

(2,901
)
Term savings accounts - deferred withdrawal

(39,644
)
—

—

—

—

(39,644
)
Obligations with Chilean Central Bank without lines of credit

(376,629
)
—

—

—

—

(376,629
)
Lines of credit secured from Chilean Central Bank

—

—

—

—

—

—

Obligations with other domestic banks without lines of credit

—

—

—

—

—

—

Lines of credit secured from other domestic banks

—

—

—

—

—

—

Savings accounts and time deposits

(3,091,375
)
(2,474,208
)
(3,500,821
)
(1,139,025
)
(1,938,961
)
(12,144,391
)
Foreign loans without lines of credit

(245,352
)
(281,556
)
(1,017,915
)
(109,668
)
(328,524
)
(1,983,014
)
Lines of credit from foreign banks

—

—

—

—

—

—

Letter of credit obligations

(4,099
)
(809
)
(12,048
)
(26,473
)
(79,972
)
(123,402
)
Bonds payable

(40,256
)
(32,952
)
(632,208
)
(1,638,082
)
(6,217,523
)
(8,561,021
)
Other obligations or payment commitments without lines of credit

(335,616
)
(10,453
)
(51,380
)
(46,999
)
(90,151
)
(534,599
)
Other lines of credit secured

—

—

—

—

—

—

Net band

(4,016,798
)
(687,391
)
(436,113
)
2,291,563

9,169,677

6,320,937

December 31, 2015

1 Month

1 - 3 Months

3 Months to 1
Year

1 to 3 Years

More than 3
Years

Total

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

Assets

1,684,312

634,369

1,862,438

1,106,943

5,370,043

10,658,103

Cash

556,223

—

—

—

—

556,223

Financial instruments recorded at market value

465,982

—

—

—

—

465,982

Loans to other domestic banks without lines of credit

49,779

8,927

38,282

2,825

2,825

102,638

Lines of credit granted to other domestic banks

—

—

—

—

—

—

Commercial loans without lines of credit

548,585

550,736

1,193,941

616,189

2,936,302

5,845,752

Commercial lines of credit and overdrafts

8,671

2,306

38,713

22

22

49,734

Consumer loans without lines of credit

13,780

27,094

113,379

221,144

317,221

692,619

Consumer lines of credit and overdrafts

(9,524
)
9,338

295,542

3,001

3,001

301,357

Residential mortgage loans

10,773

21,390

98,262

257,087

2,053,706

2,441,217

Financial instruments recorded based on issuer’s flow

89

17,682

34,274

11,504

14,079

77,628

Other transactions or commitments without lines of credit

61,262

—

77,054

—

—

138,316

Other lines of credit granted

—

—

—

—

—

—

Derivative instruments

(21,308
)
(3,104
)
(27,009
)
(4,829
)
42,887

(13,363
)
Liabilities

(2,140,218
)
(875,303
)
(2,297,841
)
(1,191,284
)
(3,520,612
)
(10,025,260
)
Current accounts and other demand deposits

(1,013,102
)
—

—

—

—

(1,013,102
)
Term savings accounts - unconditional withdrawal

—

—

—

—

—

—

Term savings accounts - deferred withdrawal

—

—

—

—

—

—

Obligations with Chilean Central Bank without lines of credit

—

—

—

—

—

—

Lines of credit secured from Chilean Central Bank

—

—

—

—

—

—

Obligations with other domestic banks without lines of credit

(2
)
(2
)
(99
)
(753
)
(9,210
)
(10,066
)
Lines of credit secured from other domestic banks

(21
)
—

—

—

—

(21
)
Savings accounts and time deposits

(943,680
)
(821,386
)
(1,660,957
)
(362,949
)
(976,198
)
(4,765,172
)
Foreign loans without lines of credit

(2,992
)
(22,259
)
(550,776
)
(83,019
)
(87,778
)
(746,824
)
Lines of credit from foreign banks

—

—

—

—

—

—

Letter of credit obligations

(1,748
)
—

(4,916
)
(9,009
)
(21,783
)
(37,456
)
Bonds payable

(3,806
)
(952
)
(51,699
)
(290,792
)
(1,907,377
)
(2,254,626
)
Other obligations or payment commitments without lines of credit

(174,867
)
(30,704
)
(29,394
)
(444,762
)
(518,266
)
(1,197,993
)
Other lines of credit secured

—

—

—

—

—

—

Net band

(455,906
)
(240,934
)
(435,403
)
(84,341
)
1,849,431

632,843

~~Note: comparative basis for 2015 is only Itaú Chile~~
The preceding tables present undiscounted cash flows from the Bank’s assets (Notes 5 - 11) and liabilities (Notes 16 - 18) on the basis of maturity estimation models. The Bank’s expected cash flows could varyrecognized as a manageable risk, for which it has defined a function in charge of ~~changes in the variable that are used to estimate asset and liability maturities.~~this task within its corporate structure.
The grouping corresponds to regulatory categories that bring together financial items with similar characteristics from the perspective of liquidity risk. These categories are modeled separately and reported in cash flows.
F-~~171~~

~~Table of Contents~~
~~Liquidity Coverage Ratio (“LCR”) and Net Stable Funding Ratio (“NSFR”)~~
~~In line with international risk management practices, the Bank uses the liquidity coverage ratio (“LCR”) and net stable funding ratio (“NSFR”) to manage liquidity risk.~~
The LCR aims to measure the sufficiency of high-quality assets to face a 30-day funding stress scenario. At a minimum, the institution must survive until the thirtieth day of the stress scenario with funding from liquid assets in its portfolio because, as described in the standard, managers and/or supervisors would have been able to establish timely corrective measures. The indicator also recognizes differentiated behavior for wholesale versus retail counterparties, which in the Bank’s case represent 72% and 28%, respectively, for the 30-day band. On the other hand, the NSFR focuses on maintaining sufficient stable funding to meet (long-term) stable funding needs. The bank calculates LCR and NSFR using the methodologies defined by the local regulator and the Brazilian Central Bank (“BACEN”). Both regulators set a limit for LCR, while the parent company establishes a limit for NSFR. The methodology used to estimate LCR and NSFR consists of liquidity ratios proposed by the “Basel III Committee on Banking Supervision” (“BIS III”) that were adopted by the local Chilean regulator and the Brazilian Central Bank.
~~Deposits / Loans~~
Structurally, the Bank’s liquidity can be quantified based on the level of assets and liabilities in its balance sheet. In particular, the following table shows the ratio of deposits / loans in Itaú Corpbanca’s balance sheet. Deposits refer to the carrying amount of funds (demand and time deposits) that customers deposit in the bank, while loans are credit that the bank grants. This is a measurement of the reciprocity between the Bank’s commercial activity and the stability of its funding.

Dec 2017

Dec 2016

Dec 2015

Year-End

71.9%

78.4%

73.5%

Minimum

70.2%

71.0%

73.2%

Maximum

78.4%

81.5%

79.9%

Average

72.3%

77.5%

76.5%

~~Note1: loans are reported net of provisions~~
~~Note2: comparative basis for 2015 is only Itaú Chile~~
~~Liquidity Warning Levels~~
Warning levels seek to provide evidence or signs of potential adverse liquidity events. The most relevant warning levels include: counterparty and maturity concentration, currency concentration, product concentration, reserve management, evolution of funding rates and diversification of liquid assets.
~~Analysis of Pledged and Unpledged Assets~~
~~The following presents an analysis of the Bank’s pledged and uncommitted assets that will be available to generate additional funding as fixed-income instruments. For this, pledged assets are:~~
·             ~~Assets that have been committed or received in guarantee.~~
·             ~~Assets that an entity considers that it is restricted from using.~~
~~Available assets and investments adjusted for the delivery or receipt of guarantees for year-end 2017, 2016 and 2015 are detailed as follows.~~

Guarantees

Guarantees

Amount

Furnished

Received

Cash

MCh$

MCh$

MCh$

MCh$

Year

(i)

(ii)

(iii)

(i-ii+iii)

2017

999,044

(356,881
)
172,881

1,528,806

2016

1,980,930

423,655

383,424

1,940,699

2015

579,597

43,727

10,293

546,163

F-~~172~~

~~Table of Contents~~
·~~Counterparty Risk~~
Exposure to derivative counterparty risk is measured by recognizing the different contracts maintained with the institution’s customers, including contracts without mitigating clauses, contracts with netting, contracts with Credit Support Annex (“CSA”) and with clearing houses, which receive a differentiated treatment.
~~The following table details the netting of these transactions:~~

12/31/2017

12/31/2016

12/31/2015

Gross amount
assets

Gross amount
liabilities

Net amounts

Gross amount
assets

Gross amount
liabilities

Net amounts

Gross amount
assets

Gross amount
liabilities

Net amounts

(a)

(b)

(c) = (a) + (b)

(a)

(b)

(c) = (a) + (b)

(a)

(b)

(c) = (a) + (b)

Notes

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

Derivatives with netting agreement

127,293

(96,942
)
30,351

776,613

(885,158
)
(108,545
)
—

—

—

Derivatives without netting agreement

1,121,482

(998,212
)
123,270

326,156

(22,176
)
303,980

227,984

(253,183
)
(25,199
)
Total Derivatives

8

1,248,775

(1,095,154
)
153,621

1,102,769

(907,334
)
195,435

227,984

(253,183
)
(25,199
)
Net guarantees delivered in compensation houses (*)

78,097

—

78,097

56,818

—

56,818

724

—

724

Net guarantees delivered in bilateral agreements (**)

15/20

88,520

(79,589
)
8,931

167,148

(49,776
)
117,372

—

—

—

Net guarantees

166,617

(79,589
)
87,028

223,966

(49,776
)
174,190

724

—

724

Derivatives net of guarantees

1,169,186

(928,537
)
240,649

1,052,993

(683,368
)
369,625

227,984

(252,459
)
(24,475
)
~~(*) Clearing Houses: centralized counterparties that play the counterparty role for all participants~~
~~(**) Bilateral agreements: contractual agreements between both parties for delivery of guarantees under certain conditions~~
Market values of derivatives that are reported in accounting do not reflect counterparty risk management using guarantees as they do not reveal the true exposures with the counterparties. The guarantees delivered (received) must be added (subtracted) from the market value in order to correctly reflect these exposures.
~~It is important to highlight that counterparty~~Operational risk management is ~~framed within~~executed, mainly, through the ~~Bank’s~~Operational Risk Management function. The Bank adopts a model of three lines of defense as the primary way to implement its operational risk management structure, internal controls and compliance, ensuring compliance with corporate ~~credit policies.~~
~~b.3) Monitoring and Governance of Financial Risks~~
guidelines.
The ~~Board is~~defense lines are composed by; the ~~body~~business and support areas (first line of defense) responsible for managing the risks related to their processes; Operational Risk, Internal Controls, and Compliance (second line of defense) area in charge of supporting the ~~Bank’s management. Its duties include defining~~first line of defense in relation to the ~~institution’s strategic guidelines~~fulfillment of its direct responsibilities; and ~~supervising its~~Internal Audit function (third line of defense) responsible for verifying, independently and periodically, the adequacy of the risk identification and management ~~structure.~~
~~Risk management policies are established~~processes and procedures, in accordance with the objective of identifying and analyzing the risks faced by the Bank, setting adequate limits and controls and monitoring risks and compliance with limits. Risk management policies and structures are reviewed regularly so that they reflect changesguidelines established in ~~the Bank’s activities. The Bank, through its standards and procedures, aims to develop an appropriate control environment in which all employees understand their roles and responsibilities.~~
The Audit Committee supervises the way in which the Bank monitors and manages risk and compliance with the risk management policies and procedures and oversights if the risks management framework is appropriate for the risks faced by the Bank. This committee is assisted by the Internal Audit inPolicy and submitting the results of its ~~oversight role. Internal Audit performs reviews of risk management controls and procedures, whose results are reported~~recommendations for improvement to the Audit Committee.
The risk management program contemplates that all relevant risk issues must be reported to the higher levels and to the Operational Risk Committee.
~~In accordance with~~Our methodology consists in the ~~Bank’s governance outlook,~~evaluation of the ~~Financial Risk Division is responsible for identifying, quantifying, analyzing, controlling~~risks and controls of a business from a broad perspective and includes a plan to monitor the effectiveness of such controls and the identification of eventual weaknesses. The main objectives of the Bank and its subsidiaries in terms of operational risk management are the following:
Identification, evaluation, information, management, and monitoring ~~financial risk at the Bank. The Credit Risk Division is responsible for managing credit risk for the Corporate Banking, Treasury, Companies and Retail divisions. The Financial Risk Department is part~~ of the ~~Planning~~operational risk in connection with activities, products, and processes carried out or commercialized by the Bank and its subsidiaries;
Build a strong culture of operational risk management and internal controls, with clearly defined and adequately segregated responsibilities between business and support functions, whether these are internally developed or outsourced to third parties;
Generate effective internal reports in connection with issues related to operational risk management, with a clearly defined escalation protocol;
Control ~~Division. The other departments within this division include Accounting, Management Control, Planning~~the design and ~~Development, Capital Management~~application of effective plans to deal with contingencies that ensure business continuity and ~~Investor Relations. The~~losses control.
Regarding training and awareness, the risk culture continues to be reinforced throughface-to-face training in the field of operational risk, internal control, prevention of external and internal fraud, and the implementation of the annual “more security” program for all collaborators and induction programs for new employees.
Finally, it is worth mentioning that Sarbanes-Oxley methodologies (SOX) continue to be applied for their main ~~objective~~products and processes, the application of this ~~corporate division~~methodology is ~~to provide accurate, timely and high-quality information to support decision making~~annually certified by ~~internal and~~an external ~~stakeholders.~~consultant.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-180
Note 34 – Risk management, continued

The Corporate Treasury Division is charged with managing financial risk in the Bank’s trading and banking books. In the banking book, this consists of managing inflation, interest rate and liquidity risk in the Bank’s balance sheet in order to maximize returns in compliance with corporate policies and current laws and regulations. The trading book refers to the portfolio of financial instruments acquired to obtain short-term gains from increases in fair value arising from changes in the values of underlying variables. This book is responsible for managing currency risk for the entire balance sheet. Management of the Bank’s funding
F-~~173~~

~~Table of Contents~~
~~structure is an important component of managing liquidity and interest rate risk within the Banking Book or balance sheet.~~
The Financial Risk Division is independent from the business areas and is responsible for controlling and measuring the Bank’s financial risks (market and liquidity risk) as well as supplying, along with the Treasury Division, the ALCO with the metrics and limits for those risks, which are established in the respective policies.
The Bank’s financial risk management efforts are framed within the Financial Risk Policy, which is comprised of the Liquidity Management Policy, the Market Risk Management Policy and the Valuation Policy.
~~Financial Risk Management Principles~~
·             ~~Risk is monitored and controlled by parties independent from those managing risk, thus correctly aligning incentives.~~
·             ~~Management efforts should be flexible, within the framework permitted by policies, rules and current regulations.~~
·             ~~Senior management establishes the guidelines for risk appetite, and is informed periodically on risk levels assumed, contingencies and instances when limits are exceeded.~~
~~Financial Risk Management Committees~~
~~In order to guarantee the flexibility of management efforts and communication of risk levels to senior management, the following network of committees has been established:~~
·             Daily meeting: Happens daily to review financial conditions and the latest market movements. This committee reviews the relevance of positions on a daily basis in order to detect in advance any scenarios that could negatively impact returns and liquidity. It also monitors the performance of strategies used for each of the portfolios.
·             Proprietary Trading and Market Making Commission: Meets weekly to analyze strategies for managing investment portfolio or directional positions. This committee reviews local and global economic conditions and projections in order to analyze the potential benefits and risks of the strategies executed and evaluate new strategies.
·             ~~Asset and Liability Management Commission (“ALM”): Meets biweekly to analyze management of structural interest rate and indexation risk in the Banking Book.~~
·             ~~Liquidity and Market Commission: Meets biweekly to analyze management of funding liquidity risk.~~
·             ~~Treasury Committee: Meets monthly to analyze matters related to treasury activity and establish agreements and strategies on related matters, always in line with current ALCO policies and guidelines.~~
·             Asset-Liability Committee (“ALCO”): Meets monthly to analyze economic and financial conditions and inform senior management of market and liquidity risk levels assumed by presenting indexes of market and funding liquidity risk, limit consumption and results of stress tests.
·             Board of Directors: The Board of Directors is informed each quarter of the market and funding liquidity risk levels assumed by presenting established risk indexes, limit consumption and results of stress tests.
~~b.3~~D) Shareholders’ equity ~~requirement~~
requirements
The primary objectives of capital management are to ensure compliance with regulatory requirements and to maintain a solid risk rating and healthy capital ratios. During ~~2016~~2018 and ~~2015,~~2017, the Bank has complied fully with all capital requirements.
The Bank maintains and actively manages core capital to cover the risks inherent to its business. The Bank’s capital adequacy is monitored using, among other measures, indices and rules established by the SBIF.
In accordance with the General Banking Law, the Bank must maintain a minimum ratio of ~~regulatory capital~~Regulatory Capital to ~~consolidated risk-weighted assets~~Consolidated Risk-Weighted Assets of 8%, net of required provisions, and a minimum ratio of ~~core capital~~Core Capital to
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~~Table of Contents~~
~~total consolidated assets~~ Total Consolidated Assets of 3%, net of required provisions. However, after the merger, the SBIF determined that the Bank’s ~~regulatory capital~~Regulatory Capital could not be less than 10% of its ~~risk-weighted assets.~~Risk-Weighted Assets. For this purpose, the Bank has applied the dispose in the Chapter12-1 “Heritage for legal and regulatory ~~capital is determined based on capital and reserves or core capital, adjusted by:~~
·            ~~adding subordinated bonds limited to 50%~~purposes” of ~~core capital and~~
·            ~~subtracting the asset balance of goodwill and unconsolidated investments in companies~~
·            ~~adding non-controlling interest up to a maximum of 20% of core capital.~~
RAN.
Assets are weighted using risk categories, which are assigned a risk percentage based on the capital needed to back up each asset. There are ~~five~~5 risk categories (0%, 10%, 20%, 60% and 100%). For example, cash, due from ~~banks~~Banks and financial instruments issued by the Chilean Central Bank have 0% risk, which means that, in accordance with current standards, no capital is required to back these assets. ~~Property, plant and equipment~~Bank have 100% risk, which means that a minimum capital equivalent to 8% of the value of these assets is needed.
In the case of Itaú, it uses 10%.
All derivative instruments tradedoff-market are taken into account to determine risk assets using conversion factors over notional values, thus calculating the value of the credit risk exposure (or “credit equivalent”). For weighting purposes, “credit equivalent” also considers contingent loans not recorded in the Consolidated Statement of Financial Position.
According to local regulations, as of December 31, 2018 and 2017, the relation between assets and risk weighted assets is as follow:
~~As instructed in Chapter 12-1 “~~~~Equity for Legal and Regulatory Purposes~~” of the SBIF RAN, beginning in January 2010, a regulatory change was implemented that made effective Chapter B-3 of the Compendium of Accounting Standards and its subsequent amendments, which changed the risk exposures of contingent loans, passing from 100% to the percentages indicated below:
   Consolidated assets    Risk-weighted assets
   As of December 31,    As of December 31,
   2018    2017    2018    2017
   MCh$    MCh$    MCh$    MCh$
Assets balance (net of allowances)

Cash and deposits in banks
   987,680    964,030    —      —
Cash items in process of collection
   318,658    157,017    56,963    30,679
Trading securities
   86,938    415,061    27,658    64,799
Investments under resale agreements
   109,467    28,524    106,916    7,277
Financial derivative contract (*)
   1,315,165    1,461,326    1,040,274    1,094,481
Interbank loans
   341,244    70,077    95,612    36,073
Loans and accounts receivable from customers
   20,880,186    19,767,434    18,808,886    17,850,495
Available for sale investments
   2,650,776    2,653,066    551,593    501,656
Held to maturity investments
   198,910    202,030    198,910    202,030
Investments in companies
   10,555    10,412    10,555    10,412
Intangible
   1,613,807    1,605,234    435,572    435,991
Fixed assets
   95,564    130,579    95,564    130,579
Current taxes
   123,129    238,452    12,313    23,845
Deferred taxes
   154,599    161,109    15,460    16,111
Other assets
   561,435    444,692    505,495    427,567
Off-balance sheet assets

Contingent loans
   2,333,398    2,199,660    1,400,038    1,319,796








Totals
   31,781,511    30,508,703    23,361,809    22,151,791








(*)
~~Type~~Items presented at their Equivalent Credit Risk value, in accordance with the provisions of ~~Contingent Loan~~Chapter12-1
~~Exposure~~
~~a) Collaterals~~ “Equity for Legal and ~~Guarantors~~
~~100%~~
~~b) Confirmed foreign letters~~Regulatory Effects” of ~~credit~~
~~20%~~
~~c) Issued documentary letters~~the RAN, issued by the Superintendency of ~~credit~~
~~20%~~
~~d) Performance~~Banks and ~~bid bonds~~
~~50%~~
~~e) Unrestricted lines of credit:~~
~~35%~~
~~f) Other loan commitments:~~
~~- Higher education loans Law 20,027~~
~~15%~~
~~- Other~~
~~100%~~
~~g) Other contingent loans~~
~~100%~~
Financial Institutions.

Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-181
F-~~175~~

~~Table of Contents~~Note 34 – Risk management, continued

~~As of year-end, the ratio of assets to risk-weighted assets was as follows:~~
   Amount    Ratio
   As of December 31,    As of December 31,
   2018    2017    2018    2017
   MCh$    MCh$    %    %
Basic capital
   3,324,531    3,189,876    (a ) 10.46    10.46    (c )
Effective equity
   3,415,845    3,249,572    (b ) 14.62    14.67    (d )

Consolidated Assets

Risk-Weighted Assets

2017

2016

2017

2016

MCh$

MCh$

MCh$

MCh$

Balance sheet assets (net of provisions)

Cash and due from banks

964,030

1,487,137

—

—

Transactions pending settlement

157,017

137,190

30,679

41,425

Trading securities

415,061

632,557

64,799

104,617

Receivables from repurchase agreements and securities borrowing

28,524

159,458

7,277

59,703

Financial derivative instruments

1,461,326

1,615,789

1,094,481

1,203,011

Loans and advances to banks

70,077

150,568

36,073

123,759

Loans to customers

19,767,434

20,449,754

17,850,495

18,713,221

Financial assets available for sale

2,653,066

2,054,110

501,656

326,964

Financial assets held to maturity

202,030

226,422

202,030

226,422

Investments in other companies

10,412

19,967

10,412

19,967

Intangible assets

1,605,234

1,657,614

435,991

469,167

Property, plant and equipment

130,579

119,970

130,579

119,970

Current tax assets

238,452

162,410

23,845

16,241

Deferred tax assets

161,109

287,051

16,111

28,705

Other assets

444,692

486,047

427,567

388,304

Off-balance-sheet assets

Contingent loans

2,199,660

2,255,880

1,319,796

1,353,528

Total risk-weighted assets

30,508,703

31,901,924

22,151,791

23,195,004

(a)
Basic Capital Corresponds to the net amount that must be shown in the Consolidated Financial Statements filed with the SBIF under the line item “Equity attributable to equity holders” as indicated in the Compendium of Accounting Standards.
(b)
Based on the consolidated financial statements filed with SBIF, the effective net equity of a bank is the sum of (i) a bank’s basic capital, (ii) subordinated bonds issued by a bank valued at their placement price up to 50% of its net capital base; provided that the value of the bonds shall decrease 20% for each year that lapses during the period commencing six years prior to their maturity and (iii) voluntary loan loss allowances in an amount up to 1.25% of a bank’s risk-weighted assets (if a bank has goodwill, this value would be required to be deducted from the calculation of the effective net equity). The calculation of the effective net equity does not include the capital contributions made to subsidiaries of a bank and is made on a consolidated basis rather than on an unconsolidated basis.
(c)
Consolidated basic capital ratio corresponding to basic capital divided by total assets for capital purposes (includes items outside the Consolidated Financial Statements).
(d)
Consolidated solvency ratio corresponds to the ratio of effective equity to weighted assets.
~~Figures are presented as required by local regulations.~~
Risk weighted assets are calculated according to Chapter 12-1 of the Recopilación Actualizada de Normas —RAN (update compilation of rules) issued by the Superintendency of Bank and Financial Institutions.

Amount

Ratio

2017

2016

2017

2016

MCh$

MCh$

%

%

Basic capital

3,189,876
(a)
3,173,516

10.46
(c)
9.95

Regulatory capital

3,249,572
(b)
3,252,175

14.67
(d)
14.02

~~(a)~~    Basic capital is defined as the net amount that should be shown in the Consolidated Financial Statements as “equity attributable to equity holders of the Bank” as indicated in the Compendium of Accounting Standards.
~~(b)~~    Regulatory capital is equal to basic capital plus subordinated bonds, additional provisions, and non-controlling interest as indicated in the Compendium of Accounting Standards; however, if that amount is greater than 20% of basic capital, only the amount equivalent to that percentage will be added; goodwill is subtracted and if the sum of the assets corresponding to minority investments in subsidiaries other than banking support companies is greater than 5% of basic capital, the amount that the sum exceeds that percentage will also be subtracted.
~~(c)~~The ~~consolidated basic capital ratio is equal to basic capital divided by total assets for capital purposes (includes items outside the Consolidated Statement of Financial Position).~~
~~(d)~~    ~~The consolidated solvency ratio is equal to the ratio of regulatory capital to weighted assets.~~
~~As of December 31, 2017, the Bank includes the following information within its management objectives, policies and processes:~~
·             In accordance with the SBIF’s authorization of the business combination, it determined that the resulting bank (from April 1, 2016 onward) shall maintain regulatory capital of not less than 10% of its risk-weighted assets.
F-~~176~~

~~Table of Contents~~
·             ~~The shareholder~~shareholders’ agreement established ~~“Optimum~~an “Optimal Regulatory Capital” ~~for~~with respect to Itaú Corpbanca ~~(Chilean Bank) or Corpbanca~~Chile and Colombia, ~~(Colombian Bank), as appropriate, (a) of~~which must be, at any date, the ~~greater of (i)~~highest between 120% of the minimum regulatory ~~Capital Ratio required~~capital ratio established by ~~applicable law~~the respective legislation and the average of the regulatory capital ratio of the 3 largest private Banks in the respective ~~country; and (ii)~~country, multiplied by the ~~average minimum regulatory Capital Ratio of the three largest private banks (excluding the Chilean Bank and/or the Colombian Bank (measured in terms of the~~consolidated risk-weighted assets (APR) of the Chilean ~~Bank and/~~or ~~the~~ Colombian Bank, ~~(measured in terms of assets) in Chile or Colombia,~~ as ~~appropriate, in each case~~applicable, on the date that is one year from the last day of the ~~most recent~~ fiscal year multiplied by (b) the risk-weighted assets (which include the risk-weighted assets of the Bank’s subsidiaries that are consolidated for the purpose of calculating the minimum regulatory capital ratio in each country) of the Chilean Bank or the Colombian Bank, as appropriate, as of the date one year after the last day of the mostmore recent, ~~fiscal year, presuming~~assuming that the ~~risk-weighted~~ assets weighted by their level of risk grow during that year at a rate equal to the ~~minimum growth rate.~~
·Minimum Growth Rate. The Bank, in consolidated terms ~~(the owners~~(owners of the Bank), ~~has~~maintains a total equity of MCh$3,324,531 (MCh$3,189,876 ~~(MCh$3,173,516~~ in ~~2016).~~December 2017) in the Consolidated Financial Statements filed with the SBIF, according to local regulations.
·             ~~In terms~~As of ~~regulatory ratios,~~December 31, 2018 and 2017, the Bank ~~closed the 2017 period with a ratio of core capital to total assets of 10.46% (9.95% in 2016), while the Basel Index (regulatory capital to total risk-weighted assets was 14,67% (14.02% in 2016).~~
~~b.4 Operational Risk~~
a.~~Definition~~
The Bank and its subsidiaries define operational risk as the possibility of losses resulting from failures, weaknesses or inadequacy of internal processes, staff, and systems or from external events. This definition includes legal risk but excludes strategic and reputation risk. Operational risk is ~~recognized as a manageable risk and, therefore, the Bank has designated an area within its corporate structure that is in charge of this task.~~
b.~~Structure~~
In line with its business strategy, Banco Itaú Corpbanca has assigned operational risk management to the Operational Risk Division, which acts according to an annual plan based on the strategic plan for the business areas, support areas and the parent company. This plan includes its own activities and others agreed with the parent company to comply with regulatory requirements. Time and available resources are distributed based on the organization’s objectives and size. This division reports to the Corporate Risk Division, which in turn reports to the Bank’s Chief Executive Officer.
In the Bank’s corporate governance structure, managing operational risk is of strategic importance to its business processes. Operational risk management is based on financial industry best practices, international standards (most importantly the Basel standards) and local standards, especially Chapter 1-13 of the SBIF regulations on operational risk management.
Banco Itaú Corpbanca has adopted a model with three lines of defense as the primary means of implementing its operational risk management, internal control and compliance structure, ensuring that corporate guidelines are followed. It establishes that the business and support areas (first line of defense) are responsible for managing risks related to their processes. To accomplish this, they must establish and maintain a risk management program that ensures effective controls. The risk management program calls for all relevant risk matters to be reported to higher levels and to the Operational Risk Committee. According to Bank policy, this operational risk management program is implemented at all personnel levels and for all types of products, activities, processes and systems. Business and support units are responsible for playing an active and primary role in identifying, measuring, controlling and monitoring these risks and for understanding and managing their risks in compliance with ~~policies.~~the “Optimar Regulatory Capital” requirements, as well as with all financial covenants related to regulatory capital requirements.

Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-182
F-~~177~~

~~Table~~Note 35 – Maturity of ~~Contents~~
~~Our methodology consists of evaluating the risks~~assets and controls of a business from a broad perspective and includes a plan to monitor the effectiveness of those controls and identify potential weaknesses. This perspective considers, among other factors, the volume and complexity of activities and the potential impact of the related operational losses and the control environment. The stages and main activities of our methodology are:
~~Identifying risks:~~liabilities
·             ~~Mapping processes~~
·             ~~Identifying risks and controls associated with processes, products, projects~~
·             ~~Identifying internal and external rules and regulations~~
·             ~~Recording operating losses~~
~~Measuring and evaluating each risk identified:~~
·             ~~Evaluating events~~
·             ~~Evaluating internal and external rules and regulations~~
·             ~~Walk-throughs and tests~~
·             ~~Classifying controls (SOX, as defined below)~~
·             ~~Evaluating business impacts of contingencies using a business impact analysis (“BIA”)~~
·             ~~Corporate and regulatory self-assessment~~
~~Mitigation and control:~~
·             ~~Defining the risk response (walk-throughs, tests, action plans)~~
·             ~~Mitigating and controlling crisis situations~~
·             ~~Monitoring the internal control environment~~
·             ~~Defining and implementing risk indicators~~
·             ~~Monitoring indicators and controls~~
·             ~~Assisting with implementation of actions plans to mitigate audit comments and risk events~~
~~Reporting:~~
·             ~~Management reports to the Bank’s senior management and committees~~
·             ~~Coordinating operational risk, IT security, continuity and crisis management committees~~
·             ~~Management reports to parent company~~
c.~~Objectives~~
The main ~~objectives of the Bank and its subsidiaries in managing operational risk are to:~~
·             ~~Identify, evaluate, report, manage and monitor operational risk of activities, products and processes carried out or sold~~assets Banked by ~~the Bank or its subsidiaries;~~
·             Build a strong culture of operational risk management and internal controls with responsibilities clearly defined and duties properly segregated among business and support functions, whether developed internally or outsourced to third parties;
·             ~~Generate effective internal reports on matters related to operational risk management, with scaling; and~~
·             ~~Control the design and application of effective plans for facing contingencies that ensure business continuity and limit loss.~~
In terms of training and awareness, the Bank continues to reinforce a risk culture through classroom training sessions on operational risk, internal controls and external and internal fraud prevention; to carry out the yearly program “more security” for all associates and to provide orientation programs for new employees.
~~Lastly, it continues to apply the Sarbanes-Oxley (“SOX”) methodologies for its main products and processes.~~
F-~~178~~

~~Table of Contents~~
~~NOTE 35 MATURITY OF ASSETS AND LIABILITIES~~
a)        ~~Maturity of financial assets~~
~~Below are the main financial assets grouped according to their remaining terms,~~maturity, including interest accrued as of December 31, ~~2017, 2016~~2018 and ~~2015:~~

As of December 31, 2017

Up to 1
month

From 1
month to 3
months

From 3
month to 1
year

From 1
year to 3
years

From 3
years to 6
years

Over 6
years

Total

Notes

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

Trading portfolio financial assets

6

18,941

298

170,098

189,735

9,365

26,624

415,061

Investments under agreements to resell

7

27,923

601

—

—

—

—

28,524

Derivative financial instruments

8

112,249

102,009

199,966

260,818

284,247

289,486

1,248,775

Loans and receivables from banks (*)

9

43,096

—

16,621

10,568

—

—

70,285

Loans and receivables from customers (**)

10

1,531,883

1,649,448

2,689,484

4,174,173

2,952,407

7,385,210

20,382,605

Commercial loans

1,226,214

1,494,950

2,513,004

2,410,168

1,917,111

4,155,099

13,716,546

Mortgages loans

35,428

66,596

98,292

649,867

446,737

2,855,833

4,152,753

Consumer loans

270,241

87,902

78,188

1,114,138

588,559

374,278

2,513,306

Financial investments available-for-sale

11

86,201

155,376

408,093

790,503

805,892

417,413

2,663,478

Financial investments held to maturity

11

55,554

6,171

113,445

23,466

430

2,964

202,030

~~(*) Loans and advances to banks are presented gross. The amount of provisions corresponds to MCh$208.~~
~~(**) Loans are presented gross. Provisions by loan type~~2017, are detailed as follows: ~~Commercial MCh$383,950, Mortgage MCh$45,312 and Consumer MCh$189,265.~~

As of December 31, 2016

Up to 1
month

From 1
month to 3
months

From 3
month to 1
year

From 1
year to 3
years

From 3
years to 6
years

Over 6
years

Total

Notes

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

Trading portfolio financial assets

6

7,475

14,708

279,372

244,335

60,968

25,699

632,557

Investments under agreements to resell

7

170,242

—

—

—

—

—

170,242

Derivative financial instruments

8

44,359

323,631

300,755

122,920

217,371

93,733

1,102,769

Loans and receivables from banks (*)

9

72,750

47,651

7,822

22,557

—

—

150,780

Loans and receivables from customers (**)

10

1,403,606

1,822,973

3,223,347

4,002,409

2,795,830

7,755,787

21,003,952

Commercial loans

1,154,891

1,683,001

3,031,056

2,318,045

1,846,661

4,600,817

14,634,471

Mortgages loans

29,808

50,810

76,685

566,873

402,947

2,761,394

3,888,517

Consumer loans

218,907

89,162

115,606

1,117,491

546,222

393,576

2,480,964

Financial investments available-for-sale

11

209,064

338,326

159,525

521,123

688,655

157,384

2,074,077

Financial investments held to maturity

11

95,697

13,405

114,514

—

—

2,817

226,433

   As of December 31, 2018
   Up to 1
month    Between 1
month to 3
months    Between 3
month to 1
year    Between 1
year to 3
years    Between 3
years to 6
years    Over 6
years    Totals
   MCh$    MCh$    MCh$    MCh$    MCh$    MCh$    MCh$
Assets

Financial instruments at fair value through profit or loss
   46,266    470    19,002    22,027    4,573    4,605    96,943
Financial instruments at fair value through other comprehensive income
   151,521    103,048    582,899    1,314,188    330,485    175,013    2,657,154
Loans and accounts receivable from customers at amortized cost (**)
   1,595,651    2,343,263    2,115,285    2,322,459    3,464,140    9,641,692    21,482,490
Commercial loans
   1,391,707    1,876,174    2,023,542    1,734,720    2,238,373    5,102,384    14,366,900
Mortgages loans
   2,544    1,021    3,876    18,192    103,965    4,316,229    4,445,827
Consumer loans
   201,400    466,068    87,867    569,547    1,121,802    223,079    2,669,763
Financial instruments at amortized cost
   27,012    18,238    153,673    —      —      —      198,923
Investments under resale agreements
   109,467    —      —      —      —      —      109,467
Financial derivative contracts
   120,361    102,992    178,826    263,595    279,427    423,756    1,368,957
Interbank loans (*)
   65,398    16,685    17,437    242,187    —      —      341,707














Liabilities

Investments under resale agreements
   1,015,614    —      —      —      —      —      1,015,614
Deposits and other demand liabilities
   3,624,335    2,311,111    2,910,851    762,998    102,155    409,661    10,121,111
Financial derivative contracts
   128,367    95,019    161,214    200,052    248,765    279,389    1,112,806
Interbank borrowings
   231,419    446,436    1,151,959    337,465    100,455    59,989    2,327,723
Debt instruments issued
   2,449    23,261    668,648    868,994    1,125,037    3,321,735    6,010,124














~~(*) Loans and advances to banks~~
(*)
Interbank loans are presented gross. The amount of allowances corresponds to MCh$463.
(**)
Loans and accounts receivable from customers at amortized cost are presented gross. Allowances by loan type are detailed as follows: Commercial MCh$484,707, Mortgage MCh$66,117 and Consumer MCh$217,296.

   As of December 31, 2017
   Up to 1
month    Between 1
month to 3
months    Between 3
month to 1
year    Between 1
year to 3
years    Between 3
years to 6
years    Over 6
years    Totals
   MCh$    MCh$    MCh$    MCh$    MCh$    MCh$    MCh$
Assets

Trading investments
   18,941    298    170,098    189,735    9,365    26,624    415,061
Investments under agreements to resell
   27,923    601    —      —      —      —      28,524
Derivative financial instruments
   112,249    102,009    199,966    260,818    284,247    289,486    1,248,775
Interbank loans (*)
   43,096    —      16,621    10,568    —      —      70,285
Loans and accounts receivable (**)
   1,531,883    1,649,448    2,689,484    4,174,173    2,952,407    7,385,210    20,382,605
Commercial loans
   1,226,214    1,494,950    2,513,004    2,410,168    1,917,111    4,155,099    13,716,546
Mortgages loans
   35,428    66,596    98,292    649,867    446,737    2,855,833    4,152,753
Consumer loans
   270,241    87,902    78,188    1,114,138    588,559    374,278    2,513,306
Available for sale instruments
   86,201    155,376    408,093    790,503    805,892    417,413    2,663,478
Held to maturity investments
   55,554    6,171    113,445    23,466    430    2,964    202,030














Liabilities

Investments under repurchase agreements
   420,320    600    —      —      —      —      420,920
Deposits and other demand liabilities
   2,957,278    1,858,394    3,936,827    793,684    118,388    372,262    10,036,833
Financial derivative contracts
   144,639    90,445    172,606    250,792    241,810    194,862    1,095,154
Interbank borrowings
   163,031    238,151    1,074,406    529,171    104,443    86,928    2,196,130
Debt instruments issued
   3,064    46,514    625,287    1,209,242    812,979    3,252,952    5,950,038














(*)
Interbank loans are presented gross. The amount of allowances corresponds to MCh$208
(**)
Loans and accounts receivable are presented gross. Allowances by loan type are detailed as follows: Commercial MCh$446,914, Mortgage MCh$35,019 and Consumer MCh$136,594.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-183
Note 36 – Foreign currency position
In the Consolidated Statements of ~~provisions corresponds to MCh$212.~~
~~(**) Loans are presented gross. Provisions by loan type are detailed as follows: Commercial MCh$418,928, Mortgage MCh$23,472 and Consumer MCh$116,904.~~

As of December 31, 2015

Up to 1
month

From 1
month to 3
months

From 3
month to 1
year

From 1
year to 3
years

From 3
years to 6
years

Over 6
years

Total

Notes

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

Trading portfolio financial assets

6

16,182

264

1,319

—

—

—

17,765

Investments under agreements to resell

7

10,293

—

—

—

—

—

10,293

Derivative financial instruments

8

6,513

18,799

27,499

58,540

116,633

—

227,984

Loans and receivables from banks (*)

9

49,842

30,141

16,687

2,798

—

—

99,468

Loans and receivables from customers (**)

10

651,320

862,768

2,374,316

660,737

1,616,802

635,128

6,801,071

Commercial loans

628,378

831,527

1,905,819

344,187

610,304

246,251

4,566,466

Mortgages loans

10,410

11,868

54,397

145,379

922,917

388,877

1,533,848

Consumer loans

12,532

19,373

414,100

171,171

83,581

—

700,757

Financial investments available-for-sale

11

169,786

272,490

68,325

1,909

—

2,475

514,985

Financial investments held to maturity

11

—

—

—

—

—

—

—

~~(*) Loans and advances to banks are presented gross. The amount of provisions corresponds to MCh$70.~~
~~(**) Loans are presented gross. Provisions by loan type are detailed as follows: Commercial MCh$61,995, Mortgage MCh$6,251 and Consumer MCh$27,333.~~
F-~~179~~

~~Table of Contents~~
b)        ~~Maturity of financial liabilities~~
~~Below are the main financial liabilities grouped according to their remaining terms, including interest accrued to~~Financial Position as of December 31, 2018 and 2017, ~~2016~~assets and ~~2015:~~liabilities are included in local and foreign currency, as well as adjustable by the variation of the exchange rate, for the amounts indicated below:

As of December 31, 2017

Up to 1 month

From 1
month to 3
months

From 3
month to 1
year

From 1 year
to 3 years

From 3
years to 6
years

Over 6
years

Total

Notes

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

Obligations under repurchase agreements

7

420,320

600

—

—

—

—

420,920

Time deposits and saving accounts (*)

16

2,957,278

1,858,394

3,936,827

793,684

118,388

372,262

10,036,833

Derivative financial instruments

8

144,639

90,445

172,606

250,792

241,810

194,862

1,095,154

Borrowings from financial institutions

17

163,031

238,151

1,074,406

529,171

104,443

86,928

2,196,130

Debt issued

18

3,064

46,514

625,287

1,209,242

812,979

3,252,952

5,950,038

As of December 31, 2018
   Note CLP (*) UF    USD COP    EUR    Others
currency    Readjustment Totals
MCh$ MCh$    MCh$ MCh$    MCh$    MCh$    MCh$ MCh$
Cash and deposits in banks
   5a ) 223,099 —      449,437 299,458    15,686    —      —   987,680
Cash items in process of collection
   5b ) 195,640 —      119,725 226    2,861    206    —   318,658
Financial instruments at fair value through profit or loss
   6 54,162 —      —   42,781    —      —      —   96,943
Financial instruments at fair value through other comprehensive income
   11 835,543 680,505    78,908 1,062,198    —      —      —   2,657,154
Loans and accounts receivable at amortized cost
   10 5,571,537 7,785,104    3,208,848 4,120,535    19,391    13    8,942 20,714,370
Financial instruments at amortized cost
   11 —   —      122,391 76,532    —      —      —   198,923
Investments under resale agreements
   7 91,510 —      —   17,957    —      —      —   109,467
Financial derivative contracts
   8 972,693 66,989    226,561 102,709    5    —      —   1,368,957
Interbank loans, net
   9 239,963 —      70,823 30,458    —      —      —   341,244
Intangible assets
   12 1,389,518 —      1,308 180,138    —      —      —   1,570,964
Property, plant, and equipment
   13 77,639 —      846 17,079    —      —      —   95,564
Current taxes
   14 68,094 —      2,887 52,148    —      —      —   123,129
Deferred taxes
   14 130,883 —      20,311 27,492    —      —      —   178,686
Other assets
   15 200,164 7,787    164,724 121,619    7,467    36    —   501,797
Othernon-current assets held for sale
   16 59,802 —      —   —      —      —      59,802










TOTAL ASSETS
   10,110,247 8,540,385    4,466,769 6,151,330    45,410    255    8,942 29,323,338










Deposits and other demand liabilities
   16 2,058,537 4,214    444,668 1,785,581    7,418    57    —   4,300,475
Cash in process of being cleared
   5b ) 133,926 —      112,284 —      796    159    —   247,165
Obligations under repurchase agreements
   7 363,789 —      6,834 644,991    —      —      —   1,015,614
Time deposits and other time liabilities
   16 6,513,874 609,136    1,955,631 1,042,445    25    —      —   10,121,111
Financial derivative contracts
   8 773,186 83,339    178,869 76,207    1,205    —      —   1,112,806
Interbank borrowings
   17 —   5,863    2,279,817 39,859    2,170    14    —   2,327,723
Debt instruments issued
   18 439,805 4,475,832    649,897 444,590    —      —      —   6,010,124
Other financial liabilities
   18 12,390 10    —   —      —      —      —   12,400
Current taxes
   14 528 —      —   663    —      —      —   1,191
Deferred taxes
   14 —   —      454 17    —      —      —   471
Provisions
   19 140,925 —      —   73,978    —      —      —   214,903
Other liabilities
   20 239,175 133,106    69,900 49,508    2,509    —      27,597 521,795
Liabilities directly associated withnon-current assets held for sale
   20             —










TOTAL LIABILITIES
   10,676,135 5,311,500    5,698,354 4,157,839    14,123    230    27,597 25,885,778










Assets (liabilities) net
   (565,888 ) 3,228,885    (1,231,585 ) 1,993,491    31,287    25    (18,655 ) 3,437,560










(*)
Includes transactions denominated in foreign currencies but that are settled in pesos.
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-184
~~(*) Exclude term savings accounts totaling MCh$28,410 during 2017.~~Note 36 – Foreign currency position, continued

As of December 31, 2016

Up to 1 month

From 1
month to 3
months

From 3
month to 1
year

From 1 year
to 3 years

From 3
years to 6
years

Over 6
years

Total

Notes

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

Obligations under repurchase agreements

7

373,879

—

—

—

—

—

373,879

Time deposits and saving accounts (*)

16

3,379,325

2,462,804

2,262,166

2,708,973

96,621

639,396

11,549,285

Derivative financial instruments

8

67,702

235,972

235,374

112,317

206,924

49,045

907,334

Borrowings from financial institutions

17

279,217

274,361

652,998

735,710

168,635

68,949

2,179,870

Debt issued

18

3,682

1,617

495,789

1,324,415

1,366,694

2,268,056

5,460,253

As of December 31, 2017
   Note CLP (*) UF    USD COP    EUR    Others
currency Adjustable    Totals
MCh$ MCh$    MCh$ MCh$    MCh$    MCh$ MCh$    MCh$
Cash and deposits in banks
   5a ) 221,037 —      377,014 354,751    10,340    888 —      964,030
Cash items in process of collection
   5b ) 124,414 —      22,202 1,067    9,286    48 —      157,017
Trading investments
   6 25,652 —      —   389,409    —      —   —      415,061
Investments under resale agreements
   7 2,074 —      218 26,232    —      —   —      28,524
Financial derivative contracts
   8 967,831 70,174    119,997 90,773    —      —   —      1,248,775
Interbank loans, net
   9 33,928 —      35,287 862    —      —   —      70,077
Loans and accounts receivable from customers, net
   10 5,652,307 7,693,789    2,204,036 4,207,288    —      —   6,658    19,764,078
Available for sale instruments
   11 914,656 999,540    14,053 725,569    —      —   9,660    2,663,478
Held to maturity investments
   11 —   —      95,652 106,378    —      —   —      202,030
Intangible assets
   12 1,370,857 —      1,422 190,375    —      —   —      1,562,654
Property, plant, and equipment
   13 81,438 —      1,043 48,098    —      —   —      130,579
Current taxes
   14 202,093 —      —   36,359    —      —   —      238,452
Deferred taxes
   14 115,800 —      24,885 —      —      —   —      140,685
Other assets
   15 239,308 12,843    95,807 80,308    677    82 —      429,025
Othernon-current assets held for sale
   15 18,308 —      —   —      —      —   —      18,308










TOTAL ASSETS
   9,969,703 8,776,346    2,991,616 6,257,469    20,303    1,018 16,318    28,032,773










Deposits and other demand liabilities
   16 1,952,975 7,803    432,253 1,742,508    6,076    52 —      4,141,667
Cash in process of being cleared
   5b ) 56,399 —      53,097 —      —      —   —      109,496
Obligations under repurchase agreements
   7 44,264 —      —   376,656    —      —   —      420,920
Time deposits and other time liabilities
   16 6,034,571 814,336    1,013,235 2,196,671    6,429    —   1    10,065,243
Financial derivative contracts
   8 869,263 84,530    82,231 59,130    —      —   —      1,095,154
Interbank borrowings
   17 (1,257 ) 21,958    1,516,717 650,987    2,269    5,456 —      2,196,130
Debt instruments issued
   18 1,179,526 3,381,318    923,718 �� 465,476    —      —   —      5,950,038
Other financial liabilities
   18 16,255 —      —   811    —      —   —      17,066
Current taxes
   14 624 —      —   —      —      —   —      624
Deferred taxes
   14 52 —      —   26,302    —      —   —      26,354
Provisions
   19 26,109 —      25,772 66,008    —      —   —      117,889
Other liabilities
   20 145,599 166,866    86,648 63,675    —      —   647    463,435
Liabilities directly associated withnon-current assets held for sale
   20 —   —      —   —      —      —   —      —










TOTAL LIABILITIES
   10,324,380 4,476,811    4,133,671 5,648,224    14,774    5,508 648    24,604,016










Assets (liabilities) net
   (354,677 ) 4,299,535    (1,142,055 ) 609,245    5,529    (4,490 ) 15,670    3,428,757










~~(*) Exclude term savings accounts totaling MCh$32,425 during 2016.~~
(*)
Includes transactions denominated in foreign currencies but that are settled in pesos.

As of December 31, 2015

Up to 1 month

From 1
month to 3
months

From 3
month to 1
year

From 1 year
to 3 years

From 3
years to 6
years

Over 6
years

Total

Notes

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

MCh$

Obligations under repurchase agreements

7

—

43,727

—

—

—

—

43,727

Time deposits and saving accounts (*)

16

835,462

851,337

1,618,887

323,057

323,830

—

3,952,573

Derivative financial instruments

8

27,958

17,001

30,649

56,509

121,066

—

253,183

Borrowings from financial institutions

17

24,554

312,027

301,221

20,798

—

—

658,600

Debt issued

18

11,172

2,208

116,525

217,945

1,156,485

—

1,504,335

Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-185
Note 37 – Subsequent events
SBIF resolution
On January 7, 2019, the Bank was informed by Resolution No 101 of January 4, 2019, that the SBIF imposed a penalty fee of MCh$5,985 on the Bank, on the grounds that it had exceeded the limit of credits to the same debtors to which the Bank was obligated to comply with according to articles 84 No. 1, 85 letter a) of the General Law of Banks and Chapter12-3 of the Updated Compilation of Standards of the SBIF. The same resolution accepted the defenses used by the Bank with respect to the other two charges that were formulated in the same sanctioning administrative proceeding.
On January 14, 2019, the Bank’s Board of Directors, together with its legal advisors, analyzed the aforementioned Resolution, its rationale and implications, as well as the possible courses of action against it, and considered all the aspects involved, both legal and not legal. The Board of Directors agreed, unanimously, to reiterate its full conviction that the Bank acted in accordance with the Law in all the loans operations that were subject to charges, including the one for which the penalty fee was issued; and decided not file a claim against the Resolution. This decision was adopted in the best interest of the Bank and its shareholders, since it was considered that initiating an appeal process would involve various costs to the Bank, even though there are solid grounds to challenge the fine. Instead, the Board of Directors agreed to favor the ordinary course of operations of the Bank, concentrating the attention and resources of Management in the development of its business, and to avoid continuing with this process and its negative implications regarding the distraction of the managerial staff, communicational impact, and loss of focus in the relationship between the Bank and the authority. In accordance with the provisions of the aforementioned Resolution, the fine has been paid in full as of the date of issuance of these Consolidated Financial Statements.
The foregoing constitutes a subsequent event that results in adjustment to the Consolidated Financial Statements as of December 31, 2018 in accordance with IAS 10 “Events after the reporting period”, for which the effects have been duly incorporated into the present Consolidated Financial Statements.
Dissolution by absorption of CorpLegal S.A.
On January 8, 2019, the Bank requested authorization from the SBIF to proceed with the dissolution of its subsidiary CorpLegal S.A., which will occur as a consequence of the acquisition that Itaú Corpbanca will make of the stock that Itaú Corredores de Bolsa Limitada holds in CorpLegal S.A., both of which are subsidiaries of the Bank, and so all of its shares are held by a single shareholder.
By letter dated February 25, 2019, the SBIF authorized the dissolution of the company.
After that, in March 2019, the Board approved the dissolution of CorpLegal.
As of the date of these Consolidated Financial Statements, the purchase has not yet taken place, therefore the entity has not yet been dissolved.
Modification of the General Banking Law
On January 12, 2019, Law 21,130, Modernizing Banking Legislation, was issued in the Official Gazette. This law introduces modifications, among other regulatory bodies, to the General Banking Law, N°21,000 that created the Commission for the Financial Market, the Organic Law of the State Bank of Chile and the Tax Code.
One of the main changes introduced by this law, is the integration of the SBIF with the Commission for the Financial Market (CMF), new capital requirements in accordance with the international standards established by Basel III, as well as new limits for credit operations.
The new Law adopts the highest international standards in terms of banking regulation and supervision, strengthening international competitiveness and contributing to financial stability of Chile.

Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-186
~~(*)Excluding term savings accounts for 2015.~~Note 37 – Subsequent Events, continued

F-~~180~~

~~Table~~Lawsuit of ~~Contents~~Helm LLC against Itaú Corpbanca
In December 2016 Helm LLC (“Helm”) initiated an arbitration before the ICC International Court of Arbitration (the “ICC”) against Corp Group Holding Inversiones Ltda. (“Corp Group”) and Itaú Corpbanca (collectively, “Respondents”). Helm alleged that Respondents had breached (i) the Amended and Restated Shareholders Agreement of HB Acquisition S.A.S., dated as of July 31, 2013, which governs Itaú Corpbanca’s subsidiary Itaú Corpbanca Colombia, and (ii) the Transaction Agreement, dated January 29, 2014, as amended and restated, which governs the merger between Itaú Chile S.A. and Corpbanca, by which Itaú Corpbanca was formed, and the potential acquisition by Itaú Corpbanca of certain shares of Itaú Corpbanca Colombia from Corp Group. During the course of the proceedings, Helm demanded that Itaú Corpbanca and Corp Group effect the acquisition of its shares of Itaú Corpbanca Colombia at the price agreed with Corp Group in the Transaction Agreement, which (with interest at 9% per year running from January 29, 2014) would have totaled approximately $850 million.
~~NOTE 36 FOREIGN CURRENCY POSITION~~On February 28, 2019, a three-member Tribunal of the ICC rejected Helm’s demand and ordered Helm to sell its shares of Itaú Corpbanca Colombia, which represent 19.44% of the equity of Itaú Corpbanca Colombia, to Respondents at approximately $299 million (which includes interest at LIBOR plus 2.7% per year running from April 1, 2016).
~~Assets~~Itaú Corpbanca intends to purchase the shares from Helm. This price of $299 million implies a valuation multiple of 1.36 times book value of Itaú Corpbanca Colombia as of December 31, 2018, and ~~liabilities denominated~~is consistent with the valuations of Itaú Corpbanca Colombia in ~~foreign currencies or indexed to changes~~Itaú Corpbanca’s financial statements. The acquisition, when completed, will result in an estimated impact of 0.82% on Itaú Corpbanca’s Common Equity Tier 1 capital, on a fully loaded basis, under the Basel III standards (using exchange rates as of February 28, 2019).
In this context, on March 11, 2019 we have filed with regulators a request to be authorized to purchase those shares from Helm LLC corresponding to the 19.44% as indicated above and also from Kresge Stock Holding Company Inc (KSHC) for a 1.38% of the equity of Itaú Corpbanca Colombia, respectively, as part of the shareholders agreement in Colombia.
The Bank is currently in the process of seeking regulatory authorization to purchase those shares in Chile, Colombia and Brazil. The regulators’ approval in these three different jurisdictions is not perfunctory and accordingly, the acquisition of thenon-controlling interest and corresponding obligation is to be reflected in the Consolidated Financial Statements once the approval process is completed. Consequently, as a result of these recent events, there are ~~summarized below:~~no effects to be recognized in these Consolidated Financial Statements.

Payable in

Payable in

Foreign Currency

Chilean Peso (*)

Total

As of December 31,

As of December 31,

As of December 31,

2017

2016

2015

2017

2016

2015

2017

2016

2015

ThUS$

ThUS$

ThUS$

ThUS$

ThUS$

ThUS$

ThUS$

ThUS$

ThUS$

ASSETS

��
Cash and deposits in banks

1,209,141

1,692,086

250,652

—

—

23,756

1,209,141

1,692,086

274,408

Cash in the process of collection

53,058

66,208

33,088

—

—

—

53,058

66,208

33,088

Trading portfolio financial assets

633,721

847,778

—

—

—

—

633,721

847,778

—

Investments under agreements to resell

43,045

203,673

—

—

—

—

43,045

203,673

—

Derivative financial instruments

343,005

319,512

86,049

—

—

—

343,005

319,512

86,049

Surrendered by bank

58,829

224,797

139,643

—

—

—

58,829

224,797

139,643

Loans and receivables from customers and banks

10,433,739

10,754,875

1,768,791

10,835

12,165

23,756

10,444,574

10,767,040

1,792,547

Financial investments available-for-sale

1,196,914

700,517

—

15,721

15,561

—

1,212,635

716,078

—

Held to maturity investments

328,782

338,039

—

—

—

—

328,782

338,039

—

Investment in other companies

6,739

9,909

—

—

—

—

6,739

9,909

—

Intangible assets

309,932

315,148

—

—

—

—

309,932

315,148

—

Property, plant and equipment, net

79,487

59,939

—

—

—

—

79,487

59,939

—

Current income taxes

59,170

36,896

—

—

—

—

59,170

36,896

—

Deferred income taxes

40,498

117,271

—

—

—

—

40,498

117,271

—

Other assets

286,131

390,596

105,377

—

3

—

286,131

390,599

105,377

TOTAL ASSETS

15,082,191

16,077,244

2,383,600

26,556

27,729

47,512

15,108,747

16,104,973

2,431,112

LIABILITIES

Current accounts and demand deposits

3,549,162

3,791,293

227,541

—

—

—

3,549,162

3,791,293

227,541

Transaction in the course of payment

86,410

44,614

11,579

—

—

—

86,410

44,614

11,579

Obligations under repurchase agreements

612,967

550,020

—

—

—

—

612,967

550,020

—

Time deposits and saving accounts

5,234,239

6,182,859

805,971

2

7

—

5,234,241

6,182,866

805,971

Derivative financial instruments

230,050

204,062

67,829

—

—

—

230,050

204,062

67,829

Borrowings from financial institutions

3,540,276

3,254,744

927,501

—

—

—

3,540,276

3,254,744

927,501

Debt issued

2,260,764

2,387,535

—

—

—

—

2,260,764

2,387,535

—

Other financial obligations

1,320

3,382

—

—

—

—

1,320

3,382

—

Current income tax provision

—

—

—

—

—

—

—

—

—

Deferred income taxes

18,523

140,900

—

—

—

—

18,523

140,900

—

Provisions

148,737

119,361

—

—

—

—

148,737

119,361

—

Other liabilities

242,861

185,618

1,500

1,053

—

—

243,914

185,618

1,500

TOTAL LIABILITIES

15,925,309

16,864,388

2,041,921

1,055

7

—

15,926,364

16,864,395

2,041,921

~~(*) Includes transactions denominated in foreign currencies but that are settled in pesos.~~
F-~~181~~

~~Table of Contents~~
~~NOTE 37 SUBSEQUENT EVENTS~~
~~ITAÚ CORPBANCA~~
Shareholders’ meeting
In the Annual Ordinary Shareholders’ Meeting held on March ~~27, 2018,~~19, 2019, Itaú Corpbanca’s shareholders agreed:
1. To renew in its entirety the ~~Bank’s shareholders agreed to~~bank’s board of directors. Consequently, the following persons were appointed, eleven as office-holders and two as alternates, respectively, as provided by Itaú Corpbanca’sby-laws:
Office-holders: Andrés Bucher Cepeda
Jorge Andrés Saieh Guzmán Gustavo Arriagada Morales
Ricardo Villela Marino Pedro Samhan Escándar
Jorge Selume Zaror Bernard Pasquier
Fernando Aguad Dagach Fernando Concha Ureta
Caio Ibrahim David
Milton Maluhy Filho
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-187
Note 37 – Subsequent Events, continued
Alternates:
Diego Fresco Gutiérrez Jessica López Saffie
It is noted herein that the office-holders, Messrs. Gustavo Arriagada Morales, Pedro Samhan Escándar, Bernard Pasquier and Fernando Concha Ureta were appointed as independent directors, as set forth in article 50 Bis. of Law No. 18,046.
2. To distribute a dividend ~~equal~~equivalent to ~~40%~~30% of ~~2017’s~~ net income for 2018, which represents an aggregate amount equal to ~~Ch$22,978,721,573,~~MCh$51,614 payable to the ~~holders~~shareholders of the ~~Bank’s 512,406,760,091 total outstanding shares~~Bank entitled to receive dividends in a proportion of ~~Ch$0.044844469~~0.100728627 per share.
Other subsequent events
Between January 1 ~~2018,~~ and April ~~6, 2018~~8, 2019, the date of issuance of these ~~Consolidated Financial Statements,~~consolidated financial statements, there have been no other events after the reporting period that could affect the presentation ~~and/or~~and results of the ~~Financial Statements.~~financial statements.

~~Jonathan Covarrubias~~
~~Milton Maluhy~~
/s/ Jonathan Covarrubias Hernández
/s/ Manuel Olivares Rossetti
Chief Accounting Officer
Chief Executive Officer

F-~~182~~
Itaú Corpbanca and subsidiaries – Consolidated Financial Statements – December 31, 2018
F-188

☐
	~~For the fiscal year ended December 31, 2017~~

OR

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


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


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



	ITEM 16H. MINE SAFETY DISCLOSURE	~~208~~		239
PART III			239
~~PART III~~	~~209~~

	ITEM 17. FINANCIAL STATEMENTS	~~209~~		239

	ITEM 18. FINANCIAL STATEMENTS	~~209~~		239

	ITEM 19. EXHIBITS	~~209~~		239

☒
OR

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

☐
OR

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

~~PART I~~	1
PART I			1
	ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS			1

	ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE			1

	ITEM 3. KEY INFORMATION			1

	ITEM 4. INFORMATION ON THE COMPANY	29		37

	ITEM 4A. UNRESOLVED STAFF COMMENTS	~~106~~		125

	ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS	~~106~~		125

	ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	~~136~~		159

	ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	~~145~~		169

	ITEM 8. FINANCIAL INFORMATION	~~149~~		173

	ITEM 9. OFFER AND LISTING DETAILS	~~151~~		176

	ITEM 10. ADDITIONAL INFORMATION	~~152~~		176

	ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT FINANCIAL RISK	~~181~~		211

	ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	~~203~~		233
PART II			234
~~PART II~~	~~204~~

	ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	~~204~~		234

	ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	~~204~~		234

	ITEM 15. CONTROLS AND PROCEDURES	~~204~~		234

	ITEM 16. RESERVED	~~205~~		235

	ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT	~~205~~		235

	ITEM 16B. ETHICS	~~205~~		235

	ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES	~~205~~		236

	ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES	~~206~~		236

	ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS	~~206~~		236

	ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT	~~206~~		237

	ITEM 16G. CORPORATE GOVERNANCE	~~206~~		237

	Daily Observed Exchange Rate (Ch$ per US$)(1)
	Low (2)	High (2)	Average (3)	Period-End (4)
Year Ended December 31,
2013	466.50	533.95	495.00	523.76
2014	524.61	621.41	570.01	607.38
2015	597.10	715.66	654.25	707.34
2016	645.22	730.31	676.83	667.29
2017	615.22	679.05	649.33	615.22

Quarterly period
2016 1st Quarter	671.97	730.31	702.07	675.10
2016 2nd Quarter	657.90	696.96	677.69	661.49
2016 3rd Quarter	645.22	680.28	661.65	659.08
2016 4th Quarter	649.40	679.24	665.80	667.29
2017 1st Quarter	638.35	673.36	655.58	662.66
2017 2nd Quarter	647.47	679.05	664.68	663.21
2017 3rd Quarter	615.58	666.61	643.23	636.85
2017 4th Quarter	615.22	655.74	633.36	615.22
2018 1st Quarter	588.28	614.75	602.08	605.26

Month ended
September 2017	615.58	638.28	625.54	636.85
October 2017	619.68	640.52	629.55	636.49
November 2017	629.21	642.41	633.77	642.41
December 2017	615.22	655.74	636.92	615.22
January 2018	599.33	614.75	605.53	604.42
February 2018	588.28	603.25	596.84	589.15
March 2018	593.61	609.58	603.45	605.26
April 2018(5)	603.39	603.39	603.39	603.39

	Bank’s Exchange Rate Ch$ per US$1
	Low (2)	High (2)	Average (3)	Period-End
Year Ended December 31,
2013	466.48	533.95	495.31	526.41
2014	605.46	621.56	612.85	605.46
2015	593.49	714.82	654.55	710.32
2016	643.04	731.70	677.15	669.81
2017	614.48	678.23	649.12	614.48

Quarterly period
2016 1st Quarter	667.08	731.70	701.17	667.08
2016 2nd Quarter	658.95	695.94	677.29	659.55
2016 3rd Quarter	643.04	692.91	662.75	658.20
2016 4th Quarter	648.87	680.20	666.36	669.81
2017 1st Quarter	637.03	673.91	655.53	662.26
2017 2nd Quarter	645.88	678.23	664.68	663.97
2017 3rd Quarter	615.78	667.07	642.65	639.14
2017 4th Quarter	614.48	655.24	633.14	614.48
2018 1st Quarter	587.93	610.47	601.93	604.18

Month ended
September 2017	615.78	639.14	626.07	639.14
October 2017	619.19	639.49	629.68	636.19
November 2017	627.64	647.50	634.61	647.50
December 2017	614.48	655.24	635.16	614.48
January 2018	598.10	610.47	605.12	601.18
February 2018	587.93	603.30	596.22	594.62
March 2018	595.74	610.19	604.03	604.18
April 2018(4)	605.52	605.52	605.52	605.52


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

Total	20,444,648	19,764,078	(680,570	)	(3.3	)%

	Shareholders’ Equity (1)(2)
	As of December 31,
	2015	2016	2017
	(in millions of Ch$)
Banco Santander-Chile	2,420,484	2,538,055	2,670,809
Banco de Chile	2,505,558	2,620,394	2,842,609
Banco de Crédito e Inversiones (BCI)	1,771,113	2,280,185	2,467,862
Itaú Corpbanca (3)	740,335	3,172,486	3,149,663
Banco Bilbao Vizcaya Argentaria Chile (BBVA)	722,896	768,215	844,129
Scotiabank Chile	703,600	772,684	827,611
Others	4,933,087	4,129,791	4,083,895
Total	13,797,073	16,281,810	16,886,578