Source: Central Bank.

The observed exchange rate on April 15, 201317, 2015 was Ch$469.24612.30 = U.S.$1.00. The Federal Reserve Bank of New York does not report a noon buying rate for Chilean pesos.

Until November 30, 2011, Banco de Chile applied the observed exchange rate as reported by the Central Bank in order to translate its financial statements from Chilean pesos to U.S. dollars. However, beginning December 1, 2011, Banco de Chile adopted the exchange rate of accounting representation, or spot exchange rate, for such matters. The exchange rate of accounting representation is determined on a daily basis by our Treasury based on the average of the daily closing bid and offer rates reported by Bloomberg, for the Santiago Stock Exchange.

RISK FACTORS

The risks and uncertainties described below are not the only ones that we face. Additional risks and uncertainties that we do not know about or that we currently think are immaterial may also impair our business operations.operations in the future. Any of the following risks, if they actually occur, could materially and adversely affect our business, results of operations, prospects and financial condition.

We are also subject to market risks that are presented both in this subsection and in Note 4142 to our audited consolidated financial statements as of and for the year ended December 31, 20122014 appearing elsewhere in this annual report.

Risks Relating to our Operations and the Chilean Banking Industry

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

During the last five years, our total loan portfolio has shown double-digitgrown at a compounded average growth rates,rate of 10.7% per year. The expansion in our loan portfolio has been primarily as a result of the expansionfostered by growth in both residential mortgage and consumer loans, and, to a lesser extent, due toby an increaseexpansion in commercial loans. The growth ofin our loan portfoliobook is in linealigned with ourmid-term strategic priorities, althoughgoals, which seek to diversify our business model and optimize ourrisk-return relationship. In this regard, we recognize that our focus on the retail marketbanking segment may expose us to higher levels of loan losses and may require us to establish higher levels of allowances for loan losses.losses in the future. For this reason, we are constantly striving to develop and utilize improved risk models and procedures in order to mitigate the risks associated with business growth. For the year ended December 31, 2012,2014, our loan portfolio amounted towas Ch$18,771,76121,891,333 million, which representsrepresented a 8.0%4.8% annual increase as compared to the amount of Ch$17,386,49720,880,770 million that we recorded as of December 31, 2011.2013. Similarly, our allowances for loans losses increased 6.9%11.7% from Ch$362,741439,298 million in 20112013 to Ch$387,803490,558 million in 2012. Accordingly,2014. As a result, our ratio of allowances for loan losses to total loans was 2.09%slightly increased over that period, from 2.10% in 2011 and 2.07%2013 to 2.24% in 2012.2014.

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

We cannot assure you that our loan portfolio will continue to grow at the same rates as it has in the past. The Chilean financial system’s loan portfolio of the Chilean banking industry has grown significantlyat a compounded average growth rate of 11.8% over the last five years which growth(excluding the operations of subsidiaries abroad). This expansion has been fostered by a generalan overall effort of all market participants in the financial industry to broaden their value offerings and increase banking penetration inof lower and middle income segments.segments, as well as small andmedium-sized companies. As a result, loan growth has been mainly prompted by the expansion in consumer and mortgage loans, and—to a lesser extent—by growth in commercial loans. These efforts have also been also supported by the robustness ofpositive cycle observed in the Chilean economy over the last decade.samefive-year period. However, a slowdown or negative GDP growth, rate of the Chilean economy, as well as a change in the behavior of banking customers, could adversely affect the growth rate of the industry and, therefore, the expansion of our loan portfolio andwhile affecting our credit quality indicators and, accordingly, causeleading us to increase our requiredthe allowances for loan losses. For more information, see “Item 4. Information on the Company—Regulation and Supervision” and “Item 4. Information on the Company—Selected Statistical Information.”

Restrictions imposed by banking regulations may restrictconstrain our operations and thereby adversely affect our financial condition and results of operations.results.

We are subject to regulation by the Superintendency of Banks.SBIF. In addition, we are subject to regulation by the Central Bank with respect to certain matters, including interest rates and foreign exchange transactions. See “Item 4. Information on the Company—Regulation and Supervision.”

Pursuant to theLey General de Bancos (the “General Banking Law”) all Chilean banks may, subject to the approval of the Superintendency of Banks,SBIF, engage in certainnon-banking businesses approved by the law. The Superintendency of Banks’SBIF’s approval will depend on the risk of the activity and the strength of the bank. Further,Furthermore, the General Banking Law applies toimposes on the Chilean banking system a modified version of the capital adequacy guidelines issued by the Basel Committee on Banking Regulation and Supervisory Practices (the “Basel Committee”) and limits the discretion of the Superintendency of BanksSBIF to deny new banking licenses.

In addition, during 2011recent years the Chilean Congress debated bills regulating insurance commissions relatedgovernment has focused on consumer protection. Thus, between 2010 and 2014, a number of legal and administrative regulations have been enacted, amended and revoked in order to mortgage loans and maximum legal interest rates for smallreinforce consumer loans. The bill regulating insurance commissions was published on December 17, 2011, effective as of July 1, 2012. This new law imposed restrictions and obligations on lenders such as a mandatory bid process for insurance related to mortgage loans and a general prohibition on commissions benefiting the lender. Although this law became effective on July 1, 2012, it did not

have any impact on our business activity due to the characteristicsprotection in all relevant aspects of the insurance contracts associated with residential mortgage loans, which consist of collective insurance policies that are renewed every January 1^st. The new law will apply to our results of operations beginning in 2013, although we do not expectfinancial relationship between consumers and financial institutions. In this regard, and for any material effects.

Additionally, there is a bill currently under consideration in Congress related to maximum legal interest rates. This bill states that applicable maximum interest rates may not exceed the higher of: (i) 1.5 times the average interest rate for loans applicable at the time of the agreement, and (ii) the average interest rate for loans applicable at the time of the agreement plus two annual percentage points. In addition, the bill states that the interest rate for local currency loans not indexed to inflation with terms longer than 90 days may not exceed the average interest rate applicable to the same type of loans for amounts between 200 and 5.000 UF (approximately U.S.$9,527 and U.S.$238,187) plus: (i) 14 annual percentage points if the loan is higher than 50 UF (approximately U.S.$2,382) or (ii) 21 annual percentage points if the loan is equal or lower than 50 UF. Accordingly, the proposed law—if enacted—will mainly affect consumer loans, namely, installment, credit card and credit line loans, as well as overdue loans. We estimate that under the terms considered in this bill, as of December 31, 2012, no more than 2.5% of our total loans had an interest rate above the proposed new limit or had an overdue portion subject to penalty charges and, therefore, were potentially affected by the new maximum interest rate. We believe that if the bill is enacted, it would affect the volume of installment loans to be granted from the date the law goes into effect, as well as the outstanding and new loans related to credit cards and credit lines, whereas the outstanding balance of installment loans would not be affected. In addition, the proposed law—if enacted—may result in lower net interest income together with a reduction in our loan growth. Since the bill is currently under discussion in Congressother general matters, we cannot ascertain the final outcome of the law or its actual impact on interest rates. Nevertheless, based on preliminary estimations, we believe the proposed law—if enacted—would not have any material effects on our results of operations for 2013.

It is also important to note that the Chilean regulator has suggested that Basel III guidelines may be implemented in Chile which could impose new requirements for Chilean banks in terms of capital adequacy and liquidity standards. We do not expect the potential implementation of Basel III to affect our profitability and results of operations in 2013 as the Chilean regulator has not given any indication as to when and how these guidelines will be implemented. Nevertheless, we cannot assure that these guidelines will not affect our financial performance in the future if adopted.

There can be no assurance that regulators will not impose more restrictive limitations in the future on the activities of banks, including us, than those that are currently in effect or proposed.effect. Any such change could have a material adverse effect on our results of operations or financial condition in a fashion that we cannot determine in advance. See “Item 4. Information on the Company—Regulation and Supervision.”

Regarding Basel III, the SBIF has suggested these guidelines may be implemented in Chile in the future, which could impose new requirements for all Chilean banks, including us. In fact, the Chilean Ministry of Finance has announced that the implementation of Basel III is a priority for the current administration and, therefore, a set of amendments to the General Banking Law will be presented for approval to the Chilean congress. In addition to Basel III, the Finance Ministry has announced that these amendments will also include changes in the corporate governance of the SBIF, reinforcing the independence of the local regulator and establishing a dispute resolution system for Chilean banks. However, it is not clear yet as to when and how Basel III will finally be implemented in Chile, since the SBIF has also recognized the possibility of adapting these rules to the local market. Similarly, there is no certainty as to when the changes to the General Banking Law could go into effect. Despite this, we do not expect this regulatory body will affect our profitability or results of operations in 2015. Nevertheless, we cannot ensure that these new rules will not affect our financial performance in the future, if adopted.

In regards to liquidity, during 2014, the Chilean Central Bank released a proposal of new liquidity standards for local banks, which is based on Basel III guidelines. After receiving comments for the proposed set of rules, the Central Bank published a final version in January of 2015. In addition, the SBIF is the institution empowered to put these guidelines into practice and monitor them on an ongoing basis. Accordingly, in February of 2015, the SBIF introduced a draft of these rules for comment and discussion. The first stage of these new liquidity requirements is intended to improve the information—in quantity and quality—about the situation of banks without imposing specific limits. Nevertheless, regulatory thresholds are expected to be defined and implemented by 2016. Although this new regulatory body will not affect our operations and results for the year ended December 31, 2015, we cannot be sure that the new liquidity requirements will not have a material impact on our financial condition or results of operations.

As for credit risk allowances, on December 30, 2014 the SBIF published a set of amendments to the regulations on allowances for potential loan losses. These new rules establish a standardized method for calculating provisions for loan losses for residential mortgage loans, based on past-due behavior and loan-to-value ratios, while supplementing and defining provisioning rules for the impaired loan portfolio. In addition, this set of rules also addressed the possibility of putting into practice standardized credit risk provisioning models for consumer and commercial loan portfolios evaluated on a grouped basis. Lastly, the new guidelines also introduced changes to the treatment of provisions related to factoring loans. This new set of rules will go into effect on January 1, 2016. It is important to mention that the implementation of standardized credit risk provisioning models would only have an effect—if any—on our results of operations or financial condition prepared under Chilean GAAP, which differ to some extent from IFRS as issued by the IASB. The adoption of these guidelines will not have any impact on our results of operations or financial condition under IFRS.

Increased competition and industry consolidation may adversely affect our operations.

The Chilean market for financial services is highly competitive. We compete with other Chilean and foreign banks, with Banco del Estado de Chile, a which isgovernment-owned, bank, and with large department stores that are allowed to grant consumer loans to a large portion of the Chilean population, especially in the low andmiddle-income segments. segments, through credit card financing. In addition, the retail marketsegment (which comprisesencompasses individuals and small andmedium-sized companies) has become the target market of several banks, andsince banking penetration is still in progress in Chile. Accordingly, competition within this market is increasing as banks are continuously incorporating new and tailored products and services, while they strivestriving to improve service quality. As a result, net interest margins (after(once deducted provisions for loan losses) in thesesub-segments are likely to decline over time.

We also face competition from non-banknon-banking competitors with respect toin some of our credit products, such asespecially credit cards and consumer loans. In these markets, competition fromnon-banking companies like large department stores, private compensation funds and saving and credit cooperatives has become increasingly significant. In addition, we face competition from other types of competitors,lenders, such as leasing, factoring and automobile financing companies (especially in credit products), as well as mutual funds, pension funds and insurance companies within the market for savings products and mortgage loans. Currently,Nevertheless, banks continue to be the main suppliers of leasing, factoring and mutual funds, and thefund management, while growing quickly in insurance sales business is experiencing fast growth, butbrokerage services. However, we cannot assure you that this trend will continue in the future. See “Item 4. Information on

Lastly, in the Company—Business Overview—Competition.”

Increasingpast, increasing competition within the Chilean banking industry has been accompanied by a consolidation trend inwave and the industry in recent years.entry of international players to the system through multiple mergers and acquisitions. We expect that both of these trends will continue and result in the creation of larger and stronger financial groups.banking conglomerates offering a wide range of products and services while targeting most of the segments in the Chilean banking market. These trends may adversely affect us becauseimpact our results of operations as they may increase thetranslate into higher interest rates we pay to attract depositorspaid on deposits and decrease thelower interest rates we charge our customers forearned on loans, resulting in a decrease of thedecreased net interest margins we are able to generate.

See “Item 4. Information on the Company—Business Overview—Competition.”

Our exposure to certain segments of the retail market could lead to higher levels of totalpast-due loans and subsequentcharge-offs.

Although we have historically been focused on wholesale banking, forover the last five years we have reoriented our commercial strategy to increase our focus on the retail and the wholesale marketbanking segments. Accordingly, the share of the retail banking segment in our total loan book has increased from 45.7% in 2009 to 53.6% in 2014. Although this trend has been associated with expansion in middle and high-income individuals, an increasing portion ofhigher income personal banking, our retail market consistsbanking segment is also composed of small andmedium-sized companies (approximately 7.6%11.4% of our total loan book as of December 31, 2012, including2014, which consists of companies with annual sales of up to Ch$1,600 million) and, to a lesser extent, oflower-income individuals (approximately 4.1%3.7% of our total loan book as of December 31, 2012, including2014, which consists of individuals with monthly incomes that rangeranging from Ch$170,000 to Ch$500,000). Our strategy aims to increase lending and banking penetration by providing multiple value propositions to attract additional retail customers. These customers are likely to be more severely affected by adverse developments in the Chilean economy than large corporations and high-incomehigher-income individuals. Consequently, in the future, we may experiencebe exposed to higher levels of total past-due loans and subsequentwrite-offs, which could result in materially higher allowances for loan losses.

The levels of total past-due loans and subsequent write-offs may be materially higher in the future, whichlosses that could adversely affect us. our results of operations.

As of December 31, 20122014 our total past-due loans (loans overdue 90 days or more)more past-due) reached Ch$181,863272,983 million, which represented a 1.7%15.3% annual increase as compared to the figureCh$236,730 million recorded a year earlier. In addition,in 2013. Also, as of December 31, 20122014 our total past-due loans (loans 90 days or more past-due) were composed of 77.3% of80.6% retail banking 90 days or morepast-due loans (consumer and residential mortgage loans to individuals, as well as commercial loans to small and medium sized companies) and 22.7% of19.4% wholesale banking 90 days or morepast-due loans (commercial loans to large companies and corporations). During the prior fiscal year, ourpast-due loans (90 days or more) portfolio comprised 81.9%was composed of 79.1% retail banking past due loans (90 days or more) and 20.9% wholesale banking past due loans (90 days or more).

The annual increase of Ch$36,253 million in the amount ofpast-due loans (90 days or more) was mainly attributable to the retail banking segment, including both SME and personal banking. In fact, 78.3% of the annual variance was attributable to past-due loans (90 days or more) in retail banking and 18.1%the remaining 21.7% of the annual variance was attributable to past-due loans (90 days or more) in the wholesale banking segment past-due credits.loans. This is in line with the growth displayed by both segments within our total loan book. Additionally, the higher delinquency in retail banking loans was generally aligned with a less robust economic environment, which worsened with the economic slowdown of 2014. Although certain indicators that directly affect the retail banking segment—such as unemployment—remained at positive levels during 2014, there was a counterbalance between the employed andself-employed work force. Moreover, diverse surveys have reflected the negative outlook held by individuals with respect to the local economy. In light of these trends, we have tightened the entire credit process, from assessment to collection, while introducing stricter requirements related to collateral, financial burden,loan-to-value, etc. Nonetheless, we cannot assure you the trend inpast-due loans (90 days or more) will not continue if global or local economic conditions deteriorate in the future.

For more information, see “Item 4. Information on the Company—Business Overview—Principal Business Activities.”

One of our affiliates may be obligated to sell shares of our stock in the public market if we do not pay sufficient dividends.

As of December 31, 2012,2014,Sociedad Administradora de la Obligación Subordinada S.A. (“SAOS”), our affiliate, held 32.5%30.21% of our shares as a consequence of our 1996 reorganization. This reorganization was due in part to the 1989 repurchase by the Central Bank of certainnon-performing loans that we had previously sold to the Central Bank and later exchanged for subordinated debt without a fixed term. For more information, see “Item 4. Information on the Company—History and Development of the Bank—History—The1982-1983 Economic Crisis and the Central Bank Subordinated Debt.”

In exchange for assuming the Central Bank debt, SAOS received fromSM-Chile S.A.(“SM-Chile”), the a holding company that controls us and SAOS, a stake of 63.6% of our shares as collateral for this debt. Dividends received from us are the sole source of SAOS’s revenues, which—in turn—must be used to repay this debt. However, under SAOS’s agreement with the Central Bank, we have no obligation to distribute dividends to our shareholders. To the extent distributed dividends arewere not sufficient to pay the amount due on this debt, SAOS is permitted to maintain a cumulative deficit balance with the Central Bank that SAOS commits to pay with future dividends. If this cumulative deficit balance exceeds 20% of ourpaid-in capital and reserves, the Central Bank may require SAOS to sell a sufficient number of our shares to pay the entire amount of the accumulated deficit. As of March 31, 2013,2015, SAOS maintained a surplus with the Central Bank of Ch$275,702484,560 million, equivalent to a 13.4%19.2% of our paid-in capital and reserves as of the same date.

Furthermore, if our shareholders decide to retain and capitalize all or part of our annual net income in order to finance our future growth and to distribute stock dividends, the Central Bank may require us to pay in cash to SAOS the portion of net income corresponding to its economic stake in our shares. If we distribute stock dividends and the Central Bank does not require us to pay that portion in cash, the shares received by SAOS must be sold by SAOS within the following 12 months.SM-Chile shareholders will have a right of first refusal with respect to that sale.

If SAOS is required to sell shares of our stock for any of the aforementioned circumstances in the public market, that sale could adversely affect the prevailing market price of our stock.

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

The results of our operations depend to a great extent on our net interest income, which represented 71.8%75.5% of our total operating revenues in 2012.2014. Changes in inflation and nominal interest rates and inflation could affect the interest rates earned on ourinterest-earning assets differently from the interest rates paid on ourinterest-bearing liabilities, resulting in a reduction in our net income.income reduction. Inflation and interest rates are highly sensitive to several factors beyond our control, including the Central Bank’s monetary policy, deregulation of the Chilean financial sector, domestic and international economic and political conditions, among other factors. Any volatility in interest rates could have a material adverse effect on our financial condition and results of operations. The inflation rate—measured as the annual variation in the Consumer Price Index (“CPI”) as published by the National Statistics Institute—was 2.96% in 2010, 4.44% in 2011 and 1.49% in 2012.

The average annualshort-term nominal interest rate in Chile for 90 to 360 day deposits received by Chilean financial institutions was 2.73% in 2010, 5.61% in 2011 and 5.90% in 2012.2012, 5.20% in 2013, and 3.91% in 2014. The averagelong-term nominal interest rate based on the interest rate of the Central Bank’sfive-year bonds traded in the secondary market was 5.54%5.34% in 2010, 5.67%2012, 5.20% in 20112013 and 5.26%4.43% in 2012. 2014.

Inflation in Chile has been moderate in recent years, especially in comparison with periods of high inflation experienced in the 1980s and 1990s. High levels of inflation in Chile could adversely affect the Chilean economy, consumer purchasing power, household consumption and investment in machinery and equipment and, therefore, the demand for financing and our business. The annual inflation rate (as measured by annual changes in the CPI and as reported by the Chilean National Institute of Statistics) during the last five years and the first three months of 2015 was:

Source: Chilean National Institute of Statistics

Although we benefit from a higher than expected inflation rate in Chile due to the structure of our assets and liabilities (we have a significant net asset position indexed to the inflation rate), significant changes in inflation with respect to current levels could adversely affect our results of operations and, therefore, the value of both our shares and ADSs.

For more information, see “Item 5. Operating and Financial Review and Prospects—Operating Results—Overview—Inflation” and “Item 5. Operating and Financial Review and Prospects—Operating Results—Overview—Interest Rates.”

Operational problems, errors, criminal events or errors canterrorism may have a material adverse impact on our business, financial condition and results of operations.

As all large financial institutions, we are exposed to many operational risks, including the risk of fraud by employees and outsiders, failure to obtain propersuitable internal authorizations, failure to properly document transactions, equipment failures, errors made by employees and natural disasters, such as earthquakes, tsunamis and floods. Furthermore, we are exposed to criminal events or tsunamis.terrorist attacks 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 a system of operational controls composed ofworld-class human and technological resources, as well as comprehensive contingency plans and security procedures, there can be no assuranceassurances that operational problems, errors, criminal events or errorsterrorist attacks will not occur and that their occurrence will not have a material adverse impact on us.our results of operations, financial condition and the value of our shares and ADSs.

Cybersecurity events could negatively affect our reputation or results of operations and may result in litigation.

We have access to large amounts of confidential financial information and controlhold substantial financial assets belonging to our customers as well as to us. In addition, we provide our customers with continuous remote access to their accounts and the possibility of transferring substantial financial assets by electronic means. Accordingly, cybersecurity is a material risk for us.

We depend on a variety of internet-basedInternet-based data processing, communication, and information exchange platforms and networks. Thus, weWe cannot assure you that all of our systems are entirely free from vulnerability. Additionally, we enter into contracts with several third-partiesthird parties to provide the business,our customers with data and communication services we offer to our customers. Ifservices. Therefore, if information security is breached, or if one of our employees breaches compliance procedures, information could be lost or misappropriated, which may affect our results of operations, damage others or result in potential litigation.

We are also exposed to the risk ofcyber-attacks and other cybersecurity incidents in the normal course of business. There has been an increased level of attention focused recently oncyber-attacks against large corporations that include, but are not limited to, gaining unauthorized access to digital systems for purposes of misappropriating cash, other assets or sensitive information, corrupting data or causing operational disruption. Cybersecurity incidents such as computerbreak-ins, phishing, identity theft and other disruptions could negatively affect the security of information stored in and transmitted through our computer systems and network infrastructure, which may result in significant liability to us in excess of insurance coverage, and may cause existing and potential customers to refrain from doing business with us. Although we, with the help of service providers, intend to continue tocontinuously implement security technology devices and establish operational procedures to prevent such damage, we cannot assure you that these security measures will be successful.

Request from Spanish Court to Chilean Judicial Authorities

On April 29, 2010, the Supreme Court of Chile denied the requests contained in a rogatory letter issued on October 26, 2009 by the Central Court of Instruction Number 5 of the National Court of Spain (Juzgado Central de Instrucción No. 5 de la Audiencia Nacional de Madrid) in Madrid, Spain (the “Spanish Court”) to have certain actions taken (as described below) with respect to a lawsuit before the Spanish Court. The Supreme Court of Chile established that the subject matter of the investigation by the Spanish Court was currently pending before a Chilean tribunal that has jurisdiction and competence over these matters.

The rogatory letter referred to above notified the Chilean judicial authorities that a lawsuit pending before the Spanish Court had been amended to add causes of action concerning concealment of assets and money laundering against Mr. Pablo Granifo Lavin (the chairman of our board of directors) and Mr. Hernán Donoso Lira (former manager of our New York branch) and against us, Banchile Corredores de Bolsa S.A. and Banchile Administradora General de Fondos S.A., the latter three of which face only subsidiary civil liability. The rogatory letter, among other items, requested a joint guarantee (fianza solidaria) from the defendants in the amount of U.S.$77,348,374 and, if the aforementioned parties were not to grant such a joint guarantee, requested the attachment of assets of up to U.S.$103,131,165.

On April 30, 2012, the Spanish Court decided the provisional dismissal (sobreseimiento provisional) of the aforementioned lawsuit on the grounds that the Chilean judicial authorities have investigated and prosecuted the same facts as those pending before the courts in Spain, and there is an existing legal proceeding underway in Chile, which should have priority. The complainant filed an appeal (recursos de apelación y reforma), which was dismissed on July 27, 2012 and June 19, 2012 by the Spanish judicial authorities.

In Chile, a judicial investigation is currently underway and at the time of filing of this annual report no indictments for criminal participation of persons affiliated with us have been issued. Consequently, it is not possible to predict the outcome of these proceedings, or what impact, if any, they might have on us.

Exposure to European sovereign debt or related instruments and future turmoil and destabilization related thereto could negatively affect our business.

Although emerging markets were less impacted by the global financial crisis of 2008 and showed a quick recovery, there are still concerns about the possibility of a recession in developed countries, especially due to the fiscal condition of certain European economies (such as Greece, Italy, Ireland, Portugal and Spain, also called PIIGS economies). The debt levels and fiscal unreliability of these countries have resulted in uncertainty regarding the outlook for the global economy and a potential contagion to other economies linked to these countries.

Similarly,We may lose revenue if we are unable to determine and predictrenew our global connectivity agreement with Citigroup Inc.

On December 27, 2007, we entered into a global connectivity agreement with Citigroup Inc. (as amended, the effects this situation will have on the world’s“Global Connectivity Agreement”). The Global Connectivity Agreement enables us and our commercial partners’ GDP growthclients to become part of Citigroup’s global network and overall financial stability. Also, these factors could translate intoprovides a local economy’s slowdown that would affectframework for us, Citigroup and our respective affiliates to direct certain types of business to our companies. The Global Connectivity Agreement sets forth the decision making process of individuals and companies regarding consumption and investment, which—in turn—could adversely affect the demand for credits. Accordingly, we cannot assure you that these developments will not occur or that they will not affect us.

As of December 31, 2012 we had a total exposure to PIIGS economies of Ch$38,785 million (U.S.$80.9 million), which represents 0.17%terms of our total assetsrelationship with respect to investment banking services and other services such as international personal banking, cash management and treasury operations, among others. See “Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions.”

The Global Connectivity Agreement expires on January 1, 2016. We cannot predict if this agreement will be renewed, or if it is renewed, what the renewal terms would be. Although we would continue to provide the services governed by the Global Connectivity Agreement even if it is not renewed, any loss of the same date. This exposure was concentratedexclusivity or referral provisions in only two economies, Italythe Global Connectivity Agreement could result in significantly less revenues from the services listed above and Spain, and it wasany profits we would generate from these services. Our preliminary estimates suggest that the potentially lost revenues (net of direct costs associated with services provided to customers) directly related to contingent credits, suchthese services could be as standby letter of credits in favor of usmuch as well as third parties. As of the same date, we had no additional exposure to PIIGS countries, in any type of instrument, such as financial assets available-for-sale, assets held for trading, derivatives, commercial loans, credit lines, confirming export letters of credits, etc.U.S.$12.5 million per year.

Risks Relating to our ADSs

Our principal shareholders may have interests that differ from those of our other shareholders and their significant share ownership may have an adverse effect on the future market price of our ADSs and shares.

As of April 15, 2013,17, 2015, LQ Inversiones Financieras S.A. (“LQIF”), a holding company beneficially owned by Quiñenco S.A. and Citigroup Chile S.A., holds directly and indirectly approximately 58.40%51.2% of the voting rights of our shares. These principal shareholders are in a position to elect a majority of the members of our board of directors, direct our management and control all matters decided by a shareholder vote, including the approval of fundamental corporate transactions.

Actions by our principal shareholders with respect to the disposition of the shares or ADSs they beneficially own, or the perception that such actions may occur, may adversely affect the trading price of our shares on the various stock exchanges on which they are listed and, consequently, the market price of the ADSs.

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

While our ADSs have been listed on the New York Stock Exchange (the “NYSE”) since the first quarter of 2002, there can be no assurance that an active trading market for our ADSs will be sustained. During 2012,2014, a daily average volume of 22,92467,287 of our American Depositary Receipts (“ADRs”) waswere traded on the NYSE, according to data provided by Bloomberg. Although our shares are traded on the Santiago Stock Exchange, the Valparaiso Stock Exchange and the Chilean Electronic Stock Exchange, the Chilean market for our shares in Chile is small and somewhat illiquid. As of December 31, 2012,April 17, 2015 approximately 15.7%25.1% of our outstanding shares were held by shareholders other than our principal shareholders, including LQIF,SM-Chile, SAOS and Ergas Group.

If an ADS holder withdraws the underlying shares from the ADR facility, the small size of the market, its limited liquidity, as well as our concentrated ownership, may impair the ability of the ADS holder to sell the shares in the Chilean market in the amount and at the price and time such holder desires, and could increase the volatility of the price of our ADSs.

You may be unable to exercise preemptive rights.

TheLey Sobre Sociedades Anónimas No. 18,046 (the(the “Chilean Corporations Law”) and theReglamento de Sociedades Anónimas (the “Chilean Corporations Regulations”) require that whenever we issue new common stock for cash, we grant preemptive rights to all of our shareholders (including holders of ADSs) to purchase a sufficient number of shares to maintain their existing ownership percentage. Such an offering would not be possible unless a registration statement under the Securities Act were effective with respect to such rights and common stock or an exemption from the registration requirements thereunder were available.

We may elect not to make a registration statement available with respect to the preemptive rights and the common stock, in which case you may not be able to exercise your preemptive rights. If a registration statement is not filed, the depositary will sell such holders’ preemptive rights and distribute the proceeds thereof if a premium can be recognized over the cost of any such sale.

Developments in international financial markets may adversely affect the market price of the ADSs and shares.

The market price of our ADSs and shares may be adversely affected by volatility in international financial markets and adverse worldglobal economic conditions. The market for Chilean securities and the Chilean economy as a whole are, to varying degrees,diverse extents, influenced by economic and market conditions in the United States, Europe and certain emerging market economies, especially Asian countries, including someand also economic as well as political developments in Latin America and Asia.American countries. Although economic conditions are different in each country, investors’ reactions to developmentsspecific issues in one country canmay affect the financial markets in other countries,others, including Chile. Therefore, unfavorable developments in other countries countries—especially in developed economies and Chile’s main commercial partners—may adversely affect the market price of our ADSs and shares.

In particular, since August 2007, there has been significant volatility in worldwide financial markets due to consequences from the announcement, by several U.S. banks and financial institutions, of significantwrite-downs related to their exposure tomortgage-backed securities and other financial instruments. This situation, also known as the subprime crisis, translated into several and significant governmentbail-outs for important banks worldwide, bankruptcy for some others and an active M&A market in the financial industry.industry intended to maintain the confidence of investors and customers, as well as avoiding bank runs. Although the Chilean economy iswas not directly exposed to the U.S. housing credit market and and—historically—we dohave not directly holdheld any assets related to such financial instruments, the subprime crisis impacted the Chilean economic activity towardseconomy by the end of 2008, with additionalincluding banking activity. Currently, the U.S. economy seems to be overcoming the effects onof the banking industrysubprime crisis, as evidenced by recoveringmid-term growth rates and our commercial activity. Weimproving employment and consumption indicators, while the Federal Reserve is tapering the quantitative easing monetary policy it has used for the past several years. However, we cannot assure you that these past developments will not continue to affect us, noroccur again in the future or that any future developments in international markets couldwill not affect us, including our results of operations and, consequently, the market price of our ADSs and shares.

Similarly, although ourFinancial deterioration in certain European countries was another indirect effect of the subprime crisis that occurred in the United States. Our exposure to European sovereign debt is not significant, amounting to U.S.$80.9 million as of December 31, 2012,significant; however, we cannot assure you that volatility in global financial markets due to the uncertainty regarding the Eurozone fiscal condition of certain European countries will not continue and affect the Chilean economy and consequently ourthe financial condition and results of operations.operations of the entire Chilean banking system, including us. Accordingly, the price of our ADS could be adversely affected by a new financial turmoil in the Eurozone, political issues, armed conflicts, a slower than expected recovery, or a deterioration in healthier economies, such as Germany, and France, that could translate into increasing volatility and uncertainty all over the world.

In the past, Chile has imposed controls on foreign investment and repatriation of investments that affected investments in, and earnings from, our ADSs.

Equity investments held in Chile by persons who are not Chileannon-Chilean residents have historically been subject to various exchange control regulations that restrict the repatriation of the investments and earnings therefrom.from Chile. In April 2001, the Central Bank eliminated most of the regulations that affectedaffecting foreign investors, although foreign investorsthey still have to provide the Central Bank with information related to equity investments and must conduct such operations within the Formal Exchange Market. Additional Chilean restrictions applicable to holders of our ADSs, the disposition of the shares underlying them, the repatriation of the proceeds from such disposition or the payment of dividends may be imposed in the future, and we cannotcan neither determine in advance nor advise you as to the durationwhen or how those restrictions could impact of such restrictionsyou if imposed.

If for any reason, including changes in Chilean law, the depositary for our ADSs were unable to convert Chilean pesos to U.S. dollars, investors would receive dividends and other distributions, if any, in Chilean pesos.

We are required to withhold 35% from any dividends we pay to you.

ADSs owners are entitled to receive dividends on the underlying shares to the same extent as the holders of shares. Dividends received by ADSs owners will be paid net of foreign currency exchange fees and expenses of the depositary and will be subject to Chilean withholding tax of 35% of the dividend, which we will withhold and pay to the Chilean tax authorities. Any dividend distributions made in property (other than common stock) will be subject to the same Chilean tax rules as cash dividends. For more information, see “Item 10. Additional Information—Taxation—Chilean Tax Considerations.”

Risks Relating to Chile

Our growth and profitability depend on the level of economic activity in Chile.

Our core business and transactions are with customers doing business in Chile. Accordingly, our ability to increasegrow our business scalevolumes and results of operations, as well as enhance our financial condition, in general, depends on the dynamism of the Chilean economy and specific macroeconomic variables such as inflation, unemployment, interest rates, consumption and investment. The global financial crisis of 2008 that significantlydramatically affected the economic growth in developed economiescountries also affected the Chilean economy by the end of 2008 and during the first three quarters of 2009, which immediately2009. This translated into a subsequent slowdown in the local banking industry due to lower levels of consumption and deteriorated credit quality in loan portfolios prompted by increasing unemployment.unemployment and financial stress experienced by certain economic sectors. Conversely, duringbetween 2010 and 20112012 the local economy and financial system experiencedthe banking industry evidenced a significant upturn, fostered by real GDP growth of around 6%that averaged 5.7% per year, mainly as a result of the recovery in consumption and investment. Toinvestment, as well as higher fiscal spending associated with the reconstruction process after a great extent, this trend continuedsignificant earthquake in 20122010. During 2013, the Chilean economy entered into a moderate slowdown by supportingrecording a 4.2% GDP expansion, which deepened throughout 2014 as both corporate and individual confidence continued to deteriorate. The slowdown was explained in part by both slower growth of 5.6% forChile’s main commercial partners, especially China, and uncertainty associated with diverse reforms presented by the local economy.recently appointed administration that affected investment and consumption. Accordingly, over the last three years the Chilean banking industry, including us, returnedeconomy grew by only 1.9% in 2014, which was influenced by a 6.1% contraction in investment that was offset by a 2.2% expansion in private consumption. Although Chilean economic growth continues to historical average figures of loan growth and profitability. Nevertheless,be positive, we cannot assure you that the Chileanlocal economy will continue to growexpanding in the future or that developments in, or affecting the Chilean economy and the local banking industry will not materially and adversely affect us, our business, financial condition or results of operations. For more information, see “Item 5. Operating and Financial Review and Prospects—Operating Results—Overview”.

Currency fluctuations could adversely affect the value of our ADSs and any distributions on the ADSs.

The Chilean Government’s economic policies and any future changes in the value of the Chilean peso with respect to the U.S. dollar could affect the dollar value of our common stock and our ADSs. TheGiven the floating exchange rate regime that exists in Chile, the Chilean peso has been subject to large fluctuations in the past and could continue this trend in the future. BetweenAccording to information published by the Chilean Central Bank, between December 31, 20112013 and December 31, 2012,2014, the value of the U.S. dollar relative to the Chilean peso decreasedincreased by approximately 8.2%16.0%, as compared to the increase of 11.3%9.4% recorded in the period from December 31, 20102012 to December 31, 2011.2013. See “Item 3. Key Information—Exchange rates.”

Chilean trading in the shares underlying our ADSs is conducted in Chilean pesos. Cash distributionsdividends associated with respect to our shares of common stock are received in Chilean pesos by the depositary, which then converts such amounts to U.S. dollars at thethen-prevailing exchange rate for the purpose of making payments in respect of our ADSs. If the value of the U.S. dollar increases relative to the Chilean peso, the dollar value of our ADSs and any distributions to be received from the depositary will decrease. In addition, the depositary will incur customary currency conversion costs (to be borne by the holders of our ADSs) in connection with the conversion and subsequent distribution of dividends or other payments. For more information, see “Item 10. Additional Information—Exchange Controls.”

Our results of operations may be affected by fluctuations in the exchange rates between the Chilean peso and the U.S. dollar despite our policy and Chilean regulations related to the general avoidance of material exchange rate mismatches. In order to reduce the effect of exchange rate mismatches we enter into foreign exchange derivative transactions in order to hedge—partially or totally—that hedge our exposure. As of December 31, 2012,2014, our foreigncurrency-denominated assets and Chileanpeso-denominated assets, which contain repayment terms linked to changes in foreign currency exchange rates, exceeded our foreigncurrency-denominated liabilities and Chileanpeso-denominated liabilities, which contain repayment terms linked to changes in foreign currency exchange rates, by an amount of Ch$1,097.29,979 million, or 0.06%0.42% of ourpaid-in capital and reserves.

We may decide to change our policy regarding exchange rate mismatches. Regulations that limit such mismatches may also be amended or eliminated.eliminated by regulatory institutions. Higher exchange rate mismatches will increase our exposure to the devaluation of the Chilean peso, and any such devaluation may impair our capacity to serviceforeign-currency obligations and may, therefore, materially and adversely affect us, our financial condition and results of operations. Additionally, the economic policies of the Chilean Government and any future fluctuations of the Chilean peso againstwith respect to the U.S. dollar could adversely affect our financial condition and results of operations.

Inflation could adversely affect the value of our ADSs and financial condition and results of operations.

Inflation has been moderate in recent years, especially in comparison to the periods of high inflation in the 1980s and 1990s. High levels of inflation in Chile could adversely affect the Chilean economy and, indirectly, our results of operations and the value of our ADSs. The annual rate of inflation (as measured by changes in the CPI and as reported by the Chilean National Institute of Statistics) during the last five years and the first three months of 2013 was:

Source: Chilean National Institute of Statistics

Although we benefit from a positive inflation rate in Chile due to the structure of our assets and liabilities (we have a significant net asset position indexed to the inflation rate), our operating results and the value of our ADSs in the future may be adversely affected by changing levels of inflation, and Chilean inflation could change significantly from current levels. For more information, see “Item 5. Operating and Financial review and Prospects—Inflation.”

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

Chilean disclosure requirements for publicly listed companies differ from those in the United States in some significant aspects. In addition, although Chilean law imposes restrictions on insider trading and price manipulation, the Chilean securities markets are not as highly regulated and closely supervised as the U.S. securities markets. Accordingly, the information about us available to you will not be the same as the information available to shareholders of a U.S. company. For more information, see “Item 16G. Corporate Governance.”

Chilean law provides forshareholders with fewer and lesswell-defined shareholders’ rights.

Our corporate affairs are governed by ourestatutos (bylaws) and the laws of Chile. Under such laws, our shareholders may have fewer or lesswell-defined rights than they might have as shareholders of a corporation incorporated in a U.S. jurisdiction. For example, our shareholders would not be entitled to appraisal rights in the event of a merger or other business combination undertaken by us.

Recent changes in the Chilean tax system could impact the profitability of investments held by foreign and local investors.

In September 2014, the Chilean congress approved a law reforming the Chilean tax system. This tax reform (Law N° 20,780, defined terms in this risk factor are used as defined therein) gradually increases the first category tax or corporate tax rate between 2014 and 2018 while establishing two alternative tax regimes from 2017 onwards: (i) the Semi-Integrated Regime and (ii) the Attribution Regime. The tax reform increases the statutory corporate tax rate from 20.0% in 2013 to 21.0% in 2014, 22.5% in 2015 and 24.0% in 2016. From 2017 onwards, the statutory corporate tax rate will depend on the tax regime chosen by the owners of the taxpayer (the company). If the Semi-Integrated regime is selected, the company will be subject to a statutory corporate tax rate of 25.5% in 2017 and 27.0% from 2018 onwards. If, instead, the Attribution regime is selected, the company will be subject to a statutory corporate tax rate of 25.0% from 2017 onwards. At this time, we cannot anticipate which regime we will select in the future.

The tax reform will also affect the taxes levied on dividends received by investors that hold shares of common stock or ADS from 2017 onwards. Under the Semi-Integrated Regime, holders of shares or ADS will pay taxes on the dividends effectively received from the company (withholding tax of 35% for foreign investors and a general regime tax for local investors). Foreign investors from DTAT (Double Taxation Avoidance Treaty) countries will be able to use 100% of the corporate tax paid by the company as a tax credit. However, local investors and holders from non-DTAT countries will be permitted to use 65% of the corporate tax paid by the company as a tax credit. Accordingly, the effective tax rate paid by local (individual) investors or foreign holders could increase up to 44.5%. Under the Attribution Regime, holders of shares or ADS will pay taxes (withholding tax of 35.0% for foreign investors and personal taxes for individual local holders) on their proportional participation in the earnings before taxes generated by the company, regardless of whether cash dividends are distributed or not. Holders of shares or ADS will be permitted to use 100% of the corporate tax paid by the company as a tax credit.

Lastly, stock dividends (distributions on fully paid-in shares) are currently tax exempt when distributed. Under the new tax law, regardless of the regime that the owners of the company ultimately chooses, stock dividends will be subject to taxation. Furthermore, the new tax income law introduces certain changes to the treatment of capital gains associated with the sale of shares received as stock dividends.

For more information, see “Item 10. Additional Information—Taxation—Chilean Tax Considerations.”

Labor strikes or slowdowns could adversely affect our operations because the majority of our employees belong to labor unions.

We are a party to collective bargaining agreements with various labor unions. Disputes with regard to the terms of these agreements or our potential inability to negotiate acceptable contracts with these unions could result in, among other things, strikes,

work stoppages, or other slowdowns by the affected workers. If unionized workers were to engage in a strike, work stoppage, or other slowdown, or other employees were to become unionized, we could experience disruption of our operations or higher ongoing labor costs, either of which could have a material adverse effect on our results of operations. See “Item 6. Directors, Senior Management and Employees—Employees.”

On December 29, 2014 the government sent a labor reform bill to the Chilean congress for discussion and approval. The government stated that this bill was intended to strengthen and give more power to Chilean unions while prohibiting the replacement of workers during strikes. As a result, unions would enhance their negotiation position in collective bargaining processes. In addition, the reform involved some changes to the current labor framework by introducing certain flexibility in the contractual relationship between workers and companies. There is currently no certainty as to when and how this bill, if passed by the congress, will go into effect and, therefore, we cannot assure you that this bill will not have a material effect on our business.

History and Development of the BANKBank

Overview

We were founded in 1893, and we have been, for much of our history, among the largest and most profitable Chilean banks in terms of return on average assets and average equity in Chile. Our core business is commercial banking in Chile, providing traditional banking products and specialized financial services to our diversified customer base of individuals and companies.

Our legal name is Banco de Chile and we are organized as a banking corporation under the laws of Chile and were licensed by the Superintendency of BanksSBIF to operate as a commercial bank on September 17, 1996. Our main executive offices are located at Paseo Ahumada 251, Santiago, Chile, our telephone number is +56+56 (2) 2637-1111 and our website iswww.bancochile.cl. Our representative in the United States is Puglisi & Associates, with offices at 850 Library Avenue, Suite 204, Newark, Delaware 19711.

We are a full-servicefull service financial institution that provides, directly and indirectly through our subsidiaries, and affiliates, a wide variety of lending andnon-lending products and services to all segments of the Chilean financial market, providing our customers with powerful, differentiated and differentiatedcomprehensive value offerings to our customers.offerings. Our business is not materially affected by seasonality.

We organize our operations and deliver our services to our customers through the following four principal business segments:

WeIn Retail Banking, we provide our retailindividual customers with credit cards, residential mortgage loans and consumer loans, as well as traditional deposit services, such as current accounts, demand deposits, savings accounts and time deposits. Our retail customers are composed ofalso include micro, small and medium sized companies that we serve by providing them with short and long term loans, as well as diverse deposit solution, in order to satisfy their needs. Our banking services for wholesale customers include commercial loans (which include factoring and leasing), foreign trade, capital markets services, cash management andnon-lending services, such as payroll, payment and paymentcollection services, as well as a wide range of treasury, financial advisory and risk management products.

In 2008, we supplemented our products and services and enhanced our value offerings by entering into a strategic partnership with Citigroup Inc., as a result of our merger with Citibank Chile.

As of December 31, 2012,2014, we also offered international banking services through our Trade Services subsidiary in Hong Kong, our representative officesoffice in São Paulo and Beijing, and a worldwide network of correspondent banks. However, we have begun a voluntary dissolution process for our Trade Services subsidiary in Hong Kong that we expect to complete before the end of 2015.

In addition to our traditional banking operations, our subsidiaries and affiliates permit us to offer a variety ofnon-banking but specialized financial services including securities brokerage, mutual funds management, investment banking, factoring, insurance brokerage, securitization, collection and creditpre-evaluation services.

According to the Superintendency of Banks,SBIF, as of December 31, 20122014 and excluding the operations of subsidiaries abroad, we were the largest bank in terms of net income with a market share of 29.0%, the second largest bank in Chile in terms of total loans with a market share of 19.0%18.1%, the largest provider of commercial loans with a market share of 19.0%, the largest bank in terms of current account balances held by individuals with a market share of 31.0%18.0%, the second largest provider of consumer loans with a market share of 22.0%20.9% and the second largest privately owned bank in terms of residential mortgage loans with a market share of 17.2%17.1%. Also, as reported by the SBIF, we were the largest bank in terms of net income with a market share of 23.8% and the first bank in terms of current account balances held by individuals with a market share of 28.9%, both as of December 31, 2014. Lastly, according to the Chilean Association of Mutual Funds, as of December 31, 20122014 we were the largest provider of mutual funds management with a market share of 23.2%22.5%.

As of December 31, 20122014 we had:

As of December 31, 2012,2014, we had 14,58114,803 employees and delivered financial products and services through a nationwide distribution network of 434429 branches, and 1,915 ATMs1,460 Automatic Teller Machines (ATMs) that are part of a larger ATM network operated by Redbanc S.A. (a company owned by us and 11 other privately owned banks) that comprises 6,765consists of 8,029 ATMs.

History

We were founded in 1893 as a result of the merger of Banco Nacional de Chile, Banco Agrícola and Banco de Valparaíso, which created the largest privately heldowned bank in Chile. We have played an important role in the economic history of Chile. Before the creation of the Central Bank in 1926 and prior to the enactment of the General Banking Law, we were the main stabilization agent of the Chilean banking system, a role that is now performed by the Chilean Central Bank. Beginning in the early 1970s, the Chilean Government assumed control of a majority of Chilean banks, and all but one of the foreign banks that were operating at that time closed their branches and offices within the country. Throughout this era, we remained as aprivately-owned bank, with the exception of a portion of our shares owned by the Chilean Government that were sold to private investors in 1975. Throughout our history we have developed awell-recognized brand name in Chile and expanded our operations in foreign markets, where we developed an extensive network of correspondent banks. In the early twentieth century, we established a representative office in London, which we maintained until 1985, when our operations in Europe were moved to Frankfurt. The office in Frankfurt was closed in 2000, when our foreign operations were centralized at the New York branch. In 1987 and 1988, we established four subsidiaries to provide a full range of specialized financial products and services as permitted by the General Banking Law. In 1999, we widened our scope of specialized financial services by creating our insurance brokerage and factoring subsidiaries. According to our estimates, we remained the largest private bank in Chile until 1996. During the early 2000s, the Chilean banking

industry witnessed intense merger and acquisition activity. In 2002, we merged with Banco de A. Edwards, which allowed us to expand our business to new customer segments. In 2008, we sold our U.S. branchesbranch to Citigroup in connection with our merger with Citibank Chile that was carried out during the same year. As a result of these consolidations, we currently operate a distribution network that is composed of three brand names, namely, “Banco de Chile” (which operates throughout Chile), “BancoEdwards-Citi” (which is primarily oriented to higher income segments) and “Banco CrediChile” (which is focused on consumer loans and sightdemand accounts for lower and middle income segments). In 2012, we became the market leader in net income and the most profitable bank (the highest return on average equity and average capital and reserves) within the Chilean banking industry, according to information released by the Superintendency of Banks.SBIF. Similarly, among our peers we were the bank with the best credit quality indicators in terms ofpast-due loans (90 days or more), provisions for loan losses over average loans and coverage of past-due loans coverage. In terms of business,(loans 90 days or more past-due). Also, during 2012 we endorsedmaintained our leadership in mutual funds management and current accounts for individuals, while our investment banking subsidiary maintained the market leading position in corporate bond placements within the local market, according to information available at the Chilean Association of

Mutual Funds, the Superintendency of BanksSBIF and the Superintendency of Securities and Insurance,SVS, respectively. In terms of funding diversification, in 2012 we accessed newimproved our access to foreign debt markets by placing senior bonds in Hong Kong and Peru for a total aggregate amount of approximately U.S.$193 million. Similarly, we established a commercial paper program in the U.S. market of U.S.$1,000 million.

In addition, during 20122013, we undertookcontinued to enhance our competitive advantages. As a capital increase of approximately Ch$250 billion (approximately U.S.$521 million) backedresult, we completed a very successful year by leading the industry in operating revenues—for the first time in our recent history—and net income, according to information published by the issuanceSBIF. These achievements enabled us to remain the most profitable bank in Chile in terms of approximately 3.9 million new seriesreturn on average equity and average assets. Our leading position in net income was also a consequence of shares, labeled Banco de Chile-T series. This series hasour market leading performance in expenses, which allowed us to reach the same rights as any Banco de Chile shares, withlowest efficiency ratio in the exception that it will not allow its holderslocal industry, according to receive dividendsinformation published by the SBIF. Also, in order to maintain a convenient and fully paid-in shares, with chargewell diversified liability structure, we have continued to our net distributable earnings,seek alternative financing opportunities, especially overseas. In this regard, during 2013 we carried out four placements in Switzerland for the fiscal year 2012. Nevertheless, once those dividends and fully paid-in shares are distributed and paid, all of the Banco de Chile-T shares will automatically convert into Banco de Chile shares. We have successfully completed this equity offering by placing thea total amount of sharesapproximately U.S.$785 million. Also, we established a U.S.$2,000 million medium term notes program (the “MTN Program”) in Luxembourg. Under this program we issued medium term notes in Hong Kong and Japan for approximately U.S.$168 million and U.S.$167 million, respectively.

In 2014, growth in the Chilean economy decreased, which in turn affected investment and the growth of commercial loans during the first two quarters of the year and private consumption by the end of the year. Amid this slowdown, we took advantage of our competitive strengths and continued to optimize ourrisk-return relationship by keeping our credit risk under control and developing innovative commercial strategies. As a result, we remained at the top of the industry in terms of net income generation and return on average equity, according to information published by the SBIF as of December 31, 2014. In order to achieve these goals, we improved customer experience by launchingcutting-edge mobile banking solutions and applyingworld-class business intelligence methodologies. Furthermore, we continued to diversify our funding structure by issuing long term bonds in Switzerland, Japan and Hong Kong, while taking advantage of our U.S.$ Commercial Paper program to raiseshort-term funds. Lastly, we recorded a 15.9% annual expansion in current accounts and demand deposit(year-end balances) that enabled us to rank first in these liabilities within the local banking industry, according to information released by the SBIF as of December 31, 2014. These figures were initially offered.reflected by the interest of investors in Banco de Chile’s stock, which recorded an 86.5% annual increase in trading volumes (excluding the effect of the LQIF secondary offering), the highest increase among all publicly listed Chilean banks.

Merger with Banco de A. Edwards

On December 6, 2001, our shareholders approved our merger with Banco de A. Edwards, which became effective on January 1, 2002. Banco de A. Edwards had been listed on the NYSE since 1995, and in January 2002, we were listed on the NYSE under the symbol BCH. Since 2002, our shares have also been traded on the Latin American Stock Exchange of the Madrid Stock Exchange (“Latibex”), and the London Stock Exchange (“LSE”). We concluded the merger process with the consolidation of a new corporate structure and the integration of our technological platforms. As for Latibex, on October 18, 2013, we voluntarily delisted our trading units from that market.

Merger with Citibank Chile

On December 27, 2007, our shareholders approved our merger with Citibank Chile, which became effective on January 1, 2008. During 2008, we integrated Citibank Chile’s technological platforms with ours and established a new organizational structure in order to satisfy the needs of our customers and to achieve important synergies. We concluded the merger process with the integration of Corporación Financiera Atlas S.A. (Citibank Chile’s consumer division) into our consumer division (CrediChile), which allowed us to nearly double our customer base and market share in consumer finance.

Our partnership with Citigroup Inc., an internationallywell-known brand name, enabled us to broaden the scope of financial services that we offer to our customers through the addition of global financial services and other benefits. As a result of this partnership, we entered into a global connectivity agreement (the “Globalthe Global Connectivity Agreement”),Agreement, which has supported the creation of (i) an international personal banking unit, responsible for optimizing access to financial services outside Chile to our local retail customers, (ii) a global transactional services unit, responsible for executing local and international cash management services, as well as custody and foreign trade assistance, to our wholesale customers, and (iii) an enhanced investment banking unit, responsible for providing financial advisory services and access to global capital markets to our Chilean corporate customers.

Technological Projects

During 2010, our efforts were focused on upgrading internal processes and services, implementing new information technology systems and starting to develop new mid-term strategic IT programs. By December 31, 2010, we had optimized and reduced the response time of different operating processes and achieved important improvements in our internal processes and services, such as: (i) availability of electronic distribution channels; (ii) availability of additional services through the Internet; and (iii) reduction of our operating systems’ starting time. In addition, during 2010 we also implemented several IT projects, including: (i) a new telephone-based service system for our Large Companies and Real Estate Division intended to reduce the rate of unanswered calls; (ii) a system that integrated current accounts from Citibank Chile into our system; and (iii) a number of online systems that allow a credit risk pre-evaluation and online credit simulation through our website. During 2010 we also prioritized the start-up of our data processing center and the upgrade of our contingency site.

In 2011, our technological projects aimed to support the development of new products and services, improve the efficiency and productivity of our internal systems and processes, reinforce our technological infrastructure and minimize our operational risks. Thus, the main projects developed throughout 2011 were: (i) the implementation of new websites and a phone-based sales platform, in addition to the launch of “Banca Móvil”

(mobile solutions for tablets and smartphones) for our retail banking segment; (ii) the development of operational and technological processes required to release the “Banco de Chile | Entel” credit card; (iii) the release of a new platform for options trading; (iv) a new system of financial evaluation for companies that supports the tasks carried out by our Corporate Risk Management Division; and (v) the setup of a new data center.

Throughout 2012, our IT priorities were focused on improving operating efficiency through diverse projects intended to enhance internal processes in quality and timing, as well as reinforcing security in transactional services. Our main IT projects in 2012 included: (i) the automation of product application forms for small and medium sized companies, (ii) implementation of a new online platform for current accounts, (iii) approval of individuals’ and SMEs’ operations through scanned documentation,(iv) time-improving procedures for foreign exchange operations, (v) new systems for managing and trading derivatives, and (vi) the implementation of a new platform for financial planning. For security matters, we implementedworld-class security software that is intended to avoid fraud in electronic money transfers. Similarly, we implemented improved ATMs shield procedures.

Therefore,During 2013, we focused on ensuring the stability of our IT systems and implementing improvements to key processes in order to provide our customers with better service quality. Accordingly, the main IT projects undertaken in 2013 had to do with: (i) upgrading ourInternet-based array of services, in order to significantly improve the availability of our Internet platforms for personal and corporate banking, (ii) setting up a security device (chip) in credit cards that should enable us to reduce the rate of fraud in this business and maintain ourindustry-leading position in these matters, (iii) improving the uptime of ATMs, (iv) enhancingproduct-related platforms for factoring, insurance, time and demand deposits, and (v) strengtheningcredit-assessment and granting by implementing the final stages of a new system of financial evaluation for companies and optimizing required documentation for lending.

In 2014, we devoted our efforts to developing technological solutions to provide our customers with better services while improving the performance of our primary systems and operating processes. In relation to IT innovations for customers, during 2014 we developed and released a bundle of mobile applications for smartphones called MiBanco|MiPago|MiBeneficio. These applications enable our customers to carry out diverse banking and payment transactions directly from their mobile phones. As for the performance of IT systems, throughout 2014 we improved our operating systems that support credit card transactions and electronic money transfers. We also completed the first stage of our accounting control system and replaced some of our existing credit cards with new ones that include a microchip for enhanced security. In addition, in relation to the optimization of our main operating processes, we focused on reducing the potential for manualdata-entry mistakes, which represents an important source of our operational risk.

Through these efforts we have maintained our commitment ofto anticipating and minimizing cybersecurity risks, as mentioned in “Item 3. Risk Factors—Risks Relating to our Operations and the Chilean Banking Industry” and “Item 3. Risk Factors—Cybersecurity events could negatively affect our reputation or results of operations and may result in litigation.”

The1982-1983 Economic Crisis and the Central Bank Subordinated Debt

During the1982-1983 economic crisis, the Chilean banking system experienced significant instability that required the Central Bank and the Chilean Government to provide assistance to most Chilean private sector banks, including us. During this period, we experienced significant financial difficulties. In 1985 and 1986, we increased our capital and sold shares representing 88% of our capital to more than 30,000 new shareholders. As a result, no single shareholder held a controlling stake in the Bank. In 1987, the Superintendency of BanksSBIF returned complete control and administration of the Bank to our shareholders and our Board of Directors by ending our provisional administration based on our successful capital increases as required by Law 18,401.

Subsequent to the crisis, like most major Chilean banks, we sold certain of ournon-performing loans to the Central Bank at face value on terms that included a repurchase obligation. The repurchase obligation was later exchanged for subordinated debt of each participating bank issued in favor of the Central Bank. In 1989, pursuant to Law No. 18,818, banks were permitted to repurchase the portfolio ofnon-performing loans for a price equal to the economic value of such loans, provided that the bankbanks assume a subordinated obligation equal to the difference between the face and economic value of such loans. In November 1989, we repurchased our portfolio ofnon-performing loans from the Central Bank and assumed the Central Bank’s subordinated debt related to ournon-performing loans.

The original repayment terms of our Central Bank subordinated debt, which at December 31, 1989 equaled approximately Ch$1,427,8451,531,390 million (in real terms)terms as of December 31, 2014), required that a certain percentage of our income before provisions for the subordinated debt be applied to repay this obligation. The Central Bank subordinated debt did not have a fixed maturity, and payments were made only to the extent that we earned income before provisions for the subordinated debt. In 1993 we applied 72.9% of our income before provisions to repay the Central Bank subordinated debt. In 1994 we applied 67.6%, and in 1995 we applied 65.8% of our income before provisions to repay the Central Bank subordinated debt.

In November 1996, pursuant to Law No. 19,396, our shareholders approved a reorganization by which we were converted into a holding company namedSM-Chile. In turn,SM-Chile organized a newwholly-owned banking subsidiary named Banco de Chile, to which the former contributed all of its assets and liabilities, other than the Central Bank subordinated debt, to the latter. In addition,SM-Chile created SAOS, a secondwholly-owned subsidiary that, pursuant to a prior agreement with the Central Bank, assumed a new repayment obligation in favor of the Central Bank that replaced the Central Bank subordinated debt in its entirety.

This Central Bank debt, for which SAOS is solely responsible and for which there is no recourse to us orSM-Chile, was equal to the unpaid principal of the Central Bank subordinated debt that it replaced but had terms that differed in some aspects, such as the rescheduling of the debt for a term of 40 years providing for equal annual installments and a pledge of our shares as collateral for such debt. The Central Bank debt bears interest at a rate of 5.0% per year and isUF-denominated.

In exchange for assuming the Central Bank debt, SAOS received fromSM-Chile 63.6% of our shares as collateral. Although shares held by SAOS as collateral have economic rights that belong to the Chilean Central Bank, their voting rights are exercised bySM-Chile’s shareholders. As a result of our merger with Banco de A. Edwards, the percentage of our shares held by SAOS decreased to 42.0%. Subsequently, as of December 31, 2014 the percentage of our shares held by SAOS declined to 30.21%, as a result of theof: (i) capital increases agreed upon in theto an Extraordinary Shareholders’ Meetings held in May 2007.2007, January 2011 and October 2012, the share(ii) stock dividends paid in May 2006, May 2007, June 2009, MarchApril 2011, MarchJune 2012, May 2013, and March 2013, as well as theJuly 2014, and (iii) our merger with Citibank Chile in January 2008, the percentage of our shares held by SAOS further decreased to 32.5%. 2008.

Dividends received from us are the sole source of SAOS’s revenues, to be applied by legal mandate to repay its debt to the Central Bank of Chile. SAOS does not have any other material debt, as it is a special purpose legal entity created by Law 19,396 whose only business is to own Banco de Chile shares and repay the obligation to the Central Bank of Chile. However, under SAOS’s agreement with the Central Bank, we have no obligation to distribute dividends to our shareholders. To the extent distributed dividends are not sufficient to pay the amount due on its debt;debt, SAOS is permitted to maintain a cumulative deficit balance with the Central Bank that SAOS commits to pay with future dividends. If the cumulative deficit balance exceeds an amount equal to 20% of our paid-inpaid in capital and reserves, the Central Bank may require SAOS to sell a sufficient number of shares of our stock to pay the entire accumulated deficit amount. As of March 31, 2013,2015, SAOS maintained a surplus with the Central Bank of

Ch$275,702484,560 million, equivalent to 13.4%19.2% of our paid-inpaid in capital and reserves as of the same date. See “Item 3. Key Information—Risk Factors—Risks Relating to our Operations and the Banking Industry—Our affiliate may be obligated to sell shares of our stock in the public market if we do not pay sufficient dividends”.

As of December 31, 2012,2014, the outstanding subordinated debt balance held by SAOS amounted towas Ch$754,322565,552 million (including accrued interests)interest). SAOS paid to the Central Bank a total of Ch$97,973 million during 2009, Ch$101,972 million during 2010, Ch$131,530 million during 2011 and Ch$124,342 million in 2012, Ch$151,560 million in 2013 and Ch$145,123 million in 2014, exceeding in each of thesethose years the required minimum annual payment.

As of December 31, 2012,2014, the major shareholder ofSM-Chile was LQ Inversiones Financieras S.A. (a subsidiary of Quiñenco S.A.), which owned, directly and indirectly, 58.2% ofSM-Chile’s total shares. As of the same date, our major shareholders were SAOS LQ Inversiones Financieras S.A., SAOS andSM-Chile, each having a direct participation of 33.1%30.2%, 31.8%25.7% and 13.5%12.8% in our total common stock, respectively. On January 31, 2014, LQ Inversiones Financieras S.A. (our major shareholder) closed the sale of 6,700,000,000 shares of Banco de Chile through a public secondary offering, which resulted in a 7.20% decrease of their ownership interest in Banco de Chile. Accordingly, as of April 17, 2015, LQ Inversiones Financieras S.A. directly owned 25.71% of our shares and held, directly and indirectly, 51.17% of the voting rights in Banco de Chile.

If from time to time in the future our shareholders decide to retain and capitalize all or part of our annual net income in order to finance our future growth and to distribute stock dividends, the Central Bank may require us to pay the portion of the net income corresponding to shares owned by SAOS in cash to SAOS. If we distribute stock dividends and the Central Bank does not require us to pay that portion in cash, the shares received by SAOS must be sold by SAOS within the following 12 months. The shareholders ofSM-Chile will have a right of first refusal with respect to that sale.

Capital Expenditures

The following table sets forth our capital expenditures in each of the three years ended December 31, 2010, 20112012, 2013 and 2012:2014: