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Document and Entity Information	12 Months Ended
Document and Entity Information	Dec. 31, 2019 shares
Document and Entity Information
Entity Registrant Name	BANCO SANTANDER CHILE
Entity Central Index Key	0001027552
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Shell Company	false
Entity Filer Category	Large Accelerated Filer
Entity Emerging Growth Company	true
Entity Common Stock, Shares Outstanding	0
Document Type	20-F
Amendment Flag	false
Document Period End Date	Dec. 31, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	FY
Entity Interactive Data Current	Yes
Entity Incorporation, State or Country Code	F3
Document Annual Report	true
Document Transition Report	false
Document Shell Company Report	false
Entity File Number	1-14554
Entity Ex Transition Period	false

Consolidated Statements of Financial Position - CLP ($) $ in Millions	Dec. 31, 2019	Dec. 31, 2018
ASSETS
Cash and deposits in banks	$ 3,554,520	$ 2,065,441
Cash items in process of collection	355,062	353,757
Financial derivative contracts	8,148,608	3,100,635
Financial assets held for trading	270,204	77,041
Loans and account receivable at amortised cost	31,775,420	29,331,001
Loans and account receivable at fair value through other comprehensive income	66,065	68,588
Debt instrument at fair value through other comprehensive income	4,010,272	2,394,323
Equity instruments at fair value through other comprehensive income	482	483
Investments in associates and other companies	10,177	32,003
Intangible assets	73,389	66,923
Property, plant, and equipment	252,346	253,586
Right of use assets	155,987
Current taxes	11,648
Deferred taxes	451,388	397,515
Other assets	1,439,146	991,216
TOTAL ASSETS	50,574,714	39,132,512
LIABILITIES
Deposits and other demand liabilities	10,297,432	8,741,417
Cash items in process of being cleared	198,248	163,043
Obligations under repurchase agreements	380,055	48,545
Time deposits and other time liabilities	13,192,817	13,067,819
Financial derivative contracts	7,390,654	2,517,728
Interbank borrowings	2,519,818	1,788,626
Issued debt instruments	9,500,723	8,115,233
Other financial liabilities	226,358	215,400
Lease liabilities	158,494
Current taxes		8,093
Deferred taxes	99,157	15,470
Provisions	326,130	305,271
Other liabilities	2,806,325	900,407
TOTAL LIABILITIES	47,096,211	35,887,052
Attributable to the shareholders of the Bank:
Capital	891,303	891,303
Reserves	2,122,742	1,923,022
Valuation adjustments	(8,856)	11,353
Retained earnings
Retained earnings from prior years	(39,683)	(43,114)
Income for the year	619,091	595,333
Minus: Provision for mandatory dividends	(185,727)	(178,600)
Retained earnings	393,681	373,619
Attributable to the shareholders of the Bank	3,398,870	3,199,297
Non-controlling interest	79,633	46,163
TOTAL EQUITY	3,478,503	3,245,460
TOTAL LIABILITIES AND EQUITY	$ 50,574,714	$ 39,132,512

Consolidated Statements of Income - CLP ($) $ in Millions	12 Months Ended
Consolidated Statements of Income - CLP ($) $ in Millions	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
OPERATING INCOME
Interest income	$ 2,321,381	$ 2,244,317	$ 2,058,446
Interest expense	(904,417)	(829,949)	(731,755)
Net interest income	1,416,964	1,414,368	1,326,691
Fee and commission income	498,658	484,463	455,558
Fee and commission expense	(211,572)	(193,578)	(176,495)
Net fee and commission income	287,086	290,885	279,063
Net income (expense) from financial operations	(78,165)	53,174	2,796
Net foreign exchange gain	279,857	51,908	126,956
Other operating income	13,001	23,129	62,016
Net operating profit before provision for loan losses	1,918,743	1,833,464	1,797,522
Provision for loan losses	(323,311)	(317,408)	(302,255)
NET OPERATING INCOME	1,595,432	1,516,056	1,495,267
Personnel salaries and expenses	(410,157)	(397,564)	(396,967)
Administrative expenses	(233,612)	(245,089)	(230,103)
Depreciation and amortization	(106,092)	(79,280)	(77,823)
Impairment of property, plant, and equipment	(2,726)	(39)	(5,644)
Other operating expenses	(49,303)	(32,342)	(68,413)
Total operating expenses	(801,890)	(754,314)	(778,950)
OPERATING INCOME	793,542	761,742	716,317
Income from investments in associates and other companies	1,146	1,324	1,144
Income from continuing operations before tax	794,688	763,066	717,461
Income tax expense	(175,074)	(167,144)	(145,031)
Result of continuing operations	619,614	595,922	572,430
Result of discontinued operations	1,699	3,771	2,819
NET INCOME FOR THE YEAR	621,313	599,693	575,249
Attributable to:
Shareholders of the Bank	619,091	595,333	562,801
Non-controlling interest	$ 2,222	$ 4,360	$ 12,448
Earnings per share from continued operations attributable to shareholders of the Bank:
Basic earnings	$ 3.276	$ 3.139	$ 2.975
Diluted earnings	3.276	3.139	2.975
Earnings per share from discontinued operations attributable to shareholders of the Bank:
Basic earnings	0.009	0.02	0.015
Diluted earnings	0.009	0.02	0.015
Earnings per share attributable to shareholders of the Bank :
Basic earnings	3.285	3.159	2.987
Diluted earnings	$ 3.285	$ 3.159	$ 2.987

Consolidated Statements of Comprehensive Income - CLP ($) $ in Millions	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Consolidated Statements Of Comprehensive Income
NET INCOME FOR THE YEAR	$ 621,313	$ 599,693	$ 575,249
Equity instruments at fair value through other comprehensive income	(1)	(113)
Income tax related to the above		31
Total items that will not be reclassified to the income statements	(1)	(82)
Other comprehensive income that will be reclassified to profit or loss
Debt instruments at fair value through other comprehensive income	22,223	4,826
Available for sale financial assets			(5,520)
Cash flow hedge	(50,238)	13,365	(5,850)
Income tax related to the above	7,618	(4,903)	2,754
Total items that will be reclassified to the income statements	(20,397)	13,288	(8,616)
Other comprehensive income for the year, net of tax	(20,398)	13,206	(8,616)
TOTAL COMPREHENSIVE INCOME FOR THE YEAR	600,915	612,899	566,633
Attributable to:
Shareholders of the Bank	598,693	608,623	553,849
Non-controlling interests	$ 2,222	$ 4,276	$ 12,784

Consolidated Statements of Changes in Equity - CLP ($) $ in Millions	Capital	Reserves and other retained earnings	Effects of merger of companies under common control	Fair value reserve	Cash flow hedge	Income tax effects	Retained earnings of prior years	Income for the year	Provision for mandatory dividends	Total attributable to shareholders of the Bank	Non-controlling interest	Total
Equity at beginning at Dec. 31, 2016	$ 891,303	$ 1,642,336	$ (2,224)	$ 6,449	$ 2,288	$ (2,097)	$ 37,551	$ 476,067	$ (142,815)	$ 2,908,858	$ 29,341	$ 2,938,199
Changes in equity [Roll Forward]
Distribution of income from previous period							476,067	(476,067)
Equity at beginning at Dec. 31, 2016	891,303	1,642,336	(2,224)	6,449	2,288	(2,097)	513,618		(142,815)	2,908,858	29,341	2,938,199
Changes in equity [Roll Forward]
Dividends distributions/ withdrawals made							(330,645)		142,815	(187,830)	(242)	(188,072)
Transfer of retained earnings to reserves		141,706					(141,706)
Provision for mandatory dividends									(168,840)	(168,840)		(168,840)
Subtotal		141,706					(472,351)		(26,025)	(356,670)	(242)	(356,912)
Other comprehensive income				(5,990)	(5,850)	2,888				(8,952)	336	(8,616)
Result of continuous operations								559,982		559,982	12,448	572,430
Result of discontinuous operations								2,819		2,819		2,819
Subtotal				(5,990)	(5,850)	2,888		562,801		553,849	12,784	566,633
Equity at ending at Dec. 31, 2017	891,303	1,784,042	(2,224)	459	(3,562)	791	41,267	562,801	(168,840)	3,106,037	41,883	3,147,920
Changes in equity [Roll Forward]
Distribution of income from previous period							562,801	(562,801)
Equity at beginning at Dec. 31, 2017	891,303	1,784,042	(2,224)	459	(3,562)	791	604,068		(168,840)	3,106,037	41,883	3,147,920
Changes in equity [Roll Forward]
Impact of adopting IFRS 9				394		(19)	(82,367)			(81,992)		(81,992)
Restated opening balance under IFRS 9	891,303	1,784,042	(2,224)	853	(3,562)	772	521,701		(168,840)	3,024,045	41,883	3,065,928
Dividends distributions/ withdrawals made							(423,611)		168,840	(254,771)	4	(254,767)
Transfer of retained earnings to reserves		141,204					(141,204)
Provision for mandatory dividends									(178,600)	(178,600)		(178,600)
Subtotal		141,204					(564,815)		(9,760)	(433,371)	4	(433,367)
Other comprehensive income				4,799	13,365	(4,874)				13,290	(84)	13,206
Result of continuous operations								591,563		591,563	4,360	591,563
Result of discontinuous operations								3,770		3,770		3,770
Subtotal				4,799	13,365	(4,874)		595,333		608,623	4,276	612,899
Equity at ending at Dec. 31, 2018	891,303	1,925,246	(2,224)	5,652	9,803	(4,102)	(43,114)	595,333	(178,600)	3,199,297	46,163	3,245,460
Changes in equity [Roll Forward]
Distribution of income from previous period							595,333	(595,333)
Equity at beginning at Dec. 31, 2018	891,303	1,925,246	(2,224)	5,652	9,803	(4,102)	552,219		(178,600)	3,199,297	46,163	3,245,460
Changes in equity [Roll Forward]
Purchase of Santander Consumer S.A.		(37,041)								(37,041)	31,437	(5,604)
Dividends distributions/ withdrawals made							(355,141)		178,600	(176,541)		(176,541)
Transfer of retained earnings to reserves		236,761					(236,761)
Provision for mandatory dividends									(185,727)	(185,727)		(185,727)
Subtotal		199,720					(591,902)		(7,127)	(399,309)	31,437	(367,872)
Other comprehensive income				22,483	(50,238)	7,546				(20,209)	(189)	(20,398)
Result of continuous operations								617,392		617,392	2,222	619,614
Result of discontinuous operations								1,699		1,699		1,699
Subtotal				22,483	(50,238)	7,546		619,091		598,882	2,033	600,915
Equity at ending at Dec. 31, 2019	$ 891,303	$ 2,124,966	$ (2,224)	$ 28,135	$ (40,435)	$ 3,444	$ (39,683)	$ 619,091	$ (185,727)	$ 3,398,870	$ 79,633	$ 3,478,503

Consolidated Statements of Changes in Equity (Parenthetical) - CLP ($) $ in Millions	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Statement of changes in equity [abstract]
Total attributable to shareholders of the Bank	$ 591,902	$ 564,815	$ 472,351
Allocated to reserves	236,761	141,204	141,706
Allocated to dividends	$ 355,141	$ 423,611	$ 330,645
Percentage distributed	60.00%	75.00%	70.00%
Number of shares	188,446,126,791	188,446,126,794	188,446,126,794
Dividend per share (in pesos)	$ 1.885	$ 2.248	$ 1.755

Consolidated Statements of Cash Flow - CLP ($) $ in Millions	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
A - CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME FOR THE YEAR	$ 621,313	$ 599,693	$ 575,249
Adjustments for non-cash items included in net income	(1,119,126)	(1,266,270)	(1,198,330)
Depreciation and amortization	106,092	79,280	77,823
Impairment of property, plant, and equipment	2,726	39	5,644
Provision for loan losses	406,024	405,889	385,782
Mark to market of trading investments	39,997	1,438	1,438
Income from investments in associates and other companies	(1,146)	(5,095)	(3,962)
Net gain on sale of assets received in lieu of payment	(5,613)	(7,106)	(3,330)
Provision on assets received in lieu of payment	1,809	816	3,912
Loss on sale of associate	126
Net gain on sale of property, plant and equipment	(2,456)	(2,490)	(23,229)
Net interest income	(1,416,964)	(1,414,368)	(1,326,691)
Net fee and commission income	(287,086)	(290,885)	(279,063)
Other non-cash items	(67)	(8,271)	(29,903)
Changes in deferred taxes	37,432	(25,517)	(6,751)
Increase/decrease in operating assets and liabilities	2,346,978	1,689,069	206,725
(Increase) of loans and accounts receivables from customers, net	(2,449,954)	(2,703,700)	(629,605)
Decrease (increase) of financial investments	(1,809,112)	588,918	725,611
Decrease (increase) of interbank loans	232	147,534	110,036
Decrease of assets received or awarded in lieu of payment	(1,473)	722	4,125
Increase of debits in customers checking accounts	1,298,976	521,476	127,968
(Decrease) increase of time deposits and other time liabilities	124,998	1,153,874	(1,237,764)
Increase (decrease) of obligations with domestic banks	271,620	(480)	(364,956)
Increase (decrease) of other demand liabilities or time obligations	257,039	451,775	100,883
Increase of obligations with foreign banks	459,572	90,754	146,947
(Decrease) increase of obligations with Central Bank of Chile		(5)	(2)
(Decrease) increase of obligations under repurchase agreements	331,510	(219,516)	55,624
Increase (decrease) in other financial liabilities	10,958	(26,630)	2,014
(Decrease) increase of other assets and liabilities	982,760	(872,264)	(151,544)
Redemption of letters of credit	(6,988)	(8,989)	(11,772)
Senior bond issuances	1,893,552	1,156,057	911,581
Redemption of mortgage bonds and payments of interest	(6,109)	(5,911)	(5,736)
Redemption of senior bonds and payments of interest	(714,783)	(289,837)	(1,167,656)
Redemption of subordinated bonds and payments of interest			(14,899)
Interest received	2,321,381	2,244,317	2,058,446
Interest paid	(904,417)	(829,949)	(731,755)
Dividends received from investments in other companies	130	38	116
Fees and commissions received	498,658	484,463	455,558
Fees and commissions paid	(211,572)	(193,578)	(176,495)
Total cash flow (used in) provided by operating activities	1,849,165	1,022,492	(416,357)
B - CASH FLOWS FROM INVESTMENT ACTIVITIES:
Purchases of property, plant, and equipment	(50,969)	(68,329)	(58,771)
Sales of property, plant, and equipment	8,666	6,297	17,939
Sales of investments in associates	1,930
Purchases of investments in associates and other companies	(62,136)		(3)
Purchases of intangible assets	(32,860)	(29,563)	(32,624)
Total cash flow used in investment activities	(135,369)	(91,565)	(73,459)
C - CASH FLOW FROM FINANCING ACTIVITIES:
From shareholders' financing activities	(355,141)	(423,611)	(330,645)
Dividends paid	(355,141)	(423,611)	(330,645)
Lease obligation paid	(30,145)
Total cash flow used in financing activities	(385,286)	(423,611)	(330,645)
D - NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS DURING THE YEAR	1,328,510	507,316	(820,460)
E - EFFECTS OF FOREIGN EXCHANGE RATE FLUCTUATIONS	126,669	114,498	(31,398)
F - INITIAL BALANCE OF CASH AND CASH EQUIVALENTS	2,256,155	1,634,341	2,486,199
FINAL BALANCE OF CASH AND CASH EQUIVALENTS	3,711,334	2,256,155	1,634,341
Provision for loan losses for cash flow purposes	406,024	405,889	385,782
Recovery of loans previously charged off	(82,713)	(88,481)	(83,527)
Provision for loan losses - net	$ 323,311	$ 317,408	$ 302,255

Consolidated Statements of Cash Flow (Parenthetical) $ in Millions	12 Months Ended
	Dec. 31, 2019 CLP ($)
Reconciliation of liabilities that arise from financing activities [Roll Forward]
Balance as of beginning	$ 795,957
Cash flow	(385,286)
Changes not related to cash flows
Adquisition
Foreign currency exchange
Inflation effect	22,127
Fair value changes
Balance as of ending	432,798
Paid Dividend [Member]
Reconciliation of liabilities that arise from financing activities [Roll Forward]
Balance as of beginning
Cash flow	(355,414)
Changes not related to cash flows
Adquisition
Foreign currency exchange
Inflation effect
Fair value changes
Balance as of ending	(355,141)
Other Liabilities [Member]
Reconciliation of liabilities that arise from financing activities [Roll Forward]
Balance as of beginning
Cash flow	(30,145)
Changes not related to cash flows
Adquisition
Foreign currency exchange
Inflation effect
Fair value changes
Balance as of ending	(30,145)
Subordinated Bonds [Member]
Reconciliation of liabilities that arise from financing activities [Roll Forward]
Balance as of beginning	795,957
Cash flow
Changes not related to cash flows
Adquisition
Foreign currency exchange
Inflation effect	22,127
Fair value changes
Balance as of ending	$ 818,084

Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2019

Summary Of Significant Accounting Policies

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 01

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CORPORATE INFORMATION

Banco Santander-Chile is a banking corporation (limited company) operating under the laws of the Republic of Chile, headquartered at Bandera N°140, Santiago. The corporation provides a broad range of general banking services to its customers, ranging from individuals to major corporations. Banco Santander-Chile and its subsidiaries (collectively referred to herein as the "Bank" or "Banco Santander-Chile") offers commercial and consumer banking services, including (but not limited to) factoring, collection, leasing, securities and insurance brokering, mutual and investment fund management brokering, and investment banking. Banco Santander Spain controls Banco Santander-Chile through its holdings in Teatinos Siglo XXI Inversiones Ltda. and Santander Chile Holding S.A., which are controlled subsidiaries of Banco Santander Spain. As of December 31, 2019 Banco Santander Spain owns or controls directly and indirectly 99.5% of Santander Chile Holding S.A. and 100% of Teatinos Siglo XXI Inversiones Ltda. Banco Santander Spain,through its subsidiaries, has control over 67.18% of the Bank's shares.

Basis of preparation

These Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) (hereinafter referred to as IFRS).

For purposes of these financial statements we use certain terms and conventions. References to "US$", "U.S. dollars" and "dollars" are to United States dollars, references to "EUR" are to European Economic Community Euro, references to "CNY" are to Chinese Yuan, reference to "JPY" are to Japanese Yuan, references to "CHF" are to Swiss franc, references to "Chilean pesos", "pesos" or "Ch$" are to Chilean 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) for the previous month.

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 during the prior calendar month. One UF is equaled to Ch$28,309.94 as of December 31, 2019 and Ch$27,565.79 as of December 31, 2018. In 2019, UF inflation was 2.7% compared to 2.9% in 2018. 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 Notes to the Consolidated Financial Statements contain additional information to support the figures submitted in the Consolidated Statements of Financial Position, Consolidated Statements of Income, Consolidated Statements of Comprehensive Income, Consolidated Statements of Changes in Equity and Consolidated Statements of Cash Flows for the period.

Basis of preparation for the Consolidated Financial Statements

The Consolidated Financial Statements for the years ended December 31, 2019, 2018 and 2017, incorporate the financial statements of the entities over which the Bank has control (including structured entities); and includes the adjustments, reclassifications and eliminations needed to comply with the accounting and valuation criteria established by IFRS. Control is achieved when the Bank:

has power over the investee;

II.

is exposed, or has rights, to variable returns from its involvement with the investee; and

III.

has the ability to use its power to affect its returns.

The Bank reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. When the Bank has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities over the investee unilaterally. The Bank considers all relevant facts and circumstances in assessing whether or not the Bank's voting rights in an investee are sufficient to give it power, including:

●

the size of the Bank's holding of voting rights relative to the size and dispersion of holdings of the other vote holders;

●

potential voting rights held by the Bank, other vote holders or other parties;

●

rights arising from other agreements; and

●

any additional facts and circumstances that indicate that the Bank has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders' meetings.

Consolidation of a subsidiary begins when the Bank obtains control over the subsidiary and ceases when the Bank loses control over the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the Consolidated Statements of Income and Comprehensive Income from the date the Bank gains control until the date when the Bank ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income are attributed to the owners of the Bank and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Bank and to the non-controlling interests even if this results in the non-controlling interests having a deficit in certain circumstances.

When necessary, adjustments are made to the financial statements of the subsidiaries to ensure their accounting policies are consistent with the Bank's accounting policies. All intragroup assets, liabilities, equity, income, expenses and cash flows relating to transactions between consolidated entities are eliminated in full on consolidation.

Changes in the consolidated entities ownership interests in subsidiaries that do not result in a loss of control over the subsidiaries are accounted for as equity transactions. The carrying values of the Bank's equity and the non-controlling interests' equity are adjusted to reflect the changes to their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Bank.

In addition, third parties' shares in the Bank's consolidated equity are presented as "Non-controlling interests" in the Consolidated Statements of Changes in Equity. Their share in the income for the year is presented as "Attributable to non-controlling interest" in the Consolidated Statements of Income.

The following companies are considered entities controlled by the Bank and are therefore within the scope of consolidation:

Entities controlled by the Bank through participation in equity

			Percent ownership share
		Place of	As of December 31,
		Incorporation	2019						2018						2017
Name of the	Main	and	Direct		Indirect		Total		Direct		Indirect		Total		Direct		Indirect		Total
Subsidiary	Activity	operation	%		%		%		%		%		%		%		%		%
Santander Corredora de Seguros Limitada	Insurance brokerage	Santiago, Chile		99.75		0.01		99.76		99.75		0.01		99.76		99.75		0.01		99.76
Santander Corredores de Bolsa Limitada	Financial instruments brokerage	Santiago, Chile		50.59		0.41		51.00		50.59		0.41		51.00		50.59		0.41		51.00
Santander Asesorias Financieras Limitada (1)	Securities brokerage	Santiago, Chile		99.03		-		99.03		99.03		-		99.03		99.03		-		99.03
Santander S.A. Sociedad Securitizadora	Purchase of credits and issuance of debt instruments	Santiago, Chile		99.64		-		99.64		99.64		-		99.64		99.64		-		99.64
Klare Corredora de Seguros S.A. (2)	Insurance brokerage	Santiago, Chile		50.10		-		50.10		-		-		-		-		-		-
Santander Consumer Chile S.A. (3)	Financing	Santiago, Chile		51.00		-		51.00		-		-		-		-		-		-

The detail of non-controlling participation on all the remaining subsidiaries can be seen in Note 25– Non-controlling interest.

(1)

On December 18, 2019, Santander Agente de Valores Limitada changes its business name and the company's object, to Santander Asesorías Financieras Limitada, and offering financial advice.

(2)

On October 19, 2019 Klare Corredora de Seguros S.A. was created as a digital insurance brokerage, and supporting banking business company and thus subject to banking regulations. The Banks owns the 50,10% of the company's capital share.

(3)

On November 15, 2019, Financial Market Commission (FMC) authorized Banco Santander to acquire the 51% of the Santander Consumer Chile S.A. capital share from SK Berge (49%) and Banco Santander S.A. (2%). The sale was completed on November 27, 2019.

ii.

Entities controlled by the Bank through other considerations

The following companies have been consolidated based on the determination that the Bank has control as previously defined above and in accordance with IFRS 10, Consolidated Financial Statements:

Santander Gestión de Recaudación y Cobranza Limitada (collection services)

Bansa Santander S.A. (financing revolving inventory lines to automotive dealers) (1)

Multiplica SpA (Development card incentive programs) (2)

(1)

Since December 2019, Bansa Santander S.A.("Bansa") modified it activity from management of repossessed assets and leasing of properties to financing revolving inventory lines to automotive dealers. Accordingly, Consumer has started to guide relevant activities of Bansa, and therefore it has begun to consolidate.

(2)

On October 4, 2019 Multiplica Spa was created as a supporting banking business company. In accordance with IFRS 10 Consolidated Financial Statement, the Bank controls the entity, since the relevant activities are addressed by the Bank, and the Bank is exposed, or has rights, to variable returns from its involvement with the investee.

iii.

Associates

An associate is an entity over which the Bank has significant influence. Significant influence, in this case, is defined as the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. An investment in an associate is accounted for using the equity method from the date on which the investee becomes an associate.

The following companies are considered "Associates" in which the Bank accounts for its participation using the equity method:

			Percentage of ownership share
		Place of	As of December 31,
		Incorporation and	2019		2018		2017
Associates	Main activity	operation	%		%		%
Redbanc S.A. (*)	ATM services	Santiago, Chile		-		33.43		33.43
Transbank S.A. (*)	Debit and credit card services	Santiago, Chile		-		25.00		25.00
Centro de Compensación Automatizado	Electronic fund transfer and compensation services	Santiago, Chile		33.33		33.33		33.33
Sociedad Interbancaria de Depósito de Valores S.A.	Delivery of securities on public offer	Santiago, Chile		29.29		29.29		29.29
Cámara Compensación de Alto Valor S.A.	Payments clearing	Santiago, Chile		15.00		15.00		15.00
Administrador Financiero del Transantiago S.A.	Administration of boarding passes to public transportation	Santiago, Chile		20.00		20.00		20.00
Sociedad Nexus S.A. (*)	Credit card processor	Santiago, Chile		-		12.90		12.90
Servicios de Infraestructura de Mercado OTC S.A.	Administration of the infrastructure for the financial market of derivative instruments	Santiago, Chile		12.48		12.48		12.48

(*)

The Bank is in process to sell its share participation on Redbanc S.A., Transbank S.A. and Nexus S.A., therefore it has applied IFRS 5 Non-current Assets Held for Sale and Discontinued Operations over its participations share. As of December 31, 2019, the Bank has sold 85% of its share participation in Nexus S.A. See Note N°39.

In the case of Cámara Compensación de Pagos Alto Valor S.A., Banco Santander-Chile has a representative on the Board of Directors. As per the definition of associates, the Bank has concluded that it exerts significant influence over those entities.

In the case of Servicios de Infraestructura de Mercado OTC S.A.The Bank participates, through its executives, actively in the administration and in the process of organization, which is why the Administration has concluded that it exerts significant influence on it.

Non-controlling interest

Non-controlling interest represents the portion of net income and net assets which the Bank does not own, either directly or indirectly. It is presented as "Attributable to non-controlling interest" separately in the Consolidated Statements of Income, and separately from shareholders' equity in the Consolidated Statements of Financial Position.

In the case of entities controlled by the Bank through other considerations, income and equity are presented in full as non-controlling interest, since the Bank controls them, but does not have any ownership expressed as a percentage.

Reporting segments

Operating segments are components of an entity:

that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses from transactions with other components of the same entity);

ii.

whose operating results are regularly reviewed by the entity's chief executive officer, who makes decisions about resources allocated to the segment and assess its performance; and

iii.

for which discrete financial information is available.

Two or more segments can be combined only if aggregation is consistent with International Financial Reporting Standard 8 "Operating Segments" (IFRS 8) and the segments have similar economic characteristics and are similar in each of the following respects:

the nature of the products and services;

ii.

the nature of the production processes;

iii.

the type or class of customers that use their products and services;

iv.

the methods used to distribute their products or services; and

if applicable, the nature of the regulatory environment, for example, banking, insurance, or public utilities.

The Bank reports separately on each operating segment that exceeds any of the following quantitative thresholds:

its reported revenue, from both external customers and intersegment sales or transfers, is 10% or more of the combined internal and external revenue of all the operating segments.

ii.

the absolute amount of its reported profit or loss is 10% or more of the greater in absolute amount of: (i) the combined reported profit of all the operating segments that did not report a loss; (ii) the combined reported loss of all the operating segments that reported a loss.

iii.

its assets represent 10% or more of the combined assets of all the operating segments.

Operating segments that do not meet any of the quantitative threshold may be treated as segments to be reported, in which case the information must be disclosed separately if management believes it could be useful for the users of the Consolidated Financial Statements.

Information about other business activities of the operating segments not separately reported is combined and disclosed in the "Other segments" category.

Functional and presentation currency

According to International Accounting Standard (IAS) 21 "The Effects of Changes in Foreign Exchange Rates", the Chilean peso, which is the currency of the primary economic environment in which the Bank operates and the currency which influences its costs and revenue structure, has been defined as the Bank's functional and presentation currency.

Accordingly, all balances and transactions denominated in currencies other than the Chilean Peso are treated as "foreign currency".

The Bank maintains its accounting records and prepares its financial statements in Chilean pesos.

Foreign currency transactions

The Bank makes transactions in amounts denominated in foreign currencies, mainly the U.S. dollar. Assets and liabilities denominated in foreign currencies, held by the Bank are translated to Chilean pesos based on the market rate published by Reuters at 1:30 p.m. representative of the month end reported; the rate used was Ch$747.37 per US$1 as of December 31, 2019 (Ch$697.76 per US$1 as of December, 2018).

The amounts of net foreign exchange gains and losses includes recognition of the effects that exchange rate variations have on assets and liabilities denominated in foreign currencies and the profits and losses on foreign exchange spot and forward transactions undertaken by the Bank.

Classification and measurement of financial instrument – under IFRS 9

Financial instruments must be classified and measured in accordance with IFRS 9 starting from January 1, 2019, which established guidance for the financial reporting of financial assets and financial liabilities that will present relevant and useful information to users of financial statements for their assessment of the amounts, timing and uncertainty of an entity's future cash flows.

Classification of financial instrument

i) Classification of financial assets

Financial assets are classified into a measurement category based on both the Bank's business model for managing the financial asset and the contractual cash flow characteristics of the financial asset.

Contractual cash flow assessment determine if the cash flows from the financial asset meet the SPPI (solely payment of principal and interest) criterion, i.e., whether the contractual terms of the financial asset give rise, on specific dates, to cash flows that are solely payments of principal and interest. Principal is the fair value of the financial assets at initial recognition, and interest is the consideration for the time value of money, the credit risk associated with the principal outstanding, and also may include liquidity risk, administrative cost and profit margin.

For classification process the Bank perform the SPPI test, which assesses the contractual term to identify whether they meet SPI criterion, ie, the contract is a basic lending arrangement. The Bank applies judgement 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 Banks's business model is not assessed on an instrument-by- instrument basis, but at a higher level of aggregated portfolio and is based on observable factors such as: performance of the financial assets, the risk that affect the performance, and the expected frequency, value and timing of sales.

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 realise 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 realising cash flows through the sale of the assets. The Bank makes decisions based on the assets' fair values and manages the assets to realise those fair values.

ii) Classification of financial liabilities

The Bank classified all financial liabilities as subsequently measured at amortised cost, except for derivatives that are liabilities, which are measured at fair value through profit or loss.

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 are directly attributable to the acquisition or issue of the financial asset or financial liability.

ii) Subsequent measurement- financial assets

After initial recognition, the Bank shall measure a financial asset at:

(a)

Amortised 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 amortised cost.

The effective interest method is used in the calculation of the amortised 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 amortised 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 recognised in other comprehensive income, until the assets are sold. Upon disposal, the cumulative gain and losses in OCI are recognised 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 recognised at fair value through profit or loss, likewise derivatives contracts for trading purposes.

(d)

Equity instruments

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 recognised 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 amortised cost.

III. Derecognition of financial assets and liabilities

Financial assets are derecognised 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 derecognises the financial asset and recognise 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 recognise 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 recognised as a financial asset and a financial liability is recognised for the obligation to pay the repurchase price.

Financial liabilities are derecognised when, and only when, they are extinguished, cancelled or expired.

IV. Contingent loan

The Bank issues contingent liabilities (including letters of credit, foreign letters of credit and performance guarantee) and loan commitments.

Contingent liabilities and undrawn loan commitments are commitments under which, over the duration of the commitment, the Bank is required to provide a loan with pre-specified term to the customer.

The nominal contractual loan value, when the loan agreed to be provided is on market terms, is not recorded in the statements of financial position. The related ECL allowances are disclosed in Note 22.

V. Offsetting of financial instruments

Financial asset and liability balances are offset, i.e., reported in the Consolidated Statements of Financial Position at their net amount, only if there is a legally enforceable right to offset the recorded amounts and the Bank intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously. As of December 31, 2019 and 2018 the Bank does not have balance offsetting of financial instruments.

Definitions and classification of financial instruments – under IAS 39

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.

"Hybrid financial instruments" are contracts that simultaneously include a non-derivative host contract together with a financial derivative, known as an embedded derivative, which is not separately transferable and has the effect that some of the cash flows of the hybrid contract vary in a way similar to a stand-alone derivative.

ii.

Classification of financial assets for measurement purposes

Financial assets are 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 are recognised and derecognised on a trade basis.

Regular way purchases or sales of financial assets require 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 amortised 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 is recognised on an effective interest basis for loans and accounts receivables other than those financial assets classified as at fair value through profit or loss.

Financial assets FVTPL – trading investment

Financial assets are 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 is classified as held for trading if:

●

it has been acquired principally for the purpose of selling it in the near term; or

●

on initial recognition it is part of a portfolio of identified financial instruments that the Bank manages together and has a recent actual pattern of short-term profit-taking; or

●

it is a derivative that is not designated and effective as a hedging instrument.

A financial asset other than a financial asset held for trading may be designated as FVTPL upon initial recognition if:

●

such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or

●

the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Bank's documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

●

it forms part of a contract containing one or more embedded derivatives, and IAS 39 permits the entire combined contract to be designated as FVTPL.

Financial assets at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset and is included in the 'net income (expense) from financial operations' line item.

Held to maturity investments

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity dates that the Bank has the positive intent and ability to hold to maturity. Subsequent to initial recognition, held-to-maturity investments are measured at amortised cost using the effective interest method less any impairment.

Available for sale investments (AFS investments)

AFS investments are non-derivatives that are either designated as AFS or are 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 are traded in an active market are classified as AFS and are stated at fair value at the end of each reporting period. The Bank also has investments in financial instruments that are not traded in an active market but that are also classified as AFS investments and stated at fair value at the end of each reporting period (because the Bank considers 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 are recognised in profit or loss. Other changes in the carrying amount of available for sale investments are recognised in other comprehensive income and accumulated under the heading of "Valuation Adjustment". When the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in the investments revaluation reserve is reclassified to profit or loss.

Dividends on AFS equity instruments are recognised in profit or loss when the Bank's right to receive the dividends is established.

The fair value of AFS monetary financial assets denominated in a foreign currency is determined in that foreign currency and translated as the described in f) above. The foreign exchange gains and losses that are recognised in profit or loss are determined based on the amortised cost of the monetary asset.

Loans and accounts receivable from customers

Loans and accounts receivable from customers are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and accounts receivables from customers (including loans and accounts receivable from customers and interbank loans) are measured at amortised cost using the effective interest method, less any impairment.

Interest income is recognised 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 are classified by their nature into the following line items in the Consolidated Financial Statements:

Cash and deposits in banks: this line includes cash balances, checking accounts and on-demand deposits with the Central Bank of Chile and other domestic and foreign financial institutions. Amounts invested as overnight deposits are included in this item.

Cash items in process of collection: this item represents 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.

Trading investments: this item includes 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: includes balances of financial instruments purchased under resale agreement.

Interbank loans : this item includes 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 are non-derivative financial assets for which fixed or determined amounts are charged, that are not listed on an active market and which 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 rewards incidental to the leased asset, the transaction is presented in loans and accounts receivable from customers while the leased asset is derecognised in the Bank´s statements of financial position.

Investment instruments: are classified into two categories: held-to-maturity investments, and available-for-sale investments. The held-to-maturity investment classification includes only those instruments for which the Bank has the ability and intent to hold to maturity. The remaining investments are treated as available for sale.

iv.

Classification of financial liabilities for measurement purposes

The Bank classifies all financial liabilities as subsequently measured at amortised cost, except for:

Financial liabilities at FVTPL

As of December 31, 2018 and 2017 the Bank does not maintain financial liabilities at FVTPL.

Other financial liabilities

Other financial liabilities (including interbank borrowings, issued debt instruments and other payables) are initially recorded at fair value and subsequently measured at amortised cost using the effective interest method.

Classification of financial liabilities for presentation purposes

The financial liabilities are classified by their nature into the following line items in the consolidated statements of financial position:

Deposits and other on- demand liabilities: this includes all on-demand obligations except for term savings accounts, which are not considered on-demand instruments in view of their special characteristics. Obligations whose payment may be required during the period are deemed to be on-demand obligations. Operations which become callable the day after the closing date are not treated as on-demand obligations.

Cash items in process of being cleared: this represents 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 includes the balances of sales of financial instruments under securities repurchase and loan agreements. The Bank does not record in its own portfolio instruments acquired under repurchase agreements.

Time deposits and other time liabilities: this shows the balances of deposit transactions in which a term at the end of which they become callable has been stipulated.

Interbank borrowings: this includes 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 includes 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.

vi.

Offsetting of financial instruments

Financial asset and liability balances are offset, i.e., reported in the Consolidated Statements of Financial Position at their net amount, only if there is a legally enforceable right to offset the recorded amounts and the Bank intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously. As of December 31, 2018 and 2017 the Bank does not have balance offsetting of financial instruments.

vii.

Derecognition of financial assets and liabilities

The accounting treatment of transfers of financial assets is determined by the extent and the manner in which the risks and rewards associated with the transferred assets are transferred to third parties:

If the Bank transfers 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 does not retain subordinated debt nor grants any credit enhancement to the new holders, and other similar cases, the transferred financial asset is derecognised from the Consolidated Statements of Financial Position and any rights or obligations retained or created in the transfer are simultaneously recorded.

ii.

If the Bank retains 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 undertakes to return the same or similar assets, and other similar cases, the transferred financial asset is not derecognised from the Consolidated Statements of Financial Position and continues to be measured by the same criteria as those used before the transfer. However, the following items are recorded:

An associated financial liability for an amount equal to the consideration received; this liability is subsequently measured at amortised 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 transfers nor substantially retains 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 is not deeply in or out of the money, securitization of assets in which the transferor retains a subordinated debt or other type of credit enhancement for a portion of the transferred asset, and other similar cases—the following distinction is made:

If the transferor does not retain control of the transferred financial asset: the asset is derecognised from the Consolidated Statements of Financial Position and any rights or obligations retained or created in the transfer are recognised.

If the transferor retains control of the transferred financial asset: it continues to be recognised 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 is the amortised cost of the rights and obligations retained, if the transferred asset is measured at amortised cost, or the fair value of the rights and obligations retained, if the transferred asset is measured at fair value.

Accordingly, financial assets are only derecognised from the Consolidated Statements of Financial Position when the rights over the cash flows they generate have terminated or when all the inherent risks and rewards of ownership have been substantially transferred to third parties. Similarly, financial liabilities are only derecognised from the Consolidated Statements of Financial Position when the obligations specified in the contract are discharged or cancelled or the contract has matured.

i) 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:

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:

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").

It is effective in offsetting exposure inherent in the hedged item or position throughout the expected term of the hedge, which means that:

At the date of arrangement the hedge is expected, under normal conditions, to be highly effective ("prospective effectiveness").

There is sufficient evidence that the hedge was actually effective during the life of the hedged item or position ("retrospective effectiveness").

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:

For fair value hedges, the gains or losses arising on both hedging instruments and the hedged items (attributable to the type of risk being hedged) are included as "Net income (expense) from financial operations" in the Consolidated Statements of Income.

For fair value hedges of interest rate risk on a portfolio of financial instruments, gains or losses that arise in measuring hedging instruments within "Interest income and expense", and other gains or losses due to changes in fair value of the underlying hedged item (attributable to the hedged risk) are recorded in the Consolidated Statements of Income under "Net income (expense) from financial operations".

For cash flow hedges, the change in fair value of the hedging instrument is included as "Cash flow hedge" in "Other comprehensive income".

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 requirements 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 amortised to gain or loss from that date, where applicable.

When cash flow hedges are discontinued, any cumulative gain or loss of the hedging instrument recognised 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.

Fair value measurement

In general, financial assets and liabilities are initially recognised 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 recognised at fair value plus transaction costs. Subsequently, and at the end of each reporting period, financial instruments are measured pursuant to the following criteria:

Valuation of financial instruments

Financial assets are measured according to their fair value, gross of any transaction costs that may be incurred in the course of a sale, except for loans and accounts receivable from customers.

"Fair value" is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions (i.e. an exit price) regardless of whether that price is directly observable or estimated using another valuation technique. When measuring fair value an entity shall take into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date.

The fair value measurement assumes that the transaction to sell the asset or transfer the liability takes place either: (a) in the principal market for the asset or liability, or (b) in the absence of a principal market, the most advantageous market for the asset or liability. Even when there is no observable market to provide pricing information in connection with the sale of an asset or the transfer of a liability at the measurement date, the fair value measurement shall assume that the transaction takes place, considered from the perspective of a potential market participant who intends to maximize value associated with the asset or liability.

When using valuation techniques, the Bank shall maximize the use of relevant observable inputs and minimize the use of unobservable inputs as available. If an asset or a liability measured at fair value has a bid price and an ask price, the price within the bid-ask spread that is most representative of fair value in the circumstances shall be used to measure fair value regardless of where the input is categorized within the fair value hierarchy (i.e. Level 1, 2 or 3). IFRS 13 establishes a fair value hierarchy that categorizes into three levels the inputs to valuation techniques used to measure fair value. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1 inputs) and the lowest priority to unobservable inputs (Level 3 inputs).

All derivatives are recorded in the Consolidated Statements of Financial Position at the fair value previously described. This value is compared to the valuation as at the trade date. If the fair value is subsequently measured positive, this is recorded as an asset. If the fair value is subsequently measured negative, this is recorded as a liability. The fair value on the trade date is deemed, in the absence of evidence to the contrary, to be the transaction price. The changes in the fair value of derivatives from the trade date are recorded in "Net income (expense) from financial operations" in the Consolidated Statements of Income.

Specifically, the fair value of financial derivatives included in the portfolios of financial assets or liabilities held for trading is deemed to be their daily quoted price. If, for exceptional reasons, the quoted price cannot be determined on a given date, the fair value is determined using similar methods to those used to measure over the counter (OTC) derivatives. The fair value of OTC derivatives is the sum of the future cash flows resulting from the instrument, discounted to present value at the date of valuation ("present value" or "theoretical close") using valuation techniques commonly used by the financial markets: "net present value" (NPV) and option pricing models, among other methods. Also, within the fair value of derivatives are included Credit Valuation Adjustment (CVA) and Debit Valuation Adjustment (DVA), all with the objective that the fair value of each instrument includes the credit risk of its counterparty and Bank´s own risk. The Credit valuation adjustment (CVA) is a valuation adjustment to OTC derivatives as a result of the risk associated with the credit exposure assumed by each counterparty. The CVA is calculated taking into account potential exposure to each counterparty in each future period. The debit valuation adjustment (DVA) is a valuation adjustment similar to the CVA but, in this case, it arises as a result of the Bank's own risk assumed by its counterparties in OTC derivatives.

ii.

Valuation techniques

Financial instruments at fair value, determined on the basis of price quotations in active markets, include government debt securities, private sector debt securities, equity shares, short positions, and fixed-income securities issued.

In cases where price quotations cannot be observed in available markets, the Bank's management determines a best estimate of the price that the market would set using its own internal models. In most cases, these models use data based on observable market parameters as significant inputs however for some valuations of financial instruments, significant inputs are unobservable in the market. To determine a value for those instruments, various techniques are employed to make these estimates, including the extrapolation of observable market data.

The most reliable evidence of the fair value of a financial instrument on initial recognition usually is the transaction price, however due to lack of availability of market information, the value of the instrument may be derived from other market transactions performed with the same or similar instruments or may be measured by using a valuation technique in which the variables used include only observable market data, mainly interest rates.

The main techniques used as of December 31, 2019 and 2018 by the Bank's internal models to determine the fair value of the financial instruments are as follows:

In the valuation of financial instruments permitting static hedging (mainly forwards and swaps), the present value method is used. Estimated future cash flows are discounted using the interest rate curves of the related currencies. The interest rate curves are generally observable market data.

ii.

In the valuation of financial instruments requiring dynamic hedging (mainly structured options and other structured instruments), the Black-Scholes model is normally used. Where appropriate, observable market inputs are used to obtain factors such as the bid-offer spread, exchange rates, volatility, correlation indexes and market liquidity.

iii.

In the valuation of certain financial instruments exposed to interest rate risk, such as interest rate futures, caps and floors, the present value method (futures) and the Black-Scholes model (plain vanilla options) are used. The main inputs used in these models are observable market data, including the related interest rate curves, volatilities, correlations and exchange rates.

The fair value of the financial instruments calculated by the aforementioned internal models considers contractual terms and observable market data, which include interest rates, credit risk, exchange rates, quoted market price of shares, volatility and prepayments, among others. The Bank's management considers that its valuation models are not significantly subjective, since these methodologies can be adjusted and evaluated, as appropriate, through the internal calculation of fair value and the subsequent comparison with the related actively traded price.

Recognising income and expenses

The most significant criteria used by the Bank to recognise its revenues and expenses are summarized as follows:

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 amortised cost (i.e. net of the ECL provision).

ii.

Commissions, fees, and similar items

Fee and commission income and expenses are recognised 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 recognises 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 recognises revenue over time, and/or the Bank satisfies the performance obligation at a point in time.

The main revenues arising from commissions, fees and similar items correspond to:

Fees and commissions for lines of credits and overdrafts: includes accrued fees related to granting lines of credit and overdrafts in checking accounts.

Fees and commissions for guarantees and letters of credit: includes accrued fees in the period relating to granting of guarantee payment for current and contingent third party obligations.

Fees and commissions for card services: includes accrued and earned commissions in the period related to use of credit cards, debit cards and other cards

Fees and commissions for management of accounts: includes accrued commissions for the maintenance of checking, savings and other accounts

Fees and commissions for collections and payments: includes income arising from collections and payments services provided by the Bank.

Fees and commissions for intermediation and management of securities: includes income from brokerage, placements, administration and securities' custody services.

Fees and commissions for insurance brokerage fees: includes income arising for insurances distribution.

Other fees and commissions: includes income arising from currency changes,financial advisory, cashier check issuance, placement of financial products and online banking services.

The main expenses arising from commissions, fees and similar items correspond to:

Compensation for card operation: includes commission expenses for credit and debit card operations related to income commissions card services.

Fees and commissions for securities transactions: includes commissions expense for deposits, securities custody service and securities' brokerage.

Other fees and commissions: includes mainly expenses generated from online services.

The Bank has incorporated disaggregated revenue and expense disclosures and reportable segment relationship in Note 28.

Additionally, the Bank maintains certain loyalty programs associated to its credit cards services, for which it has deferred a percentage of the consideration received in the statements of financial position to comply with its related performance obligation or has liquidated on a monthly basis as far they arise.

Revenue recognition accounting and discloures for the year 2017, is under IAS 18 "Revenue recognition", fees and commission income and expense were recognised in according to their nature. The main criteria were:

Fee and commission income and expenses on financial assets and liabilities are recognised when they are earned.

Those arising from transactions or services that are performed over a period of time are recognised over the life of these transactions or services.

Those relating to services provided in a single transaction are recognised when the single transaction is performed.

iii.

Loan arrangement fees

Fees that arise as a result of the origination of a loan, mainly application and analysis-related fees, are deferred and charged to the Consolidated Statements of Income over the term of the loan.

Impairment of non-financial assets

The Bank's non-financial assets, are reviewed at the reporting date to determine whether they show signs of impairment (i.e. its carrying amount exceeds its recoverable amount). If any such evidence exists, the recoverable amount of the asset is estimated, in order to determine the extent of the impairment loss.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.

In connection with other assets, impairment losses recorded in prior periods are assessed at each reporting date to determine whether the loss has decreased and should be reversed. The increased carrying amount of an asset other than goodwill attributable to a reversal of an impairment loss shall not exceed the carrying amount that would have been determined (net of amortization or depreciation) had no impairment loss been recognised for the asset in prior years. Goodwill impairment is not reversed.

Property, plant, and equipment

This category includes the amount of buildings, land, furniture, vehicles, computer hardware and other fixtures owned by the consolidated entities or acquired under finance leases. Assets are classified according to their use as follows:

Property, plant and equipment for own use

Property, plant and equipment for own use includes but is not limited to tangible assets received by the consolidated entities in full or partial satisfaction of financial assets representing accounts receivable from third parties which are intended to be held for continuing own use and tangible assets acquired under finance leases. These assets are presented at acquisition cost less the related accumulated depreciation and, if applicable, any impairment losses (when net carrying amount was higher than recoverable amount).

Depreciation is calculated using the straight-line method over the acquisition cost of assets less their residual value, assuming that the land on which buildings and other structures stand has an indefinite life and, therefore, is not subject to depreciation.

The Bank applies the following useful lives for the tangible assets that comprise its assets:

ITEM	Useful life (Months)

Land		-
Paintings and works of art		-
Carpets and curtains		36
Computers and hardware		36
Vehicles		36
IT systems and software		36
ATMs		60
Other machines and equipment		60
Office furniture		60
Telephone and communication systems		60
Security systems		60
Rights over telephone lines		60
Air conditioning systems		84
Other installations		120
Buildings		1,200

The consolidated entities assess at each reporting date whether there is any indication that the carrying amount of any tangible asset exceeds its recoverable amount. If this is the case, the carrying amount of the asset is reduced to its recoverable amount and future depreciation charges are adjusted in accordance with the revised carrying amount and to the new remaining useful life.

The estimated useful lives of the items of property, plant and equipment held for own use are reviewed at the end of each reporting period to detect significant changes. If changes are detected, the useful lives of the assets are adjusted by correcting the depreciation charge to be recorded in the Consolidated Statements of Income in future years on the basis of the new useful lives.

Maintenance expenses relating to tangible assets held for own use are recorded as an expense in the period in which they are incurred.

ii.

Assets leased out under operating leases

The criteria used to record the acquisition cost of assets leased out under operating leases, to calculate their depreciation and their respective estimated useful lives, and to record the impairment losses thereof, are consistent with those described in relation to property, plant and equipment held for own use.

Leasing

As of January 1, 2019 the Bank has started to apply IFRS 16 "Leases", using the modified retrospective method and therefore, no comparative information is required, and 2018 balances continue to be reported under IAS 17 "Leases"

Policy applicable from January 1, 2019

At inception of a contract the Bank assesses whether a contract contains a lease. A contract contains a lease if the contracts conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Bank assesses whether:

●

the contract involves the use of an identified asset – this may be specified explicitly or implicitly and should be physically distinct. If the supplier has a substantive substitution right, then the asset is not identified.

●

the Bank has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use, and

●

the Bank has the right to direct the use of the asset – this is decision-making purpose for which asset is use

a. As a Lessee

The Bank recognises a right-of-use asset and a lease liability at the lease commencement date in accordance within IFRS 16 "Leases". The main contracts that the Bank has are offices and branches related, which are necessary to carry out its activities.

At the beginning, the right-of-use asset is equal to the lease liability and is calculated as the present value of the lease payments discounted using the incremental interest rate at the commencement date, considering the lease term of each contract. The average incremental interest rate as of December 31, 2019 is 1.7%. After initial recognition, the right-of-use is subsequently depreciated using the straight-line method in accordance with the lease term of the contract, and the lease liability is amortised in accordance with the effective interest method. Financial interest is accounted as interest expense, and depreciation as depreciation expense in each period.

The term of the lease comprises non-cancelable periods established within each contract, while for lease contracts with an indefinite useful life, the Bank has determined to assign a useful life equal to the longer non-cancelable period of its lease agreements. The Bank has elected not to recognise right-of-use assets and lease liabilities for short term leases that have a lease term of 12 months or less and leases of low-value assets. The Bank recognises lease payments associated with these leases as an expense on a straight-line basis over the lease term. Any modification in the terms or lease should be treated as a new measurement.

Initially, the Bank measures the right-of-use asset at cost. The rent of the lease agreements is agreed in UF and paid in pesos. According to that, monthly variation in UF should be treated as a new measurement, and therefore, readjustments should be recognized as a modification to the obligation and the right-of-use asset.

The Bank has not entered into lease agreements with residual value guarantee or variable lease payments.

In applying IFRS 16 for the first time, the Bank has used the following practical expedients permitted by the standard:

●

accounting for operating leases with a remaining lease term of less than 12 months as at 1 January 2019 as short-term leases

●

excluding initial direct costs for the measurement of the right-of-use asset at the date of initial application.

The Bank has also elected not to reassess whether a contract is, or contains a lease at the date of initial application. Instead, for contracts entered into before the transition date the Bank relied on its assessment made applying IAS 17 and Interpretation 4 Determining whether an Arrangement contains a Lease.

b. As a lessor

When the Bank acts as a lessor, it determines at the beginning if it corresponds to a financial or operating lease. To do this, it evaluates whether it has substantially transferred all the risks and benefits of the asset. In the affirmative case, it corresponds to a financial lease, otherwise it is a financial lease.

The Bank recognizes the lease income on a straight-line basis over the lease term.

c. Third party financing

The Bank recognises the loans with third parties within "Loans and accounts receivable from customers" in the Consolidated Statements of Financial Position, the sum of the present value of the lease payments receivable from the lessee, including the exercise price of the lessee's purchase option at the end of the lease term, when at the inception of the lease it is reasonably certain that the lessee will exercise the option.

The finance income and expenses arising from these contracts are recorded under "Interest income" and "Interest expense" respectively, in Consolidated Statements of Income to achieve constant return rate over the lease term.

Policy applicable prior to January 1, 2019

Prior to effective date of IFRS 16, the Bank applied IAS 17 Leases.

Finance leases

Finance leases are leases that substantially transfer all the risks and rewards incidental to ownership of the leased asset to the lessee.

The Bank recognised as lending to third parties under "Loans and accounts receivable from customers" in the Consolidated Statements of Financial Position, the sum of the present value of the lease payments receivable from the lessee, including the exercise price of the lessee's purchase option at the end of the lease term, when at the inception of the lease it is reasonably certain that the lessee will exercise the option.

When consolidated entities acts as lessees, the leased assets are classified based on their nature in the Consolidated Statements of Financial Position, and recognising an asset and liability at the same amount (the lower between the fair value of the leased property and the present value of the minimum lease payments, plus purchase option). These assets are depreciated in accordance with property, plant and equipment for own use criterion.

In both cases, the finance income and expenses arising from these contracts are recorded under "Interest income" and "Interest expense" respectively, in Consolidated Statements of Income to achieve constant return rate over the lease term.

ii.

Operating leases

In operating leases, the ownership of the leased asset and substantially all the risks and rewards incidental thereto remain with the lessor.

When the consolidated entities act as a lessor, the leased assets are classified at their acquisition cost under "Property, plant and equipment". The depreciation criterion for these assets is consistent with that for similar items of property, plant and equipment held for own use and revenues from operating leases are 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 expenses" in the Consolidated Statements of Income.

iii.

Sale and leaseback transactions

For sale at fair value and operating leasebacks, the profit or loss generated is recorded at the time of the sale except in the case of excess of proceeds over fair value, which is amortised over the period of use of the asset. In the case of finance leasebacks, the profit or loss generated is amortised over the lease term.

Intangible assets

Intangible assets are identified as non-monetary assets (separately identifiable from other assets) without physical substance which arise as a result of legal or contractual rights. The Bank recognizes an intangible asset, whether purchased or self-created (at cost), when the cost of the asset can be measured reliably, and it is probable that the future economic benefits that are attributable to the asset will flow to the Bank.

Intangible assets are recorded initially at acquisition or production cost and are subsequently measured at cost less any accumulated amortization and any accumulated impairment losses.

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.

Intangible assets are amortized on a straight-line basis using the estimated useful life, which has been defined by default in 36 months, and can be modified to the extent that it is demonstrated that the Bank will benefit from the use of the intangible for a different period mentioned above.

Expenditure on research activities is recorded as an expense in the year in which it is incurred and cannot be subsequently capitalized.

Cash and cash equivalents

For the preparation of the cash flow statements, the indirect method was used, starting with the Bank's consolidated pre-tax income and incorporating non-cash transactions, as well as income and expenses associated with cash flows, which are classified as operating, investment or financing activities.

For the preparation of the cash flow statements, the following items are considered:

Cash flows: Inflows and outflows of cash and cash equivalents, such as deposits with the Central Bank of Chile, deposits in domestic banks, and deposits in foreign banks.

ii.

Operating activities: Principal revenue-producing activities performed by banks and other activities that cannot be classified as investing or financing activities.

The Bank's activity of granting loans encompasses not only the activities with its debtors but also the related activities that provide the funding to the loans granted. Since the funding for granting such loans is provided by, among other sources, senior bonds, mortgage bonds and subordinated bonds, the Bank presents the related cash flows as operating activities.

iii.

Investing activities: The acquisition and disposal of long-term assets and other investments not included in cash and cash equivalents.

iv.

Financing Activities: Activities that result in changes in the size and composition of the equity and liabilities that are not operating activities.

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 single impairment model applies to all financial assets measured at amortised cost and 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 amortised 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 as a provision in the statements of financial position. The Bank recognises in profit or loss, as an impairment gain or loss, the amount of ECL (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognised in accordance IFRS 9, for financial assets measured at amortised 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

The Bank has defined default on individual or collective basis:

●

Individual: when exposure is more than 89 days past due, it has been restructured, it is in judicial collection, it has been write-off, drag effect define as the entire outstanding amount on any loan which is 89 days or more past due.

●

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).

The 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 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, evaluated whether financial instrument's credit risk has significantly increased since initial recognition or whether an asset is considered to be credit-impaired, and consequently classified financial instrument in the respective stage:

●

Stage 1: When loans are first recognised, the Bank recognises an allowance based on 12 months ECL. Stage 1 loans also include facilities where the credit risk has improved and the loan has been returned to Stage 1.

●

Stage 2: When a loan has shown a significant increase in credit risk since origination, the Bank records an allowance for the 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 for the lifetime ECL, setting the PD at 100%.

The Bank considers reasonable and supportable information that is available without undue cost or effort and that may affect the credit risk on a financial instrument, including forward looking information to determine a significant increase in credit risk since initial recognition. Forward looking information includes past events, current conditions and forecast or future economic conditions (macro-economic data).

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:

Financial or economic conditions that are expected to cause a significant change in the borrower's ability to meet its debt obligations

An actual or expected internal credit rating downgrade for the borrower or decrease in behavioral scoring

An actual or expected significant change in the operating results of the borrower.

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

Significant changes in the value of the collateral supporting the obligation or in the quality of third-party guarantees or credit enhancements.

Reductions in financial support from a parent entity or other affiliate.

Expected changes in the loan documentation including an expected breach of contract that may lead to covenant waivers or amendments, interest payment holidays, interest rate step-ups, requiring additional collateral or guarantees, or other changes to the contractual framework of the instrument.

The Bank has considered that if contractual payments are more than 30 days past due, the credit risk is deemed to have increased significantly since initial credit recognition but is not an absolute indicator. The bank did not rebut the backstop presumption of IFRS 9 relating to SICR or default.

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 derecognised and is still in the portfolio.

LGD: The loss given default is an estimate of the loss arising in the case where a default occurs at a given time. It is based on the difference between the contractual cash flows due and those that the lender would expect to receive, including from the realization of any collateral.

EAD: The Exposure at default is an estimate of the exposure at a future default date, taking into account expected changes in the exposure after the reporting date, including repayments of principal and interest, whether scheduled by contract or otherwise, expected drawdown on committed facilities, and accrued interest from missed payments.

For measuring 12-month and lifetime ECL, cash shortfalls are identified as follow:

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 individual or collective evaluated.

The Bank divides its portfolio as:

Commercial loans,

ii.

Mortgage loans, and

iii.

Consumer loans.

iv.

Contingent loans

The Bank evaluates individually whether objective evidence of impairment exists for loans that are individually significant, then collectively assesses loans that are not individually significant and loans which are significant but for which there is no objective evidence of impairment available under individually assessment.

ii.

Contingent loans

The Bank enters into various irrevocable loan commitments and contingent liabilities. Even though these obligations may not be recognised on the statements of financial position, they contain credit risk and, therefore, form part of the overall risk of the Bank.

When the Bank estimates the ECL for contingent loans, it estimates the expected portion of the loan commitment that will be drawn down over its expected life.

iii.

Forward looking information

The ECL model includes a broad range of forward-looking information as economic inputs, such as:

●

GDO growth

●

Unemployment rates

●

Central Banks interest rates

●

Real estate prices

iv.

Modifications of financial assets

When loan measured at amortised cost has been renegotiated or modified but not derecognised, the Bank recognises 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 on financial assets that have been modified, is required to distinguish between modification that result in derecognition from those that does not result in derecognition. If the modification does not result in derecognition, then the subsequent assessment of whether there is a significant increase in credit risk is made comparing the risk at the reporting date based on the modified contractual term and the risk at initial recognition based on the original, unmodified contractual term.

If the modification results in derecognition, then the modified asset is considered to be a new asset. Accordingly, the date of modification is treated as the date of initial recognition for the purposes of the impairment requirements.

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 state and inventories. The Bank's accounting policy for collateral assigned to it through its lending arrangements under IFRS 9 is the same is it was under IAS 39. Collateral, unless repossessed, is not recorded on the Bank's statements of financial position. However, the fair value of collateral affects the calculation of ECLs. The main collateral associated to mortgage loans are real estate, which are valued based on data provided by specialized third parties.

The estimation of ECL reflects the cash flows expected from collateral and other credit enhancement that are part of the contractual terms of the financial instruments.

According to the Bank's policy when an asset (real estate) is repossessed are transferred to assets held for sale at their fair value less cost to sell as non-financial assets at the repossession date.

vi.

Write-offs

The gross carrying amount of a financial asset is reduced when there is no reasonable expectation of recovery. A write-off constitutes a derecognition event of the corresponding loan transaction in its entirety, and therefore, include portions not past-due for installments loans or leasing operation (no partial write-off).

Subsequent recoveries of amounts previously written-off are credited to the income statements, as recovery of loans previously write-off, as a deduction from provisions for loan losses.

Loan and accounts receivable write-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		6 months
Other transactions without collateral		24 months
Commercial loans with collateral		36 months
Mortgage loans		48 months
Consumer leasing		6 months
Other non-mortgage leasing transactions		12 months
Mortgage leasing (household and business)		36 months

Allowance for loan losses – under IAS 39

Prior to adoption of IFRS 9, the Bank established allowances to cover incurred losses on loans and account receivables from customers in accordance with its internal models and risk assessment as approved by the Board of Directors.

The Bank performed an assessment of the risk associated with loans and accounts receivable from customers to determine their allowance for loan losses as described below:

Individual assessment – represented cases where the Bank assesses a debtor as individually significant, or when he/she could not be classified within a group of financial assets with similar credit risk characteristics, due to their size, complexity or level of exposure.

Group assessment - a group assessment was relevant for analyzing a large number of transactions with small individual balances from individuals or small companies. The Bank grouped debtors with similar credit risk characteristics giving to each group a default probability and recovery rate based on a historical analysis.

The Bank models determined allowances and provisions for loan losses according to the type of portfolio or transactions. Loans and accounts receivables from customers were divided into three categories:

Commercial loans,

ii.

Mortgage loans, and

iii.

Consumer loans.

The models used to determine credit risk allowances are described as follows:

Allowances for individual assessment

An individual assessment of commercial debtors was necessary in the case of companies which, due to their size, complexity or level of exposure regarding the entity, must be known and analyzed in detail.

For the purposes of establishing its provisions, the Bank assigned a risk category to each debtor, their loans and contingent loans. The risk factors considered were: industry or economic sector of the borrower, owners or managers of the borrower, their financial situation and payment capacity, and payment behavior.

The Bank's risk categories were as follows:

Debtors may be classified in risk categories A1, A2, A3 or B (if they are current on their payment obligations and show no sign of impairment in their credit quality). B is different from the A categories by a certain history of late payments. The A and B categories were distinguished by different PNPs (as defined below).

Debtors classified as C1, C2, C3, C4, D1 or D2 included debtors whose loans with us have been charged off or administered by our Recovery Unit or identified as impaired by an internal risk committee.

For loans classified as A1, A2, A3 and B, we assigned a specific provision level on an individual basis to each borrower and, therefore, the amount of loan loss allowance is determined on a case by case basis.

Estimated Incurred Loan Loss = Loan Loss Allowance.

The estimated incurred loss was obtained by multiplying all risk factors defined in the following equation:

EIL= EXP x PNP x SEV

EIL = Estimated Incurred Loan Loss. The estimated incurred loan loss is how much could be lost in the event a debtor does not perform the obligations under the loan.

EXP = Exposure. This corresponds to the value of commercial loans.

PNP = Probability of Non-Performance. This variable, expressed as a percentage, indicates the probability that a debtor will default. This percentage is associated with the internal rating that we give to each debtor, which is determined by analyzing such parameters as debt servicing capacity (including, usually, projected cash flows), the company's financial history, the solvency and capacity of shareholders and management, and projections for the economic sector in which it operates.

SEV = Severity. This is the effective loss rate given default for debtors in the same segment, which is determined statistically based on the historical effective losses for each segment.

Every year, models together with PNP and SEV assumptions, were tested by the Bank's Credit Risk Department, to ensure that they are appropriate at each reporting date so as to make sure any difference between the estimated incurred losses and actual losses is reduced.

These tests focused on the validation of the sufficiency of the Bank's allowances and consisted of comparisons between actual write-offs to allowances established by the model, and the coverage of the total allowance to actual write-offs in the most current periods. Individual loan classification and improvements to any customer classification were also presented for approval to our Risk Committee.

For loans classified in the C and D categories, loan loss allowances were based mainly on the fair value of the collateral, adjusted for an estimated cost to sell, that each of these loans have. Allowance percentage for each category was then based on the fair value of the collateral, or the expected future cash flow from the loan for each individually evaluated non-performing loans.

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 group evaluation to approach transactions that have similar credit risk features, which indicated the debtor's payment capacity over the entire debt, principal and interests, pursuant to the contract's terms. In addition, this allowed us to assess a high number of transactions with low individual amounts, whether they belong to individuals or SMEs (small and medium sized companies). Therefore, debtors and loans with similar features were grouped together and each group has a risk level assigned to it.

These models were meant to be used mainly to analyze loans granted to individuals (including consumer loans, credit lines, mortgage loans and commercial loans) and commercial loans to small to middle-sized entities (SMEs).

Allowances were established using these models, taking into account the historical Impairment and other known circumstances at the time of evaluation. After this, a historical loss rate was assigned to each portfolio profile constituting each evaluated group.

Allowances for group-evaluated loans were established based on the credit risk of the profile to which the loan belongs. The method for assigning a profile was based on statistical building method, establishing a relation through logistic regression of various variables, such as payment behavior in the Bank, payment behavior outside the Bank, various sociodemographic data, among others, and a response variable that determined a client's risk level, which in this case was 90 days of non-performance (the chosen features are relevant when calculating future cash flows per group of assets). Afterwards, common profiles were established and with differentiated default rates, applying the real historical loss the Bank had with that portfolio.

The different risk categories were constructed and updated periodically based on the payment behavior of the client's profile to which they belong, as well as his or her sociodemographic characteristics. Therefore, when a customer had past due balance or has missed some payments, the outcome was that the customer will move to a different segment with a higher loss rate, therefore capturing current trends for each risk profile.

Allowance quantification, once the customers have been classified, was the product of three factors: exposure (EXP), Probability of Non-Performance (PNP) and Severity (SEV), the same equation used for individual assessment mentioned above.

The estimated incurred loss rates for group-evaluated loans correspond to charge-offs net of recoveries. The methodology established the period in which the estimated incurred loss for each risk profile emerges. Once the loss has been considered to have been incurred, the estimated incurred loss rates were applied to the corresponding risk profile to obtain the net charge-off level associated with this period. The loss rates applied to each risk profile are based only on the historical net charge-off data for that specific profile within one of the four groups of loans (consumer loans, credit lines, mortgage loans and commercial loans). No other statistical or other information other than net charge-offs was used to determine the loss rates.

To determine the estimated incurred loss for commercial and mortgage loans collectively evaluated for impairment, we mainly analyzed the payment behavior of clients, particularly the payment behavior of clients with payments that are more than 90 days overdue, clients with other weaknesses, such as early nonperformance (i.e., payments that are past-due, though by less than 90 days), clients with modified loans and clients with renegotiated loans, as well as success in recovery against these clients. We also took into account whether the loan is supported by collateral.

In connection with mortgage loans, historical net charge-offs were considered in the model to calculate loss rates for loans collectively evaluated for impairment. The risk categories were such that when a customer has a past-due balance or has missed some payments, the outcome was that the customer will move to a different risk category with a higher loss rate, therefore capturing current trends of the customer and, when aggregate, current trends in the market.

Our models for loans analyzed on a group basis (consumer loans, residential mortgage loans and small-and-mid- sized commercial loans) were monitored on a monthly basis with respect to predictability and stability, using indicators that seek to capture the underlying need to update the models for current loss trends. Therefore, the periods of historical net charge-offs used in the allowance model may were more than a year old as we only updated the historical net charge-offs when our assessment of predictability and stability indicators determine it was necessary.

III.

Charge-offs

As a general rule, charge-offs should be done when all collection efforts have been exhausted. These charge-offs consisted of derecognition from the Consolidated Statements of Financial Position of the corresponding loans transactions in its entirety, and, therefore, included portions not past-due of a loan in the case of installments loans or leasing transactions (no partial charge-offs exist).

Subsequent payments obtained from charged-off loans were recognised in the Consolidated Statements of Income as a recovery of loans previously charged-off.

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		6 months
Other transactions without collateral		24 months
Commercial loans with collateral		36 months
Mortgage loans		48 months
Consumer leasing		6 months
Other non-mortgage leasing transactions		12 months
Mortgage leasing (household and business)		36 months

IV.

Recovery of loans previously charged off and accounts receivable from customers

Any payment agreement of an already charged-off loan did not give rise to income—as long as the operation was in an impaired status—and the effective payments received were accounted for as a recovery from loans previously charged-off.

Recovery of previously charged-off loans and accounts receivable from customers, were recorded in the Consolidated Statements of Income as a deduction from provisions for loan losses.

In accordance with our charge-off policy described in iii) above, we may subsequently recover a portion of the amount charged-off (at 100%). The allowance for loan losses on our collectively evaluated loans incorporates an expected recovery rate based on historical information. At the time we charged-off the carrying amount of any loans which have been collectively evaluated for impairment, the allowance for loan losses on collectively evaluated loans was replenished to reflect incurred losses based on statistical models developed in compliance with IAS 39 on the remaining pool of loans. The amounts required for replenishment were recorded in the financial statements as provision established.

Provisions, contingent assets, and contingent liabilities

Provisions are liabilities of uncertain timing or amount. Provisions are recognised in the Consolidated Statements of Financial Position when the Bank:

has a present obligation (legal or constructive) as a result of past events, and

ii.

it is probable that an outflow of resources will be required to settle these obligations and the amount of these resources can be reliably measured.

Contingent assets or contingent liabilities are any potential rights or obligations arising from past events whose existence will be confirmed only by the occurrence or non-occurrence if one or more uncertain future events that are not wholly within control of the Bank.

The Consolidated Statements of Financial Position and annual accounts reflect all significant provisions for which it is estimated that it is probable an outflow of resources will be required to meet the obligation where the probability of having to meet the obligation is more likely than not. Provisions are quantified using the best available information on the consequences of the event giving rise to them and are reviewed and adjusted at the end of each year. Provisions must specify the liabilities for which they were originally recognised. Partial or total reversals are recognised when such liabilities cease to exist or are reduced.

Provisions are classified according to the obligation covered as follows:

Provision for employee salaries and expenses

Provision for mandatory dividends

Provision for contingent credit risks

Provisions for contingencies

Deferred income taxes and other deferred taxes

The Bank records, when appropriate, deferred tax assets and liabilities for the estimated future tax effects attributable to differences between the carrying amount of assets and liabilities and their tax bases. The measurement of deferred tax assets and liabilities is based on the tax rate, in accordance with the applicable tax laws, using the tax rate that applies to the period when the deferred asset and liability will be settled. The future effects of changes in tax legislation or tax rates are recorded in deferred taxes beginning on the date on which the law is enacted or substantially enacted.

Use of estimates

The preparation of the financial statements requires the Bank's management to make estimates and assumptions that affect the application of the accounting policies and the reported balances of assets, liabilities, revenues and expenses. Actual results may differ from these estimates.

In certain cases, International Financial Reporting Standards (IFRS) require that assets or liabilities be recorded or disclosed at their fair values. The fair value is 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. When available, quoted market prices in active markets have been used as the basis for measurement. When quoted market prices in active markets are not available, the Bank has estimated such values based on the best information available, including the use of modeling and other valuation techniques.

The Bank has established allowances to cover incurred losses to estimate allowances. These allowances must be regularly reviewed taking into consideration factors such as changes in the nature and volume of the loan portfolio, trends in forecasted portfolio quality, credit quality and economic conditions that may adversely affect the borrowers' ability to pay. Increases in the allowances for loan losses are reflected as "Provision for loan losses" in the Consolidated Statements of Income. Loans are charged-off when the Bank's management determines that a loan or a portion thereof is impaired. Charge-offs are recorded as a reduction of the allowance for loan losses.

The relevant estimates and assumptions made to calculate provisions are regularly reviewed by the Bank's Management to quantify certain assets, liabilities, revenues, expenses, and commitments.

These estimates, made on the basis of the best available information, mainly refer to:

Allowances for loan losses

Impairment losses of certain assets

The useful lives of tangible and intangible assets

The fair value of assets and liabilities

Commitments and contingencies

Current and deferred taxes

Non-current assets held for sale (in "Other Assets")

The Bank classified its investment held on Redbanc, Transbank and Nexus, previously classified as associated, as assets held for sale in Other Assets, in accordance with IFRS 5 "Non-current Assets held for sale and discontinued operations", since its carrying amount will be recovered principally through a sale transaction rather through continuing use.

To apply the mentioned treatment, the Bank has ensured to comply with related requirement established in IFRS 5, which include:

●

the assets are available for immediate sale in its present conditions and its sale must be highly probable.

●

for the sale to be highly probable, the appropriate level of management is committed to a plan to sell the asset, and an active program to locate a buyer and complete the plan.

●

In addition, the sale should be expected to qualify for recognition as a completed sale within one year from the date of classification.

The Bank has measured their investment on the mentioned associated investment at their carrying amount since it represents the lower between carrying amount and fair value less cost to sell. Additionally, the Bank will recognise an impairment loss for any initial or subsequent write-down of the asset to fair value less costs to sell, to the extent that it has not been recognized.

As of December 31, 2019, the Bank still maintains its investment on Transbank and Redbanc (classified as held for sale), while a main portion of Nexus was sold on October 2019, and we expect to complete the sale on January 2020.

Assets received or awarded in lieu of payment

Assets received or awarded in lieu of payment of loans and accounts receivable from clients are recognised 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 the both cases, an independent appraisal is performed. The excess of the outstanding loan balance over the fair value is charged to net income for the period, 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 (assuming a forced sale). The difference between the carrying value of the asset and the estimated fair value less costs to sell is charged to net income for the period, under "Other operating expenses". The result obtained in the sale of the asset is subsequently recorded under "Other operating income".

Independent appraisals are obtained at least every 18 months and fair values are adjusted accordingly. No adjustments have been made between appraisals with respect to the period covered by these financial statements considering the stability of the real estate market in Chile during past years and expected stability of the real estate market in the coming years.

At least once a year, the Bank performs the necessary analysis to update the "cost to sale" of assets received or awarded in lieu of payments. According to the Bank's survey, as of December 31, 2019 the average cost to sale was estimated at 3.1% of the appraisal value (2.2% as of December 31, 2018).

Earnings per share

Basic earnings per share are determined by dividing the net income attributable to the shareholders of the Bank for the reported period by the weighted average number of shares outstanding during the reported period.

Diluted earnings per share are determined in the same way as basic earnings, but the weighted average number of outstanding shares is adjusted to take into consideration the potential diluting effect of stock options, warrants, and convertible debt.

As of December 31, 2019 and 2018 the Bank did not have any instruments that generated dilution.

Temporary acquisition (assignment) of assets and liabilities

Purchases or sales of financial assets under non-optional repurchase agreements at a fixed price are recorded in the Consolidated Statements of Financial Position based on the nature of the debtor (creditor) under "Deposits in the Central Bank of Chile," "Deposits in financial institutions" or "Loans and accounts receivable from customers" ("Central Bank of Chile deposits," "Deposits from financial institutions" or "Customer deposits"), in Note 7.

Differences between the purchase and sale prices are recorded as financial interest over the term of the contract.

Provision for mandatory dividends

As of December 31, 2019 and 2018 the Bank recorded a provision for mandatory dividends. This provision is made pursuant to Article 79 of the Corporations Act, which is in accordance with the Bank's internal policy, pursuant to which at least 30% of net income for the period is distributed, except in the case of a contrary resolution adopted at the respective shareholders' meeting by unanimous vote of the outstanding shares. This provision is recorded, as a deducting item, under the "Retained earnings – provision for mandatory dividends" line of the Consolidated Statements of Changes in Equity with offset to Provisions.

Post-employment benefits – Defined Benefit Plan:

According to current collective labor agreements and other agreements, the Bank has an additional benefit available to its principal executives, consisting of a pension plan whose purpose is to endow them with funds for a better supplementary pension upon their retirement.

Features of the Plan:

The main features of the Post-Employment Benefits Plan promoted by the Banco Santander-Chile are:

Aimed at the Bank's management.

The general requirement to apply for this benefit is that the employee must be carrying out his/her duties when turning 60 years old.

The Bank will create a pension fund, with life insurance, for each beneficiary in the plan. Periodic contributions into this fund are made by the manager and matched by the Bank.

The Bank will be responsible for granting the benefits directly.

The Bank uses the method of projected unit credit, to determine the present value of the defined benefit obligation and the current service cost.

Components of defined benefit cost include:

current service cost and any past service cost, which are recognised in profit or loss for the period;

net interest on the liability (asset) for net defined benefit, which is recognised in profit or loss for the period;

new liability (asset) remeasurements for net defined benefit include:

(a) actuarial gains and losses;

(b) the difference between the actual return on plan assets and the interest on plan assets included in the net interest component and;

The liability (asset) for net defined benefit is the deficit or surplus, determined as the difference between the present value of the defined benefit obligation less the fair value of plan assets.

Plan assets comprise the pension fund taken out by the Group with a third party that is not a related party. These assets are held by an entity legally separated from the Bank and exist solely to pay benefits to employees.

The Bank recognises the present service cost and the net interest of the Personnel salaries and expenses on the Consolidated Statements of Income.

The post-employment benefits liability, recognised in the Consolidated Statements of Financial Position represents the deficit or surplus in the defined benefit plans of the Bank. Any surplus resulting from the calculation is limited to the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions.

When employees leave the plan before meeting the requirements to be eligible for the benefit, contributions made by the Bank are reduced.

ii.

Cash-settled share-based compensation

The Bank allocates cash-settled share-based compensation to executives of the Bank and its Subsidiaries in accordance with IFRS 2. The Bank measures the services received and the obligation incurred at fair value. Until the obligation is settled, the Bank determines the fair value at the end of each reporting period, as well as at the date of settlement, recognising any change in fair value in the income statements of the period.

Application of new and revised International Financial Reporting Standards

1. New and revised standards effective in current year

The following new and revised IFRS have been adopted in these financial statements:

IFRS 16 Leases – issued on January 13, 2016, the IASB has published its new standard for leases, which replaces IAS 17 Leases, IFRIC 4 Determining whether an arrangement contains a lease, SIC15 Operating leases and SIC27 Evaluating the substance of transactions involving the legal form of a lease. IFRS 16 introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee is required to recognise a right-of-use asset representing its right of use the underlying leased asset and a lease liability representing its obligation to make lease payment. Lessor accounting however remains largely unchanged and the distinction between operating and finance leases is retained.

For lease commitments that are in scope of the standard, the Bank recognised, as of January 1, 2019, the right of use assets of approximately MM$154,284 and lease liabilities for the same amount, since it has been elected to apply the simplified transition approach in which no comparative information is restated, instead, the cumulative effect of the application of the standard (if any) is recognised as an adjustment to the initial balance of retained earnings at the date of the initial application.

IFRIC 23 Uncertainty over Income Tax Treatments – This standard issued on June 7, 2017, clarifies how the recognition and measurement requirements of IAS 12 apply when there is uncertainty about tax treatments. The standard applies to annual periods beginning on or after January 1, 2019, with early application permitted. The implementation of this standard did not have a material impact on the Bank's financial statement.

Amendments to IAS 28 long-term interest in Associates and Joint Ventures - This standard was issued in October 12, 2017 to clarify that an entity applies IFRS 9 including its impairment requirements, to long-term interests in an associate or joint venture that form part of the net investment in the associate or joint venture but to which the equity method is not applied. The amendments are effective for periods beginning on or after January 1, 2019, early application is permitted. The implementation of this standard did not have a material impact on the Bank's financial statement.

Annual Improvements to IFRS Standards 2015–2017 Cycle - These annual improvements issued in December 12, 2017, containing the following amendments:

IFRS 3 Business Combination and IFRS 11 Joint Arrangements – The amendments to IFRS 3 clarify that when an entity obtains control of a business that is a joint operation, it remeasures previously held interests in that business. The amendments to IFRS 11 clarify an entity obtains joint control of a business that is a joint operation, the entity does not remeasure previously held interest in that business.

IAS 12 Income taxes – The amendments clarify that all income tax consequences of dividends should be recognised in profit or loss, regardless of how the tax arises.

IAS 23 Borrowing cost – The amendments clarify that if any specific borrowing remain outstanding after the related asset is ready for its intended use or sale, that borrowing becomes part of the funds that an entity borrows generally when calculating the capitalization rate on general borrowings. The implementation of this standard did not have a material impact on the Bank's financial statement.

Amendments to IAS 19 Plan amendment, curtailment or settlement – issued on February 7, 2018, amendments are:

●

If a plan amendment, curtailment or settlement occurs, it is now mandatory that the current service cost and the net interest for the period after the remeasurement are determined using the assumptions used for the remeasurement.

●

In addition, amendments have been included to clarify the effect of a plan amendment, curtailment or settlement on the requirements regarding the asset ceiling.

The amendments are effective for periods beginning on or after January 1, 2019, early application is permitted but must be disclosed. The implementation of this standard did not have a material impact on the Bank's financial statement.

New and revised IFRS issued but not effective

As of the closing date of these financial statements, new International Financial Reporting Standards had been published as well as interpretations of them, which were not mandatory as of December 31, 2019. Although in some cases the application is permitted by the IASB, the Bank has not made its application on that date.

Sale or Contributions of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28) - Issued on September 11, 2014, the IASB has published 'Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28)'. The amendments address a conflict between the requirements of IAS 28 'Investments in Associates and Joint Ventures' and IFRS 10 'Consolidated Financial Statements' and clarifies the treatment of the sale or contribution of assets from an investor to its associate or joint venture, as follows:

●

requires full recognition in the investor's financial statements of gains and losses arising on the sale or contribution of assets that constitute a business (as defined in IFRS 3 Business Combinations);

●

requires the partial recognition of gains and losses where the assets do not constitute a business, i.e. a gain or loss is recognised only to the extent of the unrelated investors' interests in that associate or joint venture.

On December 17, 2015 the IASB has published final amendments to "Sale or Contribution of Assets between an Investor and its Associate or Joint Venture". The amendments defer the effective date of the September 2014 amendments to these standards indefinitely until the research project on the equity method has been concluded. The Bank's management has considered that these amendments will not have a material impact on the consolidated financial statements of the Bank.

IFRS 17 Insurance Contracts – Issued on May 18, 2017, this standard establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts. The objective is to ensure that an entity provides relevant information that faithfully represents those contracts. This information gives a bases for users of financial statements to assess the effect that insurance contracts have on the entity's financial position, financial performance and cash flows. This standard supersedes IFRS 4.

The standard is effective for periods beginning on or after January 1, 2022, early application is permitted if both IFRS 15 Revenue from contracts with customers and IFRS 9 Financial Instruments have also been applied. The Bank's management is evaluating the potential impact of this standards on the consolidated financial statements of the Bank.

Conceptual Framework for Financial Reporting 2018 – Issued on March 29, 2018, the purpose of this framework is to assist the IASB in developing and revising IFRSs that are based on consistent concepts, helps preparers to develop consistent accounting policies for areas that are not covered by a standard or where there is choice of accounting policy, and to assist all parties to understand and interpret IFRS.

This framework in not a standard and does not override any specific IFRS. The implementation of this standard does not have a material impact on the Bank's financial statement.

Amendments to IFRS 3 – Definition of a Business – Issued on October 22, 2018, this amendment aimed at resolving the difficulties that arise when an entity determines whether it has acquired a business or a group of assets. The amendments include:

●

clarify that to be considered a business, an acquired set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs;

●

narrow the definitions of a business and of outputs by focusing on goods and services provided to customers and by removing the reference to an ability to reduce costs;

●

add guidance and illustrative examples to help entities assess whether a substantive process has been acquired;

●

remove the assessment of whether market participants are capable of replacing any missing inputs or processes and continuing to produce outputs; and

●

add an optional concentration test that permits a simplified assessment of whether an acquired set of activities and assets is not a business.

The amendments are effective for business combination for which the acquisition date is on or after the periods beginning of the first annual reporting period beginning on or after January 1, 2020, and to asset acquisitions that occur on or after the beginning of that report. Early application is permitted. The implementation of this standard does not have a material impact on the Bank's financial statement.

Amendments to IAS 1 and IAS 8- Definition of material – Issued on October 31, 2018, the purpose of this amendment is to clarify the definition of material and to align the definition used in the Conceptual Frameworks and the IFRSs

The new definition of material and the accompanying explanatory paragraphs are contained in IAS 1 Presentation of Financial Statements. The definition of material in IAS 8 Accounting policies, Changes in Accounting estimates and Errors has been replaced with a reference to IAS 1.

The standard is effective for periods beginning on or after January 1, 2020, early application is permitted. The implementation of this standard does not have a material impact on the Bank's financial statement.

Amendments to IFRS 9, IAS 39 and IFRS 7 – Interest Rate benchmark Reform – Issued on September 26, 2019, this amendment deal with issues affecting financial reporting in the period before the replacement of an existing interest rate benchmark with an alternative interest rate and address the implications for specific hedge accounting requirements in IFRS 9 Financial Instruments, which require forward-looking analysis.

The amendments are effective for period beginning on or after January 1, 2020 and must be applied retrospectively. Early application is permitted. The Bank's management has considered that these amendments will not have a material impact on the consolidated financial statements of the Bank.

Accounting Changes

12 Months Ended

Dec. 31, 2019

Accounting Changes

ACCOUNTING CHANGES

NOTE 02

ACCOUNTING CHANGES

IFRS 16 ADOPTION

On January 1, 2019, IFRS 16 Leases has become effective; this standard sets out the principles for the recognition, measurement, presentation and disclosure of leases. The objective is to ensure that lessees and lessors provide relevant information in a manner that faithfully represents those transactions. IFRS 16 introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months, thus a lessee is required to recognise a right-of-use asset representing its right of use the underlying leased asset and a lease liability representing its obligation to make lease payments.

IFRS 16 supersedes IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases—Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.

The Bank has elected to adopt IFRS 16 using a modified retrospective approach at the date of initial application, therefore, it has recognise a right-of-use asset for an amount equal to the lease liability, which amounted MCh$154,284.

Below is the detail of impacts as of January 1, 2019:

	Balance as				Balance as
	of December 31, 2018		Additions		of January 01, 2019
	MCh$		MCh$		MCh$

Right of use assets		-		154,284		154,284
Subtotals Assets		-		154,284		154,284

Lease liability		-		154,284		154,284
Subtotals Liabilities		-		154,284		154,284

For more details, see Note 14.

IFRS 9 ADOPTION – Transition disclosure

The following disclosure provides the impact of adopting IFRS 9 on the statements of financial position and retained earnings including the effect of replacing IAS 39's incurred credit loss provision with IFRS 9's ECLs.

		IAS 39 carrying amount										IFRS 9 carrying amount
		Category		Amount		Reclassification			Remeasurement			Amount		Category
	Ref	MCh$		MCh$		MCh$			MCh$			MCh$		MCh$
AMORTISED COST
Cash and deposit in banks
Opening balance under IAS 39 and closing under IFRS 9			AC		1,452,922		-			-			1,452,922		AC
Interbank loans, net
Opening balance under IAS 39			AC		162,213		-			-			-		-
Remeasurement: ECL Allowance	A		-		-		(162,213	)		-			-		-
Closing balance under IFRS9			-		-		-			-			-		-
Loans and accounts receivable from customers, net
Opening balance under IAS 39			AC		26,772,544		-			-			-		-
Addition: from interbank loans	A		-		-		162,213			-			-		-
Subtraction to FVOCI (net of allowance)	B		-		-		(107,846	)		-			-		-
Remeasurement: ECL Allowance			-		-		-			(97,322	)		-
Closing balance under IFRS 9			-		-		-			-			26,729,589		AC
Total financial assets measured at amortised cost					28,387,679		(107,846	)		(97,322	)		28,182,511		-
FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME (FVOCI)
Available for sale investment (debt securities)
Opening balance under IAS 39			FVOCI		2,574,546		-			-			-		-
Remeasurement: ECL Allowance			-		-		-			-			-		-
Closing balance under IFRS 9			-		-		-			-			2,574,546		FVOCI
Loans and accounts receivable from customers, net
Opening balance under IAS 39			AC		-		-			-			-		-
Addition: from amortised cost (net of allowance)	B		-		-		107,846			-			-		-
Remeasurement: from cost to FV	B		-		-		-			(236	)		-		-
Remeasurement: ECL Allowance	B		-		-		-			291			-		-
Closing balance under IFRS 9			-		-		107,846			55			107,901		FVOCI
Investment in associate and other companies – Bladex (equity instruments)
Opening balance under IAS 39			Cost		136		-			-			-		-
Remeasurement: from cost to FV	C		-		-		-			306			-		-
Closing balance under IFRS 9			-		-		-			306			442		FVOCI
Investment in associate and other companies- Stock exchange (equity instruments)
Opening balance under IAS 39			FV		287		-			-			-		-
Remeasurement: from cost to FV			-		-		-			-			-		-
Closing balance under IFRS 9	C		-		-		-			-			287		FVOCI
Total financial assets measured at FVOCI			-		2,574,969		107,846			361			2,683,176		-

	Ref	IAS 39 carrying amount				IFRS 9 carrying amount
		Category	Amount	Reclassification	Remeasurement	Amount	Category
		MCh$	MCh$	MCh$	MCh$	MCh$	MCh$
FAIR VALUE THROUGH PROFIT OR LOSS (FVPL)
Trading investment
Opening balance under IAS 39 and closing under IFRS 9		FVPL	485,736	-	-	485,736	FVPL
Derivative contracts (hedging + trading)				-	-	-	-
Opening balance under IAS 39 and closing under IFRS 9		FVPL	2,238,647	-	-	2,238,647	FVPL
Total financial assets measured at FVTPL			2,724,383	-	-	2,274,383	-

The following explains how applying the new requirements of IFRS 9 led to changes in classification of certain financial assets held by the Bank as shown in the table above:

(A)

Interbank loans

According to the new balance presentation, the Bank has grouped interbank loans with the loans and account receivable since both are measured at amortised cost, and evaluated together for impairment purposes.

(B)

Loans and account receivable measured at fair value through other comprehensive income

The Bank enters into arrangements with its major customers for project finance and syndicated loans and, sometimes the amount requested exceeds the Bank's limit for a single client exposure under the established credit risk policy, accordingly, the transaction is approved under the condition to sell a portion of the facility in the near term, which is classified under this category. Also, the Bank has decided to include loans that the Bank are expecting to sell if the market conditions are favorable to the Bank in this category. These loans are measured at fair value through other comprehensive income, and subject to impairment requirements.

(C)

Investment in equity instrument

The Bank has elected to irrevocably designate non-trading equity securities required to operates in Chile and outside at FVOCI as permitted under IFRS 9. Bladex and stock exchange securities were previously measured at cost as permitted by IAS 39. The changes in fair value will no longer be reclassified to profit or loss when they are disposed of.

The following table reconciles the December 31, 2017 period's closing impairment allowance measured in accordance with the IAS 39 incurred loss model to the new impairment model:

	Loans loss allowance under IAS 39		Reclassification			Remeasurement			Loans loss allowance under IFRS 9
	MCh$		MCh$			MCh$			MCh$
Loans and receivable (IAS 39)/ Financial assets at amortised cost (IFRS 9)
Interbank loans		472		(472	)		-			-
Loans and account receivable from customers		790,685		84			97,322			888,091
Total loans and account receivable at amortised cost		791,157		(388	)		97,322			888,091
Available for sale investment (IAS39)/Financial assets at FVOCI (IFRS 9)
Loans and account receivable from customer – at FVOCI		-		388			(291	)		97
Total financial assets at FVOCI		-		388			(291	)		97
Other credit- related commitments
Contingent liabilities		8,404		-			(3,767	)		4,637
Loan commitments		-		-			19,124			19,124
Total contingents		8,404		-			15,357			23,761
Total provision for loan losses		799,561		-			112,388			911,949

The composition of the loan portfolio as of January 1, 2018 is as follows:

	Assets before allowances								ECL allowance
As of January 1, 2018	Stage 1		Stage 2		Stage 3		Total		Stage 1		Stage 2		Stage 3		Total		Net Assets
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$

Commercial loans
Interbank loans		162,685		-		-		162,685		13		-		-		13		162,672
Commercial loans		8,743,179		595,436		543,807		9,882,422		56,546		36,541		246,870		339,957		9,542,465
Foreign trade loans		1,464,059		56,110		54,344		1,574,513		4,883		849		33,480		39,212		1,535,301
Checking accounts debtors		173,738		8,005		13,953		195,696		2,302		411		9,385		12,098		183,598
Factoring transactions		441,014		4,035		4,841		449,890		837		91		3,366		4,294		445,596
Student loans		70,984		7,402		9,904		88,290		3,644		2,329		6,092		12,065		76,225
Leasing transactions		1,235,103		161,882		60,019		1,457,004		8,946		9,553		27,835		46,334		1,410,670
Other loans and account receivable		110,307		5,663		36,623		152,593		2,640		1,549		24,551		28,740		123,853
Subtotal		12,401,069		838,533		723,491		13,963,093		79,811		51,323		351,579		482,713		13,480,380

Mortgage loans
Loans with mortgage finance bonds		21,529		1,230		1,301		24,060		25		51		172		248		23,812
Endorsable mortgage mutual loans		107,900		2,973		4,205		115,078		100		143		628		871		114,207
Other mortgage mutual loans		8,061,800		465,146		430,811		8,957,757		14,477		20,033		72,390		106,900		8,850,857
Subtotal		8,191,229		469,349		436,317		9,096,895		14,602		20,227		73,190		108,019		8,988,876

Consumer loans
Installment consumer loans		2,378,614		234,044		298,084		2,910,742		51,172		46,866		157,811		255,849		2,654,893
Credit card balances		1,324,742		20,916		19,322		1,364,980		20,443		7,633		11,982		40,058		1,324,922
Leasing transactions		4,627		47		41		4,715		1,013		23		74		1,110		3,605
Other consumer loans		270,410		2,573		4,272		277,255		84		35		223		342		276,913
Subtotal		3,978,393		257,580		321,719		4,557,692		72,712		54,557		170,090		297,359		4,260,333

Total		24,570,691		1,565,462		1,481,527		27,617,680		167,125		126,107		594,859		888,091		26,729,589

Significant Events

12 Months Ended

Dec. 31, 2019

Significant Events

SIGNIFICANT EVENTS

NOTE 03

SIGNIFICANT EVENTS

As of December 31, 2019, the following significant events have occurred and affected the Bank's operations and Consolidated Financial Statements.

a) The Board

During the ordinary session of the Board of Directors of Banco Santander-Chile, held on February 28, 2019, it was agreed to propose to the Ordinary Shareholders' Meeting on April 23, 2019, a dividend of $ 1.88457837 per share, corresponding 60% of the profits for the 2018 fiscal year. Likewise, the board will propose that the remaining 40% of the profits be used to increase the Bank's reserves.

During the ordinary session of the Board of Directors of Banco Santander-Chile, held on March 26, 2019, the following matters were agreed:

Due to the resignation of the Director Mr. Andreu Plaza López, the Board of Directors of the Bank has appointed Mr. Rodrigo Echenique Gordillo to replace him as Director.

It was agreed to subscribe an agreement with SKBergé S.A., whereby the Bank would acquire the ownership held by SKBergé Financiamiento S.A. in Santander Consumer Chile S.A., representing 49% of the capital stock of Santander Consumer Chile S.A., for a total of $59,063,470,000.

During the ordinary session of the Board of Directors of Banco Santander-Chile, held on July 30, 2019, it was agreed to call an Extraordinary Shareholders Meeting for August 27, 2019, in order to submit for the shareholder's consideration the acquisition of 51% of the shares issued by Santander Consumer Chile S.A.

On August 13, 2019, the favorable opinions of the members of the Board of Directors of Banco Santander-Chile were communicated to the market, regarding the 51% acquisition of the shares of Santander Consumer Chile S.A.

At the Extraordinary Shareholders Meeting of Banco Santander-Chile held on August 27, 2019, it was agreed to approve the operation to acquire 51% of the shares issued by Santander Consumer Chile S.A. The transactions were approved by the Financial Market Commission (FMC) on November 15, 2019, and executed on November 21, 2019.

b) New subsidiaries and corporate modifications

On October 19, 2019, Klare Corredora de Seguros S.A. was created as a digital insurance broker. With prior FMC (former SBIF) authorization by resolution No. 6780 of September 26, 2019, Banco Santander-Chile subscribed to 50.10% of the subsidiary.

On November 27, 2019, the Bank acquired 51% of Santander Consumer S.A., an automobile financing non-banking company, which became a subsidiary of the Bank and a supporting banking business company from SK Berge (49%) and Banco Santander S.A. (2%) for a total amount MCh$62,136. The purchase generated a negative equity effect of MCh$37,041, since it was considered a transaction between entities under common control, the Bank used "predecessor accounting method".

On December 18, 2019, Santander Agencia de Valores Limitada modified its corporate name and business objective, becoming Santander Asesorias Financieras Limitada and having the following object: i) search for alternative sources of financing; ii) restructuring of its liabilities; iii) negotiations to acquire, sell or merge companies; iv) issuance and placement of bonds; v) placement of funds in the capital market; vi) credit or market risk analysis; vii) evaluation of new businesses; viii) knowledge of banking matters; ix) any other activity directly linked to financial advice.

c) Bods issued at December 31, 2019

c.1 Senior bonds

During the year ended December 31, 2019 the Bank has issued senior bonds int the amount of AUD 185,000,000, EUR 65,000,000 and CHF 250,000,000, debt issuance information is included in Note 19.

Series	Currency	Term (annual)	Issuance rate (annual)	Issuance date	Amount	Maturity date
EUR	EUR	7	1,09%	02-01-2019	40,000,000	07-02-2026
EUR	EUR	15	1,25%	11-26-2019	25,000,000	01-03-2022
Total	EUR				65,000,000
AUD	AUD	15	3,66%	05-13-2019	22,000,000	20-05-2034
AUD	AUD	5	1,13%	07-11-2019	20,000,000	11-07-2024
AUD	AUD	5	1,13%	07-17-2019	28,000,000	17-07-2024
AUD	AUD	5	1,13%	07-17-2019	15,000,000	17-07-2024
AUD	AUD	20	3,05%	08-30-2019	75,000,000	28-02-2039
AUD	AUD	15	3,16%	11-12-2019	12,000,000	20-11-2034
AUD	AUD	15	2,91%	11-21-2019	13,000,000	27-11-2034
Total	AUD				185,000,000
CHF	CHF	5	0,38%	03-12-2019	150,000,000	27-09-2024
CHF	CHF	10	0,14%	08-29-2019	100,000,000	29-08-2029
Total	CHF				250,000,000

c.2 Subordinated bonds

As at December 31, 2019 the Bank had not issued subordinated bonds in this financial year.

c.3 Mortgage bonds

As at December 31, 2019 the Bank had not issued mortgage bonds in this financial year.

c.4 Repurchase of bonds

The Bank has conducted the following repurchase of bonds as of December 31, 2019:

Date	Series	Currency	Amount
02-12-2019	Senior	CLP	10,000,000,000
02-14-2019	Senior	CLP	30,000,000,000
02-19-2019	Senior	CLP	4,200,000,000
02-22-2019	Senior	CLP	14,240,000,000
02-22-2019	Senior	CLP	30,000,000
02-22-2019	Senior	CLP	10,000,000
03-01-2019	Senior	CLP	11,800,000,000
03-04-2019	Senior	CLP	40,080,000,000
03-05-2019	Senior	CLP	20,000,000,000
03-15-2019	Senior	UF	156,000
03-19-2019	Senior	UF	418,000
03-20-2019	Senior	CLP	6,710,000,000
03-20-2019	Senior	UF	154,000
03-21-2019	Senior	UF	100,000
03-25-2019	Senior	UF	100,000
03-26-2019	Senior	UF	90,000
04-08-2019	Senior	CLP	3,950,000,000
04-10-2019	Senior	UF	409,000
04-16-2019	Senior	UF	55,000
04-17-2019	Senior	CLP	130,000,000
04-18-2019	Senior	CLP	330,000,000
05-16-2019	Senior	CLP	14,880,000,000
05-16-2019	Senior	UF	9,000
06-13-2019	Senior	UF	1,000
10-01-2019	Senior	CLP	10,960,000,000
10-02-2019	Senior	CLP	100,000,000
10-04-2019	Senior	CLP	60,000,000
11-05-2019	Senior	CLP	15,220,000,000
11-07-2019	Senior	CLP	3,620,000,000
11-13-2019	Senior	CLP	5,320,000,000
11-14-2019	Senior	UF	2,977,000
11-28-2019	Senior	UF	340,000
12-02-2019	Senior	UF	105,000

d) Others

On January 12, 2019, was published in the "Diario Oficial" Law 21,130 that modernizes Banking Legislation. This law introduces modifications, among other regulatory bodies, to the General Bank Law (LGB), to Law 21,000 creating the Financial Market Commission ("FMC" which replaces former SBIF), to the Organic Law of the State Bank of Chile and to the Tax Code.

The main changes introduced by this law are the integration of the SBIF within the Financial Market Commission (FMC), new capital requirements in accordance with the international standards established by Basel III, in addition to new limits for credit operations.

The new law adopts the highest international standards in banking regulation and supervision, strengthening international competitiveness and contributing to the financial stability of Chile.

The FMC has issued three standards drafts for comment of a total of 16 that are required for the full fulfillment of the new capital requirements:

- Identification of banks with systemic importance.

- New standardized methodology to determine risk-weighted assets operational risk.

- Methodology for computing regulatory capital.

On December 20, 2019, the FMC issued Circular N°2,243 Compendium of Accounting Standards for banks, which incorporates the modifications introduced by the IASB through new standards such as IFRS 9 Financial Instruments (excluding impairment chapter), IFRS 16 Leases, IFRS15 Revenue from Contracts with customers and disclosures required by IFRS 7 Financial Instruments:Disclosures. The modifications pursue greater convergence to IFRS, improving disclosures and contributing to the transparency of the Chilean banking system. The new compendium (CNCB) is applicable from January 1, 2021, and for the purposes of comparative financial statement as of March 2021, 2020 will be a transition year.

Sale of associates

The Bank completed the sale of a significant part of its participation in Sociedad Nexus S.A., which reached 12.9% investment that was registered as an asset held for sale (see Note No. 39).

Social unrest

During October 2019, growing public concern over perceived social inequality led to a rise in social unrest. As a results, certain Bank's branches suffered different level of damages. As of December 31, 2019, the Bank recorded an impairment for an amount of MCh$2,726 (see Note 33), and expenses for MCh$1,823 as other operational expenses (see Note 34). Most of this damage was insured.

Reporting Segments

12 Months Ended

Dec. 31, 2019

Reporting Segments

REPORTING SEGMENTS

NOTE 04

REPORTING SEGMENTS

The Bank manages and measures the performance of its operations by business segments. The information disclosed in this note is not necessarily comparable to that of other financial institutions, since it is based on management's internal information system by segment.

Inter-segment transactions are conducted under normal arm's length commercial terms and conditions. Each segment's assets, liabilities, and income include items directly attributable to the segment to which they can be allocated on a reasonable basis.

Under IFRS 8, the Bank has aggregated operating segments with similar economic characteristics according to the aggregation criteria specified in the standard. A reporting segment consists of clients that are offered differentiated but, considering how their performance is measured, are homogenous services based on IFRS 8 aggregation criteria, thus they form part of the same reporting segment. Overall, this aggregation has no significant impact on the understanding of the nature and effects of the Bank's business activities and the economic environment.

The Bank has the reportable segments noted below:

Retail Banking

Consists of individuals and small to middle-sized entities (SMEs) with annual income less than Ch$2,000 million. This segment gives customers a variety of services, including consumer loans, credit cards, automobile loans, commercial loans, foreign exchange, mortgage loans, debit cards, checking accounts, savings products, mutual funds, stockbrokerage, and insurance brokerage. Additionally the SME clients are offered government-guaranteed loans, leasing and factoring.

Middle-market

This segment is made up of companies and large corporations with annual sales exceeding Ch$2,000 million. It serves institutions such as universities, government entities, local and regional governments and companies engaged in the real estate industry who carry out projects to sell properties to third parties and annual sales exceeding Ch$800 million with no upper limit. The companies within this segment have access to many products including commercial loans, leasing, factoring, foreign trade, credit cards, mortgage loans, checking accounts, transactional services, treasury services, financial consulting, savings products, mutual funds, and insurance brokerage. Also companies in the real estate industry are offered specialized services to finance projects, chiefly residential, with the aim of expanding sales of mortgage loans.

Global Investment Banking

This segment consists of foreign and domestic multinational companies with sales over Ch$10,000 million. The companies within this segment have access to many products including commercial loans, leasing, factoring, foreign trade, credit cards, mortgage loans, checking accounts, transactional services, treasury services, financial consulting, investments, savings products, mutual funds and insurance brokerage.

This segment also consists of a Treasury Division which provides sophisticated financial products, mainly to companies in the Middle-market and Global Investment Banking segments. These include products such as short-term financing and fund raising, brokerage services, derivatives, securitization, and other tailor-made products, The Treasury area may act as brokers to transactions and also manages the Bank's investment portfolio.

Corporate Activities ("Other")

This segment mainly includes the results of our Financial Management Division, which develops global management functions, including managing inflation rate risk, foreign currency gaps, interest rate risk and liquidity risk. Liquidity risk is managed mainly through wholesale deposits, debt issuances and the Bank's available for sale portfolio. This segment also manages capital allocation by unit. These activities usually result in a negative contribution to income.

In addition, this segment encompasses all the intra-segment income and all the activities not assigned to a given segment or product with customers.

The segments' accounting policies are those described in the summary of accounting policies, The Bank earns most of its income in the form of interest income, fee and commission income and income from financial operations. To evaluate a segment's financial performance and make decisions regarding the resources to be assigned to segments, the Chief Operating Decision Maker (CODM) bases his assessment on the segment's interest income, fee and commission income, and expenses.

Below are the tables showing the Bank's results by reporting segment for the years ended December 31, 2019, 2018 and 2017 in addition to the corresponding balances of loans and accounts receivable from customers:

			For the year ended December 31, 2019
	Loans and accounts receivable at amortised cost (1)		Net interest income		Net fee and commission income			Financial transactions, net (2)		Expected credit losses			Support expenses (3)			Segment's net contribution
	MCh$		MCh$		MCh$			MCh$		MCh$			MCh$			MCh$

Retail Banking		22,926,377		960,361		230,627			28,426		(279,969	)		(575,511	)		356,665
Middle-market		8,093,496		298,587		38,712			13,535		(38,746	)		(97,054	)		220,320
Global Investment Banking		1,603,633		98,154		29,103			94,761		(224	)		(65,343	)		156,083
Other		48,009		59,862		(11,356	)		64,970		(4,819	)		(11,953	)		99,502

Total		32,671,515		1,416,964		287,086			201,692		(323,311	)		(749,861	)		832,570

Other operating income																	13,001
Other operating expenses and impairment																	(52,029	)
Income from investments in associates and other companies																	1,146
Income tax expense																	(175,074	)
Result of continuing operations																	619,614
Result of discontinued operations																	1,699
Net income for the year																	621,313

(1) Corresponds to loans and accounts receivable at amortised cost under IFRS 9, without deducting their allowances for loan losses.

(2) Corresponds to the sum of the net income from financial operations and the foreign exchange profit or loss.

(3) Corresponds to the sum of personnel salaries and expenses, administrative expenses, depreciation and amortization.

			For the year ended December 31, 2018
	Loans and accounts receivable at amortised cost (1)		Net interest income		Net fee and commission income			Financial transactions, net (2)		Expected credit losses			Support expenses (3)			Segment's net contribution
	MCh$		MCh$		MCh$			MCh$		MCh$			MCh$			MCh$

Retail Banking		20,786,637		949,764		220,532			19,694		(287,739	)		(553,157	)		349,094
Middle-market		7,690,380		272,912		36,746			16,848		(26,314	)		(92,377	)		207,815
Global Investment Banking		1,613,088		96,722		35,064			57,340		2,339			(64,913	)		126,552
Other		123,310		94,970		(1,457	)		11,200		(5,694	)		(11,486	)		87,533

Total		30,213,415		1,414,368		290,885			105,082		(317,408	)		(721,933	)		770,994

Other operating income																	23,129
Other operating expenses and impairment																	(32,381	)
Income from investments in associates and other companies																	1,325
Income tax expense																	(167,144	)
Result of continuing operations																	595,923
Result of discontinued operations																	3,770
Net income for the year																	599,693

(1) Corresponds to loans and accounts receivable from customers, without deducting their allowances for loan losses.

(2) Corresponds to the sum of the net income from financial operations and the foreign exchange profit or loss.

(3) Corresponds to the sum of personnel salaries and expenses, administrative expenses, depreciation and amortization.

			For the year ended December 31, 2017
	Loans and accounts receivable from customers (1)		Net interest income			Net fee and commission income		Financial transactions, net (2)		Provision for loan losses			Support expenses (3)			Segment's net contribution
	MCh$		MCh$			MCh$		MCh$		MCh$			MCh$			MCh$

Retail Banking		19,233,169		970,332			206,449		20,595		(293,956	)		(534,970	)		368,450
Middle-market		6,775,734		264,663			36,280		13,751		(19,235	)		(91,882	)		203,577
Global Investment Banking		1,633,796		100,808			27,626		50,714		6,440			(62,685	)		122,903
Other		83,215		(9,112	)		8,708		44,692		4,496			(15,356	)		33,428

Total		27,725,914		1,326,691			279,063		129,752		(302,255	)		(704,893	)		728,358

Other operating income																	62,016
Other operating expenses and impairment																	(74,057	)
Income from investments in associates and other companies																	1,144
Income tax expense																	(145,031	)
Result of continuing operations																	572,430
Result of discontinued operations																	2,819
Net income for the year																	575,249

(1) Corresponds to loans and accounts receivable from customers, without deducting their allowances for loan losses.

(2) Corresponds to the sum of the net income from financial operations and the foreign exchange profit or loss.

(3) Corresponds to the sum of personnel salaries and expenses, administrative expenses, depreciation and amortization.

Cash and Cash Equivalents

12 Months Ended

Dec. 31, 2019

Cash and cash equivalents [abstract]

CASH AND CASH EQUIVALENTS

NOTE 05

CASH AND CASH EQUIVALENTS

The detail of the balances included under cash and cash equivalents is as follows:

	As of December 31,
	2019		2018
	MCh$		MCh$

Cash and deposits in banks
Cash		861,178		824,863
Deposits at the Central Bank of Chile		1,731,079		953,016
Deposits in local banks		948		664
Deposits in banks abroad		961,315		286,898
Subtotals – Cash and deposits in banks		3,554,520		2,065,411

Net cash items in process of collection		156,814		190,714

Cash and cash equivalents		3,711,334		2,256,155

The balance of funds held in cash and at the Central Bank of Chile reflects the monthly average that the Bank must maintain in accordance with the regulations governing minimum reserves although the balance can be withdrawn on demand.

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 which may be delayed in settlement due to timing differences. These transactions were as follows:

	As of December 31,
	2019		2018
	MCh$		MCh$

Assets
Documents held by other banks (documents to be cleared)		217,394		210,546
Funds receivable		137,668		143,211
Subtotal		355,062		353,757
Liabilities
Funds payable		198,248		163,043
Subtotal		198,248		163,043

Cash in process of collection, net		156,814		190,714

Financial Assets Held for Trading

12 Months Ended

Dec. 31, 2019

Financial Assets Held For Trading Trading Investments

FINANCIAL ASSETS HELD FOR TRADING

NOTE 06

FINANCIAL ASSETS HELD FOR TRADING

The detail of instruments deemed as financial trading investments is as follows:

	As of December 31,
	2019		2018
	MCh$		MCh$

Chilean Central Bank and Government securities
Chilean Central Bank Bonds		1,952		22,947
Chilean Central Bank Notes		-		-
Other Chilean Central Bank and Government securities		268,252		48,211
Subtotal		270,204		71,158

Other Chilean securities
Time deposits in Chilean financial institutions		-		-
Mortgage finance bonds of Chilean financial institutions		-		-
Chilean financial institution bonds		-		-
Chilean corporate bonds		-		-
Other Chilean securities		-		-
Subtotal		-		-

Foreign financial securities
Foreign Central Banks and Government securities		-		-
Other foreign financial instruments		-		5,883
Subtotal		-		5,883

Investments in mutual funds
Funds managed by related entities		-		-
Funds managed by others		-		-
Subtotal		-		-

Total		270,204		77,041

As of December 31, 2019 and 2018, there were no trading investments sold under contracts to resell to clients or financial institutions.

Investments under Resale Agreements and Obligations under Repurchase Agreements

12 Months Ended

Dec. 31, 2019

Investments Under Resale Agreements And Obligations Under Repurchase Agreements

INVESTMENTS UNDER RESALE AGREEMENTS AND OBLIGATIONS UNDER REPURCHASE AGREEMENTS

NOTE 07

INVESTMENTS UNDER RESALE AGREEMENTS AND OBLIGATIONS UNDER REPURCHASE AGREEMENTS

As of December 31, 2019 and 2018, the Bank does not have investment under resale agreements.

Obligations arising from repurchase agreements

The Bank raises funds by selling financial instruments and committing itself to buy them back at future dates, plus interest at a predetermined rate. As of December 31, 2019 and 2018, obligations related to instruments sold under repurchase agreements are as follows:

	As of December 31,
	2019								2018
	From 1 day to less than 3 months		More than 3 months and less than 1 year		More than 1 year		Total		From 1 day to less than 3 months		More than 3 months and less than 1 year		More than 1 year		Total
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$

Securities from Chilean Government and the Chilean Central Bank:
Chilean Central Bank Bonds		-		-		-		-		48,307		-		-		48,307
Chilean Central Bank Notes		-		-		-		-		-		-		-		-
Other securities from the Government and the Chilean Central Bank		379,891		33		-		379,924		110		-		-		110
Subtotal		379,891		33		-		379,924		48,417		-		-		48,417
Instruments from other domestic institutions:
Time deposits in Chilean financial institutions		127		4		-		131		128		-		-		128
Subtotal		127		4		-		131		128		-		-		128
Instruments from other foreign institutions:
Securities from Government or foreign Central Banks		-		-		-		-		-		-		-		-
Subtotal		-		-		-		-		-		-		-		-

Total		380,018		37		-		380,055		48,545		-		-		48,545

Below is the detail by portfolio of collateral associated with repurchase agreements as of December 31, 2019 and 2018, valued at fair value:

	As of December 31,
	2019						2018
	Available for sale portfolio		Trading portfolio		Total		Available for sale portfolio		Trading portfolio		Total
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$

Chilean Central Bank and Government securities:
Chilean Central Bank Bonds		-		-		-		49,040		-		49,040
Chilean Central Bank Notes		-		-		-		-		-		-
Other securities from the Government and the Chilean Central Bank		379,924		-		379,924		109		-		109
Subtotal		379,924		-		379,924		49,149		-		49,149
Other Chilean securities:
Time deposits in Chilean financial institutions		131		-		131		132		-		132
Subtotal		131		-		131		132		-		132
Instruments from other foreign institutions:
Securities from Government or foreign Central Banks		-		-		-		-		-		-
Subtotal		-		-		-		-		-		-

Total		380,055		-		380,055		49,281		-		49,281

Derivative Financial Instruments and Hedge Accounting

12 Months Ended

Dec. 31, 2019

Derivative Financial Instruments And Hedge Accounting

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING

NOTE 08

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING

As of December 31, 2019 and 2018 the Bank holds the following portfolio of derivative instruments:

	As of December 31, 2019
	Notional amount								Fair value
	Up to 3 Months		More than 3 months to 1 year		More than 1 year		Total		Assets		Liabilities
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$

Fair value hedge derivatives
Interest rate swaps		381,638		317,610		1,847,138		2,546,386		39,460		34,264
Cross currency swaps		407,008		863,984		13,357,058		14,628,050		226,870		295,281
Subtotal		788,646		1,181,594		15,204,196		17,174,436		266,330		329,545

Cash flow hedge derivatives
Currency forwards		99,105		1,018,656		768,256		1,886,017		4,131		3,505
Cross currency swaps		2,266,907		1,938,222		10,848,233		15,053,362		106,413		43,183
Subtotal		2,366,012		2,956,878		11,616,489		16,939,379		110,544		46,688

Trading derivatives
Currency forwards		28,472,586		18,508,702		7,679,464		54,660,752		1,023,683		1,137,496
Interest rate swaps		16,678,487		40,892,909		89,109,046		146,680,442		2,465,235		2,270,686
Cross currency swaps		7,726,724		20,457,463		113,206,678		141,390,865		4,277,450		3,605,516
Call currency options		17,971		47,012		81,804		146,787		5,176		240
Put currency options		16,409		41,872		80,655		138,936		190		483
Subtotal		52,912,177		79,947,958		210,157,647		343,017,782		7,771,734		7,014,421

Total		56,066,835		84,086,430		236,978,332		377,131,597		8,148,608		7,390,654

	As of December 31, 2018
	Notional amount								Fair value
	Up to 3 months		More than 3 months to 1 year		More than 1 year		Total		Assets		Liabilities
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$

Fair value hedge derivatives
Interest rate swaps		80,000		491,600		1,191,012		1,762,612		14,789		9,188
Cross currency swaps		-		1,276,909		6,706,197		7,983,106		96,357		36,708
Subtotal		80,000		1,768,509		7,897,209		9,745,718		111,146		45,896

Cash flow hedge derivatives
Currency forwards		205,750		168,151		-		373,901		-		8,013
Cross currency swaps		1,920,900		1,970,412		9,191,209		13,082,521		79,859		32,712
Subtotal		2,126,650		2,138,563		9,191,209		13,456,422		79,859		40,725

Trading derivatives
Currency forwards		15,301,943		13,080,875		6,062,183		34,445,001		613,063		466,741
Interest rate swaps		12,024,095		22,064,681		69,453,618		103,542,394		723,870		577,835
Cross currency swaps		2,173,111		8,853,306		68,976,339		80,002,756		1,568,365		1,385,314
Call currency options		26,731		60,235		57,579		144,545		4,332		854
Put currency options		23,411		50,445		56,392		130,248		-		363
Subtotal		29,549,291		44,109,542		144,606,111		218,264,944		2,909,630		2,431,107

Total		31,755,941		48,016,614		161,694,529		241,467,084		3,100,635		2,517,728

Hedge accounting

Fair value hedge:

The Bank uses cross-currency swaps and interest rate swaps to hedge its exposure to changes in fair value of hedged items attributable to interest rates. The aforementioned hedging instruments change the effective cost of long-term issuances from a fixed interest rate to a variable interest rate.

Below is a detail of the hedged elements and hedge instruments under fair value hedges as of December 31, 2019 and 2018, classified by term to maturity:

	As of December 31, 2019
	Within 1 year		Between 1 and 3 years		Between 3 and 6 years		Over 6 years		Total
	MCh$		MCh$		MCh$		MCh$		MCh$
Hedged item
Loans and accounts receivable at amortised cost
Mortgage loan		633,300		1,189,036		1,545,240		3,466,874		6,834,450
Commercial loans		-		600,000		50,000		-		650,000
Debt instruments at FVOCI
Chilean sovereign bonds		-		-		5,605		394,691		400,296
Mortgage financing bonds		-		2,728		-		-		2,728
Treasury bonds		-		-		149,474		37,369		186,843
Chilean Treasury bonds		-		289,369		-		-		289,369
Chilean Central Bank bonds		-		254,685		-		-		254,685
Time deposits and other time liabilities
Time deposits		685,259		281,921		225,515		-		1,192,695
Issued debt instruments
Senior bonds		651,681		1,133,698		2,253,892		3,324,099		7,363,370
Total		1,970,240		3,751,437		4,229,726		7,223,033		17,174,436
Hedging instrument
Cross currency swaps		1,270,992		2,791,437		3,774,647		6,790,974		14,628,050
Interest rate swaps		699,248		960,000		455,079		432,059		2,546,386
Total		1,970,240		3,751,437		4,229,726		7,223,033		17,174,436

	As of December 31, 2018
	Within 1 year		Between 1 and 3 years		Between 3 and 6 years		Over 6 years		Total
	MCh$		MCh$		MCh$		MCh$		MCh$
Hedged item
Loans and accounts receivable at amortised cost
Mortgage loan		653,872		1,272,382		276,590		603,818		2,806,662
Debt instruments at FVOCI
Chilean sovereign bonds		-		-		-		172,072		172,072
Mortgage financing bonds		-		-		3,779		-		3,779
Treasury bonds		-		-		-		174,440		174,440
Chilean Treasury bonds		-		304,818		-		220,041		524,859
Chilean Central Bank bonds		-		449,730		-		-		449,730
Time deposits and other time liabilities
Time deposits		486,013		-		-		-		486,013
Issued debt instruments
Senior bonds		708,624		1,117,779		1,298,471		2,003,289		5,128,163
Total		1,848,509		3,144,709		1,578,840		3,173,660		9,745,718
Hedging instrument
Cross currency swaps		1,276,909		2,794,709		1,228,840		2,682,648		7,983,106
Interest rate swaps		571,600		350,000		350,000		491,012		1,762,612
Total		1,848,509		3,144,709		1,578,840		3,173,660		9,745,718

Cash flow hedges

The Bank uses cross currency swaps to hedge the risk from variability of cash flows attributable to changes in the interest rates of bonds and interbank loans at a variable rate. To cover the inflation risk in some items, both forwards as well as currency swaps are used.

Below is the notional amount of the hedged items as of December 31, 2019 and 2018, and the period when the cash flows will be generated:

	As of December 31, 2019
	Within 1 year		Between 1 and 3 years		Between 3 and 6 years		Over 6 years		Total
	MCh$		MCh$		MCh$		MCh$		MCh$
Hedged item
Loans and accounts receivable at amortised cost
Mortgage loans		3,334,734		1,505,595		1,995,156		3,136,962		9,972,447
Commercial loans		-		-		-		-		-
Debt instruments at FVOCI
Chilean sovereign bonds		-		-		-		-		-
Chilean Central Bank bonds		-		-		82,727		-		82,727
Time deposits		-		-		267,286		225,981		493,267
Time deposits and other time liabilities
Time deposits		-		-		-		-		-
Issued debt instruments
Senior bonds (variable rate)		358,118		341,283		-		-		699,401
Senior bonds (fixed rate)		803,596		1,696,595		1,152,461		1,069,511		4,722,163
Interbank borrowings
Interbank loans		826,442		142,932		-		-		969,374
Total		5,322,890		3,686,405		3,497,630		4,432,454		16,939,379
Hedging instrument
Cross currency swaps		4,205,129		2,918,149		3,497,630		4,432,454		15,053,362
Currency forwards		1,117,761		768,256		-		-		1,886,017
Total		5,322,890		3,686,405		3,497,630		4,432,454		16,939,379

	As of December 31, 2018
	Within 1 year		Between 1 and 3 years		Between 3 and 6 years		Over 6 years		Total
	MCh$		MCh$		MCh$		MCh$		MCh$
Hedged item
Loans and accounts receivable at amortised cost
Mortgage loans		1,890,696		3,026,824		1,459,389		2,467,090		8,843,999
Commercial loans		109,585		-		-		-		109,585
Debt instruments at FVOCI
Chilean sovereign bonds		-		-		-		-		-
Chilean Central Bank bonds		-		-		246,306				246,306
Time deposits		-		-		166,628		-		166,628
Time deposits and other time liabilities
Time deposits		-		-		-		-		-
Issued debt instruments
Senior bonds (variable rate)		-		666,823		-		-		666,823
Senior bonds (fixed rate)		500,583		52,790		601,639		503,721		1,658,733
Interbank borrowings
Interbank loans		1,764,348		-		-		-		1,764,348
Total		4,265,212		3,746,437		2,473,962		2,970,811		13,456,422
Hedging instrument
Cross currency swaps		3,891,311		3,746,437		2,473,962		2,970,811		13,082,521
Currency forwards		373,901		-		-		-		373,901
Total		4,265,212		3,746,437		2,473,962		2,970,811		13,456,422

Below is an estimate of the periods in which cash flows are expected to be produced:

b.1 Forecasted cash flows for interest rate risk:

	As of December 31, 2019
	Within 1 year			Between 1 and 3 years			Between 3 and 6 years			Over 6 years			Total
	MCh$			MCh$			MCh$			MCh$			MCh$
Hedged item
Inflows		25,328			10,220			217			-			35,765
Outflows		(356,683	)		(245,480	)		(154,689	)		(163,151	)		(920,003	)
Net flows		(331,355	)		(235,260	)		(154,472	)		(163,151	)		(884,238	)

Hedging instrument
Inflows		356,683			245,480			154,689			163,151			920,003
Outflows (*)		(25,328	)		(10,220	)		(217	)		-			(35,765	)
Net flows		331,355			235,260			154,472			163,151			884,238

(*)Only includes cash flow forecast portion of the hedge instruments used to cover interest rate risk.

	As of December 31, 2018
	Within 1 year			Between 1 and 3 years			Between 3 and 6 years			Over 6 years			Total
	MCh$			MCh$			MCh$			MCh$			MCh$
Hedged item
Inflows		76,736			35,994			3,062			2,401			118,193
Outflows		(125,747	)		(46,372	)		(13,311	)		(4,701	)		(190,131	)
Net flows		(49,011	)		(10,378	)		(10,249	)		(2,300	)		(71,938	)

Hedging instrument
Inflows		125,747			46,372			13,311			4,701			190,131
Outflows (*)		(76,736	)		(35,994	)		(3,062	)		(2,401	)		(118,193	)
Net flows		49,011			10,378			10,249			2,300			71,938

(*)Only includes cash flow forecast portion of the hedge instruments used to cover interest rate risk.

b.2 Forecasted cash flows for inflation risk:

	As of December 31, 2019
	Within 1 year			Between 1 and 3 years			Between 3 and 6 years			Over 6 years			Total
	MCh$			MCh$			MCh$			MCh$			MCh$
Hedged item
Inflows		74,574			109,486			216,972			422,362			823,394
Outflows		(19,466	)		(50,151	)		(33,140	)		(52,880	)		(155,637	)
Net flows		55,108			59,335			183,832			369,482			667,757

Hedging instrument
Inflows		19,466			50,151			33,140			52,880			155,637
Outflows		(74,574	)		(109,486	)		(216,972	)		(422,362	)		(823,394	)
Net flows		(55,108	)		(59,335	)		(183,832	)		(369,482	)		(667,757	)

	As of December 31, 2018
	Within 1 year			Between 1 and 3 years			Between 3 and 6 years			Over 6 years			Total
	MCh$			MCh$			MCh$			MCh$			MCh$
Hedged item
Inflows		37,086			73,576			166,516			310,293			587,471
Outflows		(14,036	)		-			-			-			(14,036	)
Net flows		23,050			73,576			166,516			310,293			573,435

Hedging instrument
Inflows		14,036			-			-			-			14,036
Outflows		(37,086	)		(73,576	)		(166,516	)		(310,293	)		(587,471	)
Net flows		(23,050	)		(73,576	)		(166,516	)		(310,293	)		(573,435	)

b.3 Forecasted cash flows for exchange rate risk:

As of December 31, 2019 and 2018 the Bank has no forecasted cash flows for exchange rate risk.

The accumulated effect of the mark to market adjustment of cash flow hedges produced by hedge instruments used in hedged cash flow was recorded in the Consolidated Statements of Changes in Equity, specifically within Other comprehensive income, as of December 31, 2019 and 2018, is as follows:

	As of December 31,
Hedged item	2019			2018
	MCh$			MCh$

Interbank loans		(1,872	)		309
Issued debt instruments		(16,345	)		(10,893	)
Debt instruments at FVOCI		(2,905	)		(1,392	)
Loans and accounts receivable at amortised cost		(19,313	)		21,779
Net flows		(40,435	)		9,803

Since the inflows and outflows for both the hedged element and the hedging instrument mirror each other, the hedges are nearly 100% effective, which means that the fluctuations of fair value attributable to risk components are almost completely offset.

During the year, the Bank did not enter into any cash flow hedges relating to forecasted transactions.

Below is a presentation of income generated by cash flow hedges amount that were reclassified from other comprehensive income to income for the year:

	For the years ended December 31,
	2019			2018			2017
	MCh$			MCh$			MCh$

Bond hedging derivatives		(120	)		-			-
Interbank loans hedging derivatives		(955	)		(683	)		-
Cash flow hedge net gain (loss)		(1,075	)		(683	)		-

See Note 24 - Equity, letter e)

Net investment hedges in foreign operations:

As of December 31, 2019 and 2018, the Bank does not have any foreign net investment hedges in its hedge accounting portfolio.

Macrohedges

Notional amount

As of December 31, 2019

Within 1
year

Between 1 and 3
years

Between 3 and 6
years

Over 6
years

Total

MCh$

Hedge item

Loans and account receivable at amortised cost

Mortage loans

633,300

1,189,036

1,545,240

3,466,874

6,834,450

Commercial loans

600,000

50,000

650,000

Notional amount

As of December 31, 2018

Within 1
year

Between 1 and 3
years

Between 3 and 6
years

Over 6
years

Total

MCh$

Hedge item

Loans and account receivable at amortised cost

Mortage loans

653,872

1,272,382

276,590

603,818

2,806,662

Commercial loans

As of December 31, 2019 and 2018, Other Assets include MCh$210,867 and MCh$9,414 respectively, related to fair value measurement of net assets or liabilities subject to macrohedges. See Note 16.

Loans and Accounts Receivable at Amortised Cost

12 Months Ended

Dec. 31, 2019

Loans And Account Receivable At Amortised Cost - Under Ifrs 9

LOANS AND ACCOUNTS RECEIVABLE AT AMORTISED COST

NOTE 09

LOANS AND ACCOUNTS RECEIVABLE AT AMORTISED COST

As of December 31, 2019 the composition of the loan portfolio is as follows:

	Assets before allowances								ECL allowance								Net
As of December 31, 2019	Stage 1		Stage 2		Stage 3		Total		Stage 1		Stage 2		Stage 3		Total		Assets
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$

Commercial loans
Interbank loans		14,852		-		-		14,852		1		-		-		1		14,851
Commercial loans		10,179,002		870,028		659,157		11,708,187		41,296		41,734		301,094		384,124		11,324,063
Foreign trade loans		1,519,757		155,324		38,552		1,713,633		4,113		705		23,569		28,387		1,685,246
Checking accounts debtors		166,771		16,108		14,014		196,893		1,492		764		9,644		11,900		184,993
Factoring transactions		478,465		7,946		2,989		489,400		1,158		234		1,904		3,296		486,104
Student loans		57,206		5,942		8,125		71,273		1,774		1,950		5,595		9,319		61,954
Leasing transactions		1,184,765		178,556		61,541		1,424,862		5,415		8,270		30,960		44,645		1,380,217
Other loans and account receivable		201,805		11,163		30,257		243,225		2,178		2,287		20,432		24,615		218,328
Subtotal		13,802,623		1,245,067		814,635		15,862,325		57,427		55,944		393,198		506,569		15,355,756

Mortgage loans
Loans with mortgage finance bonds		10,774		744		780		12,298		13		21		103		137		12,161
Endorsable mortgage mutual loans		92,792		2,819		4,541		100,152		72		103		641		816		99,336
Other mortgage mutual loans		10,172,400		454,385		523,760		11,150,545		8,361		14,385		77,360		100,106		11,050,439
Subtotal		10,275,966		457,948		529,081		11,262,995		8,446		14,509		78,104		101,059		11,161,936

Consumer loans
Installment consumer loans		3,378,489		270,347		268,700		3,917,536		51,289		45,102		158,670		255,061		3,662,475
Credit card balances		1,341,734		17,668		18,308		1,377,710		12,507		4,894		9,936		27,337		1,350,373
Leasing transactions		3,569		303		80		3,952		56		30		36		122		3,830
Other consumer loans		239,255		4,400		3,342		246,997		3,544		782		1,621		5,947		241,050
Subtotal		4,963,047		292,718		290,430		5,546,195		67,396		50,808		170,263		288,467		5,257,728

Total		29,041,636		1,995,733		1,634,146		32,671,515		133,269		121,261		641,565		896,095		31,775,420

As of December 31, 2018 the composition of the loan portfolio is as follows:

	Assets before allowances								ECL allowance								Net
As of December 31, 2018	Stage 1		Stage 2		Stage 3		Total		Stage 1		Stage 2		Stage 3		Total		Assets
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$

Commercial loans
Interbank loans		15,093		-		-		15,093		10		-		-		10		15,083
Commercial loans		9,684,451		841,123		608,192		11,133,766		52,782		41,954		274,050		368,786		10,764,980
Foreign trade loans		1,646,337		56,295		49,805		1,752,437		5,466		735		33,716		39,917		1,712,520
Checking accounts debtors		183,290		16,452		15,420		215,162		2,108		467		11,209		13,784		201,378
Factoring transactions		370,391		6,005		4,587		380,983		829		91		3,433		4,353		376,630
Student loans		64,381		6,049		9,486		79,916		2,705		2,170		6,315		11,190		68,726
Leasing transactions		1,225,755		169,196		48,773		1,443,724		7,236		9,033		22,531		38,800		1,404,924
Other loans and account receivable		123,108		5,135		36,821		165,064		2,594		1,190		26,178		29,962		135,101
Subtotal		13,312,806		1,100,255		773,084		15,186,145		73,730		55,640		377,432		506,802		14,679,342

Mortgage loans
Loans with mortgage finance bonds		15,261		1,241		924		17,426		20		40		117		177		17,249
Endorsable mortgage mutual loans		101,074		3,454		4,008		108,536		87		126		592		805		107,731
Other mortgage mutual loans		9,142,627		442,801		439,591		10,025,019		8,899		14,936		66,453		90,288		9,934,731
Subtotal		9,258,962		447,496		444,523		10,150,981		9,006		15,102		67,162		91,270		10,059,711

Consumer loans
Installment consumer loans		2,693,260		231,107		265,303		3,189,670		50,748		48,622		148,017		247,387		2,942,283
Credit card balances		1,385,783		14,977		16,392		1,417,152		15,087		4,961		8,740		28,788		1,388,364
Leasing transactions		3,974		133		50		4,157		83		22		22		127		4,030
Other consumer loans		258,723		2,822		3,765		265,310		4,986		767		2,287		8,040		257,270
Subtotal		4,341,740		249,039		285,510		4,876,289		70,904		54,372		159,066		284,342		4,591,947

Total		26,913,508		1,796,790		1,503,117		30,213,415		153,640		125,114		603,660		882,414		29,331,001

Commercial loans

An analysis of changes in the gross carrying amount and the corresponding ECL allowance as of December 31, 2019, is as follow:

	Stage1						Stage2						Stage3
	Individual			Collective			Individual			Collective			Individual			Collective			TOTAL
	MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$
Gross carrying amount at January 1, 2019(*)		9,695,837			3,644,407			867,783			235,239			386,929			387,265			15,217,460
Transfers
Transfers to stage 2		(518,990	)		(347,678	)		518,990			347,678			-			-			-
Transfers to stage 3		-			(41,696	)		-			-			-			41,696			-
Transfers to stage 3		-			-			(132,136	)		(230,125	)		132,136			230,125			-
Transfers to stage 1		158,935			159,009			(158,935	)		(159,009	)		-			-			-
Transfers to stage 2		-			-			11,229			120,293			(11,229	)		(120,293	)		-
Transfers to stage 1		-			1,134			-			-			-			(1,134	)		-
Net changes of financial assets		542,311			415,524			(119,884	)		(68,960	)		(24,788	)		(31,945	)		712,258
Write-off		-			-			-			-			(83,845	)		(94,004	)		(177,849	)
Foreign exchange adjustments and others		330,171			(236,341	)		17,920			(5,016	)		1,804			1,918			110,456
At December 31, 2019		10,208,264			3,594,359			1,004,967			240,100			401,007			413,628			15,862,325

	Stage1						Stage2						Stage3
	Individual			Collective			Individual			Collective			Individual			Collective			TOTAL
	MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$
ECL allowance at January 1, 2019(*)		30,189			44,104			31,066			24,945			198,115			179,771			508,190
Transfers
Transfers to stage 2		(7,786	)		(20,058	)		17,237			68,705			-			-			58,098
Transfers to stage 3		-			(2,666	)		-			-			-			16,087			13,421
Transfers to stage 3		-			-			(8,567	)		(42,601	)		44,203			71,200			64,235
Transfers to stage 1		1,576			4,838			(7,525	)		(22,278	)		-			-			(23,389	)
Transfers to stage 2		-			-			685			9,667			(3,867	)		(27,482	)		(20,997	)
Transfers to stage 1		-			88			-			-			-			(242	)		(154	)
Net changes of the exposure and modifications in credit risk		(6,948	)		14,199			(3,151	)		(12,533	)		41,365			54,962			87,894
Write-off		-			-			-			-			(83,844	)		(94,014	)		(177,858	)
Foreign exchange adjustments and others		4,508			(4,617	)		644			(350	)		193			(3,249	)		(2,871	)
At December 31, 2019		21,539			35,888			30,389			25,555			196,165			197,033			506,569

(*) Include loans and ECL balances of the acquired Santander Consumer Chile S.A.

An analysis of changes in the gross carrying amount and the corresponding ECL allowance as of December 31, 2018, is as follow:

	Stage1						Stage2						Stage3
	Individual			Collective			Individual			Collective			Individual			Collective			TOTAL
	MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$
Gross carrying amount at January 1, 2018		9,062,153			3,338,916			630,515			208,018			372,744			350,747			13,963,093
Transfers
Transfers to stage 2		(225,062	)		(53,020	)		225,062			53,020			-			-			-
Transfers to stage 3		(16,654	)		(67,886	)		-			-			16,654			67,886			-
Transfers to stage 3		-			-			(59,688	)		(40,853	)		59,688			40,853			-
Transfers to stage 1		13,199			52,755			(13,199	)		(52,755	)		-						-
Transfers to stage 2		-			-			4,451			36,247			(4,451	)		(36,247	)		-
Transfers to stage 1		-			718			-			-						(718	)		-
Net changes on financial assets		1,334,933			708,531			138,436			48,323			4,240			70,848			2,305,311
Write-off		-			-			-			-			(53,921	)		(74,430	)		(128,351	)
Foreign Exchange adjustments and others		(472,732	)		(363,045	)		(57,794	)		(19,528	)		(8,025	)		(32,784	)		(953,908	)
At December 31, 2018		9,695,837			3,616,969			867,783			232,472			386,929			386,153			15,186,145

	Stage1						Stage2						Stage3
	Individual			Collective			Individual			Collective			Individual			Collective			TOTAL
	MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$
ECL allowance at January 1, 2018		29,797			50,014			28,282			23,041			191,397			160,182			482,713
Transfers
Transfers to stage 2		(2,719	)		(1,525	)		8,005			8,169			-			-			11,930
Transfers to stage 3		(241	)		(2,697	)		-			-			6,612			29,839			33,513
Transfers to stage 3		-			-			(5,541	)		(6,776	)		22,705			17,475			27,863
Transfers to stage 1		167			553			(411	)		(3,402	)		-						(3,093	)
Transfers to stage 2		-						330			1,854			(1,704	)		(6,776	)		(6,296	)
Transfers to stage 1		-			22			-			-			-			(72	)		(50	)
Net changes of the exposure and modifications in the credit risk		4,105			3,770			2,740			2,855			1,251			29,253			43,974
Write-off		-			-			-						(37,439	)		(58,510	)		(95,949	)
Foreign Exchange adjustments and others		(920	)		(6,646	)		(2,339	)		(1,167	)		15,293			7,926			12,197
At December 31, 2018		30,189			43,541			31,066			24,574			198,115			179,317			506,802

Mortgage loans

An analysis of changes in the gross carrying amount and the corresponding ECL allowance as of December 31, 2019, is as follow:

	Stage1			Stage2			Stage3
	Collective			Collective			Collective			TOTAL
	MCh$			MCh$			MCh$			MCh$
Gross carrying amount at January 1, 2019		9,258,962			447,496			444,523			10,150,981
Transfers
Transfers to stage 2		(481,646	)		481,646			-			-
Transfers to stage 3		(60,329	)		-			60,329			-
Transfers to stage 3		-			(333,706	)		333,706			-
Transfers to stage 1		361,293			(361,293	)		-			-
Transfers to stage 2		-			250,896			(250,896	)		-
Transfers to stage 1		2,338			-			(2,338	)		-
Net changes on financial assets		1,131,941			(35,200	)		(24,539	)		1,072,202
Write-off		-			-			(34,184	)		(34,184	)
Foreign exchange adjustments and others		63,407			8,109			2,480			73,996
At 31 December 2019		10,275,966			457,948			529,081			11,262,995

	Stage 1			Stage 2			Stage 3
	Collective			Collective			Collective			TOTAL
	MCh$			MCh$			MCh$			MCh$
ECL allowance at January 1, 2019		9,006			15,102			67,162			91,270
Transfers
Transfers to stage 2		(3,318	)		3,318			-			-
Transfers to stage 3		(311	)		-			311			-
Transfers to stage 3		-			(12,598	)		12,598			-
Transfers to stage 1		13,849			(13,849	)		-			-
Transfers to stage 2		-			29,303			(29,303	)		-
Transfers to stage 1		193			-			(193	)		-
Net changes of the exposure and modifications in credit risk		(11,007	)		(6,825	)		57,300			39,468
Write-off		-			-			(34,184	)		(34,184	)
Foreign exchange adjustments and others		34			58			4,413			4,505
At 31 December 2019		8,446			14,509			78,104			101,059

An analysis of changes in the gross carrying amount and the corresponding ECL allowance as of December 31, 2018, is as follow:

	Stage1			Stage2			Stage3
	Collective			Collective			Collective			TOTAL
	MCh$			MCh$			MCh$			MCh$
Gross carrying amount at January 1, 2018		8,191,229			469,349			436,317			9,096,895
Transfers
Transfers to stage 2		(87,473	)		87,473			-			-
Transfers to stage 3		(64,949	)		-			64,949			-
Transfers to stage 3		-			(54,488	)		54,488			-
Transfers to stage 1		162,432			(162,432	)		-			-
Transfers to stage 2		-			79,159			(79,159	)		-
Transfers to stage 1		2,612			-			(2,612	)		-
Net changes on financial assets		1,226,259			34,653			10,215			1,271,127
Write-off		-			-			(31,664	)		(31,664	)
Foreign Exchange adjustments and others		(171,148	)		(6,218	)		(8,011	)		(185,377	)
At December 31, 2018		9,258,962			447,496			444,523			10,150,981

	Stage 1			Stage 2			Stage 3
	Collective			Collective			Collective			TOTAL
	MCh$			MCh$			MCh$			MCh$
ECL allowance at January 1, 2018		14,602			20,227			73,190			108,019
Transfers
Transfers to stage 2		(516	)		3,846			-			3,330
Transfers to stage 3		(383	)		-			9,060			8,677
Transfers to stage 3		-			(2,518	)		8,056			5,538
Transfers to stage 1		263			(6,255	)		-			(5,992	)
Transfers to stage 2		-			2,296			(10,185	)		(7,889	)
Transfers to stage 1		91			-			(232	)		(141	)
Net changes of the exposure and modifications in the credit risk		1,601			575			(1,784	)		392
Write-off		-			-			(13,548	)		(13,548	)
Foreign Exchange adjustments and others		(6,652	)		(3,069	)		2,605			(7,116	)
At December 31, 2018		9,006			15,102			67,162			91,270

Consumer loans

An analysis of changes in the gross carrying amount and the corresponding ECL allowance as of December 31, 2019, is as follow:

	Stage1			Stage2			Stage3
	Collective			Collective			Collective			TOTAL
	MCh$			MCh$			MCh$			MCh$
Gross carrying amount at January 1, 2019(*)		4,727,464			295,132			300,193			5,322,789
Transfers
Transfers to stage 2		(358,403	)		358,403			-			-
Transfers to stage 3		(25,210	)		-			25,210			-
Transfers to stage 3		-			(248,494	)		248,494			-
Transfers to stage 1		130,611			(130,611	)		-			-
Transfers to stage 2		-			56,489			(56,489	)		-
Transfers to stage 1		514			-			(514	)		-
Net changes on financial assets		430,777			(45,093	)		(3,605	)		382,079
Write-off		-			-			(223,919	)		(223,919	)
Foreign Exchange adjustments and others		57,294			6,892			1,060			65,246
At December 31, 2019		4,963,047			292,718			290,430			5,546,195

	Stage 1			Stage 2			Stage 3
	Collective			Collective			Collective			TOTAL
	MCh$			MCh$			MCh$			MCh$
ECL allowance at January 1, 2019 (*)		75,495			60,467			165,052			301,014
Transfers
Transfers to stage 2		(28,717	)		109,916			-			81,199
Transfers to stage 3		(1,633	)		-			11,699			10,066
Transfers to stage 3		-			(78,909	)		111,334			32,425
Transfers to stage 1		7,941			(32,506	)		-			(24,565	)
Transfers to stage 2		-			17,002			(31,914	)		(14,912	)
Transfers to stage 1		47			-			(233	)		(186	)
Net changes of the exposure and modifications in the credit risk		15,641			(25,712	)		135,298			125,227
Write-off		-			-			(223,919	)		(223,919	)
Foreign Exchange adjustments and others		(1,378	)		550			2,946			2,118
At December 31, 2019		67,396			50,808			170,263			288,467

(*)

Include loans and ECL balances of the acquired Santander Consumer Chile S.A.

An analysis of changes in the gross carrying amount and the corresponding ECL allowance as of December 31, 2018, is as follow:

	Stage1			Stage2			Stage3
	Collective			Collective			Collective			TOTAL
	MCh$			MCh$			MCh$			MCh$
Gross carrying amount at January 1, 2018		3,978,393			257,580			321,719			4,557,692
Transfers
Transfers to stage 2		(46,936	)		46,936						-
Transfers to stage 3		(33,161	)					33,161			-
Transfers to stage 3		-			(19,327	)		19,327			-
Transfers to stage 1		29,777			(29,777	)		-			-
Transfers to stage 2		-			17,988			(17,988	)		-
Transfers to stage 1		37			-			(37	)		-
Net changes on financial assets		766,069			1,063			76,398			843,530
Write-off		-			-			(115,933	)		(115,933	)
Foreign Exchange adjustments and others		(352,439	)		(25,424	)		(31,137	)		(409,000	)
At December 31, 2018		4,341,740			249,039			285,510			4,876,289

	Stage 1			Stage 2			Stage 3
	Collective			Collective			Collective			TOTAL
	MCh$			MCh$			MCh$			MCh$
ECL allowance at January 1, 2018		72,712			54,557			170,090			297,359
Transfers
Transfers to stage 2		(2,117	)		14,655			-			12,538
Transfers to stage 3		(1,431	)		-			16,311			14,880
Transfers to stage 3		-			(3,913	)		10,721			6,808
Transfers to stage 1		1,320			(4,890	)		-			(3,570	)
Transfers to stage 2		-			2,943			(9,107	)		(6,164	)
Transfers to stage 1		6			-			(18	)		(12	)
Net changes of the exposure and modifications in the credit risk		3,782			(8,572	)		42,194			37,404
Write-off		-			-			(64,506	)		(64,506	)
Foreign Exchange adjustments and others		(3,368	)		(408	)		(6,619	)		(10,395	)
At December 31, 2018		70,904			54,372			159,066			284,342

There were no changes to the assumptions used within the model. During 2019, the Bank completed an update of the 2018 Forward looking assessment, resulting in an increase of MCh$6.998 within the provision for loan losses.

Loans and Accounts Receivable at Fair Value Through Other Comprehensive Income

12 Months Ended

Dec. 31, 2019

LoansAndAccountReceivableAtFairValueThroughOtherComprehensiveIncome [Abstract]

LOANS AND ACCOUNTS RECEIVABLE AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

NOTE 10

LOANS AND ACCOUNTS RECEIVABLE AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

The Bank has decided to classify a portfolio at fair value through other comprehensive income (FVOCI) related to loans and account receivable with its major customer, when they request a credit operation which exceeds single client exposure under the Bank's credit risk policy. The risk committee approved the operation with the condition to sell a portion of the loan in the medium term, and meanwhile the Bank is looking for a buyer the portion is classified into this category.

Additionally, the Bank includes operations which are expecting to sell or maintain, depending if market conditions are favorable, these loans are classified into this category according to management business model.

This portfolio is initially measured at amortised cost and afterward is adjusted at fair value, recognising the adjustment in other comprehensive income, while the Bank do not sell the loan. The portfolio is assessed for impairment loss under the new ECL model, same as loans at amortised cost.

An analysis of changes in the gross carrying amount and the corresponding ECL allowance is, as of December 31, 2019 is as follows:

	Stage1		Stage2			Stage3
	Individual		Individual			Individual		TOTAL
	MCh$		MCh$			MCh$		MCh$
Gross carrying amount at January 1, 2019		63,745		4,949			-		68,694
Transfers
Transfers to stage 1		-		-			-		-
Transfers to stage 2		-		-			-		-
Transfers to stage 3		-		-			-		-
Net changes on financial assets		1,428		(4,914	)		-		(3,486	)
Write-off		-		-			-		-
Foreign Exchange adjustments and others		993		(35	)		-		958
At December 31, 2019		66,166		-			-		66,166

	Stage 1			Stage 2			Stage 3
	Individual			Individual			Individual		TOTAL
	MCh$			MCh$			MCh$		MCh$
ECL allowance at January 1, 2019		88			18			-		106
Transfers
Transfers to stage 1		-			-			-		-
Transfers to stage 2		-			-			-		-
Transfers to stage 3		-			-			-		-
Net changes of the exposure and modifications in the credit risk		65			(18	)		-		47
Write-off		-			-			-		-
Foreign Exchange adjustments and others		(52	)		-			-		(52	)
At December 31, 2019		101			-			-		101

An analysis of changes in the gross carrying amount and the corresponding ECL allowance is, as of December 31, 2018 is as follows:

	Stage1			Stage2			Stage3
	Individual			Individual			Individual		TOTAL
	MCh$			MCh$			MCh$		MCh$
Gross carrying amount at January 1, 2018		107,998			-			-		107,998
Transfers
Transfers to stage 1		-			-			-		-
Transfers to stage 2		(6,697	)		6,697			-		-
Transfers to stage 3		-			-			-		-
Net changes on financial assets		(40,754	)		(1,821	)		-		(42,575	)
Write-off		-			-			-		-
Foreign Exchange adjustments and others		3,198			73			-		3,271
At December 31, 2018		63,745			4,949			-		68,694

	Stage 1			Stage 2			Stage 3
	Individual			Individual			Individual		TOTAL
	MCh$			MCh$			MCh$		MCh$
ECL allowance at January 1, 2018		97			-			-		97
Transfers
Transfers to stage 1		-			-			-		-
Transfers to stage 2		(17	)		26			-		9
Transfers to stage 3		-			-			-		-
Net changes of the exposure and modifications in the credit risk		8			(8	)		-		-
Write-off		-			-			-		-
Foreign Exchange adjustments and others		-			-			-		-
At December 31, 2018		88			18			-		106

	Stage 1			Stage 2			Stage 3
	Individual			Individual			Individual		TOTAL
	MCh$			MCh$			MCh$		MCh$
ECL allowance at January 1, 2019		88			18			-		106
Transfers
Transfers to stage 1		-			-			-		-
Transfers to stage 2		-			-			-		-
Transfers to stage 3		-			-			-		-
Net changes of the exposure and modifications in the credit risk		65			(18	)		-		47
Write-off		-			-			-		-
Foreign Exchange adjustments and others		(52	)		-			-		(52	)
At 31 December 2019		101			-			-		101

Debt Instruments at Fair Value Through Other Comprehensive Income

12 Months Ended

Dec. 31, 2019

Debt Instruments At Fair Value Through Other Comprehensive Income

DEBT INSTRUMENTS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

NOTE 11

DEBT INSTRUMENTS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

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

	As of December 31,
	2019		2018
	MCh$		MCh$
Chilean central bank and government securities
Chilean central bank bonds		272,802		657,096
Chilean central bank notes		1,186,724		56,719
Other Chilean central bank and government securities		1,908,031		1,207,221
Subtotal		3,367,557		1,921,036
of which sold under repurchase agreement		379,294		16,109
Other Chilean securities
Time deposits in Chilean financial institutions		398		2,693
Mortgage finance bonds of Chilean financial institutions		16,748		19,227
Other instruments issued in the country		2,410		2,907
Subtotal		19,556		24,827
of which sold under repurchase agreement		131		128
Foreign financial securities
Foreign Central Banks and Government securities		197,685		280,622
Other foreign financial securities		425,474		167,838
Subtotal		623,159		448,460
of which sold under repurchase agreement		-		-
Total		4,010,272		2,394,323

As of December 31, 2019 "Chilean central bank and government securities" guarantee derivatives transactions through Comder Contraparte Central S,A, in the local market as of December 31, 2019 and 2018 Ch$65,140 and Ch$42,910, while "Foreign financial securities" guarantee derivatives transactions through London Clearing House (LCH) as of December 31, 2019 and 2018 Ch$73,109 and Ch$58,892. Additionally, the Bank maintains guarantees with Euroclear as of December 31, 2019 and 2018 Ch$390,954 and Ch$98,832 to comply with the initial margin required by European EMIR standard.

As of December 31, 2019 fair value through OCI included a cumulative net unrealised income of Ch$29,184 million, recoded as "valuation adjustment" in OCI, of which Ch$28,135 million are attributable to shareholders and Ch$1,049 million to non-controlling interest.

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

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

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

An analysis of changes in the fair value and the corresponding ECL as of December 31, 2018 is as follows:

	Stage1			Stage2		Stage3
	Collective			Collective		Collective		TOTAL
Gross carrying amount at January 1, 2018		2,574,546			-		-		2,574,546
New assets purchased		5,037,857			-		-		5,037,857
Transfers to stage 1		-			-		-		-
Transfers to stage 2		-			-		-		-
Transfers to stage 3		-			-		-		-
Assets derecognised or matured (excluding write offs)		(5,604,114	)		-		-		(5,604,114	)
Changes due to modifications not derecognised		-			-		-		-
Write-off		-			-		-		-
Foreign Exchange adjustments and others		386,034			-		-		386,034
At December 31, 2018		2,394,323			-		-		2,394,323

	Stage1			Stage2		Stage3
	Collective			Collective		Collective		TOTAL
ECL at January 1, 2018		324			-		-		324
New assets purchased		634			-		-		634
Transfers to stage 1		-			-		-		-
Transfers to stage 2		-			-		-		-
Transfers to stage 3		-			-		-		-
Assets derecognised or matured (excluding write offs)		(705	)		-		-		(705	)
Changes due to modifications not derecognised		-			-		-		-
Write-off		-			-		-		-
Foreign Exchange adjustments and others		5			-		-		5
At December 31, 2018		258			-		-		258

Gross profits and losses realized on the sale of available for sale investments as of December 31, 2019, 2018 and 2017 is as follows:

	As of December 31,
	2019		2018		2017
	MCh$		MCh$		MCh$
Sale of available for sale investments generating realized profits		5,781,636		3,505,266		6,469,344
Realized profits		63,828		8,802		4,867
Sale of available for sale investments generating realized losses		607,349		709,371		466,732
Realized losses		156		6,004		3

The Bank evaluated those instruments with unrealized losses as of December 31, 2019 and 2018 and concluded they were not impaired. This review consisted of evaluating the economic reasons for any declines, the credit ratings of the securities' issuers, and the Bank's intention and ability to hold the securities until the unrealized loss is recovered. Based on this analysis, the Bank believes that there were no significant or prolonged declines nor changes in credit risk which would cause impairment in its investment portfolio, since most of the decline in fair value of these instruments was caused by market conditions which the Bank considers to be temporary. All of the instruments that have unrealized losses as of December 31, 2019 and 2018, were not in a continuing unrealized loss position for more than one year.

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

	Less than 12 months									More than 12 months								Total
	Amortized cost		Fair value		Unrealized profit		Unrealized loss			Amortized cost		Fair value		Unrealized profit		Unrealized loss		Amortized cost		Fair value		Unrealized profit		Unrealized loss
	MCh$		MCh$		MCh$		MCh$			MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$

Chilean central bank and government securities
Chilean central bank Bonds		270,979		272,802		3,600		(1,777	)		-		-		-		-		270,979		272,802		3,600		(1,777	)
Chilean central bank notes		1,186,487		1,186,724		237		-			-		-		-		-		1,186,487		1,186,724		237		-
Other Chilean central bank and government securities		1,895,367		1,908,031		38,002		(25,338	)		-		-		-		-		1,895,367		1,908,031		38,002		(25,338	)
Subtotal		3,352,833		3,367,557		41,839		(27,115	)		-		-		-		-		3,352,833		3,367,557		41,839		(27,115	)

Other Chilean securities
Time deposits in Chilean financial institutions		398		398		-		-			-		-		-		-		398		398		-		-
Mortgage finance bonds of Chilean financial institutions		15,962		16,748		786		-			-		-		-		-		15,962		16,748		786		-
Chilean financial institution bonds		-		-		-		-			-		-		-		-		-		-		-		-
Chilean corporate bonds		-		-		-		-			-		-		-		-		-		-		-		-
Other Chilean securities		407		2,410		2,003		-			-		-		-		-		407		2,410		2,003		-
Subtotal		16,767		19,556		2,789		-			-		-		-		-		16,767		19,556		2,789		-

Foreign financial securities
Foreign central banks and government securities		198,020		197,685		11,110		(11,445	)		-		-		-		-		198,020		197,685		11,110		(11,445	)
Other foreign financial securities		413,468		425,474		13,080		(1,074	)		-		-		-		-		413,468		425,474		13,080		(1,074	)
Subtotal		611,488		623,159		24,190		(12,519	)		-		-		-		-		611,488		623,159		24,190		(12,519	)

Total		3,981,088		4,010,272		68,818		(39,634	)		-		-		-		-		3,981,088		4,010,272		68,818		(39,634	)

The following charts show debt instruments at fair value through other comprehensive income cumulative unrealized profit and loss, as of December 31, 2018:

	Less than 12 months									More than 12 months				Total
	Amortized cost		Fair value		Unrealized profit		Unrealized los			Amortized cost	Fair value	Unrealized profit	Unrealized loss	Amortized cost		Fair value		Unrealized profit		Unrealized loss
	MCh$		MCh$		MCh$		MCh$			MCh$	MCh$	MCh$	MCh$	MCh$		MCh$		MCh$		MCh$

Chilean central bank and government securities
Chilean central bank Bonds		658,013		657,096		3,698		(4,615	)						658,013		657,096		3,698		(4,615	)
Chilean central bank notes		56,737		56,719		10		(27	)						56,737		56,719		10		(27	)
Other Chilean central bank and government securities		1,196,819		1,207,220		10,689		(262	)						1,196,819		1,207,220		10,689		(262	)
Subtotal		1,911,569		1,921,035		14,397		(4,904	)						1,911,569		1,921,035		14,397		(4,904	)

Other Chilean securities
Time deposits in Chilean financial institutions		2,691		2,693		1		-							2,691		2,693		1		-
Mortgage finance bonds of Chilean financial institutions		19,010		19,227		426		(209	)						19,010		19,227		426		(209	)
Chilean financial institution bonds		-		-		-		-							-		-		-		-
Chilean corporate bonds		-		-		-		-							-		-		-		-
Other Chilean securities		220		2,907		2,687		-							220		2,907		2,687		-
Subtotal		21,921		24,827		3,114		(209	)						21,921		24,827		3,114		(209	)

Foreign financial securities
Foreign central banks and government securities		280,021		280,622		602		-							280,021		280,622		602		-
Other foreign financial securities		174,387		167,837		-		(6,575	)						174,387		167,837		-		(6,575	)
Subtotal		454,408		448,459		602		(6,575	)						454,408		448,459		602		(6,575	)

Total		2,387,898		2,394,322		18,112		(11,688	)						2,387,898		2,394,322		18,112		(11,688	)

Investments in Associates and other Companies

12 Months Ended

Dec. 31, 2019

Investments In Associates And Other Companies

INVESTMENTS IN ASSOCIATES AND OTHER COMPANIES

NOTE 12

INVESTMENTS IN ASSOCIATES AND OTHER COMPANIES

Investments in associates and other, are shown in the following table:

							Investment
	Ownership interest As of December 31						Carrying value As of December 31,						Profit and loss As of December 31,
	2019 MCh$		2018 MCh$		2017 MCh$		2019 MCh$		2018 MCh$		2017 MCh$		2019 MCh$		2018 MCh$			2017 MCh$
Company
Redbanc S.A. (*)		-		33,43		33,43		-		2,822		2,537		-		-			-
Transbank S.A. (*)		-		25,00		25,00		-		17,651		14,534		-		-			-
Centro de Compensación Automatizado S.A.		33,33		33,33		33,33		2,184		1,894		1,589		293		305			236
Sociedad Interbancaria de Depósito de Valores S.A.		29,29		29,29		29,29		1,485		1,233		1,087		252		223			235
Cámara de Compensación de Alto Valor S.A. (1)		15,00		15,00		15,00		958		945		909		29		58			66
Administrador Financiero del Transantiago S.A.		20,00		20,00		20,00		3,986		3,680		3,098		390		582			317
Sociedad Nexus S.A. (*)		-		12,90		12,90		-		2,279		1,911		-		-			-
Servicios de Infraestructura de Mercado OTC S.A.		12,07		12,48		12,48		1,556		1,491		1,489		60		57			115
Subtotal								10,169		31,995		27,154		1,024		1,225			969
Shares or rights in other companies
Bladex								-		-		136		13		19			25
Stock Exchanges								-		-		287		109		148			150
Others								8		8		8		-		(67	)		-
Total								10,177		32,003		27,585		1,146		1,325			1,144

(*)

The Bank has entered into a process of selling the shares in Redbanc S.A., Transbank S.A. and Nexus SA, therefore, the treatment established in IFRS 5 "Non-current assets held for sale and discontinued operations" has been applied, on the participation of said companies, which is described in Note 1 v) and Note 39.

(1)	In February 2017, Banco Paris sold to Banco Santander a portion of its interest in the companies "Sociedad Operadora de la Cámara de Compensación de pagos de Alto Valor S.A.", the Bank's share increased to 15,00%.

As described in Note 1 g), the Bank has irrevocably designated its shares in Bladex and Stock exchange at fair value through other comprehensive income (FVOCI) Related dividends are recognised in the income statements under "Income from investments in associates and other companies". The fair value of these equity investments is as follows:

	December 31,
	2019		2018
	MCh$		MCh$
Bladex		328		329
Stock exchange		154		154
Total		482		483

Summary of financial information of associates as of and for the years ended December 31, 2019, 2018 and 2017:

As of December 31,
	2019								2018								2017
	Assets		Liabilities		Equity		Net income		Assets		Liabilities		Equity		Net income		Assets		Liabilities		Equity		Net income
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$

Redbanc S.A.		23,413		14,106		8,441		866		20,825		12,469		7,505		851		21,235		13,751		6,428		1,056
Transbank S.A.		1,217,448		1,133,441		70,605		13,402		904,558		835,200		56,888		12,470		822,487		765,683		48,709		8,095
Centro de Compensación Automatizado S.A.		8,550		1,998		5,671		881		7,073		1,480		4,677		916		6,871		2,174		3,989		708
Sociedad Interbancaria de Depósito de Valores S.A.		5,074		4		4,209		861		4,392		230		3,400		762		3,720		60		2,858		802
Cámara de Compensación de Alto Valor S.A.		7,372		986		6,193		193		6,728		622		5,722		384		6,338		500		5,399		439
Administrador Financiero del Transantiago S.A.		54,712		34,787		17,978		1,947		55,818		37,419		15,490		2,909		51,304		35,814		13,907		1,583
Sociedad Nexus S.A.		31,147		13,471		17,660		16		35,139		18,335		13,955		2,849		32,669		18,888		10,354		3,427
Servicios de Infraestructura de Mercado OTC S.A.		15,152		2,682		11,993		477		25,273		13,313		11,506		454		17,913		6,414		10,963		536
Total		1,362,868		1,201,475		142,750		18,643		1,059,806		919,068		119,143		21,595		962,537		843,284		102,607		16,646

Restrictions over the ability of associated companies to transfer funds to investors.

There are no significant restrictions regarding the capacity of associates to transfer funds, whether in cash dividends, refund of loans, or advance payments to the Bank.

Activity with respect to investments in other companies during 2019, 2018 and 2017 is as follows:

	As of December 31,
	2019			2018			2017
	MCh$			MCh$			MCh$

Opening balance as of January 1,		32,003			27,585			23,780
Acquisition of investments		-			-			3
Sale of investments		-			-			-
Participation in income		1,146			1,325			1,144
Dividends received		(130	)		(38	)		(116	)
Other adjustments		(22,842	)		3,131			2,774

Total		10,177			32,003			27,585

(*) The Bank has entered into a process of selling the shares in Redbanc S.A., Transbank S.A. and Nexus SA, As such, these investment have been reclassified to held for sale and presented under Other assets in the Consolidated Statement of Financial Position.

Intangible Assets

12 Months Ended

Dec. 31, 2019

Intangible Assets

INTANGIBLE ASSETS

NOTE 13

INTANGIBLE ASSETS

As of December 31, 2019 and 2018, the composition of intangible assets is as follows:

					As of December 31, 2019
	Average remaining useful life		Net opening balance as of January 1, 2019		Gross balance		Accumulated amortization			Net balance
			MCh$		MCh$		MCh$			MCh$

Licenses		-		82		35,997		(35,997	)		-
Software development		2		66,841		214,005		(140,616	)		73,389

Total				66,923		250,002		(176,613	)		73,389

					As of December 31, 2018
	Average remaining useful life		Net opening balance as of January 1, 2018		Gross balance		Accumulated amortization			Net balance
			MCh$		MCh$		MCh$			MCh$

Licenses		1		1,200		37,224		(37,142	)		82
Software development		2		62,019		181,191		(114,350	)		66,841

Total				63,219		218,415		(151,492	)		66,923

The changes in the value of intangible assets during the periods ended December 31, 2019 and December 31, 2018 is as follows:

b.1

Gross balance

Gross balances	Licenses			Software development			Total
	MCh$			MCh$			MCh$

Balances as of January 1, 2019		37,224			181,191			218,415
Acquisitions		-			32,860			32,860
Disposals and impairment		(1,227	)		-			(1,227	)
Other		-			(46	)		(46	)
Balances as of December 31, 2019		35,997			214,005			250,002

Balances as of January 1, 2018		37,224			159,833			197,057
Acquisitions		-			29,562			29,562
Disposals and impairment		-			(8,204	)		(8,204	)
Other		-			-			-
Balances as of December 31, 2018		37,224			181,191			218,415

b.2

Accumulated amortization

Accumulated amortization	Licenses			Software development			Total
	MCh$			MCh$			MCh$

Balances as of January 1, 2019		(37,142	)		(114,350	)		(151,492	)
Year's amortization		(82	)		(26,266	)		(26,348	)
Other changes		1,227			-			1,227
Balances as of December 31, 2019		(35,997	)		(140,616	)		(176,613	)

Balances as of January 1, 2018		(36,918	)		(96,922	)		(133,840	)
Year's amortization		(224	)		(24,069	)		(24,293	)
Other changes		-			6,641			6,641
Balances as of December 31, 2018		(37,142	)		(114,350	)		(151,492	)

The Bank has no restriction on intangible assets as of December 31, 2019 and 2018. Additionally, intangible assets have not been pledged as guarantee for fulfillment of financial liabilities. Also, the Bank has no debt related to Intangible assets as of those dates.

Fixed Assets and Right of Use Assets and Lease Liability

12 Months Ended

Dec. 31, 2019

Fixed Assets And Right Of Use Assets And Lease Liability

FIXED ASSETS AND RIGHT OF USE ASSETS AND LEASE LIABILITY

NOTE 14

FIXED ASSETS AND RIGHT OF USE ASSETS AND LEASE LIABILITY

As of December 31, 2019 and 2018, the composition of property, plant, and equipment balances are composed as follows:

			As of December 31, 2019
	Net opening balance as of January 1, 2019		Gross balance		Accumulated depreciation			Net balance
	MCh$		MCh$		MCh$			MCh$

Land and buildings		174,758		295		(121,338	)		174
Equipment		56,865		219,600		(164,106	)		55,494
Other		21,963		69,758		(47,552	)		22,206
Total		253,586		585,342		(332,996	)		252,346

			As of December 31, 2018
	Net opening balance as of January 1, 2018		Gross balance		Accumulated depreciation			Net balance
	MCh$		MCh$		MCh$			MCh$

Land and buildings		159,352		289,568		(114,810	)		174,758
Equipment		63,516		192,328		(135,463	)		56,865
Other		15,458		62,156		(40,193	)		21,963
Total		238,326		544,052		(290,466	)		253,586

The changes in the value of property, plant, and equipment as of December 31, 2019 and 2018 is as follows:

b.1

Gross balance

2019	Land and buildings			Equipment			Other		Total
	MCh$			MCh$			MCh$		MCh$

Balances as of January 1, 2019		289,568			192,328			62,156		544,052
Additions		10,065			33,302			7,602		50,969
Disposals		(2,636	)		(6,030	)		-		(8,666	)
Impairment due to damage (*)		(1,013	)		-			-		(1,013	)
Other		-			-			-		-
Balances as of December 31, 2019		295,984			219,600			69,758		585,342

(*) Banco Santander-Chile have recognized in its consolidated financial statements as of December 31, 2019 an impairment of $ 1,013 million, due to social unrest in the country. See Note 33.

2018	Land and buildings			Equipment			Other			Total
	MCh$			MCh$			MCh$			MCh$

Balances as of January 1, 2018		259,316			169,286			55,613			484,215
Additions		30,396			27,697			8,646			66,739
Disposals		(144	)		(4,616	)		(2,103	)		(6,863	)
Impairment due to damage		-			(39	)		-			(39	)
Other		-			-			-			-
Balances as of December 31, 2018		289,568			192,328			62,156			544,052

(*) Banco Santander-Chile has had to recognize in its financial statements as of December 31, 2018 impairment by $ 39 million, corresponding to looting in ATM's.

b.2

Accumulated depreciation

2019	Land and buildings			Equipment			Other			Total
	MCh$			MCh$			MCh$			MCh$

Balances as of January 1, 2019		(114,810	)		(135,463	)		(40,193	)		(290,466	)
Depreciation charges in the period		(16,018	)		(29,968	)		(6,869	)		(52,855	)
Sales and disposals in the period		9,490			1,325			-			10,815
Other		-			-			(490	)		(490	)
Balances as of December 31, 2019		(121,338	)		(164,106	)		(47,552	)		(332,996	)

2018	Land and buildings			Equipment			Other			Total
	MCh$			MCh$			MCh$			MCh$

Balances as of January 1, 2018		(97,267	)		(109,843	)		(34,558	)		(241,668	)
Depreciation charges in the period		(17,585	)		(25,660	)		(5,635	)		(48,880	)
Sales and disposals in the period		42			40			-			82
Other		-			-			-			-
Balances as of December 31, 2018		(114,810	)		(135,463	)		(40,193	)		(290,466	)

The composition of the right of use assets as of December 31, 2019 and January 1, 2019 is as follows:

			As of December 31, 2019
	First application balance as of January 1, 2019		Gross balance		Accumulated depreciation			Net balance
	MCh$		MCh$		MCh$			MCh$
Land and building		154,284		181,325		(25,338	)		155,987
Equipment		-		-		-			-
Other		-		-		-			-
Total		154,284		181,325		(25,338	)		155,987

The movement of the right of use assets under lease during the 2019 period, is as follows:

d.1)

Gross balance

2019	Land and building			Lease improvements			Equipment		Other		Total
	MCh$			MCh$			MCh$		MCh$		MCh$
Balances as of January 1, 2019 (*)		154,284			122,658			-		-		154,284
Additions		46,423			7,013			-		-		46,423
Disposals		(17,669	)		(2,636	)		-		-		(17,669	)
Impairment		(1,713	)		-			-		-		(1,713	)
Other		-			-			-		-		-
Balances as of December 31, 2019		181,325			127,035			-		-		181,325

(*) See Note N° 02.

d.2)

Accumulated amortization

2019	Land and building			Lease improvements			Equipment		Other		Total
	MCh$			MCh$			MCh$		MCh$		MCh$
Balances as of January 1, 2019 (*)		-			(68,145	)
Amortization for the period		(26,889	)		(7,898	)		-		-		(26,889	)
Sales and disposals during the period		1,551			1,936			-		-		1,551
Transfers		-			-			-		-		-
Others		-			-			-		-		-
Balances as of December 31, 2019		(25,338	)		(74,107	)		-		-		(25,338	)

(*) See Note N° 02.

Lease liability:

As of December 31, 2019 and 2018, the composition of lease liability balances are composed as follows:

	As of December 31,
	2019		2018
	MCh$		MCh$
Lease liability		158,494		-
Total		158,494		-

An explanation of the difference between operating lease commitment under IAS 17 at December 31, 2018 and initial application of IFRS 16 as of January 1, 2019 is as follows:

	MCh$
Operating lease commitments as at December 31, 2018		173,602

Discounted using the lessee´s incremental borrowing rate of at the date of initial application		14,726
Lease liabilities recognised due to IFRS 16 implementation		139,558
Lease liability recognised as at January 1, 2019		154,284

Expenses associated with assets for the right of use leased assets and lease liability

	As of December 31,
	2019			2018
	MCh$			MCh$
Depreciation		(26,889	)		-
Interests		(2,965	)		-
Short term lease		(4,177	)		-
Total		(34,031	)		-

As of December 31, 2019 and 2018, the maturity level of the lease liability, according to their contractual maturity is as follows:

	As of December 31,
	2019		2018
	MCh$		MCh$
Due within 1 year		26,061		-
Due after 1 year but within 2 years		24,311		-
Due after 2 years but within 3 years		21,667		-
Due after 3 years but within 4 years		19,411		-
Due after 4 years but within 5 years		16,982		-
Due after 5 years		50,062		-
Total		158,494		-

Operational leases – lessor

As of December 31, 2019 and 2018, the future minimum lease cash inflows under non-cancellable operating leases are as follows:

	As of December 31,
	2019		2018
	MCh$		MCh$

Due within 1 year		603		469
Due after 1 year but within 2 years		598		882
Due after 2 years but within 3 years		500		469
Due after 3 years but within 4 years		498		460
Due after 4 years but within 5 years		412		428
Due after 5 years		1,563		2,242

Total		4,174		4,950

As of December 31, 2019 and 2018, the Bank has no financial leases which cannot be unilaterally rescinded.

The Bank has no restriction on property, plant and equipment as of December 31, 2019 and 2018. Additionally, the property, plant and equipment have not been provided as guarantees of financial liabilities. The Bank has no debt in connection with property, plant and equipment.

Current and Deferred Taxes

12 Months Ended

Dec. 31, 2019

Current and Deferred Taxes [Abstract]

CURRENT AND DEFERRED TAXES

NOTE 15

CURRENT AND DEFERRED TAXES

Current taxes

As of December 31, 2019 and 2018, the Bank recognises taxes payable (recoverable), which is determined based on the currently applicable tax legislation, This amount is recorded net of recoverable taxes, and is shown as follows:

	As of December 31,
	2019			2018
	MCh$			MCh$

Summary of current tax liabilities (assets)
Current tax (assets)		(11,648	)		-
Current tax liabilities		-			8,093

Total tax payable (recoverable)		(11,648	)		8,093

(Assets) liabilities current taxes detail (net)
Income tax, tax rate		153,424			196,527
Minus:
Provisional monthly payments		(159,943	)		(186,060	)
Credit for training expenses		(2,145	)		(1,937	)
Land taxes leasing					-
Grant credits		(1,149	)		(1,320	)
Other		(1,835	)		883

Total tax payable		(11,648	)		8,093

Effect on income

The effect of income tax expense on income for the years ended December 31, 2019, 2018 and 2017 is comprised of the following items:

	As of December 31,
	2019			2018			2017
	MCh$			MCh$			MCh$

Income tax expense
Current tax		153,424			196,527			145,112

Credits (debits) for deferred taxes
Origination and reversal of temporary differences		37,432			(25,517	)		(6,751	)
Valuation provision		-			(56	)		5,955
Subtotals		190,856			170,954			144,316
Tax for rejected expenses (Article No21)		927			1,110			610
Other		(16,709	)		(4,920	)		105
Net charges for income tax expense		175,074			167,144			145,031

Effective tax rate reconciliation

The reconciliation between the income tax rate and the effective rate applied in determining tax expenses as of December 31, 2019, 2018 and 2017, is as follows:

	For the year ended December 31,
	2019						2018						2017
	Tax						Tax						Tax
	rate			Amount			rate			Amount			rate			Amount
	%			MCh$			%			MCh$			%			MCh$

Tax calculated over profit before tax		27.00			214,566			27.00			207,046			25.50			183,671
Price level restatement for tax purposes⁽¹⁾		(6.33	)		(50,297	)		(5.15	)		(39,494	)		(3.03	)		(21,829	)
Single penalty tax (rejected expenses)		0.12			927			0.14			1,110			0.08			610
Effect of tax reform changes on deferred tax⁽²⁾		-			-			-			-			(2.86	)		(20,600	)
Real estate taxes		-			-			-			-			-			-
Other		1.24			9,878			(0.20	)		(1,518	)		0.44			3,179
Effective tax rates and expenses for income tax		22.03			175,074			21.79			167,144			20.13			145,031

(1)

Mainly corresponds to the permanent differences originated from the Own Tax Monetary Correction and the effect of the bonds received to article 104 of LIR.

Effect of deferred taxes on comprehensive income

Below is a summary of the separate effect of deferred tax on other comprehensive income, showing the asset and liability balances, for the years ended December 31, 2019 and 2018:

	As of December 31,
	2019			2018
	MCh$			MCh$

Deferred tax assets
Debt instruments at FVOCI		8,074			1,166
Cash flow hedges		10,918			65
Total deferred tax assets recognised through other comprehensive income		18,992			1,231

Deferred tax liabilities
Available for sale investments		-			-
Debt instruments at FVOCI		(15,830	)		(2,976	)
Cash flow hedges		-			(2,711	)
Total deferred tax liabilities recognised through other comprehensive income		(15,830	)		(5,687	)

Net deferred tax balances in equity		3,162			(4,456	)

Deferred taxes in equity attributable to shareholders of the Bank		3,444			(4,102	)
Deferred tax in equity attributable to non-controlling interests		(282	)		(354	)

Effect of deferred taxes on income

As of December 31, 2019 and 2018, the Bank has recorded effects for deferred taxes in the financial statements:

	As of December 31,
	2019			2018
	MCh$			MCh$
Deferred tax assets
Interests and adjustments		9,531			9,384
Non-recurring charge-offs		15,325			13,389
Assets received in lieu of payment		1,214			785
Exchange rate adjustments		-			1,675
Property, plant and equipment valuation		6,381			6,138
Allowance for loan losses		188,956			184,488
Provision for expenses		89,098			63,134
Derivatives		-			3,924
Leased assets		116,226			107,897
Subsidiaries tax losses		5,416			5,314
Prepaid expenses		-			156
Right of use assets		249			-
Total deferred tax assets		432,396			396,284

Deferred tax liabilities
Valuation of investments		(17,518	)		(42	)
Prepaid expenses		(20,347	)		(349	)
Depreciation		-			-
Valuation provision		(6,058	)		(5,989	)
Derivatives		(36,512	)		-
Exchange rate adjustments		(2,817	)		(3,383	)
Other		(75	)		(20	)
Total deferred tax liabilities		(83,327	)		(9,783	)

Summary of deferred tax assets and liabilities

Below is a summary of the deferred taxes impact on equity and income,

	As of December 31,
	2019			2018
	MCh$			MCh$

Deferred tax assets
Recognised through other comprehensive income		18,992			1,231
Recognised through profit or loss		432,396			396,284
Total deferred tax assets		451,388			397,515

Deferred tax liabilities
Recognised through other comprehensive income		(15,830	)		(5,687	)
Recognised through profit or loss		(83,327	)		(9,783	)
Total deferred tax liabilities		(99,157	)		(15,470	)

Other Assets

12 Months Ended

Dec. 31, 2019

Other Assets

OTHER ASSETS

NOTE 16

OTHER ASSETS

Other assets item includes the following:

	As of December 31,
	2019			2018
	MCh$			MCh$

Assets for leasing ⁽¹⁾		67,139			47,486

Assets received or awarded in lieu of payment
Assets received in lieu of payment		18,755			17,525
Assets awarded at judicial sale		22,177			21,524
Provision on assets received in lieu of payment or awarded		(2,042	)		(723	)
Subtotal		38,890			38,326

Other assets
Guarantee deposits (margin accounts) ⁽²⁾		314,616			170,232
Non-current assets classified as held for sale ⁽⁴⁾		22,394			-
Gold investments		680			522
VAT credit		22,663			9,097
Income tax recoverable		1,787			1,756
Prepaid expenses		432,030			477,819
Assets recovered from leasing for sale		3,575			6,848
Valuation adjustments by macro hedge ⁽⁵⁾		210,867			9,414
Pension plan assets		670			846
Accounts and notes receivable		147,108			59,511
Notes receivable through brokerage and simultaneous transactions		43,354			71,382
Other receivable assets		44,262			48,612
Other assets ⁽³⁾		89,111			49,365
Subtotal		1,333,117			905,404

Total		1,439,146			991,216

⁽¹⁾

Assets available to be granted under the financial leasing agreements.

⁽²⁾

Guarantee deposits (margin accounts) correspond to collateral associated with derivative financial contracts to mitigate the counterparty credit risk and are mainly established in cash. These guarantees operate when mark to market of derivative financial instruments exceed the levels of threshold agreed in the contracts, which could result in the Bank delivering or receiving collateral.

⁽³⁾

Other assets mainly include settlement of derivatives and other financial transactions.

⁽⁴⁾

Corresponds to the interests in Redbanc S.A., Transbank S.A. and Nexus S.A., which have been reclassified as non-current assets classified as held for sale in accordance with IFRS 5 "Non-current assets held for sale and discontinued operations ", for additional information see Note 1 v) and Note 39.

⁽⁵⁾

Net assets and liabilities fair value valuation subject to macro hedges. See Note 8

Time Deposits and Other Time Liabilities

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

TIME DEPOSITS AND OTHER TIME LIABILITIES

NOTE 17

TIME DEPOSITS AND OTHER TIME LIABILITIES

As of December 31, 2019 and 2018, the composition of the line item time deposits and other liabilities is as follows:

	As of December 31,
	2019		2018
	MCh$		MCh$

Deposits and other demand liabilities
Checking accounts		8,093,108		6,794,132
Other deposits and demand accounts		741,103		709,711
Other demand liabilities		1,463,221		1,237,574

Subtotal		10,297,432		8,741,417

Time deposits and other time liabilities
Time deposits		13,064,932		12,944,846
Time savings account		123,787		118,587
Other time liabilities		4,098		4,386

Subtotal		13,192,817		13,067,819
Total		23,490,249		21,809,236

Interbank Borrowings

12 Months Ended

Dec. 31, 2019

Interbank Borrowings

INTERBANK BORROWINGS

NOTE 18

INTERBANK BORROWINGS

As of December 31, 2019 and 2018 the line item Interbank borrowings is as follows:

	As of December 31,
	2019		2018
	MCh$		MCh$
Loans from financial institutions and the Central Bank of Chile
Other obligations with Central Bank of Chile		-		-
Subtotal		-		-
Loans from domestic financial institutions		286,603		-
Loans from foreign financial institutions
Bank of America N.A. US Foreign		355,051		38,906
Citibank N.A.		269,841		-
Mizuho Bank Ltd Ny		269,404		223,829
Wells Fargo Bank N.A.		231,823		-
Sumitomo Mitsui Banking Corporation		179,415		278,765
Standard Chartered Bank		153,373		50,960
The Bank of Nova Scotia		134,819		163,927
The Bank of New York Mellon		119,616		69,921
Barclays Bank Plc London		98,803		34,965
Corporacion Andina De Fomento		75,097		52,371
Zürcher Kantonalbank		75,002		-
The Toronto Dominion Bank		71,191		-
Hsbc Bank Plc		69,786		34,936
Bank of Montreal		56,123		31
State Bank of India		28,231		331
Banco Latinoamericano De Comercio		18,731		-
Banco Santander Brasil S.A.		7,873		8,040
Banco Santander Hong Kong		3,697		6,047
Standard Chartered Bank		3,613		843
Bank of China		952		7,777
Industrial and Commercial Bank		898		30
Banco Santander Central Hispano		848		1,295
Korea Exchange Bank		761		-
Hong Kong and Shanghai Banking		684		1,300
China Merchants Bank		597		-
Unicredito Italiano Spa		583		1,117
Banco Bilbao Vizcaya Argentaria		571		888
Rabobank, Hong Kong Branch		477		-
Bbva Bancomer, S.A.		553		-
Kbc Bank Nv		406		-
Bank of Communications		385		-
Bank of The West		261		-
Danske Bank A/S		224		-
Deutsche Bank A.G.		193		5,558
Kookmin Bank		185		-
Caixabank S.A.		166		-
E, Sun Commercial Bank Ltd.		159		-
Bank of Tokio Mitsubishi		156		1,032
Woori Bank		155		-
Agricultural Bank of China		152		106
Bank of Taiwan		135		127
Shinhan Bank		133		-
Taiwan Cooperative Bank		131		-
Keb Hana Bank		119		-
United Bank of India		113		378
Banca Di Credito Cooperativo A		112		-
Joint Stock Commercial Bank Fo.		110		33
Banca Nazionale Del Lavoro S.P.		106		77
Hua Nan Commercial Bank Ltd.		102		164
Industrial Bank of Korea		96		195
Banco Bradesco S.A.		84		89
Bank of Ningbo		83		-
Bank of East Asia, Limited		82		205
Hdfc Bank Limited		72		-
China Everbright Bank		70		-
Cassa Di Risparmio Di Parma E		69		-
Mizuho Corporate Bank Ltd.		67		-
Banco Bpm Spa		66		21
Canara Bank		66		-
Banco Comercial Portugues		63		-
Caixa Destalvis I Pensions de Barcelona		63		-
Shanghai Pudong Development Ba		59		237
Subtotal		2,232,856		1,284,501

	As of December 31,
	2019		2018
	MCh$		MCh$
Loans from foreign financial institutions, continued
Banca Monte dei Paschi di Siena		58		179
Banca Commerciale Italiana S.P.		50		288
Fortis Bank S.A./N.V. Brussels		50		42
Habib Bank Limited		38		-
Kasikornbank Public Company Li		33		-
Banco Rio De La Plata S.A.		24		-
Australia And New Zealand Bank		23		-
Banco de la Republica Oriental		23		41
Citic Industrial Bank		19		-
Shangai Pudong Development Ban		14		-
Banco Caixa Geral		10		-
Bank of Baroda		9		37
Shanghai Commercial and Saving		6		33
Hsbc Bank USA		2		394
Akbank T,A,S,		-		106
Banca Lombarda E Piemontese S.		-		60
Banca Popolare Dell'Emilia Rom		-		31
Banca Popolare Di Milano S.C.A.		-		6
Banco Commerzbank		-		19
Banco de Galicia Y Buenos Aires		-		231
Banco De Sabadell S.A.		-		20
Banco Internacional S.A.		-		33
Banco Itau S.A.		-		14
Banistmo S.A.		-		32
Bank of India		-		51
Bank of Shanghai		-		134
Bankinter S.A.		-		24
Banque Bruxelles Lambert S.A.		-		509
Bnp Paribas, Hong Kong Branch		-		3,554
Caixabank S.A.		-		44
Cajas Rurales Unidas		-		18
Canara Bank		-		237
Casa Di Risparmo De Padova E.R.		-		30
Cassa Di Risparmio In Bologna		-		21
Chang Hwa Commercial Bank Ltd.		-		18
China Construcción Bank		-		35
Citibank N.A.		-		241,041
Credit Agricole		-		106
Credit Lyonnais		-		139
Development Bank of Singapore		-		3
Dexia Bank SA		-		789
First Union National Bank		-		201
Hang Seng Bank (China) Limited		-		6
Hanvit Bank		-		58
Hdfc Bank Limited		-		28
Hsbc Bank Middle East		-		77
International Commercial Bank		-		70
Kbc Bank Nv		-		23
Keb Hana Bank		-		2,318
Kookmin Bank		-		78
Mega International Commercial		-		9
Metropolitan Bank Limited		-		170
Oriental Bank of Commerce		-		87
Rabobank, Hong Kong Branch		-		1,548
Raiffeisen Bank Polska S.A.		-		31
Shinhan Bank		-		380
Taiwan Business Bank		-		19
Taiwan Cooperative Bank		-		66
U,S, Bank (Formerly First Bank)		-		18
United World Chinese Commercial Bank		-		15
Wachovia Bank N.A.		-		33,499
Wells Fargo Bank N.A.		-		216,749
Woori Bank		-		356
Subtotal		359		504,125
Total		2,519,818		1,788,626

Loans from domestic financial institutions

These obligations' maturities are as follows:

	As of December 31,
	2019		2018
	MCh$		MCh$

Due within 1 year		158,855		-
Due within 1 and 2 year		117,344		-
Due within 2 and 3 year		8,167		-
Due within 3 and 4 year		2,237		-
Due after 5 years		-		-

Total loans from domestic financial institutions		286,603		-

Foreign obligations

	As of December 31,
	2019		2018
	MCh$		MCh$

Due within 1 year		1,970,790		1,648,955
Due within 1 and 2 year		225,025		139,671
Due within 2 and 3 year		37,400		-
Due within 3 and 4 year		-		-
Due after 5 years		-		-
Total loans from foreign financial institutions		2,233,215		1,788,626

Issued Debt Instruments and Other Financial Liabilities

12 Months Ended

Dec. 31, 2019

Issued Debt Instruments and Other Financial Liabilities [Abstract]

ISSUED DEBT INSTRUMENTS AND OTHER FINANCIAL LIABILITIES

NOTE 19

ISSUED DEBT INSTRUMENTS AND OTHER FINANCIAL LIABILITIES

As of December 31, 2019 and 2018, composition of this item is as follows:

	As of December 31,
	2019		2018
	MCh$		MCh$

Other financial liabilities
Obligations to public sector		9,198		32,449
Other domestic obligations		204,705		175,210
Foreign obligations		12,455		7,741
Subtotals		226,358		215,400
Issued debt instruments
Mortgage finance bonds		18,502		25,490
Senior bonds		8,574,213		7,198,865
Mortgage bond		89,924		94,921
Subordinated bonds		818,084		795,957
Subtotals		9,500,723		8,115,233

Total		9,727,081		8,330,633

Debts classified as current are either demand obligations or will mature in one year or less. All other debts are classified as non-current, The Bank's debts, both current and non-current, are summarized below:

	As of December 31, 2019
	Current		Non-current		Total
	MCh$		MCh$		MCh$

Mortgage finance bonds		6,013		12,489		18,502
Senior bonds		2,078,202		6,496,011		8,574,213
Mortgage bond		5,137		84,787		89,924
Subordinated bonds		-		818,084		818,084
Issued debt instruments		2,089,352		7,411,371		9,500,723

Other financial liabilities		226,033		325		226,358

Total		2,315,385		7,411,696		9,727,081

	As of December 31, 2018
	Current		Non-current		Total
	MCh$		MCh$		MCh$

Mortgage finance bonds		6,830		18,660		25,490
Senior bonds		844,898		6,353,967		7,198,865
Mortgage bond		4,833		90,088		94,921
Subordinated bonds		1		795,956		795,957
Issued debt instruments		856,562		7,258,671		8,115,233

Other financial liabilities		205,871		9,529		215,400

Total		1,062,433		7,268,200		8,330,633

Mortgage finance bonds

These bonds are used to finance mortgage loans. Their principal amounts are amortised on a quarterly basis, The range of maturities of these bonds is between five and twenty years, Loans are indexed to UF and create a yearly interest yield of 5.39% as of December 31, 2019 (5.43% as of December 31, 2018).

	As of December 31,
	2019		2018
	MCh$		MCh$

Due within 1 year		6,013		6,830
Due after 1 year but within 2 years		4,944		5,946
Due after 2 year but within 3 years		3,928		5,034
Due after 3 year but within 4 years		2,442		3,997
Due after 4 year but within 5 years		1,005		2,480
Due after 5 years		170		1,203
Total mortgage bonds		18,502		25,490

Senior bonds

The following table shows senior bonds by currency:

	As of December 31,
	2019		2018
	MCh$		MCh$

Santander bonds in UF		4,814,604		4,095,741
Santander bonds in USD		1,649,238		1,094,267
Santander bonds in CHF		499,485		386,979
Santander bonds in Ch$		1,242,633		1,291,900
Santander bonds in AUD		124,748		24,954
Current bonds in JPY		77,797		191,598
Santander bonds in EUR		165,708		113,426
Total senior bonds		8,574,213		7,198,865

Placement of senior bonds:

In 2019, the Bank issued bonds for UF 29,678,000; CLP 115,000,000,000; EUR 30,000,000; AUD 160,000,000 and CHF 250,000,000 detailed as follows:

Series	Currency	Amount		Term	Issuance rate	Series approval date	Series maximum amount		Maturity date
T7	UF		5,000,000	4	2,50%	02-01-2016		5,000,000	02-01-2023
T8	UF		5,678,000	4 y 6	2,55%	02-01-2016		5,678,000	08-01-2023
T14	UF		9,000,000	8	2,80%	02-01-2016		18,000,000	02-01-2027
T6	UF		5,000,000	10	1,70%	11-01-2018		5,000,000	05-01-2029
T10	UF		5,000,000	5 y 4	2,60%	02-01-2016		5,000,000	08-01-2024
Total	UF		29,678,000					38,678,000
U9	CLP		75,000,000,000	2 y 8	ICP + 0,80% yearly	11-01-2018		75,000,000,000	11-19-2021
P-5	CLP		75,000,000,000	2 y 7	5,3% yearly	03-01-2015		150,000,000,000	03-01-2022
Total	CLP		150,000,000,000					225,000,000,000
EUR	EUR		30,000,000	7	1,10%	02-01-2019		40,000,000	02-07-2026
EUR	EUR		25,000,000	5	1,25%	11-26-2019		25,000,000	11-26-2034
Total	EUR		55,000,000					65,000,000
AUD	AUD		22,000,000	15	3,66% yearly	05-20-2019		22,000,000	05-20-2034
AUD	AUD		20,000,000	5	1,13% yearly	07-11-2019		20,000,000	07-11-2024
AUD	AUD		28,000,000	5	1,13% yearly	07-17-2019		28,000,000	07-17-2024
AUD	AUD		15,000,000	5	1,13% yearly	07-17-2019		15,000,000	07-17-2024
AUD	AUD		75,000,000	20	3,05% yearly	08-30-2019		75,000,000	02-28-2039
AUD	AUD		12,000,000	5	3,16% yearly	11-12-2019		12,000,000	11-20-2034
AUD	AUD		13,000,000	5	2,91% yearly	11-21-2019		13,000,000	11-27-2034
Total			185,000,000					185,000,000
CHF	CHF		150,000,000	5 y 6	0,38% yearly	03-12-2019		150,000,000	09-27-2024
CHF	CHF		100,000,000	10	0,14% yearly	08-29-2019		100,000,000	08-29-2029
Total	CHF		250,000,000					250,000,000

During 2019, the Bank performed a partial repurchase of the following bonds:

Date	Type	Currency	Amount
02-12-2019	Senior	CLP		10,000,000,000
02-14-2019	Senior	CLP		30,000,000,000
02-19-2019	Senior	CLP		4,200,000,000
02-22-2019	Senior	CLP		14,240,000,000
02-22-2019	Senior	CLP		30,000,000
02-22-2019	Senior	CLP		10,000,000
03-01-2019	Senior	CLP		11,800,000,000
03-04-2019	Senior	CLP		40,080,000,000
03-05-2019	Senior	CLP		20,000,000,000
03-15-2019	Senior	UF		156,000
03-19-2019	Senior	UF		418,000
03-20-2019	Senior	CLP		6,710,000,000
03-20-2019	Senior	UF		154,000
03-21-2019	Senior	UF		100,000
03-25-2019	Senior	UF		100,000
03-26-2019	Senior	UF		90,000
04-08-2019	Senior	CLP		3,950,000,000
04-10-2019	Senior	UF		409,000
04-16-2019	Senior	UF		55,000
04-17-2019	Senior	CLP		130,000,000
04-18-2019	Senior	CLP		330,000,000
05-16-2019	Senior	CLP		14,880,000,000
05-16-2019	Senior	UF		9,000
06-13-2019	Senior	UF		1,000
10-01-2019	Senior	CLP		10,960,000,000
10-02-2019	Senior	CLP		100,000,000
10-04-2019	Senior	CLP		60,000,000
11-05-2019	Senior	CLP		15,220,000,000
11-07-2019	Senior	CLP		3,620,000,000
11-13-2019	Senior	CLP		5,320,000,000
11-14-2019	Senior	UF		2,977,000
11-28-2019	Senior	UF		340,000
12-02-2019	Senior	UF		105,000

In 2018, the Bank issued bonds for UF 23,000,000; CLP 225,000,000,000; USD 70,000,000, EUR 66,000,000, AUD 20,000,000; CHF 115,000,000 and JPY 7,000,000,000, detailed as follows:

Series	Currency	Amount		Term	Issuance rate	Series approval date	Series maximum amount		Maturity date
T1	UF		4,000,000	2	2,20%	02-01-2016		7,000,000	02-01-2020
T4	UF		4,000,000	3	2,35%	02-01-2016		8,000,000	08-01-2021
T11	UF		5,000,000	7	2,65%	02-01-2016		5,000,000	02-01-2025
T12	UF		5,000,000	7	2,70%	02-01-2016		5,000,000	08-01-2025
T15	UF		5,000,000	11	3,00%	02-01-2016		5,000,000	08-01-2028
Total	UF		23,000,000					30,000,000
P5	CLP		75,000,000,000	4	5,30%	03-05-2015		150,000,000,000	03-01-2022
U4	CLP		75,000,000,000	3 y 4	ICP + 1,00%	01-10-2017		75,000,000,000	01-10-2022
U3	CLP		75,000,000,000	2 y 7	ICP + 1,00%	06-11-2018		75,000,000,000	06-11-2021
Total	CLP		225,000,000,000					300,000,000,000
USD	USD		50,000,000	10	4,17%	10-10-2018		50,000,000	10-10-2028
USD	USD		20,000,000	2	0,03%	11-16-2018		20,000,000	11-16-2020
Total	USD		70,000,000					70,000,000
EUR	EUR		26,000,000	7	1,00%	05-04-2018		26,000,000	05-28-2025
EUR	EUR		40,000,000	12	1,78%	06-07-2018		40,000,000	06-15-2030
Total	EUR		66,000,000					66,000,000
AUD	AUD		20,000,000	5	3,56%	11-13-2018		20,000,000	11-13-2023
Total	AUD		20,000,000					20,000,000
CHF	CHF		115,000,000	5 y 3	0,44%	09-21-2018		115,000,000	12-21-2023
Total	CHF		115,000,000					115,000,000
JPY	JPY		4,000,000,000	10 y 6	0,65%	07-13-2018		4,000,000,000	01-13-2029
JPY	JPY		3,000,000,000	5	0.56%	10-30-2018		3,000,000,000	10-30-2023
Total	JPY		7,000,000,000					7,000,000,000

During 2018, the Bank performed a partial repurchase of the following bond:

Date	Type	Currency	Amount
01-04-2018	Senior	CLP		12,890,000,000
01-04-2018	Senior	CLP		4,600,000,000
01-22-2018	Senior	UF		24,000
04-05-2018	Senior	UF		484,000
04-06-2018	Senior	UF		184,000
04-23-2018	Senior	UF		216,000
04-24-2018	Senior	UF		4,000
04-25-2018	Senior	UF		262,000
05-10-2018	Senior	UF		800,000
06-07-2018	Senior	USD		3,090,000
12-11-2018	Senior	USD		250,000,000

ii.

The maturities of senior bonds are as follows:

	As of December 31,
	2019		2018
	MCh$		MCh$

Due within 1 year		2,078,202		844,898
Due after 1 year but within 2 years		1,147,825		1,331,255
Due after 2 year but within 3 years		1,221,393		1,073,847
Due after 3 year but within 4 years		742,238		1,104,547
Due after 4 year but within 5 years		1,278,746		421,918
Due after 5 years		2,105,809		2,422,400
Total senior bonds		8,574,213		7,198,865

Mortgage bonds

Detail of mortgage bonds per currency is as follows:

	As of December 31,
	2019		2018
	MCh$		MCh$

Mortgage bonds in UF		89,924		94,921
Total mortgage bonds		89,924		94,921

Allocation of mortgage bonds

During 2019 and 2018, the Bank has not placed any mortgage bonds.

ii.

The maturities of Mortgage bonds are as follows:

	As of December 31,
	2019		2018
	MCh$		MCh$

Due within 1 year		5,137		4,833
Due after 1 year but within 2 years		8,248		7,758
Due after 2 year but within 3 years		8,514		8,008
Due after 3 year but within 4 years		8,788		8,267
Due after 4 year but within 5 years		9,072		8,534
Due after 5 years		50,165		57,521
Total Mortgage bonds		89,924		94,921

Subordinated bonds

Detail of the subordinated bonds per currency is as follows:

	As of December 31,
	2019		2018
	MCh$		MCh$

Subordinated bonds denominated in CLP		-		1
Subordinated bonds denominated in UF		818,084		795,956
Total subordinated bonds		818,084		795,957

Allocation of subordinated bonds

During 2019 and 2018, the Bank has not placed any subordinated bonds. The maturities of subordinated bonds, are as follows:

	As of December 31,
	2019		2018
	MCh$		MCh$

Due within 1 year		-		1
Due after 1 year but within 2 years		-		-
Due after 2 year but within 3 years		-		-
Due after 3 year but within 4 years		-		-
Due after 4 year but within 5 years		-		-
Due after 5 years		818,084		795,956
Total subordinated bonds		818,084		795,957

e)	Other financial liabilities

The composition of other financial obligations, by maturity, is detailed below:

	As of December 31,
	2019		2018
	MCh$		MCh$

Non-current portion:
Due after 1 year but within 2 years		41		9,221
Due after 2 year but within 3 years		44		40
Due after 3 year but within 4 years		48		44
Due after 4 year but within 5 years		53		48
Due after 5 years		132		176
Non-current portion subtotal		318		9,529

Current portion:
Amounts due to credit card operators		151,984		172,425
Acceptance of letters of credit		5,709		2,894
Other long-term financial obligations, short-term portion		68,347		30,552
Current portion subtotal		226,040		205,871

Total other financial liabilities		226,358		215,400

Maturity of Financial Assets and Liabilities

12 Months Ended

Dec. 31, 2019

Maturity of Financial Assets and Liabilities [Abstract]

MATURITY OF FINANCIAL ASSETS AND LIABILITIES

NOTE 20

MATURITY OF FINANCIAL ASSETS AND LIABILITIES

As of December 31, 2019 and 2018, the detail of the maturities of assets and liabilities is as follows:

As of December 31, 2019	Demand		Up to 1 month		Between 1 and 3 months		Between 3 and 12 months		Subtotal up to 1 year		Between 1 and 3 years		Between 3 and 5 years		More than 5 years		Subtotal More than 1 year		Total
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$

Financial assets
Cash and deposits in banks		3,554,520		-		-		-		3,554,520		-		-		-		-		3,554,520
Cash items in process of collection		355,062		-		-		-		355,062		-		-		-		-		355,062
Financial assets held for trading		-		38,644		-		645		39,289		181,705		37,659		11,551		230,915		270,204
Investments under resale agreements		-		-		-		-		-		-		-		-		-		-
Financial derivative contracts		-		371,775		400,196		1,543,446		2,315,417		1,383,493		1,346,329		3,103,369		5,833,191		8,148,608
Loans and accounts receivables at amortised cost (*)		296,461		2,963,578		2,400,909		5,511,374		11,172,322		5,706,433		4,093,147		11,699,613		21,499,193		32,671,515
Loans and account receivable at fvoci (**)		-		-		-		5,953		5,953		-		-		60,213		60,213		66,166
Debt instruments at fvoci		-		1,131,500		3,752		52,130		1,187,382		508,596		725,419		1,588,875		2,822,890		4,010,272
Equity instruments at fvoci		-		-		-		-		-		-		-		482		482		482
Guarantee deposits (margin accounts)		314,616		-		-		-		314,616		-		-		-		-		314,616
Total financial assets		4,520,659		4,505,497		2,804,857		7,113,548		18,944,561		7,780,227		6,202,554		16,464,103		30,446,884		49,391,445

Financial liabilities
Deposits and other demand liabilities		10,297,432		-		-		-		10,297,432		-		-		-		-		10,297,432
Cash items in process of being cleared		198,248		-		-		-		198,248		-		-		-		-		198,248
Obligations under repurchase agreements		-		380,055		-		-		380,055		-		-		-		-		380,055
Time deposits and other time liabilities		142,273		5,184,567		4,905,414		2,417,703		12,649,957		357,856		163,121		21,883		542,860		13,192,817
Financial derivative contracts		-		422,749		427,825		951,684		1,802,258		1,253,280		1,180,948		3,154,168		5,588,396		7,390,654
Interbank borrowings		94		363,560		624,167		1,141,824		2,129,645		387,936		2,237		-		390,173		2,519,818
Issued debt instruments		-		285,159		759,519		1,044,674		2,089,352		2,394,850		2,042,292		2,974,229		7,411,371		9,500,723
Lease liabilities		-		-		-		26,061		26,061		45,978		36,393		50,062		132,433		158,494
Other financial liabilities		161,021		5,155		30,969		28,888		226,033		83		99		143		325		226,358
Guarantees received (margin accounts)		994,714		-		-		-		994,714		-		-		-		-		994,714
Total financial liabilities		11,793,782		6,641,245		6,747,894		5,610,834		30,793,755		4,439,983		3,425,090		6,200,485		14,065,558		44,859,313

(*)	Loans and accounts receivables at amortised cost are presented on a gross basis, the amount of allowance is Ch$896,095 million.

(**)	Loans and accounts receivables at fvoci are presented on a gross basis, the amount of allowance is Ch$101 million.

As of December 31, 2018	Demand		Up to 1 month		Between 1 and 3 months		Between 3 and 12 months		Subtotal up to 1 year		Between 1 and 3 years		Between 3 and 5 years		More than 5 years		Subtotal More than 1 year		Total
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$

Financial assets
Cash and deposits in banks		2,065,411		-		-		-		2,065,411		-		-		-		-		2,065,411
Cash items in process of collection		353,757		-		-		-		353,757		-		-		-		-		353,757
Financial assets held for trading		-		1,064		-		11,642		12,706		16,331		20,080		27,924		64,335		77,041
Investments under resale agreements		-		-		-		-		-		-		-		-		-		-
Financial derivative contracts		-		111,268		128,024		543,722		783,014		723,622		552,133		1,041,866		2,317,621		3,100,635
Loans and accounts receivables at amortised cost (*)		238,213		3,295,003		2,323,442		4,880,726		10,737,384		5,474,289		3,236,349		10,765,393		19,476,031		30,213,415
Loans and account receivable at fvoci (**)		-		-		-		25,294		25,294		4,949		-		38,451		43,400		68,694
Debt instruments at fvoci		-		2,391,329		-		1		2,391,330		86		-		2,907		2,993		2,394,323
Equity instruments at fvoci		-		-		-		-		-		-		-		481		483		483
Guarantee deposits (margin accounts)		170,232		-		-		-		170,232		-		-		-		-		170,232
Total financial assets		2,827,613		5,798,664		2,451,466		5,461,385		16,539,128		6,219,277		3,808,562		11,877,024		21,904,863		38,443,991

Financial liabilities
Deposits and other demand liabilities		8,741,417		-		-		-		8,741,417		-		-		-		-		8,741,417
Cash items in process of being cleared		163,043		-		-		-		163,043		-		-		-		-		163,043
Obligations under repurchase agreements		-		48,545		-		-		48,545		-		-		-		-		48,545
Time deposits and other time liabilities		122,974		5,248,418		4,108,556		3,326,199		12,806,147		191,547		6,137		63,988		261,672		13,067,819
Financial derivative contracts		-		131,378		120,361		349,551		601,290		495,789		471,185		949,464		1,916,438		2,517,728
Interbank borrowings		39,378		16,310		404,575		1,188,692		1,648,955		139,671		-		-		139,671		1,788,626
Issued debt instruments		-		71,465		39,267		745,830		856,562		2,431,849		1,549,743		3,277,079		7,258,671		8,115,233
Other financial liabilities		179,681		934		2,412		22,844		205,871		9,261		92		176		9,529		215,400
Guarantees received (margin accounts)		540,091		-		-		-		540,091		-		-		-		-		540,091
Total financial liabilities		9,786,584		5,517,050		4,675,171		5,633,116		25,611,921		3,268,117		2,027,157		4,290,707		9,585,981		35,197,902

(*)

Loans and accounts receivables at amortised cost are presented on a gross basis, the amount of allowance is Ch$ 882,414 million.

(**)

Loans and accounts receivables at fvoci are presented on a gross basis, the amount of allowance is Ch$106 million.

Provisions and Contingent Provisions

12 Months Ended

Dec. 31, 2019

Provisions [abstract]

PROVISIONS AND CONTINGENT PROVISIONS

NOTE 21

PROVISIONS AND CONTINGENT PROVISIONS

As of December 31, 2019 and 2018, the composition is as follows:

	As of December 31,
	2019		2018
	MCh$		MCh$

Provisions for personnel salaries and expenses		101,223		93,379
Provisions for mandatory dividends		185,727		178,600
Provisions for contingent loan		23,792		24,329
Provision for contingencies		15,388		8,963
Total		326,130		305,271

Below is the activity regarding provisions during the years ended December 31, 2019, 2018 and 2017

	Personnel salaries and expenses			Mandatory Dividend			Contingent loan			Contingencies			Total
	MCh$			MCh$			MCh$			MCh$			MCh$

Balances as of January 1, 2019		93,379			178,600			24,329			8,963			305,271
Provisions established		78,316			185,727			16,277			27,975			298,627
Application of provisions		(70,385	)		-			-			(155	)		(70,540	)
Provisions released		(552	)		(178,600	)		(16,814	)		(21,395	)		(207,693	)
Reclassifications		-			-			-			-			-
Other		465			-			-			-			465

Balances as of December 31, 2019		101,223			185,727			23,792			15,388			326,130

Balances as of January 1, 2018		97,576			168,840			10,079			27,303			303,798
Provisions established		80,912			178,600			19,440			19,647			298,599
Application of provisions		(72,975	)		-			-			(4,431	)		(77,406	)
Provisions released		(3,195	)		(168,840	)		(5,190	)		(33,535	)		(210,781	)
Reclassifications		-			-			-			-			-
Other		(8,939	)		-			-			-			(8,939	)

Balances as of December 31, 2018		93,379			178,600			24,329			8,963			305,271

Balances as of January 1, 2017		72,592			142,815			11,399			65,404			292,210
Provisions established		106,687			168,840			7,341			8,645			291,513
Application of provisions		(81,703	)		(142,815	)					(389	)		(224,907	)
Provisions released		-			-			(8,661	)		(46,357	)		(55,018	)
Reclassifications		-			-			-
Other		-			-			-

Balances as of December 31, 2017		97,576			168,840			10,079			27,303			303,798

c)	Provisions for personnel salaries and expenses includes:

	As of December 31,
	2019		2018
	MCh$		MCh$

Provision for seniority compensation		6,797		9,531
Provision for stock-based personnel benefits		-		-
Provision for performance bonds		68,595		59,633
Provision for vacations		23,864		22,792
Provision for other personnel benefits		1,967		1,423
Total		101,223		93,379

d)	Provisions for contingent loan risk

Provision for contingent loan arise from contingent liabilities and loan commitments. Provisions for ECL risks in respect of contingent loan are included in ECL allowance in the income statements for the year.

An analysis of changes in the corresponding ECL allowance as of December 31, 2019 and 2018 is as follows:

	Stage 1						Stage 2						Stage 3						TOTAL
	Individual			Collective			Individual			Collective			Individual			Collective
ECL allowance at January 1, 2019		1,701			15,070			259			172			3,856			3,271			24,329
Transfer
Transfers to stage 2		(100	)		(318	)		122			878			-			-			582
Transfers to stage 3		-			(203	)		-			-			167			4,675			4,639
Transfers to stage 3		-			-			(24	)		(144	)		1,742			1,290			2,864
Transfers to stage 1		46			122			(82	)		(473	)		-			-			(387	)
Transfers to stage 2		-			-			-			234			(54	)		(1,444	)		(1,264	)
Transfers to stage 1		-			45			-			-			(130	)		(1,278	)		(1,363	)
Net changes on financial assets		(423	)		(1,474	)		(41	)		(106	)		(2,100	)		2,173			(5,471	)
Write-off		-			-			-			-			-			-			-
Foreign Exchange adjustments and others		(9	)		(115	)		(8	)		(19	)		6			8			(137	)
At December 31, 2019		2,061			13,127			226			542			3,500			4,336			23,792

	Stage 1						Stage 2						Stage 3						TOTAL
	Individual			Collective			Individual			Collective			Individual			Collective
ECL allowance at January 1, 2018		1,627			16,261			219			187			2,884			3,182			24,360
Transfer
Transfers to stage 2		(30	)		-			65			-			-			-			35
Transfers to stage 3		(1	)		-			-			-			328			-			327
Transfers to stage 3		-			-			(11	)		-			567			-			556
Transfers to stage 1		1			-			(7	)		-			-			-			(6	)
Transfers to stage 2		-			-			-			-			-			-			-
Transfers to stage 1		-			-			-			-			(1	)		-			(1	)
Net changes on financial assets		136			683			3			(37	)		54			(77	)		762
Write-off		-			-			-			-			-			-			-
Foreign Exchange adjustments and others		(32	)		(1,874	)		(10	)		22			24			166			(1,704	)
At December 31, 2018		1,701			15,070			259			172			3,856			3,271			24,329

Other Liabilities

12 Months Ended

Dec. 31, 2019

Other Liabilities [Abstract]

OTHER LIABILITIES

NOTE 22

OTHER LIABILITIES

The other liabilities line item is as follows:

	As of December 31,
	2019		2018
	MCh$		MCh$

Accounts and notes payable		214,216		163,216
Income received in advance		640		673
Adjustment due to macro-hedging valuation		-		7,039
Guarantees received (margin accounts) (1)		994,714		540,091
Notes payable through brokerage and simultaneous transactions (3)		1,418,340		50,807
Other payable obligations (2)		61,555		94,779
Withholding VAT		8,147		1,990
Accounts payable insurance companies		9,510		8,424
Other liabilities		99,203		33,388

Total		2,806,325		900,407

(1)

Guarantee deposits (margin accounts) correspond to collateral associated to derivative financial contracts to mitigate the counterparty credit risk and are mainly established in cash. These guarantees operate when mark to market of derivative financial instruments exceed the levels of threshold agreed in the contracts, which could result in the Bank delivering or receiving collateral.

(2)

Other payable obligations mainly relate to settlement of derivatives and other financial transactions derived from the operation of the Bank.

(3)

In December 2019, Santander Corredora de Bolsa acted as an intermediary in the public offering of shares held between Latam and Delta, which was passed to the shareholders on January 3, 2019.

Contingencies and Commitments

12 Months Ended

Dec. 31, 2019

Contingencies and Commitments [Abstract]

CONTINGENCIES AND COMMITMENTS

NOTE 23

CONTINGENCIES AND COMMITMENTS

a)	Lawsuits and legal procedures

As of the issuance date of these financial statements, the Bank and its affiliates were subject to certain legal actions in the normal course of their business, As of December 31, 2019, the Bank and its subsidiaries have provisions for this item of Ch$1,274 (Ch$923 million as of December 31, 2018) which is included in "Provisions" in the Consolidated Statements of Financial Position as provisions for contingencies.

b)	Contingent loans

The following table shows the Bank's contractual obligations to issue loans:

	As of December 31,
	2019		2018
	MCh$		MCh$
Letters of credit issued		140,572		223,420
Foreign letters of credit confirmed		70,192		57,038
Performance guarantee		1,929,894		1,954,205
Personal guarantees		451,950		133,623
Total contingent liabilities		2,592,608		2,368,286
Available on demand credit lines		8,732,422		8,997,650
Other irrevocable credit commitments		485,991		327,297
Total loan commitment		9,218,413		9,324,947
Total		11,811,021		11,693,233

c)	Held securities

The Bank holds securities in the normal course of its business as follows:

	As of December 31,
	2019		2018
	MCh$		MCh$
Third party operations
Collections		90,966		99,784
Transferred financial assets managed by the Bank		21,507		26,262
Assets from third parties managed by the Bank and its affiliates		1,592,845		1,630,431
Subtotal		1,705,318		1,756,477
Custody of securities
Securities held in custody		9,731,894		11,160,488
Securities held in custody deposited in other entity		1,206,541		861,405
Issued securities held in custody		21,636,819		12,335,871
Subtotal		32,575,254		24,357,764
Total		34,280,572		26,114,241

During 2019, the Bank classified the portfolios managed by private banking in "Assets from third parties managed by the Bank and its affiliates" (memo account). At the end of December 2019, the balance for this was Ch$ 1,592,810 million (Ch$ 1,630,396 million at December 31, 2018).

d)	Guarantees

Banco Santander-Chile has an integral bank policy of coverage of Official Loyalty N°5014196 in force with the company Compañía de Seguros Chilena Consolidada S.A., coverage for 50,000,000 USD per claim with an annual limit of 100,000,000 USD, which covers both the Bank and its subsidiaries, with an expiration date of June 30, 2020, which has been renewed.

Contingent loans and liabilities

To satisfy its clients' needs, the Bank took on several contingent loans and liabilities that are not be recognised in the Consolidated Financial Statements of Financial Position; these contain loan risks and they are, therefore, part of the Bank's global risk.

Equity

12 Months Ended

Dec. 31, 2019

EQUITY

EQUITY

NOTE 24

EQUITY

a)	Capital

As of December 31, 2019 and 2018 the Bank had 188,446,126,794 shares outstanding, all of which are subscribed for and paid in full, amounting to Ch$891,303 million. All shares have the same rights, and have no preferences or restrictions.

The activity with respect to shares during 2019, 2018 and 2017 was as follows:

	SHARES As of December 31,
	2019		2018		2017

Issued as of January 1		188,446,126,794		188,446,126,794		188,446,126,794
Issuance of paid shares		-		-		-
Issuance of outstanding shares		-		-		-
Stock options exercised		-		-		-
Issued as of December 31,		188,446,126,794		188,446,126,794		188,446,126,794

As of December 31, 2019, 2018 and 2017 the Bank does not have any of its own shares in treasury, nor do any of the consolidated companies.

As of December 31, 2019 the shareholder composition was as follows:

Corporate Name or Shareholder's Name	Shares		ADRs (*)		Total		% of equity holding

Santander Chile Holding S.A.		66,822,519,695		-		66,822,519,695		35.46
Teatinos Siglo XXI Inversiones Limitada		59,770,481,573		-		59,770,481,573		31.72
The Bank New York Mellon		-		24,822,041,271		24,822,041,271		13.17
Banks on behalf of third parties		15,957,137,883		-		15,957,137,883		8.47
Pension funds (AFP) on behalf of third parties		9,995,705,956		-		9,995,705,956		5.30
Stock brokers on behalf of third parties		5,551,024,270		-		5,551,024,270		2.95
Other minority holders		5,527,216,146		-		5,527,216,146		2.93
Total		163,624,085,523		24,822,041,271		188,446,126,794		100.00

(*)

American Depository Receipts (ADR) are certificates issued by a U.S. commercial bank to be traded on the U.S. securities markets.

As of December 31, 2018 the shareholder composition was as follows:

Corporate Name or Shareholder's Name	Shares		ADRs (*)		Total		% of equity holding

Santander Chile Holding S.A.		66,822,519,695		-		66,822,519,695		35.46
Teatinos Siglo XXI Inversiones Limitada		59,770,481,573		-		59,770,481,573		31.72
The Bank New York Mellon		-		26,486,000,071		26,486,000,071		14.05
Banks on behalf of third parties		15,451,106,985		-		15,451,106,985		8.20
Pension funds (AFP) on behalf of third parties		9,033,172,896		-		9,033,172,896		4.79
Stock brokers on behalf of third parties		4,773,558,507		-		4,773,558,507		2.53
Other minority holders		6,109,287,067		-		6,109,287,067		3.25
Total		161,960,126,723		26,486,000,071		188,446,126,794		100.00

(*)

American Depository Receipts (ADR) are certificates issued by a U.S. commercial bank to be traded on the U.S. securities markets.

As of December 31, 2017 the shareholder composition was as follows:

Corporate Name or Shareholder's Name	Shares		ADRs (*)		Total		% of equity holding

Santander Chile Holding S.A.		66,822,519,695		-		66,822,519,695		35.46
Teatinos Siglo XXI Inversiones Limitada		59,770,481,573		-		59,770,481,573		31.72
The Bank New York Mellon		-		31,238,866,071		31,238,866,071		16.58
Banks on behalf of third parties		13,892,691,988		-		13,892,691,988		7.37
Pension funds (AFP) on behalf of third parties		6,896,552,755		-		6,896,552,755		3.66
Stock brokers on behalf of third parties		3,762,310,365		-		3,762,310,365		2.00
Other minority holders		6,062,704,347		-		6,062,704,347		3.21
Total		157,207,260,723		31,238,866,071		188,446,126,794		100.00

(*)

American Depository Receipts (ADR) are certificates issued by a U.S. commercial bank to be traded on the U.S. securities markets.

b)	Reserves

During 2019, on the Shareholders Meeting held in April, it is agreed to capitalize on reserves 40% of retained earnings from previous years, equivalent to $236,761 million ($141,204 and $141,706 million in the year 2018 and 2017 respectively).

As a result of the purchase of Santander Consumer S.A., the Bank has recorded negative equity effect of MCh$37,041, since the Bank apply "predecessor accounting method", and the difference between the consideration transferred and the acquired net asset is recorded in equity, within reserves. See Note 3.

c)	Dividends

The distribution of dividends is detailed in the Consolidated Statements of Changes in Equity.

d)	As of December 31, 2019, 2018 and 2017 the basic and diluted earnings per share were as follows:

	As of December 31,
	2019		2018		2017
	MCh$		MCh$		MCh$

a) Basic earnings per share
Total attributable to the shareholders of the Bank		619,091		595,333		562,801
Weighted average number of outstanding shares		188,446,126,794		188,446,126,794		188,446,126,794
Basic earnings per share (in Ch$)		3.285		3.159		2.986
Basic earnings per share from continuing operations (in Ch$)		3.276		3.139		2.972
Basic earnings per share from discontinued operations (in Ch$)		0.009		0.020		0.015

b) Diluted earnings per share
Total attributable to the shareholders of the Bank		619,091		595,333		562,801
Weighted average number of outstanding shares		188,446,126,794		188,446,126,794		188,446,126,794
Adjusted number of shares		188,446,126,794		188,446,126,794		188,446,126,794
Diluted earnings per share (in Ch$)		3.285		3.159		2.987
Diluted earnings per share from continuing operations (in Ch$)		3.276		3.139		2.972
Diluted earnings per share from discontinued operations (in Ch$)		0.009		0.020		0.015

As of December 31, 2019, 2018 and 2017 the Bank does not own instruments with dilutive effects.

Other comprehensive income from available for sale investments and cash flow hedges:

	For the years ended December 31,
	2019			2018			2017
	MCh$			MCh$			MCh$

Debt instruments at FVOCI
As of January 1,		6,962			1,855			-
Gain (losses) on the re-measurement of debt instruments at FVOCI, before tax		(17,775	)		6,609			-
Recycling from other comprehensive income to income for the year		39,997			(1,502	)		-
Available for sale investments
As of January 1,		-			-			7,375
Gain (losses) on the re-measurement of available for sale investments, before tax		-			-			(10,384	)
Recycling from other comprehensive income to income for the year		-			-			4,864
Subtotals		22,222			5,107			(5,520	)
Total		29,184			6,962			1,855

Cash flow hedges
As of January 1,		9,803			(3,562	)		2,288
Gains (losses) on the re-measurement of cash flow hedges, before tax		(49,163	)		14,048			(5,850	)
Recycling adjustments on cash flow hedges, before tax		(1,075	)		(683	)		-
Amounts removed from equity and included in carrying amount of non-financial asset (liability) which acquisition or incurrence was hedged as a highly probable transaction		-			-			-
Subtotals		(50,238	)		13,365			(5,850	)
Total		(40,435	)		9,803			(3,562	)

Other comprehensive income, before taxes		(11,251	)		16,765			(1,707	)

Income tax related to other comprehensive income components
Income tax relating to debt instruments at FVOCI		(7,756	)		(1,810	)		-
Income tax relating to available for sale investments					-			(473	)
Income tax relating to cash flow hedges		10,918			(2,646	)		908
Total		3,162			(4,456	)		435

Other comprehensive income, net of tax		(8,089	)		12,309			(1,272	)
Attributable to:
Shareholders of the Bank		(8,856	)		11,353			(2,312	)
Non-controlling interest		767			956			1,040

The Bank expects that the results included in "Other comprehensive income" will be reclassified to profit or loss when the specific conditions have been met.

Non-controlling Interest

12 Months Ended

Dec. 31, 2019

Non-Controlling Interest [Abstract]

NON-CONTROLLING INTEREST

NOTE 25

NON-CONTROLLING INTEREST

The non-controlling interest included in the equity and the income from the subsidiaries is summarized as follows:

								Other comprehensive income
As of December 31, 2019	Non- controlling		Equity		Income			Debt instruments at FVOCI			Deferred tax		Total other comprehensive income			Comprehensive income
	%		MCh$		MCh$			MCh$			MCh$		MCh$			MCh$

Subsidiaries:
Santander Corredora de Seguros Limitada		0.25		178		6			1			-		1			7
Santander Corredores de Bolsa Limitada		49.41		22,301		625			(261	)		71		(190	)		435
Santander Asesorías Financieras Limitada(1)		0.97		498		9			-			-		-			9
Santander S.A. Sociedad Securitizadora		0.36		2		-			-			-		-			-
Klare Corredora de Seguros S.A.		49.90		3,782		(503	)		-			-		-			(503	)
Santander Consumer Chile S.A. (2)		49.00		24,564		1,544			-			-		-			1,544
Subtotal				51,325		1,681			(260	)		71		(189	)		1,492
Entities controlled through other considerations:
Santander Gestión de Recaudación y Cobranzas Limitada		100.00		3,777		1,031			-			-		-			1,031
Bansa Santander S.A.		100.00		20,051		(486	)		-			-		-			(486	)
Multiplica Spa		100.00		4,480		(4	)		-			-		-			(4	)
Subtotal				28,308		541			-			-		-			541

Total				79,633		2,222			(260	)		71		(189	)		2,033

(1) Ex Santander Agente de Valores Limitada

(2) On November27, 2019, the Bank acquired the 51% of Santander Consumer S.A., the remaining 49% is accounted as non-controlling interest.

							Other comprehensive income
As of December 31, 2018	Non-controlling		Equity		Income		Debt instruments at FVOCI			Deferred tax		Total other comprehensive income			Comprehensive income
	%		MCh$		MCh$		MCh$			MCh$		MCh$			MCh$

Subsidiaries:
Santander Corredora de Seguros Limitada		0.25		172		4		(2	)		-		(2	)		2
Santander Corredores de Bolsa Limitada		49.41		21,673		755		(84	)		2		(82	)		673
Santander Agente de Valores Limitada		0.97		488		99		-			-		-			99
Santander S.A. Sociedad Securitizadora		0.36		2		-		-			-		-			-
Subtotal				22,335		858		(86	)		2		(84	)		774
Entities controlled through other considerations:
Santander Gestión de Recaudación y Cobranzas Limitada		100.00		3,777		852		-			-		-			852
Bansa Santander S.A.		100.00		20,051		2,650		-			-		-			2,650
Subtotal				23,828		3,502		-			-		-			3,502

Total				46,163		4,360		(86	)		2		(84	)		4,276

							Other comprehensive income
As of December 31, 2017	Non-controlling		Equity		Income		Available for sale investments		Deferred tax			Total other comprehensive income		Comprehensive income
	%		MCh$		MCh$		MCh$		MCh$			MCh$		MCh$

Subsidiaries:
Santander Corredora de Seguros Limitada		0.25		167		4		-		-			-		4
Santander Corredores de Bolsa Limitada		49.41		21,000		702		470		(134	)		336		1,038
Santander Agente de Valores Limitada		0.97		389		132		-		-			-		132
Santander S.A. Sociedad Securitizadora		0.36		2		-		-		-			-		-
Subtotal				21,558		838		470		(134	)		336		1,174
Entities controlled through other considerations:
Santander Gestión de Recaudación y Cobranzas Limitada		100.00		2,925		741		-		-			-		741
Bansa Santander S.A.		100.00		17,401		10,869		-		-			-		10,869
Subtotals				20,326		11,610		-		-			-		11,610

Total				41,883		12,448		470		(134	)		336		12,784

The overview of the financial information of the subsidiaries included in the consolidation of the Bank that possess non-controlling interests is as follows, which does not include consolidation or conforming accounting policy adjustments:

	As of December 31,
	2019									2018									2017
							Net									Net									Net
	Assets		Liabilities		Capital		income			Assets		Liabilities		Capital		income			Assets		Liabilities		Capital		income
	MCh$		MCh$		MCh$		MCh$			MCh$		MCh$		MCh$		MCh$			MCh$		MCh$		MCh$		MCh$
Santander Corredora de Seguros Limitada		82,918		12,372		68,159		2,387			77,764		9,595		66,374		1,795			76,177		9,803		64,937		1,437
Santander Corredores de Bolsa Limitada		1,479,974		1,434,843		43,866		1,265			102,228		57,999		42,691		1,538			88,711		45,855		41,424		1,432
Santander Asesorias Financieras Limitada(*)		51,505		51		50,481		973			50,552		71		40,177		10,304			44,910		4,732		26,569		13,609
Santander S.A. Sociedad Securitizadora		636		88		639		(91	)		704		66		728		(90	)		400		50		432		(82	)
Klare Corredora de Seguros S.A.		8,303		724		8,586		(1,007	)		-		-		-		-			-		-		-		-
Santander Consumer Chile S.A.		505,059		452,528		39,951		12,580			-		-		-		-			-		-		-		-
Santander Gestión de Recaudación y Cobranzas Ltda.		8,200		3,392		3,777		1,031			6,932		3,155		2,925		852			10,826		7,901		2,184		741
Bansa Santander S.A.		87,607		68,042		20,051		(486	)		20,437		386		17,401		2,650			25,535		8,134		6,533		10,868
Multiplica Spa		4,480		4		4,480		(4	)		-		-		-		-			-		-		-		-
Total		2,228,682		1,972,044		239,990		16,648			258,617		71,272		170,296		17,049			246,559		76,475		142,079		28,005

Interest Income

12 Months Ended

Dec. 31, 2019

Interest Income [Abstract]

INTEREST INCOME

NOTE 26

INTEREST INCOME

This item refers to interest earned in the period from the financial assets whose return, whether implicitly or explicitly, is determined by applying the effective interest rate method, regardless of the value at fair value, as well as the effect of hedge accounting (see c).

For the years ended December 31, 2019, 2018 and 2017 the income from interest, was attributable to the following items:

	For the years ended December 31,
	2019								2018								2017
	Interest		Inflation adjustments		Prepaid fees		Total		Interest		Inflation adjustments		Prepaid fees		Total		Interest		Inflation adjustments		Prepaid fees		Total
Items	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$

Resale agreements		718		-		-		718		903		-		-		903		939		-		-		939
Interbank loans		1,263		-		-		1,263		897		-		-		897		969		-		-		969
Commercial loans		780,284		160,462		16,478		957,224		771,405		153,851		11,008		936,264		752,013		85,389		10,525		847,927
Mortgage loans		349,663		283,820		455		633,938		330,055		266,691		909		597,655		320,041		149,303		414		469,758
Consumer loans		593,705		384		8,107		602,196		579,929		439		6,166		586,534		612,932		363		4,738		618,033
Investment instruments		71,150		26,169		-		97,319		75,423		24,790		-		100,213		74,000		5,797		-		79,797
Other interest income		18,387		3,592		-		21,979		16,644		4,013		-		20,657		12,172		1,538		-		13,710

Interest income not including income from hedge accounting		1,815,170		474,427		25,040		2,314,637		1,775,256		449,784		18,083		2,243,123		1,773,066		242,390		15,677		2,031,133

For the years ended December 31, 2019, 2018 and 2017, the expense from interest expense, excluding expense from hedge accounting, is as follows:

	For the years ended December 31,
	2019									2018									2017
	Interest			Inflation adjustments			Total			Interest			Inflation adjustments			Total			Interest			Inflation adjustments			Total
Items	MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$

Demand deposits		(14,018	)		(1,508	)		(15,526	)		(14,914	)		(1,371	)		(16,285	)		(13,851	)		(695	)		(14,546	)
Repurchase agreements		(9,710	)		-			(9,710	)		(6,439	)		-			(6,439	)		(6,514	)		-			(6,514	)
Time deposits and liabilities		(335,307	)		(27,172	)		(362,479	)		(317,061	)		(35,284	)		(352,345	)		(341,821	)		(20,509	)		(362,330	)
Interbank loans		(50,354	)		-			(50,354	)		(39,971	)		-			(39,971	)		(26,805	)		-			(26,805	)
Issued debt instruments		(250,512	)		(145,487	)		(395,999	)		(241,455	)		(133,227	)		(374,682	)		(220,027	)		(76,170	)		(296,197	)
Other financial liabilities		(1,310	)		(33	)		(1,343	)		(2,698	)		(110	)		(2,808	)		(2,946	)		(303	)		(3,249	)
Lease contracts		(2,965	)		-			(2,965	)		-			-			-			-			-			-
Other interest expense		(16,651	)		(11,300	)		(27,951	)		(6,929	)		(10,497	)		(17,426	)		(5,236	)		(4,973	)		(10,209	)
Interest expense not including expenses from hedge accounting		(680,827	)		(185,500	)		(866,327	)		(629,467	)		(180,489	)		(809,956	)		(617,200	)		(102,650	)		(719,850	)

For the years ended December 31, 2019, 2018 and 2017, the income and expense from interest is as follows:

	For the years ended December 31,
	2019			2018			2017
Items	MCh$			MCh$			MCh$

Interest income not including income from hedge accounting		2,314,637			2,243,123			2,031,133
Interest expense not including expense from hedge accounting		(866,327	)		(809,956	)		(719,850	)

Net Interest income (expense) from hedge accounting		1,448,310			1,433,167			1,311,283

Hedge accounting (net)		(31,346	)		(18,799	)		15,408

Total net interest income		1,416,964			1,414,368			1,326,691

Fees and Commissions

12 Months Ended

Dec. 31, 2019

Fees and Commissions [Abstract]

FEES AND COMMISSIONS

NOTE 27

FEES AND COMMISSIONS

This item includes the amount of fees earned and paid during the year, except for those which are an integral part of the financial instrument's effective interest rate:

	For the years ended December 31,
	2019		2018		2017
	MCh$		MCh$		MCh$

Fee and commission income
Fees and commissions for lines of credits and overdrafts		10,315		6,624		7,413
Fees and commissions for guarantees and letters of credit		35,039		33,654		33,882
Fees and commissions for card services		225,702		218,903		201,791
Fees and commissions for management of accounts		35,949		33,865		31,901
Fees and commissions for collections and payments		33,355		40,077		44,312
Fees and commissions for intermediation and management of securities		10,154		10,147		10,090
Insurance brokerage fees		49,664		39,949		36,430
Office banking		13,655		15,921		15,669
Fees for other services rendered		47,331		45,633		43,123
Other fees earned		37,494		39,690		30,947
Total		498,658		484,463		455,558

	For the years ended December 31,
	2019			2018			2017
	MCh$			MCh$			MCh$

Fee and commission expense
Compensation for card operation		(171,513	)		(163,794	)		(149,809	)
Fees and commissions for securities transactions		(1,001	)		(936	)		(858	)
Office banking		(1,860	)		(4,096	)		(15,283	)
Other fees		(37,198	)		(24,752	)		(10,545	)
Total		(211,572	)		(193,578	)		(176,495	)

Net fees and commissions income		287,086			290,885			279,063

The fees earned in transactions with letters of credit are presented in the Consolidated Statements of Income in the line item "Interest income".

The income and expenses for the commissions of the business segments are presented below and the calendar for the recognition of income from ordinary activities is opened.

	Segments															Revenue recognition calendar for ordinary activities
As of December 31, 2019	Individuals and PYMEs			Companies and Institutions			Global Investment Banking			Others			Total			Transferred over time		Transferred at a point in time			Accrual model
	MCh$			MCh$			MCh$			MCh$			MCh$			MCh$		MCh$			MCh$

Commission income
Commissions for lines of credit and overdrafts		6,123			935			3,240			17			10,315			10,315		-			-
Commissions for guarantees and letters of credit		11,553			17,531			5,842			113			35,039			35,039		-			-
Commissions for card services		218,635			6,042			950			75			225,702			41,347		184,355			-
Commissions for account management		32,608			2,515			823			3			35,949			35,949		-			-
Commissions for collections, collections and payments		36,129			2,185			464			(5,423	)		33,355			-		12,854			20,501
Commissions for intermediation and management of values		3,219			245			8,301			(1,611	)		10,154			-		10,154			-
Remuneration for insurance commercialization		49,664			-			-			-			49,664			-		-			49,664
Office banking		9,280			3,782			606			(13	)		13,655			-		13,655			-
Other remuneration for services rendered		42,499			3,748			839			245			47,331			-		47,331			-
Other commissions earned		12,462			10,727			14,293			12			37,494			-		37,494			-
Total		422,172			47,710			35,358			(6,582	)		498,658			122,650		305,843			70,165

Commission expenses
Remuneration for card operation		(168,024	)		(3,475	)		(321	)		307			(171,513	)		-		(171,513	)		-
Commissions per transaction with securities		-			-			(33	)		(968	)		(1,001	)		-		(1,001	)		-
Office banking		(1,186	)		(389	)		(282	)		(3	)		(1,860	)		-		(1,860	)		-
Other commissions		(22,335	)		(5,134	)		(5,619	)		(4,110	)		(37,198	)		-		(37,198	)		-
Total		(191,545	)		(8,998	)		(6,255	)		(4,774	)		(211,572	)		-		(211,572	)		-
Total Net commission income and expenses		230,627			38,712			29,103			(11,356	)		287,086			122,650		94,271			70,165

The income and expenses for the commissions of the business segments are presented below and the calendar for the recognition of income from ordinary activities is opened.

	Segments															Revenue recognition calendar for ordinary activities
As of December 31, 2018	Individuals and PYMEs			Companies and Institutions			Global Investment Banking			Others			Total			Transferred over time		Transferred at a point in time			Accrual model
	MCh$			MCh$			MCh$			MCh$			MCh$			MCh$		MCh$			MCh$

Commission income
Commissions for lines of credit and overdrafts		5,901			271			453			(1	)		6,624			6,624		-			-
Commissions for guarantees and letters of credit		11,099			16,258			6,239			58			33,654			33,654		-			-
Commissions for card services		211,615			6,193			1,036			59			218,903			34,856		184,047			-
Commissions for account management		30,386			2,678			799			2			33,865			33,865		-			-
Commissions for collections, collections and payments		66,780			1,693			458			(28,854	)		40,077			-		15,719			24,358
Commissions for intermediation and management of values		4,050			134			7,221			(1,258	)		10,147			-		10,147			-
Remuneration for insurance commercialization		-			-			-			39,949			39,949			-		-			39,949
Office banking		11,420			3,893			608			-			15,921			-		15,921			-
Other remuneration for services rendered		40,901			3,833			819			80			45,633			-		45,633			-
Other commissions earned		6,908			9,743			23,320			(281	)		39,690			-		39,690			-
Total		389,060			44,696			40,953			9,754			484,463			108,999		311,157			64,307

Commission expenses
Remuneration for card operation		(159,817	)		(3,186	)		(134	)		(657	)		(163,794	)		-		(163,794	)		-
Commissions per transaction with securities		(169	)		(3	)		(419	)		(345	)		(936	)		-		(936	)		-
Office banking		(2,374	)		(985	)		(722	)		(15	)		(4,096	)		-		(4,096	)		-
Other commissions		(6,168	)		(3,776	)		(4,614	)		(10,194	)		(24,752	)		-		(24,752	)		-
Total		(168,528	)		(7,950	)		(5,889	)		(11,211	)		(193,578	)		-		(193,578	)		-
Total Net commission income and expenses		220,532			36,746			35,064			(1,457	)		290,885			108,999		117,579			64,307

Net Income (Expense) From Financial Operations

12 Months Ended

Dec. 31, 2019

Net Income (Expense) from Financial Operations [Abstract]

NET INCOME (EXPENSE) FROM FINANCIAL OPERATIONS

NOTE 28

NET INCOME (EXPENSE) FROM FINANCIAL OPERATIONS

In accordance with the IFRS 9 and IFRS 7 disclosure, the detail of income (expense) from financial operations is as follows:

	For the years ended December 31,
	2019			2018
	MCh$			MCh$

Net gains on trading derivatives		(162,183	)		38,217
Net gains on financial assets at fair value through profit or loss		11,878			9,393
Net gains on derecognition of financial assets measured at amortised cost		63,672			8,479
Sale of loans and accounts receivables from customers
Current portfolio		63			(309	)
Charged-off portfolio		3,248			709
Repurchase of issued bonds (*)		3,265			(840	)
Other income (expense) from financial operations		1,892			(2,475	)
Total income (expense)		(78,165	)		53,174

(*) The Bank repurchased its own bonds, see Note 3 for details.

The disclosure for the year December 31, 2017, the detail of income (expense) from financial operations is as follows:

	For the years ended December 31,
	2017
	MCh$

Income (expense) from financial operations
Trading derivatives		(18,974	)
Trading investments		10,008
Sale of loans and accounts receivables from customers
Current portfolio		3,020
Charged-off portfolio		3,020
Available for sale investments		8,956
Repurchase of issued bonds		(742	)
Other income (expense) from financial operations		(2,492	)
Total income (expense)		2,796

Net Foreign Exchange Gain (Loss)

12 Months Ended

Dec. 31, 2019

Net Foreign Exchange Gain (Loss) [Abstract]

NET FOREIGN EXCHANGE GAIN (LOSS)

NOTE 29

NET FOREIGN EXCHANGE GAIN (LOSS)

Net foreign exchange income includes the income earned from foreign currency trading, differences arising from converting monetary items in a foreign currency to the functional currency, and those generated by non-monetary assets in a foreign currency at the time of their sale,

For the years ended December 31, 2019, 2018 and 2017 net foreign exchange income is as follows:

	For the years ended December 31,
	2019			2018			2017
	MCh$			MCh$			MCh$

Net foreign exchange gain (loss)
Net profit (loss) from currency exchange differences		(89,893	)		(212,618	)		113,115
Hedging derivatives		362,374			252,275			22,933
Income from assets indexed to foreign currency		7,376			12,251			(9,190	)
Income from liabilities indexed to foreign currency		-			-			98
Total		279,857			51,908			126,956

Expected Credit Losses Allowance

12 Months Ended

Dec. 31, 2019

Expected Credit Losses Allowance [Abstract]

EXPECTED CREDIT LOSSES ALLOWANCE

NOTE 30

EXPECTED CREDIT LOSSES ALLOWANCE

Expected credit losses (ECL) allowance – under IFRS 9

As of December 31, 2019 and 2018, under the new credit risk model established by IFRS 9 the ECL allowance by stage recorded at income statements is as follows:

For the year ended December 31, 2019	Stage1						Stage2						Stage3						TOTAL
	Individual			Collective			Individual			Collective			Individual			Collective
	MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$
Commercial loans		(3,002	)		(4,930	)		(10,469	)		(8,686	)		(79,501	)		(33,657	)		(140,245	)
Mortgage loans		-			(1,177	)		-			(4,998	)		-			(8,237	)		(14,412	)
Consumer loans		-			(8,875	)		-			(15,280	)		-			(145,328	)		(169,483	)
Contingent loans		45			589			10			24			152			188			1,008
Loans and account receivable at FVOCI		5			-			-			-			-			-			5
Debt at FVOCI		-			(184	)		-			-			-			-			(184	)
Total		(2,952	)		(14,577	)		(10,459	)		(28,940	)		(79,349	)		(187,034	)		(323,311	)

For the year ended December 31, 2018	Stage1					Stage2						Stage3						TOTAL
	Individual			Collective		Individual			Collective			Individual			Collective
	MCh$			MCh$		MCh$			MCh$			MCh$			MCh$			MCh$
Commercial loans		79			5,652		(2,891	)		(1,533	)		(96,131	)		(47,959	)		(142,783	)
Mortgage loans		-			5,583		-			5,161			-			3,377			14,121
Consumer loans		-			1,861		-			192			-			(191,304	)		(189,251	)
Contingent loans		(90	)		1,214		11			(68	)		(225	)		(834	)		8
Loans and account receivable at FVOCI		363			-		68			-			-			-			431
Debt at FVOCI		-			66		-			-			-			-			66
Total		352			14,376		(2,812	)		3,752			(96,356	)		(236,720	)		(317,408	)

II.

Provision for loan losses – under IAS 39

				Loans and accounts receivable from customers
For the year ended December 31, 2017	Interbank loans			Commercial loans						Mortgage loans			Consumer loans			Contingent loans
	Individual			Individual			Group			Group			Group			Individual			Group			Total
	MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$
Charged-off individually significant loans		-			(15,699	)		-			-			-			-			-			(15,699	)
Provisions established		(307	)		(64,658	)		(148,681	)		(43,621	)		(252,038	)		(3,117	)		(4,224	)		(516,646	)
Total provisions and charge-offs		(307	)		(80,357	)		(148,681	)		(43,621	)		(252,038	)		(3,117	)		(4,224	)		(532,345	)
Provisions released		3,970			55,925			20,491			11,427			46,089			7,001			1,660			146,563
Recovery of loans previously charged off		-			11,114			21,499			10,942			39,972			-			-			83,527
Net charge to income		3,663			(13,318	)		(106,691	)		(21,252	)		(165,977	)		3,884			(2,564	)		(302,255	)

The detail of Charge-off of individually significant loans, is as follows:

	For the years ended December 31,
	2017
	MCh$

Charge-off of loans		51,978
Provision applied		(36,279	)
Net charge offs of individually significant loans		15,699

Personnel Salaries and Expenses

12 Months Ended

Dec. 31, 2019

Personnel Salaries and Expenses [Abstract]

PERSONNEL SALARIES AND EXPENSES

NOTE 31

PERSONNEL SALARIES AND EXPENSES

For the years ended December 31, 2019, 2018 and 2017, the composition of personnel salaries and expenses is as follows:

	For the years ended December 31,
	2019			2018			2017
	MCh$			MCh$			MCh$

Personnel compensation		260,445			259,354			250,962
Bonuses or gratifications		78,534			72,728			75,181
Stock-based benefits		(315	)		(337	)		2,752
Seniority compensation		25,006			21,869			26,120
Pension plans		566			1,069			2,039
Training expenses		4,918			3,782			2,867
Day care and kindergarten		2,731			2,778			2,505
Health funds		-			-			4,748
Welfare funds		6,644			6,040			896
Other personnel expenses		31,628			30,281			28,897
Total		410,157			397,564			396,967

Administrative Expenses

12 Months Ended

Dec. 31, 2019

Administrative Expenses [Abstract]

ADMINISTRATIVE EXPENSES

NOTE 32

ADMINISTRATIVE EXPENSES

For the years ended December 31, 2019, 2018 and 2017, the composition of the item is as follows:

	For the years ended December 31,
	2019		2018		2017
	MCh$		MCh$		MCh$

General administrative expenses		124,896		145,241		139,418
Maintenance and repair of property, plant and equipment		19,214		20,962		21,359
Office lease		-		29,761		26,136
Equipment lease		-		55		96
Short term leases contracts		4,177		-		-
Insurance payments		3,848		3,439		3,354
Office supplies		5,126		5,070		6,862
IT and communication expenses		52,017		44,209		39,103
Heating, and other utilities		2,848		4,849		5,468
Security and valuables transport services		12,187		12,168		12,181
Representation and personnel travel expenses		4,109		3,444		4,262
Judicial and notarial expenses		1,277		1,148		974
Fees for technical reports and auditing		7,643		10,020		9,379
Other general administrative expenses		12,450		10,116		10,244
Outsourced services		71,572		65,358		57,400
Data processing		31,921		32,360		34,880
Archive services		3,518		3,401		3,324
Valuation services		3,644		3,167		2,419
Outsourcing		10,139		9,936		6,878
Other		22,350		16,494		9,899
Board expenses		1,356		1,297		1,290
Marketing expenses		20,891		19,286		18,877
Taxes, payroll taxes, and contributions		14,897		13,907		13,118
Real estate taxes		1,954		1,730		1,443
Patents		1,913		1,896		1,646
Other taxes		5		7		24
Contributions to CMF (former SBIF)		11,025		10,274		10,005
Total		233,612		245,089		230,103

Depreciation, Amortization, and Impairment

12 Months Ended

Dec. 31, 2019

Depreciation, Amortization, and Impairment [Abstract]

DEPRECIATION, AMORTIZATION, AND IMPAIRMENT

NOTE 33

DEPRECIATION, AMORTIZATION, AND IMPAIRMENT

Depreciation, amortization and impairment charges for the years ended December 31, 2019, 2018 and 2017, are detailed below:

	For the years ended December 31,
	2019			2018			2017
	MCh$			MCh$			MCh$

Depreciation and amortization
Depreciation of property, plant, and equipment		(52,855	)		(54,987	)		(55,623	)
Amortization of Intangible assets		(26,348	)		(24,293	)		(22,200	)
Depreciation right of use assets		(26,889	)		-			-
Total depreciation and amortization		(106,092	)		(79,280	)		(77,823	)
Impairment of property, plant, and equipment		(1,013	)		(39	)		(354	)
Impairment of right of use assets		(1,713	)		-			-
Impairment of intangibles		-			-			(5,290	)
Total impairment		(2,726	)		(39	)		(5,644	)
Total		(108,818	)		(79,319	)		(83,467	)

Other Operating Income and Expenses

12 Months Ended

Dec. 31, 2019

Other Operating Income and Expenses [Abstract]

OTHER OPERATING INCOME AND EXPENSES

NOTE 34

OTHER OPERATING INCOME AND EXPENSES

Other operating income is comprised of the following components:

	For the years ended December 31,
	2019		2018		2017
	MCh$		MCh$		MCh$

Income from assets received in lieu of payment		5,613		7,106		3,330
Release of contingencies provisions ⁽¹⁾		-		12,020		29,903
Other income		7,388		4,003		28,783
Leases				222		264
Income from sale of property, plant and equipment ⁽²⁾		2,456		2,490		23,229
Recovery of provisions for contingencies		-		-		-
Compensation from insurance companies due to damages		4,681		144		1,237
Other		251		1,147		4,053

Total		13,001		23,129		62,016

⁽¹⁾

In accordance with IAS 37, the Bank recorded contingencies provisions, which during 2018 were favorable to the Bank.

⁽²⁾

Corresponds to legal cession of rights made by Bansa Santander S.A. which result in an income of Ch$2,122 million, as of December 31, 2018. See Note N°26.

Other operating expenses are detailed as follows:

	For the years ended December 31,
	2019		2018		2017
	MCh$		MCh$		MCh$
Allowances and expenses for assets received in lieu of payment		3,900		2,537		5,591
Provision on assets received in lieu of payment		1,828		816		3,912
Expenses for maintenance of assets received in lieu of payment		2,072		1,721		1,679
Credit card expenses		1,077		3,151		3,070
Customer services		2,456		3,635		2,563
Other expenses		41,870		23,019		57,189
Operating charge-offs		973		798		1,607
Life insurance and general product insurance policies		21,205		9,964		23,475
Sale of property plant and equipment		67		62		-
Additional tax on expenses paid overseas		-		-		-
Provisions for contingencies		120		21		-
Retail association payment		343		898		912
Expense on sale of participation on associates		126		-		-
Expense on social commotion event		1,823		-		-
Other		17,213		11,276		31,195

Total		49,303		32,342		68,413

Transactions with Related Parties

12 Months Ended

Dec. 31, 2019

Transactions with Related Parties [Abstract]

TRANSACTIONS WITH RELATED PARTIES

NOTE 35

TRANSACTIONS WITH RELATED PARTIES

In addition to affiliates and associated entities, the Bank's "related parties" include its "key personnel" from the executive staff (members of the Bank's Board of Directors and Managers of Banco Santander-Chile and its affiliates, together with their close relatives), as well as the entities over which the key personnel could exercise significant influence or control.

The Bank also considers the companies that are part of the Santander Group worldwide as related parties, given that all of them have a common parent, i.e., Banco Santander S.A. (located in Spain).

Transactions between the Bank and its related parties are specified below. To facilitate comprehension, we have divided the information into four categories:

Santander Group Companies

This category includes all the companies that are controlled by the Santander Group around the world, and hence, it also includes the companies over which the Bank exercises any degree of control (affiliates and special-purpose entities).

Associated companies

This category includes the entities over which the Bank, in accordance with section b) of Note 1 to these Financial Statements, exercises a significant degree of influence and which generally belong to the group of entities known as "business support companies".

Key personnel

This category includes members of the Bank's Board of Directors and managers of Banco Santander-Chile and its affiliates, together with their close relatives.

Other

This category encompasses the related parties that are not included in the groups identified above and which are, in general, entities over which the key personnel could exercise significant influence or control.

The terms for transactions with related parties are equivalent to those which prevail in transactions made under market conditions or to which the corresponding considerations in kind have been attributed.

Loans to related parties:

Below are loans and accounts receivable as well as contingent loans that correspond to related entities:

	As of December 31,
	2019												2018												2017
	Companies of the Group			Associated companies			Key personnel			Other			Companies of the Group			Associated companies			Key personnel			Other			Companies of the Group			Associated companies			Key personnel			Other
	MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$

Loans and accounts receivable:
Commercial loans		246,868			375			2,986			685			122,289			459			4,299			233			80,076			771			3,947			7,793
Mortgage loans		-			-			20,473			-			-			-			18,814			-			-			-			18,796			-
Consumer loans		-			-			5,781			-			-			-			5,335			-			-			-			4,310			-
Loans and accounts receivable:		246,868			375			29,240			685			122,289			459			28,448			233			80,076			771			27,053			7,793

Allowance for loan losses		(122	)		(182	)		(179	)		(10	)		(308	)		(9	)		(116	)		(5	)		(209	)		(9	)		(177	)		(18	)
Net loans		246,746			193			29,061			675			121,981			450			28,332			228			79,867			762			26,876			7,775

Guarantees		462,513			-			23,918			288			442,854			-			22,893			7,171			361,452			-			23,868			7,164

Contingent loans:
Personal guarantees		-			-			-			-			-			-			-			-			-			-			-			-
Letters of credit		4,112			-			-			63			5,392			-			2,060			44			19,251			-			-			33
Guarantees		464,691			-			-			-			445,064			-			3,364			-			377,578			-			-			-
Contingent loans:		468,803			-			-			63			450,456			-			5,424			44			396,829			-			-			33

Allowance for contingent loans		(835	)		-			-			-			(1	)		-			(18	)		-			(4	)		-			-			1

Net contingent loans		467,968			-			-			63			450,455			-			5,406			44			396,825			-			-			34

Loan activity to related parties during 2019, 2018 and 2017 is shown below:

	As of December 31,
	2019												2018												2017
	Companies of the Group			Associated companies			Key Personnel			Other			Companies of the Group			Associated companies			Key Personnel			Other			Companies of the Group			Associated companies			Key Personnel			Other
	MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$

Opening balances as of January 1,		572,745			459			33,871			7,899			476,906			771			27,051			7,826			546,058			532			26,423			7,100
Loans granted		193,798			167			4,826			500			200,657			39			16,574			773			78,214			318			7,777			1,050
Loans payments		(50,646	)		(251	)		(9,457	)		(7,651	)		(104,818	)		(351	)		(9,754	)		(700	)		(147,366	)		(79	)		(7,149	)		(324	)

Total		715,897			375			29,240			748			572,745			459			33,871			7,899			476,906			771			27,051			7,826

Assets and liabilities with related parties

	As of December 31,
	2019								2018								2017
	Companies of the Group		Associated companies		Key personnel		Other		Companies of the Group		Associated companies		Key personnel		Other		Companies of the Group		Associated companies		Key personnel		Other
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$

Assets
Cash and deposits in banks		171,816		-		-		-		189,803		-		-		-		74,949		-		-		-
Trading investments		-		-		-		-		-		-		-		-		-		-		-		-
Obligations under repurchase agreements Loans		-		-		-		-		-		-		-		-		-		-		-		-
Financial derivative contracts		2,058,715		218,610		-		55		748,632		105,358		-		9		545,028		86,011		-		-
Available for sale investments		-		-		-		-		-		-		-		-		-		-		-		-
Other assets		185,317		210,579		-		-		38,960		51,842		-		-		8,480		118,136		-		-

Liabilities
Deposits and other demand liabilities		25,261		93,761		4,624		566		27,515		21,577		2,493		480		24,776		25,805		2,470		221
Obligations under repurchase agreements Loans		138,498		5,000		270		80		6,501		-		329		68		50,945		-		-		-
Time deposits and other time liabilities		1,183,235		282,171		4,246		2,204		2,585,337		-		3,189		838		785,988		27,968		3,703		3,504
Financial derivative contracts		2,159,660		288,013		-		3		770,624		112,523		-		-		418,647		142,750		-		7,190
Interbank borrowing		-		-		-		-		-		-		-		-		-		-		-		-
Issued debt instruments		363,154		-		-		-		335,443		-		-		-		482,626		-		-		-
Other financial liabilities		6,231		-		-		-		6,807		-		-		-		4,919		-		-		-
Other liabilities		8,130		146,164		-		-		60,884		89,817		-		-		164,303		58,168		-		-

Income (expense) recorded due to transactions with related parties

	For the years ended December 31,
	2019											2018												2017
	Companies of the Group			Associated Companies			Key personnel			Other		Companies of the Group			Associated companies			Key personnel			Other			Companies of the Group			Associated Companies			Key personnel			Other
	MCh$			MCh$			MCh$			MCh$		MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$

Income (expense) recorded
Interest income and inflation-indexation adjustments		(41,181	)		(5,235	)		1,151			26		(53,256	)		(156	)		1,252			508			(43,892	)		-			1,051			-
Fee and commission income and expenses		28,274			14,499			232			28		91,178			7,826			305			22			72,273			15,404			224			1
Net income (expense) from financial operations and net foreign exchange gain (loss) (*)		(586,318	)		(84,236	)		-			-		(566,677	)		65,727			27			(12	)		363,108			(48,453	)		(3	)		19
Other operating income and expenses		406			(2,026	)		-			-		42			1,388			-			-			21,670			(1,454	)		-			-
Key personnel compensation and expenses		-			-			(37,377	)		-		-			-			(40,683	)		-			-			-			(43,037	)		-
Administrative and other expenses		(11,877	)		(47,757	)		-			-		(43,035	)		(50,764	)		-			-			(48,246	)		(47,220	)		-			-

Total		(610,696	)		(124,755	)		(35,994	)		54		(571,748	)		24,021			(39,099	)		518			364,913			(81,723	)		(41,765	)		20

(*) Primarily relates to derivative contracts used to financially cover exchange risk of assets and liabilities that cover positions of the Bank and its subsidiaries,

Payments to Board members and key management personnel

The compensation received by key management personnel, including Board members and all the executives holding manager positions shown in the "Personnel salaries and expenses" and/or "Administrative expenses" items of the Consolidated Statements of Income, corresponds to the following categories:

	For the years ended December 31,
	2019			2018			2017
	MCh$			MCh$			MCh$

Personnel compensation		16,264			16,924			16,863
Board members' salaries and expenses		1,358			1,230			1,199
Bonuses or gratifications		16,104			16,243			16,057
Stock-based benefits		(315	)		(337	)		1,923
Seniority compensation		2,378			4,202			3,842
Pension plans		566			1,069			2,039
Training expenses		37			210			68
Health funds		273			284			273
Other personnel expenses		712			858			773
Total		37,377			40,683			43,037

(*)

Some of the executives that qualified for this benefit left the Group for different reasons, without complying with the requirements to receive the benefit, therefore the obligation amount decreased, which generated the reversal of provisions.

Composition of key personnel

As of December 31, 2019, 2018 and 2017, the composition of the Bank's key personnel is as follows:

	N° of executives
Position	As of December 31,
	2019		2018		2017

Director		10		11		11
Division manager		12		12		13
Manager		106		108		109

Total key personnel		128		131		133

Pension Plans

12 Months Ended

Dec. 31, 2019

Pension Plans [Abstract]

PENSION PLANS

NOTE 36

PENSION PLANS

The Bank has an additional benefit available to its principal executives, consisting of a pension plan. The purpose of the pension plan is to endow the executives with funds for a better supplementary pension upon their retirement.

For this purpose, the Bank will match the voluntary contributions made by the beneficiaries for their future pensions with an equivalent contribution. The executives will be entitled to receive this benefit only when they fulfill the following conditions:

Aimed at the Bank's management

The general requisite to apply for this benefit is that the employee must be carrying out his/her duties when turning 60 years old

The Bank will create a pension fund, with life insurance, for each beneficiary in the plan. Periodic contributions into this fund are made by the manager and matched by the Bank

The Bank will be responsible for granting the benefits directly

If the working relationship between the manager and the respective company ends, before s/he fulfills the abovementioned requirements, s/he will have no rights under this benefit plan.

In the event of the executive's death or total or partial disability, s/he will be entitled to receive this benefit.

The Bank will make contributions to this benefit plan on the basis of mixed collective insurance policies whose beneficiary is the Bank. The life insurance company with whom such policies are executed is not an entity linked or related to the Bank or any other Santander Group company.

Plan Assets owned by the Bank at the end of 2019 totaled Ch$7,195 million (Ch$6,804 million in 2018).

The amount of the defined benefit plans has been quantified by the Bank, based on the following criteria:

Calculation method:

Use of the projected unit credit method which considers each working year as generating an additional amount of rights over benefits and values each unit separately. It is calculated based primarily on fund contributions, as well as other factors such as the legal annual pension limit, seniority, age and yearly income for each unit valued individually.

Assets related to the pension fund contributed by the Bank into the Seguros Euroamérica insurance company with respect to defined benefit plans are presented as net of associated commitments.

Actuarial hypothesis assumptions:

Actuarial assumptions with respect to demographic and financial variables are non-biased and mutually compatible with each other, The most significant actuarial hypotheses considered in the calculations were:

	Plans post- employment	Plans post- employment
	2019	2018

Mortality chart	RV-2014	RV-2014
Termination of contract rates	5,0%	5,0%
Impairment chart	PDT 1985	PDT 1985

Activity for post-employment benefits is as follows:

	As of December 31,
	2019			2018
	MCh$			MCh$
Plan assets		7,195			6,804
Commitments for defined-benefit plans
For active personnel		(6,525	)		(5,958	)
Incurred by inactive personnel		-			-
Minus:
Unrealized actuarial (gain) losses		-			-
Balances at year end		670			846

Year's cash flow for post-employment benefits is as follows:

	For the years ended December 31,
	2019			2018			2017
	MCh$			MCh$			MCh$

a) Fair value of plan assets
Opening balance		6,804			7,919			6,612
Expected yield of insurance contracts		333			353			307
Employer contributions		859			836			1,931
Actuarial (gain) losses		-			-			-
Premiums paid		-			-			-
Benefits paid		(801	)		(2,304	)		(931	)
Fair value of plan assets at year end		7,195			6,804			7,919
b) Present value of obligations
Present value of obligations opening balance		(5,958	)		(6,998	)		(4,975	)
Net incorporation of Group companies		-			-			-
Service cost		(567	)		(1,069	)		(2,039	)
Interest cost		-			-			-
Curtailment/settlement effect		-			-			-
Benefits paid		-			-			-
Past service cost		-			-			-
Actuarial (gain) losses		-			-			-
Other		-			2,109			16
Present value of obligations at year end		(6,525	)		(5,958	)		(6,998	)
Net balance at year end		670			846			921

Plan expected profit:

	As of December 31,
	2019	2018	2017

Type of expected yield from the plan's assets	UF + 2,50% annual	UF + 2,50% annual	UF + 2,50% annual
Type of yield expected from the reimbursement rights	UF + 2,50% annual	UF + 2,50% annual	UF + 2,50% annual

Plan associated expenses:

	For the years ended December 31,
	2019			2018			2017
	MCh$			MCh$			MCh$

Current period service expenses		566			1,069			2,039
Interest cost		-			-			-
Expected yield from plan's assets		(333	)		(353	)		(307	)
Expected yield of insurance contracts linked to the Plan:
Extraordinary allocations		-			-			-
Actuarial (gain)/ losses recorded in the period		-			-			-
Past service cost		-			-			-
Other		-			-			-
Total		233			716			1,732

Fair Value of Financial Assets and Liabilities

12 Months Ended

Dec. 31, 2019

Fair Value of Financial Assets and Liabilities [Abstract]

FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

NOTE 37

FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

Fair value is 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. The measurement of fair value assumes the sale transaction of an asset or the transference of the liability happens within the main asset or liability market, or the most advantageous market for the asset or liability.

For financial instruments with no available market prices, fair values have been estimated by using recent transactions in analogous instruments, and in the absence thereof, the present values or other valuation techniques based on mathematical valuation models sufficiently accepted by the international financial community. In the use of these models, consideration is given to the specific particularities of the asset or liability to be valued, and especially to the different kinds of risks associated with the asset or liability.

These techniques are significantly influenced by the assumptions used, including the discount rate, the estimates of future cash flows and prepayment expectations. Hence, the fair value estimated for an asset or liability may not coincide exactly with the price at which that asset or liability could be delivered or settled on the date of its valuation, and may not be justified in comparison with independent markets.

Except as detailed in the following table, management considers that the carrying amounts of financial assets and financial liabilities recognised in the consolidated financial statements approximate their fair values.

Determination of fair value of financial instruments

Below is a comparison between the value at which the Bank's financial assets and liabilities are recorded and their fair value as of December 31, 2019 and 2018:

	As of December 31,
	2019				2018
	Book value		Fair value		Book value		Fair value
	MCh$		MCh$		MCh$		MCh$
Assets
Financial derivative contracts		8,148,608		8,148,608		3,100,635		3,100,635
Financial assets held for trading		270,204		270,204		77,041		77,041
Loans and accounts receivable at amortised cost, net		31,775,420		34,602,793		29,331,001		30,505,023
Loans and accounts receivable at FVOCI, net		66,065		66,065		68,588		68,588
Debt instrument at FVOCI		4,010,272		4,010,272		2,394,323		2,394,323
Guarantee deposits (margin accounts)		314,616		314,616		170,232		170,232

Liabilities
Deposits and interbank borrowings		26,010,067		26,200,921		23,597,863		23,770,106
Financial derivative contracts		7,390,654		7,390,654		2,517,728		2,517,728
Issued debt instruments and other financial liabilities		9,727,081		10,718,997		8,330,633		8,605,135
Guarantees received (margin accounts)		994,714		994,714		371,512		371,512

The fair value approximates the carrying amount of the following line items due to their short-term nature: cash and deposits-banks, cash items in process of collection and investments under resale or repurchase agreements.

In addition, the fair value estimates presented above do not attempt to estimate the value of the Bank's profits generated by its business activity, nor its future activities, and accordingly, they do not represent the Bank's value as a going concern. Below is a detail of the methods used to estimate the financial instruments' fair value.

Financial assets held for trading and Debt instruments at FVOCI

The estimated fair value of these financial instruments was established using market values or estimates from an available dealer, or quoted market prices of similar financial instruments. Investments are evaluated at recorded value since they are considered as having a fair value not significantly different from their recorded value. To estimate the fair value of debt investments or representative values in these lines of businesses, we take into consideration additional variables and elements, as long as they apply, including the estimate of prepayment rates and credit risk of issuers.

Loans and accounts receivable at amortised cost

Fair value of commercial, mortgage and consumer loans and credit cards are measured through a discounted cash flow (DCF) analysis. To do so, we use current market interest rates considering product, term, amount and similar loan quality. Fair value of loans with 90 days or more of delinquency are measured by means of the market value of the associated guarantee, minus the rate and term of expected payment. For variable rate loans whose interest rates change frequently (monthly or quarterly) and that are not subjected to any significant credit risk change, the estimated fair value is based on their book value.

Deposits

Disclosed fair value of deposits that do not bear interest and saving accounts is the amount payable at the reporting date and, therefore, equals the recorded amount. Fair value of time deposits is calculated through a discounted cash flow calculation that applies current interest rates from a monthly calendar of scheduled maturities in the market.

Short and long term issued debt instruments

The fair value of these financial instruments is calculated by using a discounted cash flow analysis based on the current incremental lending rates for similar types of loans having similar maturities.

Financial derivative contracts

The estimated fair value of financial derivative contracts is calculated using the prices quoted on the market for financial instruments having similar characteristics.

The fair value of interest rate swaps represents the estimated amount that the Bank determines as exit price in accordance with IFRS 13.

If there are no quoted prices from the market (either direct or indirect) for any derivative instrument, the respective fair value estimates have been calculated by using models and valuation techniques such as Black-Scholes, Hull, and Monte Carlo simulations, taking into consideration the relevant inputs/outputs such as volatility of options, observable correlations between underlying assets, counterparty credit risk, implicit price volatility, the velocity with which the volatility reverts to its average value, and the straight-line relationship (correlation) between the value of a market variable and its volatility, among others.

Measurement of fair value and hierarchy

IFRS 13 - Fair Value Measurement, provides a hierarchy of reasonable values which separates the inputs and/or valuation technique assumptions used to measure the fair value of financial instruments. The hierarchy reflects the significance of the inputs used in making the measurement. The three levels of the hierarchy of fair values are the following:

● Level 1: the inputs are quoted prices (unadjusted) on active markets for identical assets and liabilities that the Bank can access on the measurement date

● Level 2: inputs other than the quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly

● Level 3: inputs are unobservable inputs for the asset or liability i.e. they are not based on observable market data

The hierarchy level within which the fair value measurement is categorized in its entirety is determined based on the lowest level of input that is significant to the fair value measurement in its entirety.

The best evidence of a financial instrument's fair value at the initial time is the transaction price.

In cases where quoted market prices cannot be observed, Management makes its best estimate of the price that the market would set using its own internal models which in most cases use data based on observable market parameters as a significant input (Level 2) and, in very specific cases, significant inputs not observable in market data (Level 3), various techniques are employed to make these estimates, including the extrapolation of observable market data.

Financial instruments at fair value and determined by quotations published in active markets (Level 1) include:

Chilean Government and Department of Treasury bonds

Mutual funds

Instruments which cannot be 100% observable in the market are valued according to other inputs observable in the market (Level 2).

The following financial instruments are classified under Level 2:

Type of financial instrument	Model used in valuation	Description of unobservable inputs
● Mortgage and private bonds	Present Value of Cash Flows Model	Internal Rates of Return ("IRRs") are provided by RiskAmerica, according to the following criterion: If, at the valuation day, there are one or more valid transactions at the Santiago Stock Exchange for a given nemotechnic, the reported rate is the weighted average amount of the observed rates. In the case there are no valid transactions for a given mnemonic on the valuation day, the reported rate is the IRR base from a reference structure, plus a spread model based on historical spread for the same item or similar ones.

● Time deposits	Present Value of Cash Flows Model	IRRs are provided by RiskAmerica, according to the following criterion: If, at the valuation day, there are one or more valid transactions at the Santiago Stock Exchange for a given mnemonic, the reported rate is the weighted average amount of the observed rates. In the case there are no valid transactions for a given mnemonic on the valuation day, the reported rate is the IRR base from a reference structure, plus a spread model based on issuer curves.

● Constant Maturity Swaps (CMS), FX and Inflation Forward (Fwd), Cross Currency Swaps (CCS), Interest Rate Swap (IRS)	Present Value of Cash Flows Model	IRRs are provided by ICAP, GFI, Tradition, and Bloomberg according to this criterion: With published market prices, a valuation curve is created by the bootstrapping method and is then used to value different derivative instruments.

● FX Options	Black-Scholes	Formula adjusted by the volatility simile (implicit volatility), Prices (volatility) are provided by BGC Partners, according to this criterion: With published market prices, a volatility parameter is created by interpolation and then these volatilities are used to value options.

● Guarantee deposits, guarantee received (Threshold)	Present Value of Cash Flows Model	Collateral associated to derivatives financial contracts: Average trading swap (CMS), FX and inflation Forward, Cross Currency Swap (CCS), Interest Rate Swap (IRS) y FX options.

In limited occasions significant inputs not observable in market data are used (Level 3). To carry out this estimate, several techniques are used, including extrapolation of observable market data or a mix of observable data.

The following financial instruments are classified under Level 3:

Type of financial instrument	Model used in valuation	Description of no observable inputs
● Caps/ Floors/ Swaptions	Black Normal Model for Cap/Floors and Swaptions	There is no observable input of implicit volatility.
● UF options	Black – Scholes	There is no observable input of implicit volatility.
● Cross currency swap with window	Hull-White	Hybrid HW model for rates and Brownian motion for FX There is no observable input of implicit volatility.
● CCS (special contracts)	Implicit Forward Rate Agreement (FRA)	Start Fwd unsupported by MUREX (platform) due to the UF forward estimate.
● Cross currency swap, Interest rate swap, Call money swap in Tasa Activa Bancaria (Active Bank Rate) TAB,	Present Value of Cash Flows Model	Validation obtained by using the interest curve and interpolating flow maturities, but TAB is not a directly observable variable and is not correlated to any market input.
● Debt instruments (in our case, low liquidity bonds)	Present Value of Cash Flows Model	Valued by using similar instrument prices plus a charge-off rate by liquidity.
● Loans and account receivable at FVOCI	Present Value of Cash Flows Model	Measured by discounting estimated cash flow using the interest rate of new contracts.

The Bank does not believe that any change in unobservable inputs with respect to level 3 instruments would result in a significantly different fair value measurement.

The following table presents the assets and liabilities that are measured at fair value on a recurrent basis:

	Fair value measurement
As of December 31,	2019		Level 1		Level 2		Level 3
	MCh$		MCh$		MCh$		MCh$

Assets
Financial assets held for trading		270,204		270,204		-		-
Loans and accounts receivable at FVOCI, net		66,065		-		-		66,065
Debt instruments at FVOCI		4,010,272		3,992,421		17,146		705
Derivatives		8,148,608		-		8,133,700		14,908
Guarantee deposits (margin accounts)		314,616		-		314,616		-
Total		12,809,765		4,262,625		8,465,462		81,678

Liabilities
Derivatives		7,390,654		-		7,387,704		2,950
Guarantees received (margin accounts)		994,714		-		994,714		-
Total		8,385,368		-		8,382,418		2,950

	Fair value measurement
As of December 31,	2018		Level 1		Level 2		Level 3
	MCh$		MCh$		MCh$		MCh$

Assets
Financial assets held for trading		77,041		71,158		5,883		-
Loans and accounts receivable at FVOCI, net		68,588		-		-		68,588
Debt instruments at FVOCI		2,394,323		2,368,768		24,920		635
Derivatives		3,100,635		-		3,089,077		11,558
Guarantee deposits (margin accounts)		170,232		-		170,232		-
Total		5,810,819		2,439,926		3,290,112		80,781


Liabilities
Derivatives		2,517,728		-		2,516,933		795
Guarantees received (margin accounts)		371,512		-		371,512		-
Total		2,889,240		-		2,888,445		795

The following table presents assets or liabilities which are not measured at fair value in the statements of financial position but for which the fair value is disclosed:

	Fair value measurement
As of December 31,	2019		Level 1		Level 2		Level 3
	MCh$		MCh$		MCh$		MCh$
Assets
Loans and accounts receivable at amortised cost, net		34,602,793		-		-		34,602,793
Total		34,602,793		-		-		34,602,793
Liabilities
Deposits and interbank borrowings		26,200,921		-		15,903,489		10,297,432
Issued debt instruments and other financial liabilities		10,718,997		-		10,718,997		-
Total		36,919,918		-		26,622,486		10,297,432

	Fair value measurement
As of December 31,	2018		Level 1		Level 2		Level 3
	MCh$		MCh$		MCh$		MCh$

Assets
Loans and accounts receivable at amortised cost, net		30,505,023		-		-		30,505,023
Total		30,505,023		-		-		30,505,023
Liabilities
Deposits and interbank borrowings		23,770,106		-		15,028,689		8,741,417
Issued debt instruments and other financial liabilities		8,605,135		-		8,605,135		-
Total		32,375,241		-		23,633,824		8,741,417

The fair values of other assets and other liabilities approximate their carrying values.

The methods and assumptions to estimate the fair value are defined below:

- Loans and amounts due from credit institutions and from customers – Fair value are estimated for groups of loans with similar characteristics. The fair value was measured by discounting estimated cash flow using the interest rate of new contracts. That is, the future cash flow of the current loan portfolio is estimated using the contractual rates, and then the new loans spread over the risk-free interest rate are incorporated to the risk-free yield curve in order to calculate the loan portfolio fair value. In terms of behavior assumptions, it is important to underline that a prepayment rate is applied to the loan portfolio, thus a more realistic future cash flow is achieved.

- Deposits and interbank borrowings – The fair value of deposits was calculated by discounting the difference between the cash flows on a contractual basis and current market rates for instruments with similar maturities. For variable-rate deposits, the carrying amount was considered to approximate fair value.

- Issued debt instruments and other financial liabilities – The fair value of long-term loans were estimated by cash flow discounted at the interest rate offered on the market with similar terms and maturities.

The valuation techniques used to estimate each level are defined in Note 1,k)

There were no transfer between levels 1 and 2 for the year ended December 31, 2019 and 2018.

The table below shows the effect, at December 31, 2019 and 2018, on the fair value of the main financial instruments classified as Level 3 of a reasonable change in the assumptions used in the valuation. This effect was determined by a sensitivity analysis under a 1bp scenario, detailed in the following table:

As of December 31, 2019
Instrument Level 3	Valuation technique	Main unobservable inputs	Impacts (in MCh$) Sens, -1bp Unfavorable scenario	Impacts (in MCh$) Sens, +1bp Favorable scenario
Derivatives	Present Value method	Curves on TAB (1)	(2,3)	2,3
Debt instruments at FVOCI	Internal rate of return method	BR UF (2)	-	-

As of December 31, 2018
Instrument Level 3	Valuation technique	Main unobservable inputs	Impacts (in MCh$) Sens, -1bp Unfavorable scenario	Impacts (in MCh$) Sens, +1bp Favorable scenario
Derivatives	Present Value method	Curves on TAB (1)	(1,3)	1,3
Available for sale investments	Internal rate of return method	BR UF (2)	-	-

(1)

TAB: "Tasa Activa Bancaria" (Active Bank Rate). Average interest rates on 30, 90, 180 and 360 day deposits published by the Chilean Association of Banks and Financial Institutions (ABIF) in nominal currency (Chilean peso) and in real terms, adjusted for inflation (in Chilean unit of account (Unidad de Fomento - UF)).

(2)

BR: "Bonos de Reconocimiento" (Recognition Bonds). The Recognition Bond is an instrument of money provided by the State of Chile to workers who joined the new pension system, which began operating since 1981.

The following table presents the Bank's activity for assets and liabilities measured at fair value on a recurrent basis using unobserved significant inputs (Level 3) as of December 31, 2019 and 2018:

	Assets		Liabilities
	MCh$		MCh$

As of January 1, 2019		80,781		795

Total realized and unrealized profits (losses)
Included in statements of income		827		2,155
Included in other comprehensive income		70		-
Purchases, issuances, and loans (net)		-		-
As of December 31, 2019		81,678		2,950

Total profits or losses included in comprehensive income for 2019 that are attributable to change in unrealized profit (losses) related to assets or liabilities as of December 31, 2018		897		2,155

	Assets		Liabilities
	MCh$		MCh$

As of January 1, 2018		22,987		7

Total realized and unrealized profits (losses)
Included in statements of income		57,769		(802	)
Included in other comprehensive income		25		-
Purchases, issuances, and loans (net)		-		-
As of December 31, 2018		80,781		(795	)

Total profits or losses included in comprehensive income for 2018 that are attributable to change in unrealized profit (losses) related to assets or liabilities as of December 31, 2017		57,794		(802	)

The realized and unrealized profits (losses) included in comprehensive income for 2019 and 2018, in the assets and liabilities measured at fair value on a recurrent basis through unobservable market data (Level 3) are recorded in the Statements of Comprehensive Income.

The potential effect as of December 31, 2019 and 2018 on the valuation of assets and liabilities valued at fair value on a recurrent basis through unobservable significant inputs (level 3), generated by changes in the principal assumptions if other reasonably possible assumptions that are less or more favorable were used, is not considered by the Bank to be significant.

The following tables show the financial instruments subject to compensation in accordance with IAS 32, for 2019 and 2018:

As of December 31, 2019

	Linked financial instruments, compensated in balance
Financial instruments	Gross amounts		Compensated in balance		Net amount presented in balance		Remains of unrelated and / or unencumbered financial instruments		Amount in Statements of Financial Position
Assets	Ch$ Million		Ch$ Million		Ch$ Million		Ch$ Million
Financial derivative contracts		8,148,151		-		8,148,151		457		8,148,608
Investments under resale agreements		-		-
Loans and accounts receivable at amortised cost, net				-				31,775,420		31,775,420
Loans and accounts receivable at FVOCI, net		66,065				-		66,065		66,065
Total		8,214,216		-		8,148,151		31,841,942		39,990,093
Liabilities
Financial derivative contracts		7,388,145		-		7,388,145		2,509		7,390,654
Investments under resale agreements		380,055		-		380,055		-		380,055
Deposits and interbank borrowings		-		-		-		26,010,067		26,010,067
Total		7,768,200		-		7,768,200		26,012,576		33,780,776

As of December 31, 2018
	Linked financial instruments, compensated in balance
Financial instruments	Gross amounts		Compensated in balance		Net amount presented in balance		Remains of unrelated and / or unencumbered financial instruments		Amount in Statements of Financial Position
Assets	Ch$ Million		Ch$ Million		Ch$ Million		Ch$ Million
Financial derivative contracts		1,947,726		-		1,947,726		1,152,909		3,100,635
Obligations under repurchase agreements		-		-		-		-		-
Loans and accounts receivable at amortised cost, net		-		-		-		29,331,001		29,331,001
Loans and accounts receivable at FVOCI, net		68,588		-		-		68,588		68,588
Total		2,016,314		-		1,947,726		30,552,498		32,500,224
Liabilities
Financial derivative contracts		1,735,555		-		1,735,555		782,173		2,517,728
Investments under resale agreements		48,545		-		48,545		-		48,545
Deposits and interbank borrowings		-		-		-		23,597,862		23,597,862
Total		1,784,100		-		1,784,100		24,380,035		26,164,135

The Bank, in order to reduce its credit exposure in its financial derivative operations, has entered into collateral contracts with its counterparties, in which it establishes the terms and conditions under which they operate. In terms collateral (received/delivered) operates when the net of the fair value of the financial instruments held exceed the thresholds defined in the respective contracts.

	As of December 31, 2019				As of December 31, 2018
Financial derivative contracts	Assets		Liability		Assets		Liability
	MM$		MM$		MM$		MM$

Financial derivative contracts with collateral agreement threshold equal to zero		7,478,837		6,748,219		2,639,835		2,133,149
Financial derivative contracts with non-zero threshold collateral agreement		532,298		517,814		344,520		262,683
Financial derivative contracts without collateral agreement		137,472		124,621		116,280		121,896
Total		8,148,607		7,390,654		3,100,635		2,517,728

Risk Management

12 Months Ended

Dec. 31, 2019

Risk Management [Abstract]

RISK MANAGEMENT

NOTE 38

RISK MANAGEMENT

Introduction and general description

The Bank, due to its activities with financial instruments is exposed to several types of risks. The main risks related to financial instruments that apply to the Bank are as follows:

Market risk: rises from holding financial instruments whose value may be affected by fluctuations in market conditions, generally including the following types of risk:

Foreign exchange risk: this arises as a consequence of exchange rate fluctuations among currencies.

Interest rate risk: this arises as a consequence of fluctuations in market interest rates.

Price risk: this arises as a consequence of changes in market prices, either due to factors specific to the instrument itself or due to factors that affect all the instruments negotiated in the market.

Inflation risk: this arises as a consequence of changes in Chile's inflation rate, whose effect would be mainly applicable to financial instruments denominated in UFs.

Credit risk: this is the risk that one of the parties to a financial instrument fails to meet its contractual obligations for reasons of insolvency or inability of the individuals or legal entities in question to continue as a going concern, causing a financial loss to the other party.

Liquidity risk: is the possibility that an entity may be unable to meet its payment commitments, or that in order to meet them, it may have to raise funds with onerous terms or risk damage to its image and reputation.

Capital risk: this is the risk that the Bank may have an insufficient amount and/or quality of capital to meet the minimum regulatory requirement to operate as a bank, respond to market expectations regarding its creditworthiness, and support its business growth and any strategic possibilities that might arise, in accordance with its strategic plan.

This note includes information on the Bank's exposure to these risks and on its objectives, policies, and processes involved in their measurement and management.

Risk management structure

The Board is responsible for the establishment and monitoring of the Bank's risk management structure, for which purpose it has an on-line corporate governance system which incorporates international recommendations and trends, adapted to Chilean regulatory conditions and given it the ability to apply the most advanced practices in the markets in which the Bank operates.

The effectiveness with which we are able to manage the balance between risk and reward is a significant factor in our ability to generate long term, stable earnings growth. Toward that end, our Board and senior management places great emphasis on risk management.

Integral Risk Committee

The Integral Risk Committee of the Board is responsible for reviewing and monitoring all risks that may affect us, including reputation risk, allowing for an integral risk management. This committee serves as the governing body through which the Board supervises risk in general. It also evaluates the reasonability of the systems for measurement and control of risks.

●

Credit risk

●

Market risk

●

Operational risk

●

Solvency risk (BIS)

●

Legal risks

●

Compliance risks

●

Reputational risks

This Committee includes the Vice Chairman of the Board and five Board members. This committee also includes the CEO, the Director of Risk and other senior level executives from the commercial side of our business.

B. Audit Committee

The Audit Committee (Comité de Directores y Auditoría) is comprised of three members of the Board of Directors. The Chief Executive Officer, General Auditor and other persons from the Bank can be invited to the meetings if necessary and are present on specific matters. This Committee's primary responsibility is to support the Board of Directors in the continuous improvement of our system of internal controls, which includes reviewing the work of both the external auditors and the Internal Audit Department. The committee is also responsible for analyzing observations made by regulatory entities of the Chilean financial system about us and for recommending measures to be taken by our management in response. This committee also performs functions of a remuneration committee as established in Chilean Law, and reviews annually the salary and bonus programs for the executive officers of the Bank. The external auditors are recommended by this committee to our Board of Directors and appointed by our shareholders at the annual shareholders' meeting.

C. Asset and Liability Committee

The ALCO includes the Chairman of the Board and five additional members of the Board, the Chief Executive Officer, the Corporate Financial Controller, the Manager of the Financial Management Division, the Manager of Market Risk, the Manager of the Treasury Division, and other senior members of management. The ALCO meets monthly. All limits reviewed by the ALCO are measured and prepared by the Market Risk Department. The non-Board members of the ALCO meet weekly to review liquidity, funding, capital and market risk related matters.

The main functions of the ALCO are:

	●	Making the most important decisions regarding our exposure to inflation, interest rate risk, funding, capital and liquidity levels. The main limits set and monitored by the ALCO (and measured by the Market Risk Department) are:

	●	Review of the Bank's inflation gap

●

Review of the evolution of the most relevant local and international markets and monetary policies

D. Market Committee

The Market Committee includes the Vice-Chairman of the Board, three additional members of the Board, the Chief Executive Officer, the Manager of Global Banking and Markets, the Manager of the Treasury Division, the Manager of the Financial Management Division, the Manager of Market Risk, the Financial Controller and other senior members of management.

The Market Committee is responsible for:

	●	Establishing a strategy for the Bank's trading investment portfolio

	●	Establishing the Bank's policies, procedures and limits with respect to its trading portfolio. The Bank's Market Risk Department measures all risks and limits and reports these to the Market Committee

	●	Reviewing the net foreign exchange exposure and limit

●

Reviewing the evolution of the most relevant local and international markets and monetary policies

E. Risk Department

All issues regarding risk in the Bank are the responsibility of the Bank's Risk Department. The Risk Department reports to the CEO but has full independence, and no risk decisions can be made without its approval.

Credit risk

Credit risk is the risk that one of the parties to a financial instrument fails to meet its contractual obligations for reasons of insolvency or inability of the individuals or legal entities in question to continue as a going concern, causing a financial loss to the other party. The Bank consolidates all elements and components of credit risk exposure to manage credit risk (i.e., individual delinquency risk, inherent risk of a business line or segment, and/or geographical risk).

In Note 9 and Note 11, we present our net exposure to credit risk at December 31, 2019 and 2018.

Credit Risk Governance

The Risk Division, our credit analysis and risk management group, is largely independent of our Commercial Division, Risk evaluation teams interact regularly with our clients. For larger transactions, risk teams in our headquarters work directly with clients when evaluating credit risks and preparing credit applications. Various credit approval committees, all of which include Risk Division and Commercial Division personnel, must verify that the appropriate qualitative and quantitative parameters are met by each applicant. Each committee's powers are defined by our Board of Directors.

Santander-Chile's governance rules have established the existence of the Integral Risk Committee. This committee is responsible for revising and following all risks that may affect us, including reputational risk, allowing for an integral risk management. This committee serves as the governing body through which the Board supervises all risk functions. It also evaluates the reasonability of the systems for measurement and control of risks. This Committee includes the Vice Chairman of the Board and five Board members.

The Board has delegated the duty of credit risk management to the Integral Risk Committee, as well as to the Bank's risk departments, whose roles are summarized below:

●

Verify compliance with the strategic objectives of the group, depending on both assumed and potential risk, and alerting management to such risks.

●

Propose the primary metrics for risk appetite framework.

●

Review the level of compliance with regulatory provisions and recommendations issued by the Local and External Supervisors, ensuring their implementation on the stipulated dates.

●

Analyze with a comprehensive vision, the map of recommendations and incidents formulated by the different control instances (FMC-former SBIF, DAI and External Audit) in order to identify the main risks involved.

●

Review the risk benchmark analysis, and from its results, identify and propose "best practices" or corrective / preventive actions, ensuring their proper implementation.

●

Review the adequate management of risks by the management areas, formulating where appropriate, the mitigation actions in accordance with the policies approved by the Board.

●

Monitoring, analysis and control of the limits defined in the Risk Framework (basic and complementary metrics) and the key credit risk indicators of each zone, segment or product, identifying possible sources of concern.

●

Analyze the relevant aspects of the risk (exogenous variables), which could eventually materialize in possible losses for the business (emerging risks).

●

Analyze and propose eventual changes in the policies and procedures used by the Bank for the administration, control and management of risks, when inconsistencies or vulnerabilities are verified.

●

Encourage compliance by the Bank with the best corporate governance practices in risk management,

●

Pre-review the documents of type 0 and 1 (Frames and Models) that were defined in the Approval Hierarchy model, which must then be approved in the Directory.

●

Perform, according to the calendar proposed by the Risk Department or on request, the sectoral analyzes considered relevant.

●

Review of risks in terms of Risk Compliance and Reputational Risk.

●

Any other task that the Board deems necessary.

The following diagram illustrates the governance of our credit risk division including the committees with approval power:

Role of Santander Spain's Global Risk Department: Credit Risk

In matters regarding Credit Risk, Santander Spain's Global Risk Department has the following role:

●

All credit risks greater than U.S.$80 million, after being approved locally, are reviewed by Santander Spain. This additional review ensures that no global exposure limit is being breached.

●

In standardized risks, the consumer and mortgage scoring models are developed locally but are reviewed and approved by Santander Spain's Global Risk Department.

●

For each scoring model, a quarterly Risk Report is prepared, which is reviewed locally and is also sent to Santander Analitycs (Santander Spain). This report includes the evolution of basic credit risk parameters such as loan amounts, non-performance, charge-offs and provisions.

●

Monthly, the Controller of the Risk Department sends a report to Santander Spain's Global Risk Department covering all the main indicators regarding credit risk and the evolution of credit risk as compared to the budgeted levels.

Impairment assessment (policy applicable from January 1, 2019)

In accordance with the requirements of IFRS 9 the Bank has developed a new credit risk model, applicable from January 1, 2019.

Definition of default and cure

The Bank considers a financial instrument defaulted and therefore Stage 3 for ECL calculations in all cases when the borrower becomes 90 days past due on its contractual payments.

As a part of a qualitative assessment of whether a customer is in default, the Bank also considers a variety of instances that may indicate unlikeliness to pay. Such events include:

●

Internal rating of the borrower indicating default or near default

●

The borrower requesting emergency funding from the Bank

●

The borrower having past due liabilities to public creditors or employees

●

The borrower is deceased

●

A material decrease in the underlying collateral value where the recovery of the loan is expected from the sale of the collateral

●

A material decrease in the borrower's turnover or the loss of a major customer

●

A covenant breach not waived by the Bank

●

The debtor (or any legal entity within the debtor's group) filing for bankruptcy application/protection

●

Debtor's listed debt or equity suspended at the primary exchange because of rumors or facts about financial difficulties

It is the Bank's policy to consider a financial instrument as 'cured' and therefore re-classified out of Stage 3 when none of the default criteria have been present for at least twelve consecutive months (and 24 months for special vigilance operations). The decision whether to classify an asset as Stage 2 or Stage 1 once cured depends on the updated credit grade, at the time of the cure, and whether this indicates there has been a significant increase in credit risk compared to initial recognition.

Internal rating and PD estimation

The Bank's Credit Risk Department operates its internal rating models. The models incorporate both qualitative and quantitative information and, in addition to information specific to the borrower utilise supplemental external information that could affect the borrower's behavior. The internal credit grades are assigned based on the internal scoring policy, PDs are then adjusted for IFRS 9 ECL calculations to incorporate forward looking information and the IFRS 9 Stage classification of the exposure.

The following table shows quality assets and its related provision, based on our internal scoring policy as of December 31, 2019 and 2018:

	December 31, 2019
	Individually assessed
Commercial	Stage 1		Stage 2		Stage 3		Total Individual		Percentage			Stage 1		Stage 2		Stage 3		Total ECL Allowance		Percentage
Portfolio	MCh$		MCh$		MCh$		MCh$		%			MCh$		MCh$		MCh$		MCh$		%

A1		99,042		-		-		99,042		0.30	%		2		-				2		0.00	%
A2		907,659		37		-		907,696		2.78	%		443		-				443		0.05	%
A3		2,418,990		61		-		2,419,051		7.41	%		2,617		-				2,617		0.29	%
A4		3,262,671		7,184		-		3,269,855		10.01	%		4,399		22				4,421		0.49	%
A5		2,188,717		22,163		-		2,210,880		6.77	%		7,618		515				8,133		0.91	%
A6		1,086,401		47,157		487		1,134,045		3.47	%		6,461		1,410		208		8,079		0.90	%
B1		-		603,201		-		603,201		1.85	%		-		12,641		-		12,641		1.41	%
B2		-		82,781		560		83,341		0.26	%		-		3,773		205		3,978		0.44	%
B3		-		85,034		817		85,851		0.26	%		-		3,367		261		3,628		0.40	%
B4		-		83,039		50,662		133,701		0.41	%		-		4,085		21,910		25,995		2.90	%
C1		-		45,433		113,004		158,437		0.48	%		-		3,516		50,440		53,956		6.02	%
C2		-		8,865		66,965		75,830		0.23	%		-		614		28,504		29,118		3.25	%
C3		-		15,762		32,839		48,601		0.15	%		-		221		11,281		11,502		1.28	%
C4		-		2,405		38,967		41,372		0.13	%		-		170		20,039		20,209		2.26	%
C5		-		847		44,057		44,904		0.14	%		-		43		27,586		27,629		3.08	%
C6		-		998		52,649		53,647		0.16	%		-		12		35,732		35,744		3.99	%
Subtotal		9,963,480		1,004,967		401,007		11,369,454		34.80	%		21,540		30,389		196,166		248,095		27.69	%

	Collectively assessed
	Stage 1		Stage 2		Stage 3		Total Group		Percentage			Stage 1		Stage 2		Stage 3		Total ECL Allowance		Percentage
	MCh$		MCh$		MCh$		MCh$		%			MCh$		MCh$		MCh$		MCh$		%
Commercial		3,839,143		240,100		413,628		4,492,871		13.75	%		35,887		25,555		197,032		258,474		28.84	%
Mortgage		10,275,966		457,948		529,081		11,262,995		34.47	%		8,446		14,509		78,104		101,059		11.28	%
Consumer		4,963,047		292,718		290,430		5,546,195		16.98	%		67,396		50,808		170,263		288,467		32.19	%
Subtotal		19,078,156		990,766		1,233,139		21,302,061		65.20	%		111,729		90,872		445,399		648,000		72.31	%
Total		29,041,636		1,995,733		1,634,146		32,671,515		100.00	%		133,269		121,261		641,565		896,095		100.00	%

	December 31, 2018
	Individually assessed
Commercial	Stage 1		Stage 2		Stage 3		Total Individual		Percentage			Stage 1		Stage 2		Stage 3		Total ECL Allowance		Percentage
Portfolio	MCh$		MCh$		MCh$		MCh$		%			MCh$		MCh$		MCh$		MCh$		%

A1		29,998		-		-		29,998		0,10	%		2		-		-		2		0,00	%
A2		1,074,789		-		-		1,074,789		3,56	%		525		-		-		525		0,06	%
A3		2,699,684		309		-		2,699,993		8,94	%		2,526		-		-		2,526		0,29	%
A4		3,200,608		16,546		-		3,217,154		10,65	%		8,865		323		-		9,188		1,04	%
A5		1,755,259		26,141		-		1,781,400		5,90	%		11,296		453		-		11,749		1,33	%
A6		935,499		45,671		-		981,170		3,25	%		6,975		2,213		-		9,188		1,04	%
B1		-		494,915		187		495,102		1,64	%		-		14,107		79		14,186		1,61	%
B2		-		81,955		156		82,111		0,27	%		-		2,786		66		2,852		0,32	%
B3		-		67,089		614		67,703		0,22	%		-		3,841		233		4,074		0,46	%
B4		-		47,653		45,480		93,133		0,31	%		-		2,488		19,688		22,176		2,51	%
C1		-		46,383		108,325		154,708		0,51	%		-		2,548		48,147		50,695		5,75	%
C2		-		15,678		39,246		54,924		0,18	%		-		1,261		18,171		19,432		2,20	%
C3		-		19,655		26,204		45,859		0,15	%		-		733		10,803		11,536		1,31	%
C4		-		3,560		32,445		36,005		0,12	%		-		246		17,077		17,323		1,96	%
C5		-		703		64,762		65,465		0,22	%		-		32		40,541		40,573		4,60	%
C6		-		1,525		69,511		71,036		0,22	%		-		35		43,310		43,345		4,91	%
Subtotal		9,695,837		867,783		386,930		10,950,550		36,24	%		30,189		31,066		198,115		259,370		29,39	%

	Collectively assessed
	Stage 1		Stage 2		Stage 3		Total Group		Percentage			Stage 1		Stage 2		Stage 3		Total ECL Allowance		Percentage
	MCh$		MCh$		MCh$		MCh$		%			MCh$		MCh$		MCh$		MCh$		%
Commercial		3,616,969		232,472		386,154		4,235,595		14,02	%		43,541		24,574		179,317		247,432		28,04	%
Mortgage		4,341,740		249,039		285,510		4,876,289		16,14	%		70,904		54,372		159,066		284,342		32,23	%
Consumer		9,258,962		447,496		444,523		10,150,981		33,60	%		9,006		15,102		67,162		91,270		10,34	%
Subtotal		17,217,671		929,007		1,116,187		19,262,865		63,76	%		123,451		94,048		405,545		623,044		70,61	%
Total		26,913,508		1,796,790		1,503,117		30,213,415		100,00	%		153,640		125,114		603,660		882,414		100,00	%

In relation to the credit quality of the investment portfolio, local regulations specify that banks are able to hold only local and foreign fixed–income securities except in certain cases. Additionally, Banco Santander-Chile has internal policies to ensure that only securities approved by the Market Risk department, which are stated in the documents "APS" – Products and underlying Approval, are acquired. The Credit Risk Department sets the exposure limits to those approved APS's. The APS is updated on daily basis.

As of December 31, 2019, 99% our total investment portfolio corresponds to securities issued by the Chilean Central Bank and US treasury notes.

Exposure at default

The exposure at default (EAD) represents the gross carrying amount of the financial instruments subject to the impairment calculation, addressing both the client's ability to increase its exposure while approaching default and potential early repayments too.

To calculate the EAD for a Stage 1 loan, the Bank assesses the possible default events within 12 months for the calculation of the 12mECL. However, if a Stage 1 loan that is expected to default in the 12 months from the balance sheet date and is also expected to cure and subsequently default again, then all linked default events are taken into account. For Stage 2, Stage 3 the exposure at default is considered for events over the lifetime of the instruments.

Loss given default

The credit risk assessment is based on a standardised LGD assessment framework that results in a certain LGD rate. These LGD rates take into account the expected EAD in comparison to the amount expected to be recovered or realised from any collateral held.

The Bank segments its retail lending products into smaller homogeneous portfolios (evaluated collective), based on key characteristics that are relevant to the estimation of future cash flows. The applied data is based on historically collected loss data and involves a wider set of transaction characteristics (i.e., product type, wider range of collateral types) as well as borrower characteristics.

Further recent data and forward-looking economic scenarios are used in order to determine the IFRS 9 LGD rate for each group of financial instruments. Under IFRS 9, LGD rates are estimated for the Stage 1, Stage 2, Stage 3 IFRS 9 segment of each asset class. The inputs for these LGD rates are estimated and, where possible, calibrated through back testing against recent recoveries. These are repeated for each economic scenario as appropriate.

Significant increase in credit risk (SICR)

The Bank continuously monitors all assets subject to ECLs. In order to determine whether an instrument or a portfolio of instruments is subject to 12 month ECL or Lifetime ECL, the Bank assesses whether there has been a significant increase in credit risk since initial recognition.

The Bank also applies a secondary qualitative method for triggering a significant increase in credit risk for an asset, such as moving a customer/facility to the watch list (Special vigilance). The Bank may also consider that events explained in letter a) above are a significant increase in credit risk as opposed to a default. Regardless of the change in credit grades, if contractual payments are more than 30 days past due, the credit risk is deemed to have increased significantly since initial recognition.

When estimating ECLs on a collective basis for a group of similar assets, the Bank applies the same principles for assessing whether there has been a significant increase in credit risk since initial recognition.

Quantitative criteria for SICR Stage 2:

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 terms. The following formula is used to determine such threshold:

Threshold = Lifetime PD (at reporting date) – Lifetime PD (at origination)

Collectively assessed				Individually assessed
Mortgages	Other loans	Revolving (Credit cards)	Collectively assessed SME	Individually assessed SME	Middle market	Corporate and Investment Banking
39.57 %	39.11 %	15.73 %	39.11 %	22.69%	4.5 %	Santander Group criteria

There is also a relative threshold of 100% of all portfolios with the exception of the Corporate and Investment Banking Portfolio.

Qualitative criteria for SICR Stage 2:

The qualitative criteria is based on the existence of evidence that leads to an automatic classification of financial instruments in stage 2, mainly 30 days overdue and restructured. Thresholds of SICR are calibrated based on the average ECL of exposures that are 30 days overdue or with a level of credit risk considered to be "significant".

Collectively assessed				Individually assessed
Mortgages	Other loans	Revolving (Credit cards)	Collectively assessed SME	Individually assessed SME	Middle market	Corporate and Investment Banking
Irregular portfolio > 30 days	Irregular portfolio > 30 days	Irregular portfolio > 30 days	Irregular portfolio > 30 days	Irregular portfolio > 30 days	Irregular portfolio > 30 days	Irregular portfolio > 30 days
Restructured marked for monitoring	Restructured marked for monitoring	Restructured marked for monitoring	Restructured marked for monitoring	Restructured marked for monitoring	Restructured marked for monitoring	Restructured marked for monitoring
				Clients that are considered to be substandard or in incompliance (pre-legal action)	Clients that are considered to be substandard or in incompliance (pre-legal action)	Clients that are considered to be substandard or in incompliance (pre-legal action)

These thresholds are defined by the Model Committee and the Integral Risk Committee, and are evaluated annually with updates made depending on impacts and definitions of the risk models associated to each portfolio.

Grouping financial assets measured on a collective basis

The Bank calculates ECLs either on a collective or an individual basis.

The evaluates on individual basis commercial loans that are greater than Ch$400 million (US$240,000), while smaller commercial loans, mortgage loans and consumer loans are grouped into homogeneous portfolios, based on a combination of internal and external characteristics.

Modified loans

When loan measured at amortised cost has been renegotiated or modified but not derecognised, the Bank must recognise 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.

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.

	As of December 31, 2019											As of December 31, 2018
	Stage 1		Stage 2			Stage 3			Total			Stage 1		Stage 2			Stage 3			Total
	MCh$		MCh$			MCh$			MCh$			MCh$		MCh$			MCh$			MCh$
Gross carrying amount		29,041,636		1,995,733			1,634,146			32,671,515			26,913,508		1,796,790			1,503,116			30,213,415
Modified loans		-		512,529			611,316			1,123,845			-		582,513			815,094			1,397,607
%		-		25.68	%		37.41	%		3.44	%		-		32.42	%		54.23	%		4.63	%

ECL allowance		133,269		121,261			641,565			896,095			153,640		125,114			603,660			882,414
Modified loans		-		36,329			242,649			278,978			-		44,099			323,802			367,901
%		-		29.96	%		37.82	%		31.13	%		-		35.25	%		53.64	%		41.69	%

Analysis of risk concentration

The following table shows the risk concentration by industry, and by stage before ECL allowance of loans and account receivable at amortised cost:

	December 31, 2019								December 31, 2018
	Stage 1		Stage 2		Stage 3		Total		Stage 1		Stage 2		Stage 3		Total
Commercial	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$
loans
Manufacturing		1,110,484		107,356		67,974		1,285,814		992,786		92,931		54,048		1,139,765
Mining		280,297		123,005		3,739		407,041		182,342		21,821		4,585		208,748
Electricity, gas, and water		309,941		22,907		8,196		341,044		384,288		22,365		2,279		408,932
Agriculture and livestock		1,020,857		172,984		93,440		1,287,281		934,199		166,271		100,781		1,201,251
Forest		132,483		17,035		15,689		165,207		120,371		9,402		14,115		143,888
Fishing		223,980		24,879		7,695		256,554		238,348		11,104		3,569		253,021
Transport		665,570		64,115		34,192		763,877		716,493		55,011		37,802		809,306
Communications		206,660		28,122		6,168		240,950		178,215		30,407		7,222		215,844
Construction (*)		782,265		85,435		106,568		974,268		723,600		88,691		93,747		906,038
Commerce		2,655,982		110,326		30,107		2,796,415		2,950,517		189,623		199,924		3,340,064
Services		2,971,563		190,097		204,472		3,366,132		1,771,595		81,159		12,915		1,865,669
Other		3,442,541		298,806		236,395		3,977,742		4,120,052		331,470		242,097		4,693,619

Subtotal		13,802,623		1,245,067		814,635		15,862,325		13,312,806		1,100,255		773,084		15,186,145

Mortgage loans		10,275,966		457,948		529,081		11,262,995		9,258,962		447,496		444,523		10,150,981

Consumer loans		4,963,047		292,718		290,430		5,546,195		4,341,740		249,039		285,510		4,876,289

Total		29,041,636		1,995,733		1,634,146		32,671,515		26,913,508		1,796,790		1,503,117		30,213,415

(*)

In 2019 we improved the classification of our construction loans, reassigning loans for real state rental investment companies to services.

Macro economical forward-looking information and scenarios

The annual growth forecasts for the most relevant macroeconomic variables for each of our scenarios are as follows:

	Average estimates 2020 - 2021
	Unfavorable scenario 2			Unfavorable scenario 1			Base scenario			Favorable scenario 1			Favorable scenario 2
Official interest rate		0.25	%		0.50	%		1.59	%		3.20	%		4.42	%
Unemployment rate		7.31	%		6.96	%		6.50	%		6.04	%		5.70	%
Housing Price growth		(1.70	)%		1,04	%		4.67	%		8.30	%		11.04	%
GDP growth		(1.16	)%		0.67	%		3.12	%		5.56	%		7.40	%
Consumer Price Index		(0.26	)%		1.07	%		2.82	%		4.57	%		5.90	%

The highest probability of occurrence is associated to the base scenario, while the extreme scenarios have a lower probability than the more moderate scenarios.

The methodology used for the generation of the local scenarios is based on the Methodology Framework of the Corporate Research Service and is applied to the loan portfolio with the exception of loans from the Corporate and Investment Banking segment which uses global scenarios as defined by the Santander Group. The probabilities for the scenarios must total 100% and be symmetrical.

Local scenario				Global scenario
	Probability weighting				Probability weighting
Favorable scenario 2		10	%	Favorable scenario 1		30	%
Favorable scenario 1		15	%	Base scenario		40	%
Base scenario		50	%	Unfavorable scenario 1		30	%
Unfavorable scenario 1		15	%
Unfavorable scenario 2		10	%

The ECL allowance sensibility to future macro-economic conditions is as follows:

	December 31, 2019			December 21, 2018
	MCh$			MCh$
Reported ECL allowance		896,095			882,414
Gross carrying amount		32,671,515			30,213,415

Reported ECL Coverage		2.74	%		2.92	%

ECL amount by scenarios
Favorable scenarios 2		797,501			745,089
Favorable scenarios 1		835,956			815,113
Base scenarios		884,480			879,358
Unfavorable scenarios 2		929,802			949,329
Unfavorable scenarios 2		962,437			970,563

Coverage ratio by scenarios
Favorable scenarios 2		2.44	%		2.46	%
Favorable scenarios 1		2.56	%		2.69	%
Base scenarios		2.71	%		2.90	%
Unfavorable scenarios 2		2.85	%		3.13	%
Unfavorable scenarios 2		2.95	%		3.21	%

Collateral and other credit enhancement

The amount and type of collateral required depends on an assessment of the credit risk of the counterparty. Guidelines are in place covering the acceptability and valuation of each type of collateral.

The main types of collateral obtained are, as follows:

●

For securities lending and reverse repurchase transactions, cash or securities

●

For corporate and small business lending, charges over real estate properties, inventory and trade receivables and, in special circumstances, government guarantees

●

For retail lending, mortgages over residential properties

The following table show the maximum exposure to credit risk by class of financial asset, associated collateral and the net exposure to credit risk:

	As of December 31,
	2019								2018
	Maximum exposure to credit risk		Collateral		Net exposure		Associated ECL		Maximum exposure to credit risk		Collateral		Net exposure		Associated ECL
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$
Commercial loans		15,928,491		8,180,015		7,748,476		506,670		15,254,838		7,369,291		7,885,547		506,908
Mortgage loans		11,262,995		10,725,604		537,391		101,059		10,150,981		9,699,324		451,657		91,270
Consumer Loans		5,546,195		748,577		4,797,618		288,467		4,876,289		754,920		4,121,369		284,342
Total		32,737,681		19,654,196		13,083,485		896,196		30,282,108		17,823,535		12,458,537		882,520

(*)	Includes Loans and account receivable at FVOCI

According to the Bank's policy when an asset (real state) is repossessed are transferred to assets held for sale at their fair value less cost to sell as non-financial assets at the repossession date.

Maximum exposure to credit risk

Financial assets and off-balance sheet commitments

For financial assets recognised in the Consolidated Statements of Financial Position, maximum credit risk exposure equals their carrying value. Below is the distribution by financial asset and off-balance sheet commitments of the Bank's maximum exposure to credit risk as of December 31, 2019 and 2018, without deduction of collateral, security interests or credit improvements received:

		As of December 31,
		2019		2018
		Amount of exposure		Amount of exposure
	Note	MCh$		MCh$

Deposits in banks	5		2,693,342		1,240,578
Cash items in process of collection	5		355,062		353,757
Financial derivative contracts	8		8,148,608		3,100,635
Financial assets held for trading	6		270,204		77,041
Loans and account receivable at amortised cost / Loans and account receivable at FVOCI	9 /10		31,841,485		29,399,589
Debt instrument at fair value through other comprehensive income	11		4,010,272		2,394,323

Off-balance commitments:
Letters of credit issued			140,572		223,420
Foreign letters of credit confirmed			70,192		57,038
Performance guarantees			1,929,894		1,954,205
Available credit lines			8,732,422		8,997,650
Personal guarantees			451,950		133,623
Other irrevocable credit commitments			485,991		327,297
Total			59,129,994		48,345,002

Foreign derivative contracts

As of December 31, 2019, the Bank's foreign exposure -including counterparty risk in the derivative instruments' portfolio- was USD 2,309 million or 3,65% of assets. In the table below, exposure to derivative instruments is calculated by using the equivalent credit risk; which equals the replacement carrying amount plus the maximum potential value, considering the cash collateral that minimizes exposure.

Below, there are additional details regarding our exposure for those countries classified above 1 and represents our majority of exposure to categories other than 1, Below we detail as of December 31, 2019, considering fair value of derivative instruments.

Country	Classification	Derivative Instruments (adjusted to market) USD		Deposits USD		Loans USD		Financial investments USD		Total Exposure USD
China	2		0.00		0.00		7.23		0.00		7.23
Colombia	2		1.24		0.00		0.00		0.00		1.24
Italy	2		0.00		1.36		0.32		0.00		1.68
Mexico	2		9.42		0.04		0.00		0.00		9.46
Panama	2		1.50		0.00		0.00		0.00		1.50
Peru	2		2.20		0.00		0.00		0.00		2.20
Uruguay	2		0.00		0.00		0.10		0.00		0.10
Total			14.36		1.40		7.65		0.00		23.41

Our exposure to the group is as follows:

Counterpart	Country	Classification	Derivative instruments (market adjusted) MUSD		Deposits MUSD		Loans MUSD		Financial Investments MUSD		Exposure Exposure MUSD
Banco Santander España (*)	Spain	1		319.0		54.8		0.4		0.0		374.20
Santander UK	UK	1		24.0		2.0		0.0		0.0		26.00
Banco Santander Mexico	Mexico	2		9.4		0.0		0.0		0.0		9.4
Total				352.4		56.8		0.4		0.0		409.6

(*)

The total amount of this exposure to derivative instruments must be compensated daily with collateral and, therefore, the net credit exposure is USD 0.

Security interests and credit improvements

The maximum exposure to credit risk is reduced in some cases by security interests, credit improvements, and other actions which mitigate the Bank's exposure. Based on the foregoing, the creation of security interests are a necessary but not a sufficient condition for granting a loan; accordingly, the Bank's acceptance of risks requires the verification of other variables and parameters, such as the ability to pay or generate funds in order to mitigate the risk being taken on.

The procedures used for the valuation of security interests utilize the prevailing market practices, which provide for the use of appraisals for mortgage securities, market prices for stock securities, fair value of the participating interest for investment funds, etc. All security interests received must be instrumented properly and registered on the relevant register, as well as have the approval of legal divisions of the Bank.

The risk management model includes assessing the existence of adequate and sufficient guarantees that allow recovering the credit when the debtor's circumstances prevent them from fulfilling their obligations.

The Bank has classification tools that allow it to group the credit quality of transactions or customers. Additionally, the Bank has historical databases that keep this internally generated information to study how this probability varies. Classification tools vary according to the analyzed customer (commercial, consumer, SMEs, etc.).

Below is the detail of security interests, collateral, or credit improvements provided to the Bank as of December 31, 2019 and 2018,

	As of December 31,
	2019		2018
	MCh$		MCh$
Non-impaired financial assets:
Properties/mortgages		23,371,510		22,047,354
Investments and others		2,785,219		2,200,776
Impaired financial assets:
Properties/ mortgages		101,456		119,181
Investments and others		525		865
Total		26,258,710		24,368,176

Credit risk mitigation techniques

The Bank applies various methods of reducing credit risk, depending on the type of customer and product. As we shall see, some of these methods are specific to a particular type of transaction (i.e., real estate guarantees) while others apply to groups of transactions (i.e., netting and collateral arrangements).

Collateral

Banco Santander controls the credit risk through the use of collateral in its operations. Each business unit is responsible for credit risk management and formalizes the use of collateral in its lending policies.

Banco Santander uses guarantees in order to increase their resilience in the subject to credit risk operation. The guarantees can be used fiduciary, real, legal structures with power mitigation and compensation agreements. The Bank periodically reviews its policy guarantees by technical parameters, normative and also its historical basis, to determine whether the guarantee is legally valid and enforceable.

Credit limits are continually monitored and changed in customer behavior function. Thus, the potential loss values represent a fraction of the amount available.

Collateral refers to the assets pledged by the customer or a third party to secure the performance of an obligation. Collateral may be:

●

Financial: cash, security deposits, gold, etc.

●

Non-financial: property (both residential and commercial), other movable property, etc.

One very important example of financial collateral is the collateral agreement. Collateral agreements comprise a set of highly liquid instruments with a certain economic value that are deposited or transferred by a counterparty in favor of another party in order to guarantee or reduce any counterparty credit risk that might arise from the portfolios of derivative transactions between the parties in which there is exposure to risk.

Collateral agreements vary in nature but, whichever the specific form of collateralisation may be, the ultimate aim, as with the netting technique, is to reduce counterparty risk.

Transactions subject to a collateral agreement are assessed periodically (normally on a daily basis). The agreed-upon parameters defined in the agreement are applied to the net balance arising from these assessments, from which the collateral amount (normally cash or securities) payable to or receivable from the counterparty is obtained.

For real estate collateral periodic re-appraisal processes are in place, based on the actual market values for the different types of real estate, which meet all the requirements established by the regulator.

Specifically, mortgage loans are secured by a real property mortgage, and threshold mitigate counterparty credit risk of derivative instruments, (See note 9 c) ii) and iii), for a detail of the impaired portfolio and non-performing loans with or without guarantee).

Personal guarantees and credit derivatives

Personal guarantees are guarantees that make a third party liable for another party's obligations to the Bank. They include, for example, security deposits and standby letters of credit. Only guarantees provided by third parties that meet the minimum requirements established by the supervisor can be recognised for capital calculation purposes.

Credit derivatives are financial instruments whose main purpose is to hedge credit risk by buying protection from a third party, whereby the Bank transfers the risk of the issuer of the underlying instrument. Credit derivatives are OTC instruments, i.e. they are not traded in organized markets.

Credit derivative hedges, mainly credit default swaps, are entered into with leading financial institutions.

Assets Received in Lieu of Payment

Assets received or awarded in lieu of payment of loans and accounts receivable from clients are recognised at their fair value (as determined by an independent appraisal). The excess of the outstanding loan balance over the fair value is charged to net income for the period, 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 (assuming a forced sale).

At December 31, 2019, assets received or awarded in lieu of payment amounted to Ch$38,890 million (gross amount: Ch$40,932 million; allowance: Ch$2,042 million).

At December 31, 2018, assets received or awarded in lieu of payment amounted to Ch$38,326 million (gross amount: Ch$39,049 million; allowance: Ch$723 million).

Liquidity risk

Liquidity risk is the risk that the Bank may have difficulty meeting the obligations associated with its financial obligations.

Liquidity risk management

The Bank is exposed on a daily basis to requirements for cash funds from various banking activities, such as wires from checking accounts, fixed-term deposit payments, guarantee payments, disbursements on derivatives transactions, etc. As typical in the banking industry, the Bank does not hold cash funds to cover the balance of all the positions, as experience shows that only a minimum level of these funds will be withdrawn, which can be accurately predicted with a high degree of certainty.

The Bank's approach to liquidity management is to ensure-- whenever possible--to have enough liquidity on hand to fulfill its obligations at maturity, in both normal and stressed conditions, without entering into unacceptable debts or risking the Bank's reputation. The Board establishes limits on the minimal part of available funds close to maturity to fulfill said payments as well as over a minimum level of interbank operations and other loan facilities that should be available to cover transfers at unexpected demand levels. This is constantly reviewed. Additionally, the Bank must comply with the regulation limits established by the FMC (former SBIF) for maturity mismatches.

These limits affect the mismatches of future flows of income and expenditures of the Bank on an individual basis. They are:

i. mismatches of up to 30 days for all currencies, up to the amount of basic capital

ii. mismatches of up to 30 days for foreign currencies, up to the amount of basic capital

iii. mismatches of up to 90 days for all currencies, twice the basic capital

The Financial Management Division receives information from all the business units on the liquidity profile of their financial assets and liabilities, as well as breakdowns of other projected cash flows stemming from future businesses. On the basis of that information, the Financial Management Division maintains a portfolio of liquid short–term assets, comprised mainly of liquid investments, loans and advances to other banks, to make sure the Bank has sufficient liquidity. The business units' liquidity needs are met through short–term transfers from the Financial Management Division to cover any short–term fluctuations and long–term financing to address all the structural liquidity requirements.

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 month, for which a variety of scenarios encompassing both normal market conditions and conditions of market fluctuation are used. The liquidity policy and procedures are subject to review and approval by the Bank's Board. Periodic reports are generated by the Market Risk Department, providing a breakdown of the liquidity position of the Bank and its subsidiaries, including any exceptions and the corrective measures adopted, which are regularly submitted to the ALCO for review.

The Bank relies on demand deposits from Retail, Middle-Market and Corporates, obligations to banks, debt instruments, and time deposits as its main sources of funding. Although most obligations to banks, debt instruments and time deposits mature in over a year, customer (retail) and institutional deposits tend to have shorter maturities and a large proportion of them are payable within 90 days. The short–term nature of these deposits increases the Bank's liquidity risk, and hence, the Bank actively manages this risk by continual supervision of the market trends and price management.

Liquidity risk management seeks 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.

The following table sets forth the balance of our liquidity portfolio managed by our Financial Management Division in the manner in which it is presented to the Asset and Liability Committee (ALCO) and the Board. The ALCO has determined that our liquidity portfolio must be comprised of cash plus assets that can be readily convertible into cash either through the Chilean Central Bank window, overnight deposits or instruments or the local secondary market. The management of the Bank's liquidity portfolio is performed by the Financial Management Division under rules determined by the ALCO and based on classifications by the FMC and the Bank's management.

	As of December 31,
	2019			2018
	MCh$			MCh$
Financial investments for trading		270,204			77,041
Available for sale investments		4,010,272			2,394,323
Encumbered assets (net) (1)		(380,055	)		(48,843	)
Net cash (2)		2,384,323			149,321
Net Interbank deposits (3)		(281,620	)		967,095
Total liquidity portfolio		6,013,124			3,538,937

(1)

Assets encumbered through repurchase agreements are deduced from liquidity portfolio.

(2)

Cash minus reserve requirements. As is presented in Note 5 the reserve requirements are established by the monthly average reserves that the bank must maintain in accordance with regulation governing minimum reserves.

(3)

Includes overnight deposits in Central Bank, domestic banks and foreign banks.

Exposure to liquidity risk

A similar, yet not identical, measure is the calculation used to measure the Bank´s liquidity limit as established by the FMC (former SBIF). The Bank determines a mismatch percentage for purposes of calculating such liquidity limit which is calculated by dividing its benefits (assets) by its obligations (liabilities) according to maturity based on estimated repricing. The mismatch amount permitted for the 30 day and under period is 1 time [regulatory] capital and for the 90 day and under period – 2 times [regulatory] capital.

The following table displays the actual derived percentages as calculated per above:

	As of December 31,
	2019 %		2018 %
30 days		63		(20	)
30 days foreign currency		-		-
90 days		79		(37	)

Below, is the breakdown by maturity, of the liability balances of the Bank as of December 31, 2019 and 2018:

	Demand		Up to 1 month		Between 1 and 3 months		Between 3 and 12 months		Subtotal up to 1 year		Between 1 and 3 years		Between 3 and 5 years		More than 5 years		Subtotal after 1 year		Total
As of December 31, 2019	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$
Obligations under repurchase agreements		-		380,055		-		-		380,055		-		-		-		-		380,055
Checking accounts, time deposits and other time liabilities		10,439,705		5,184,567		4,905,414		2,417,703		22,947,389		357,856		163,121		21,883		542,860		23,490,249
Financial derivatives contracts		-		422,749		427,825		951,684		1,802,258		1,253,280		1,180,948		3,154,168		5,588,396		7,390,654
Interbank borrowings		94		363,560		624,167		1,141,824		2,129,645		387,936		2,237		-		390,173		2,519,818
Issue debt instruments		-		285,159		759,519		1,044,674		2,089,352		2,394,850		2,042,292		2,974,229		7,411,371		9,500,723
Lease liabilities		-		-		-		26,061		26,061		45,978		36,393		50,062		132,433		158,494
Other financial liabilities		161,021		5,155		30,969		28,888		226,033		83		99		143		325		226,358
Subtotal		10,600,820		6,641,245		6,747,894		5,610,834		29,600,793		4,439,983		3,425,090		6,200,485		14,065,558		43,666,351
Contractual interest payments		10,473		148,731		267,994		1,727,401		2,154,599		1,720,990		1,653,500		3,101,084		6,475,574		8,630,173
Total		10,611,293		6,789,976		7,015,888		7,338,235		31,755,392		6,160,973		5,078,590		9,301,569		20,541,132		52,296,524

As of December 31, 2019, the scheduled maturities of other commercial commitments, including accrued interest, were as follows:

Other Commercial Commitments	Up to 1 month		Between 1 and 3 months		Between 3 and 12 months		Between 1 and 5 years		More than 5 years		Total
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$
Performance guarantee		144,364		544,370		899,437		312,559		22,292		1,923,022
Confirmed foreign letters of credit		25,491		1,808		11,306		31,587		-		70,192
Letters of credit issued		30,555		348		33,439		70,924		-		135,266
Pledges and other commercial commitments		30,357		9,009		317,824		94,561		-		451,751
Total other commercial commitments		230,767		555,535		1,262,006		509,631		22,292		2,580,231

	Demand		Up to 1 month		Between 1 and 3 months		Between 3 and 12 months		Subtotal up to 1 year		Between 1 and 3 years		Between 3 and 5 years		More than 5 years		Subtotal after 1 year		Total
As of December 31, 2018	MM$		MM$		MM$		MM$		MM$		MM$		MM$		MM$		MM$		MM$
Obligations under repurchase agreements		-		48,545		-		-		48,545		-		-		-		-		48,545
Checking accounts, time deposits and other time liabilities		9,027,434		5,248,418		4,108,556		3,326,199		21,710,607		191,547		6,137		63,988		261,672		21,972,279
Financial derivatives contracts		-		131,378		120,361		349,551		601,290		495,789		471,185		949,464		1,916,438		2,517,728
Interbank borrowings		39,378		16,310		404,575		1,188,692		1,648,955		139,671		-		-		139,671		1,788,626
Issue debt instruments		-		71,465		39,267		745,830		856,562		2,431,849		1,549,743		3,277,079		7,258,671		8,115,233
Other financial liabilities		179,681		934		2,412		22,844		205,871		9,261		92		176		9,529		215,400
Subtotal		9,246,493		5,517,050		4,675,171		5,633,116		25,071,830		3,268,117		2,027,157		4,290,707		9,585,981		34,657,811
Contractual interest payments		4,918		82,292		158,760		812,920		1,058,890		1,156,262		1,110,918		1,537,385		3,804,565		4,863,456
Total		9,251,411		5,599,342		4,833,931		6,446,036		26,130,720		4,424,379		3,138,075		5,828,092		13,390,546		39,521,266

As of December 31, 2018, the scheduled maturities of other commercial commitments, including accrued interest, were as follows:

Other Commercial Commitments	Up to 1 month		Between 1 and 3 months		Between 3 and 12 months		Between 1 and 5 years		More than 5 years		Total
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$
Performance guarantee		663,642		188,147		905,554		163,506		33,356		1,954,205
Confirmed foreign letters of credit		3,842		9,128		33,177		10,891		-		57,038
Letters of credit issued		12,469		110,970		54,015		45,937		29		223,420
Pledges and other commercial commitments		22,128		63,230		41,637		6,628		-		133,623
Total other commercial commitments		702,081		371,475		1,034,383		226,962		33,385		2,368,286

Market risk

Market risk arises as a consequence of the market activity, by means of financial instruments whose value can be affected by market variations, reflected in different assets and financial risk factors. The risk can be diminished by means of hedging through other products (assets/liabilities or derivative instruments) or terminating the open transaction/position. The objective of market risk management is to manage and control market risk exposure within acceptable parameters.

There are four major risk factors that affect the market prices: type of interest, type of exchange, price, and inflation. In addition and for certain positions, it is necessary to consider other risks as well, such as spread risk, base risk, commodity risk, volatility or correlation risk.

Market risk management

The Bank's internal management measure market risk based mainly on the procedures and standards of Banco Santander Spain, which are in turn based on an analysis of three principal components:

trading portfolio

local financial management portfolio

foreign financial management portfolio

The trading portfolio is comprised mainly of investments, valued at fair value, and free of any restriction on their immediate sale, which are often bought and sold by the Bank with the intent of selling them in the short term in order to benefit from short-term price fluctuations. The financial management portfolios include all the financial investments not considered a part of trading portfolio.

The ALCO has the general responsibility for the market risk. The Bank's risk/finance department is responsible for formulating detailed management policies and applying them to the Bank's operations, in conformity with the guidelines adopted by the ALCO and the Global Risk Department of Banco Santander Spain.

The department's functions in connection with trading portfolio include the following:

apply the "Value at Risk" (VaR) techniques to measure interest rate risk,

ii.

adjust the trading portfolios to market and measure the daily income and loss from commercial activities,

iii.

compare the real VaR with the established limits,

iv.

establish procedures to prevent losses in excess of predetermined limits, and

furnish information on the trading activities to the ALCO, other members of the Bank's management, and the Global Risk Department of Banco Santander Spain.

The department's functions in connection with financial management portfolios include the following:

perform sensitivity simulations (as explained below) to measure interest rate risk for activities denominated in local currency and the potential losses forecasted by these simulations.

ii.

provide daily reports thereon to the ALCO, other members of the Bank's management, and the Global Risk Department of Banco Santander Spain.

Market risk – management of trading portfolio

The Bank applies VaR methodologies to measure the market risk of its trading portfolio. The Bank has a consolidated commercial position comprised of fixed–income investments and foreign currency trading. This portfolio is comprised mostly of Central Bank of Chile bonds, mortgage bonds, locally issued, low–risk corporate bonds and foreign currencies, mainly U.S. dollars. At the end of each year, the trading portfolio included no stock portfolio investments.

For the Bank, the VaR estimate is made under the historical simulation methodology, which consists of observing the behavior of the profits and losses that would have occurred in the current portfolio if the market conditions for a given historical period had been in force, in order to infer the maximum loss on the basis of that information, with a given degree of confidence. The methodology has the advantage of precisely reflecting the historical distribution of the market variables and not requiring any assumptions regarding the distribution of specific probabilities. All the VaR measures are intended to determine the distribution function for a change in the value of a given portfolio, and once that distribution is known, to calculate the percentile related to the necessary degree of confidence, which will be equal to the value at risk by virtue of those parameters. As calculated by the Bank, the VaR is an estimate of the maximum expected loss of market value for a given portfolio over a 1–day horizon, with a 99.00% confidence level. It is the maximum 1–day loss that the Bank could expect to experience in a given portfolio, with a 99.00% confidence level. In other words, it is the loss that the Bank would expect to experience only 1.0% of the time. The VaR provides a single estimate of market risk which is not comparable from one market risk to another. Returns are calculated through the use of a 2–year time window or at least 520 data points obtained since the last reference date for calculation of the VaR going backward in time.

We do not calculate three separate VaRs. We calculate a single VaR for the entire trading portfolio, which in addition is segregated by risk type. The VaR software performs a historical simulation and calculates a Profit and Loss Statement (P&L) for 520 data points (days) for each risk factor (fixed income, foreign currency and variable income.) The P&L of each risk factor is added together and a consolidated VaR is calculated with 520 points or days of data. At the same time a VaR is calculated for each risk factor based on the individual P&L calculated for each individual risk factor. Furthermore, a weighted VaR is calculated in the manner described above, but which gives a greater weighting to the 30 most recent data points. The larger of the two VaRs is the one that is reported. In 2019, 2018 and 2017, we used the same VaR model and there has been no change in methodology or assumptions for subsequent periods.

The Bank uses the VaR estimates to provide a warning when the statistically estimated incurred losses in its trading portfolio would exceed prudent levels, and hence, there are certain predetermined limits.

Limitations of the VaR model

When applying a calculation methodology, no assumptions are made regarding the probability distribution of the changes in the risk factors; the historically observed changes are used for the risk factors on which each position in the portfolio will be valued.

It is necessary to define a valuation function fj(xi) for each instrument, preferably the same one used to calculate the market value and income of the daily position, This valuation function will be applied in each scenario to generate simulated prices for all the instruments in each scenario.

In addition, the VaR methodology should be interpreted taking into consideration the following limitations:

Changes in market rates and prices may not be independent and identically distributed random variables and may not have a normal distribution. In particular, the assumption of normal distribution may underestimate the probability of extreme market movements;

The historical data used by the Bank may not provide the best estimate of the joint distribution of changes in the risk factors in the future, and any modification of the data may be inadequate. In particular, the use of historical data may fail to capture the risk of potential extreme and adverse market fluctuations, regardless of the time period used;

A 1-day time horizon may not fully capture the market risk positions which cannot be liquidated or covered in a single day, It would not be possible to liquidate or cover all the positions in a single day;

The VaR is calculated at the close of business, but trading positions may change substantially in the course of the trading day;

The use of a 99% level of confidence does not take account of, or make any statement about, the losses that could occur outside of that degree of confidence; and

A model such as the VaR does not capture all the complex effects of the risk factors over the value of the positions or portfolios, and accordingly, it could underestimate potential losses,

We perform back-testing daily and generally find that trading losses exceed our VaR estimate approximately one out of every 100 trading days. At the same time, we set a limit to the maximum VaR that we are willing to accept over our trading portfolio. Also, a maximum VaR limit was established that can be applied over the trading portfolio. During the first nine months of the year, the VaR remained at low levels. However as of October 2019 there was more market volatility as a consequence of the social crisis the country faced and there were temporary VaR excesses given the increase in market volatility.

The strategy to correct it was to decrease the foreign exchange and interest rate positions, which, in addition with a decrease in market volatility, caused the VaR for December 31, 2019 to be USD 4.7 million, below the total limit.

High, low and average levels for each component and year were as follows:

VaR	2019 USDMM		2018 USDMM
Consolidated:
High		15.78		5.23
Low		1.33		1.21
Average		3.06		2.01
Fixed-income investments:
High		9.77		2.54
Low		1.18		1.19
Average		2.33		1.71
Variable-income investments
High		-		0.01
Low		0.01		-
Average		-		-
Foreign currency investments
High		6.05		4.29
Low		0.10		0.09
Average		1.60		1.14

Market risk - local and foreign financial management

The Bank's financial management portfolio includes most of the Bank's non-trading assets and liabilities, including the credit/loan portfolio. For these portfolios, investment and financing decisions are strongly influenced by the Bank's commercial strategies.

The Bank uses a sensitivity analysis to measure market risk for domestic and foreign currencies (not included in the trading portfolio). The Bank carries out a simulation of scenarios that will be calculated as the difference between current flows in the chosen scenario (curve with a parallel movement of 100 basis points ("bp") in all its sections) and its value in the base scenario (current market). All positions in domestic currency indexed to inflation (UF) are adjusted by a sensitivity factor of 0,57 which represents a change in the curve of 57 bp in all real rates and 100 bp in nominal rates. The same scenario is carried out for net positions in foreign currency and interest rates in USD, In addition, the Bank has established limits regarding maximum loss this kind of movement in interest rates can have over capital and net financial income budgeted for the year.

To establish the consolidated limit, we add the foreign currency limit to the domestic currency limit and multiple by 2 the sum of the multiplication of them together both for net financial loss limit as well as for the capital and reserves loss limit, using the following formula:

Consolidated limit = square root of a2 + b2 + 2ab

a: domestic currency limit

b: foreign currency limit

Since we assume the correlation is 0; 2ab = 0, 2ab = 0

Limitations of the sensitivity models

The most important assumption is using an exchange rate of 100 bp based on yield curve (57 bp for real rates). The Bank uses a 100 bp exchange since sudden changes of this magnitude are considered realistic. Santander Spain Global Risk Department has also established comparable limits by country, so as to compare, control and consolidate market risk by country in a realistic and orderly fashion.

In addition, the sensitivity simulation methodology should be interpreted taking into consideration the following limitations:

The simulation of scenarios assumes that the volumes remain consistent in the Bank's Consolidated Statements of Financial Position and are always renewed at maturity, thereby omitting the fact that certain credit risk and prepayment considerations may affect the maturity of certain positions.

This model assumes an identical change along the entire length of the yield curve and does not take into account the different movements for different maturities.

The model does not take into account the volume sensitivity which results from interest rate changes.

The limits to losses of budgeted financial income are calculated based on the financial income foreseen for the year, which may not be actually earned, meaning that the real percentage of financial income at risk may be higher than the expected one.

Market risk – Financial management portfolio – December 31, 2019 and 2018

	2019				2018
	Effect on financial income		Effect on capital		Effect on financial income		Effect on capital

Financial management portfolio – local currency (MCh$)
Loss limit		100,000		275,000		48,000		192,001
High		32,719		273,473		43,742		189,725
Low		12,686		145,338		27,854		170,450
Average		24,719		228,772		37,569		180,972
Financial management portfolio – foreign currency (Th$US)
Loss limit		30		75		30		75
High		20		35		12		38
Low		5		1		4		(10	)
Average		12		12		9		22
Financial management portfolio – consolidated (in MCh$)
Loss limit		100,000		275,000		48,000		192,002
High		34,462		271,989		45,492		192,848
Low		15,236		143,836		29,167		168,766
Average		27,918		227,303		38,908		182,557

Capital risk

The Group defines capital risk as the risk that the Group or any of its companies may have an insufficient amount and/or quality of capital to: meet the minimum regulatory requirements in order to operate as a bank; respond to market expectations regarding its creditworthiness; and support its business growth and any strategic possibilities that might arise, in accordance with its strategic plan.

The objectives in this connection include most notably:

●

To meet the internal capital and capital adequacy targets

●

To meet the regulatory requirements

●

To align the Bank's strategic plan with the capital expectations of external agents (rating agencies, shareholders and investors, customers, supervisors, etc.)

●

To support the growth of the businesses and any strategic opportunities that may arise

The Group has a capital adequacy position that surpasses the levels required by regulations.

Capital management seeks to optimize value creation at the Bank an at its different business segment. The Bank continuously evaluates it risk-return ratios through its basic capital, effective net equity, economic capital and return on equity. With regard to capital adequacy, the Banks conducts its internal process based on the CMF standards (former SBIF) which are based on Basel Capital Accord (Basel I), Economic capital is the capital required to support all the risk of the business activity with a given solvency level.

Capital is managed according to the risk environment, the economic performance of Chile and the business cycle, Board may modify our current equity policies to address changes in the mentioned risk environment,

Minimum Capital

Under the General Banking Law, a bank is required to have a minimum of UF800,000 (approximately Ch$22,648 million or USD$30,3 million as of December 31, 2019) of paid-in capital and reserves, calculated in accordance with Chilean GAAP.

Capital adequacy requirement

Chilean banks are required by the General Banking Law to maintain regulatory capital of at least 8% of risk-weighted assets, net of required loan loss allowance and deductions, and paid-in capital and reserves ("basic capital") of at least 3% of total assets, net of required loan loss allowances. Regulatory capital and basic capital are calculated based on the consolidated financial statements prepared in accordance with the Compendium of Accounting Standards issued by the CMF (former SBIF) the Chilean regulatory agency. As we are the result of the merger between two predecessors with a relevant market share in the Chilean market, we are currently required to maintain a minimum regulatory capital to risk-weighted assets ratio of 11%. As of December 31, 2019, the ratio of our regulatory capital to risk-weighted assets, net of loan loss allowance and deductions, was 12,86% and our core capital ratio was 6,96%.

Regulatory capital is defined as the aggregate of:

●

a bank's paid-in capital and reserves, excluding capital attributable to subsidiaries and foreign branches or basic capital;

●

its subordinated bonds, valued at their placement price (but decreasing by 20,0% for each year during the period commencing six years prior to maturity), for an amount up to 50,0% of its basic capital; and

●

its voluntary allowances for loan losses for an amount of up to 1,25% of risk weighted-assets,

The levels of basic capital and effective net equity at the close of each period are as follows:

					Ratio
	As of December 31,				As of December 31,
	2019		2018		2019		2018
	MCh$		MCh$		%		%
Basic capital		3,390,823		3,239,546		6.96		7.72
Regulatory capital		4,304,401		4,101,664		12.86		13.40

Risk Concentration

The Bank operates mainly in Chile, thus most of its financial instruments are concentrated in that country. See Note 38, credit risk to see concentration of the Bank's loans and accounts receivable by industry above.

Non Current Assets Held for Sale

12 Months Ended

Dec. 31, 2019

Non Current Assets Held for Sale [Abstract]

NON CURRENT ASSETS HELD FOR SALE

NOTE 39

NON CURRENT ASSETS HELD FOR SALE

Banco Santander has decided to implement its own acquisition network, therefore the Bank is in process to disposing of the investment in the companies who provide such services. Accordingly, the Bank management is engaged in search plan for a buyer.

As required by IFRS 5, the Bank has reclassified to assets held for sale under the heading Other assets in the Consolidated Statement of Financial Position as of December 31, 2019 and in the same way it has presented in the income statements the effects associated with those investments as discontinued operations for all years presented.

The following investments in associates were classified to Other assets as assets held for sale:

			2019				2018		2017
As of December 31,	Participation		Assets		Income		Income		Income
	%		MCh$		MCh$		MCh$		MCh$
Transbank		25.00		19,093		1,442		3,118		2,024
Nexus (*)		1.94		357		136		368		442
Redbanc		33.43		2,944		121		285		353
Total				22,394		1,699		3,771		2,819

(*)

Remaining participation pending to sell at the end of the current year. See Note 40.

Subsequent Events

12 Months Ended

Dec. 31, 2019

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE 40

SUBSEQUENT EVENTS

Bond issuance and repurchase

On January 7, 2020 Banco Santander Chile placed a bond with a 5 year term for an amounted of U.S.$750 million under the Rule 144-A of Securities Exchange Commission of United States.

On January 21, 2020, the Bank placed a Subordinated bond for an amount of U.S.$200 million.

On February 4, 2020, the Bank placed a Senior bond for an amount of UF2,000,000.

The Bank has performed the following bond repurchases during 2020:

Date	UF		Date	Ch$
01-02-2020		375.000	01-13-2020		50.000.000
01-14-2020		131.000	01-14-2020		9.820.000.000
01-21-2020		171.000	01-15-2020		400.000.000
01-21-2020		181.000	01-21-2020		330.000.000
01-24-2020		2.000	01-22-2020		11.430.000.000
02-17-2020		15,000
02-17-2020		2,000
02-18-2020		50,000
02-18-2020		4,000
02-20-2020		350,000
02-20-2020		115,000
02-21-2020		57,000
02-21-2020		24,000
02-24-2020		10,000
02-24-2020		250,000

Investment in associated and affiliates

Nexus

On January 22, 2020 Banco Itau-Corpbanca purchased the remaining shares held by Banco Santander in Nexus (79,577 shares), whit this, the sale process of Nexus has conclude. The investment in this company was classified as assets held for sale in June 2019.

Santander Consumer S.A. ("Consumer")

On January 7, 2020 at the Extraordinary Shareholders Meeting, the members agreed to modify the business structure of Santander Consumer Chile to a limited liability company (responsabilidad limitada), which will operate under the corporate name Santander Consumer Finance Limitada.

Santander S.A. Sociedad Securitizadora

On January, 16, 2020, the company sent a "Material Fact" (Hecho Esencial) notifying that at the Extraordinary Shareholder Meeting held on January 15, 2020, the members agreed to modify the capital increase agreement dated on November 27, 2018, without changing the number of shares (280 ordinary registered shares, with a singles series and without nominal value).

New regulations

On January 27, 2020, Financial Market Commission (FMC) issued two papers draft for comments related to credit-risk weighted assets and capital buffer requirements for the framework of modernization of the Chilean Banking Law (LGB), in accordance with new Basel III requirements.

On February 24, 2020 was published in the "Diario official" Law 21,210 which will be effective from the first quarter of 2020. The modification includes changes to income tax law, VAT tax and Tax Code. The Bank is reviewing any potential impact on the implementation of the new tax regulations.

No other subsequent events to be disclose have occurred between January 1, 2020 and the authorization date of these financial statement (March 6, 2020).

Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2019

Summary Of Significant Accounting Policies

Basis of preparation

Basis of preparation

Basis of preparation for the Consolidated Financial Statements

b)	Basis of preparation for the Consolidated Financial Statements

has power over the investee;

II.

is exposed, or has rights, to variable returns from its involvement with the investee; and

III.

has the ability to use its power to affect its returns.

●

the size of the Bank's holding of voting rights relative to the size and dispersion of holdings of the other vote holders;

●

potential voting rights held by the Bank, other vote holders or other parties;

●

rights arising from other agreements; and

●

The following companies are considered entities controlled by the Bank and are therefore within the scope of consolidation:

Entities controlled by the Bank through participation in equity

			Percent ownership share
		Place of	As of December 31,
		Incorporation	2019						2018						2017
Name of the	Main	and	Direct		Indirect		Total		Direct		Indirect		Total		Direct		Indirect		Total
Subsidiary	Activity	operation	%		%		%		%		%		%		%		%		%
Santander Corredora de Seguros Limitada	Insurance brokerage	Santiago, Chile		99.75		0.01		99.76		99.75		0.01		99.76		99.75		0.01		99.76
Santander Corredores de Bolsa Limitada	Financial instruments brokerage	Santiago, Chile		50.59		0.41		51.00		50.59		0.41		51.00		50.59		0.41		51.00
Santander Asesorias Financieras Limitada (1)	Securities brokerage	Santiago, Chile		99.03		-		99.03		99.03		-		99.03		99.03		-		99.03
Santander S.A. Sociedad Securitizadora	Purchase of credits and issuance of debt instruments	Santiago, Chile		99.64		-		99.64		99.64		-		99.64		99.64		-		99.64
Klare Corredora de Seguros S.A. (2)	Insurance brokerage	Santiago, Chile		50.10		-		50.10		-		-		-		-		-		-
Santander Consumer Chile S.A. (3)	Financing	Santiago, Chile		51.00		-		51.00		-		-		-		-		-		-

The detail of non-controlling participation on all the remaining subsidiaries can be seen in Note 25– Non-controlling interest.

(1)

On December 18, 2019, Santander Agente de Valores Limitada changes its business name and the company's object, to Santander Asesorías Financieras Limitada, and offering financial advice.

(2)

(3)

ii.

Entities controlled by the Bank through other considerations

The following companies have been consolidated based on the determination that the Bank has control as previously defined above and in accordance with IFRS 10, Consolidated Financial Statements:

Santander Gestión de Recaudación y Cobranza Limitada (collection services)

Bansa Santander S.A. (financing revolving inventory lines to automotive dealers) (1)

Multiplica SpA (Development card incentive programs) (2)

(1)

(2)

iii.

Associates

The following companies are considered "Associates" in which the Bank accounts for its participation using the equity method:

			Percentage of ownership share
		Place of	As of December 31,
		Incorporation and	2019		2018		2017
Associates	Main activity	operation	%		%		%
Redbanc S.A. (*)	ATM services	Santiago, Chile		-		33.43		33.43
Transbank S.A. (*)	Debit and credit card services	Santiago, Chile		-		25.00		25.00
Centro de Compensación Automatizado	Electronic fund transfer and compensation services	Santiago, Chile		33.33		33.33		33.33
Sociedad Interbancaria de Depósito de Valores S.A.	Delivery of securities on public offer	Santiago, Chile		29.29		29.29		29.29
Cámara Compensación de Alto Valor S.A.	Payments clearing	Santiago, Chile		15.00		15.00		15.00
Administrador Financiero del Transantiago S.A.	Administration of boarding passes to public transportation	Santiago, Chile		20.00		20.00		20.00
Sociedad Nexus S.A. (*)	Credit card processor	Santiago, Chile		-		12.90		12.90
Servicios de Infraestructura de Mercado OTC S.A.	Administration of the infrastructure for the financial market of derivative instruments	Santiago, Chile		12.48		12.48		12.48

(*)

Non-controlling interest

Non-controlling interest

Reporting segments

d)	Reporting segments

Operating segments are components of an entity:

that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses from transactions with other components of the same entity);

ii.

whose operating results are regularly reviewed by the entity's chief executive officer, who makes decisions about resources allocated to the segment and assess its performance; and

iii.

for which discrete financial information is available.

the nature of the products and services;

ii.

the nature of the production processes;

iii.

the type or class of customers that use their products and services;

iv.

the methods used to distribute their products or services; and

if applicable, the nature of the regulatory environment, for example, banking, insurance, or public utilities.

The Bank reports separately on each operating segment that exceeds any of the following quantitative thresholds:

its reported revenue, from both external customers and intersegment sales or transfers, is 10% or more of the combined internal and external revenue of all the operating segments.

ii.

iii.

its assets represent 10% or more of the combined assets of all the operating segments.

Information about other business activities of the operating segments not separately reported is combined and disclosed in the "Other segments" category.

Functional and presentation currency

e)	Functional and presentation currency

Accordingly, all balances and transactions denominated in currencies other than the Chilean Peso are treated as "foreign currency".

The Bank maintains its accounting records and prepares its financial statements in Chilean pesos.

Foreign currency transactions

Foreign currency transactions

Classification and measurement of financial instrument - under IFRS 9 (first adoption)

Classification and measurement of financial instrument – under IFRS 9

Classification of financial instrument

i) Classification of financial assets

In accordance with IFRS 9 the business models are:

●

ii) Classification of financial liabilities

The Bank classified all financial liabilities as subsequently measured at amortised cost, except for derivatives that are liabilities, which are measured at fair value through profit or loss.

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

ii) Subsequent measurement- financial assets

After initial recognition, the Bank shall measure a financial asset at:

(a)

Amortised cost

(b)

Fair value through other comprehensive income (FVOCI)

(c)

Fair value through profit or loss (FVTPL)

Financial assets held for trading are recognised at fair value through profit or loss, likewise derivatives contracts for trading purposes.

(d)

Equity instruments

iii) Subsequent measurement- financial liabilities

After initial recognition, the Bank shall measure a financial liability at amortised cost.

III. Derecognition of financial assets and liabilities

Financial assets are derecognised when, and only when:

●

the contractual rights to the cash flows from the financial asset expire, or

●

Financial liabilities are derecognised when, and only when, they are extinguished, cancelled or expired.

IV. Contingent loan

The Bank issues contingent liabilities (including letters of credit, foreign letters of credit and performance guarantee) and loan commitments.

Contingent liabilities and undrawn loan commitments are commitments under which, over the duration of the commitment, the Bank is required to provide a loan with pre-specified term to the customer.

V. Offsetting of financial instruments

Definitions and classification of financial instruments - under IAS 39

h)	Definitions and classification of financial instruments – under IAS 39

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.

ii.

Classification of financial assets for measurement purposes

Regular way purchases or sales of financial assets require delivery of the asset within the time frame established by regulation or convention in the marketplace.

Effective interest method

Income is recognised on an effective interest basis for loans and accounts receivables other than those financial assets classified as at fair value through profit or loss.

Financial assets FVTPL – trading investment

Financial assets are 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 is classified as held for trading if:

●

it has been acquired principally for the purpose of selling it in the near term; or

●

on initial recognition it is part of a portfolio of identified financial instruments that the Bank manages together and has a recent actual pattern of short-term profit-taking; or

●

it is a derivative that is not designated and effective as a hedging instrument.

A financial asset other than a financial asset held for trading may be designated as FVTPL upon initial recognition if:

●

such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or

●

it forms part of a contract containing one or more embedded derivatives, and IAS 39 permits the entire combined contract to be designated as FVTPL.

Held to maturity investments

Available for sale investments (AFS investments)

Dividends on AFS equity instruments are recognised in profit or loss when the Bank's right to receive the dividends is established.

Loans and accounts receivable from customers

Interest income is recognised 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 are classified by their nature into the following line items in the Consolidated Financial Statements:

Investments under resale agreements: includes balances of financial instruments purchased under resale agreement.

iv.

Classification of financial liabilities for measurement purposes

The Bank classifies all financial liabilities as subsequently measured at amortised cost, except for:

Financial liabilities at FVTPL

As of December 31, 2018 and 2017 the Bank does not maintain financial liabilities at FVTPL.

Other financial liabilities

Classification of financial liabilities for presentation purposes

The financial liabilities are classified by their nature into the following line items in the consolidated statements of financial position:

Time deposits and other time liabilities: this shows the balances of deposit transactions in which a term at the end of which they become callable has been stipulated.

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.

vi.

Offsetting of financial instruments

Financial asset and liability balances are offset, i.e., reported in the Consolidated Statements of Financial Position at their net amount, only if there is a legally enforceable right to offset the recorded amounts and the Bank intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously. As of December 31, 2018 and 2017 the Bank does not have balance offsetting of financial instruments.

vii.

Derecognition of financial assets and liabilities

ii.

An associated financial liability for an amount equal to the consideration received; this liability is subsequently measured at amortised 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.

Derivatives and hedging activities