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As filed with the Securities and Exchange Commission on April 28, 2016

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

Commission file number 001-15266

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Securities registered or to be registered pursuant to Section 12(g) of the Act.

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

x Yes   o No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

o Yes   x No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x Yes   o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

o Yes   o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

o Item 17   o Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes   x No

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FORWARD-LOOKING STATEMENTS

This annual report on Form 20-F contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Although we have based these forward-looking statements on our expectations and projections about future events, it is possible that actual results may differ materially from our expectations.  In many cases, we include a discussion of the factors that are most likely to cause forward-looking statements to differ from actual results together with the forward-looking statements themselves.  These statements appear throughout this annual report, including, without limitation, under “Item 4.  Information on the Company” and “Item 5.  Operating and Financial Review and Prospects.”  Examples of such forward-looking statements include:

·                  projections of operating revenues, net income (loss), net income (loss) per share, capital expenditures, dividends, capital structure or other financial items or ratios;

·                  statements of our plans, objectives or goals, including those related to anticipated trends, competition and regulation;

·                  statements about market risks, including interest rate risk and foreign exchange risk;

·                  statements about our future economic performance or that of Chile or other countries in which we operate; and

·                  statements of assumptions underlying such statements.

Words such as “believe,” “anticipate,” “plan,” “aims,” “seeks,” “expect,” “intend,” “target,” “objective,” “estimate,” “project,” “potential,” “predict,” “forecast,” “guideline,” “could,” “may,” “will,” “should” and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.  These statements may relate to (i) our asset growth and financing plans, (ii) trends affecting our financial condition or results of operations and (iii) the impact of competition and regulations, but are not limited to such topics.  Forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ materially from those described in such forward-looking statements included in this annual report as a result of various factors (including, without limitation, the actions of competitors, future global economic conditions, market conditions, foreign exchange rates and operating and financial risks), many of which are beyond our control.  The occurrence of any such factors not currently expected by us could significantly alter the results set forth in these statements.

Factors that could cause actual results to differ materially and adversely include, but are not limited to:

·                  changes in general economic, business, political or other conditions in Chile, or changes in general economic or business conditions in Latin America, the United States, Europe or Asia;

·                  changes in capital markets in general that may affect policies or attitudes towards lending to Chile or Chilean companies;

·                  increased costs;

·                  increased competition and changes in competition or pricing environments, including the effect of new technological developments;

·                  unanticipated increases in financing and other costs or the inability to obtain additional debt or equity financing on attractive terms;

·                  natural disasters;

·                  the effect of tax laws on our business; and

·                  the factors discussed under “Item 3. Key Information—Risk Factors.”

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You should not place undue reliance on forward-looking statements, which speak only as of the date that they were made.  This cautionary statement should be considered in connection with any written or oral forward-looking statements that we may issue in the future.  We do not undertake any obligation to publicly release any revisions to such forward-looking statements after the filing of this annual report to reflect later events or circumstances or to reflect the occurrence of unanticipated events.

PRESENTATION OF FINANCIAL INFORMATION

We prepare our audited consolidated financial statements in Chilean pesos and in accordance with International Financial Reporting Standards in effect from time to time as issued by the International Accounting Standards Board (“IFRS”).

Unless otherwise indicated, the financial information included in this annual report with respect to 2011, 2012, 2013, 2014 and 2015 has been derived from financial statements that have been prepared in accordance with IFRS.  See Note 2(a) to our audited consolidated financial statements as of and for the year ended December 31, 2015 appearing elsewhere in this annual report.  IFRS differs in certain significant respects from Chilean Generally Accepted Accounting Principles (the “Chilean GAAP”).  As a result, our financial information presented under IFRS is not directly comparable to any of our financial information presented under Chilean GAAP.  Accordingly, readers should avoid such comparison.

In this annual report, references to “$,” “U.S.$,” “U.S. dollars” and “dollars” are to United States dollars, references to “pesos” or “Ch$” are to Chilean pesos (see Note 2(t) to our audited consolidated financial statements as of and for the year ended December 31, 2015 appearing elsewhere in this annual report), and references to “UF” are to “Unidades de Fomento.”  The UF is an inflation indexed Chilean monetary unit of account with a value in Chilean pesos that is linked to and adjusted daily to reflect changes in the Consumer Price Index (“CPI”) of the Instituto Nacional de Estadísticas (the “Chilean National Statistics Institute”).  As of December 31, 2015 and April 25, 2016, one UF equaled Ch$25,629.09 and Ch$25,889.57, respectively.

This annual report contains translations of certain Chilean peso amounts into U.S. dollars at specified rates solely for your convenience.  These translations should not be construed as representations that the Chilean peso amounts actually represent such U.S. dollar amounts, were converted from U.S. dollars at the rate indicated in our audited consolidated financial statements as of and for the year ended December 31, 2015 or could be converted into U.S. dollars at the rate indicated.  Until November 30, 2011, Banco de Chile applied the observed exchange rate reported by the Banco Central de Chile (the “Central Bank”) in order to translate its financial statements from Chilean pesos to U.S. dollars.  However, beginning December 1, 2011, Banco de Chile adopted the exchange rate of accounting representation, or spot exchange rate, for such matters.  This is also described in “Item 3.  Key Information—Selected Financial Data—Exchange Rates.”  Thus, unless otherwise indicated, the U.S. dollar amounts have been translated from Chilean pesos based on the exchange rate of accounting representation as of December 31, 2015 as determined by our Treasury on a daily basis, based on the average of the daily closing bid and offer rates reported by Bloomberg for the Santiago Stock Exchange.  As of December 31, 2015 and April 25, 2016, the exchange rates of accounting representation were Ch$708.24 = U.S. $1.00 and Ch$669.91 = U.S.$1.00, respectively.  As of the same dates, the observed exchange rates, as published by the Central Bank, were Ch$707.34 = U.S.$1.00 and Ch$666.80 = U.S.$1.00, respectively.

The Federal Reserve Bank of New York does not report a noon buying rate for Chilean pesos.

Unless otherwise specified, all references in this annual report to total loans are to loans to customers before deducting allowances for loan losses, and they do not include loans to banks or contingent loans.  In addition, all market share data and financial indicators for the Chilean banking system as compared to Banco de Chile’s financial information presented in this annual report are based on information published periodically by the Superintendencia de Bancos e Instituciones Financieras de Chile (“SBIF”) which is published under Chilean GAAP and prepared on a consolidated basis. For more information see “Item 4.  Information on the Company—Business Overview—Competition.”

In this annual report, “past-due loans” are any loans for which the counterparty has failed to make a payment when contractually due, including installments that are overdue, plus the remaining balance of principal and interest on such loans.  In order to distinguish between different overdue time periods, the corresponding time

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period is included after the term “Past-due Loans” (for example, “Past-due Loans—90 days or more”).  For more information, please see “Item 4.  Information on the Company—Selected Statistical Information—Classification of Loan Portfolio Based on the Borrower’s Payment Performance.”

According to Chilean regulations and for the purposes of this annual report, regulatory capital (“Regulatory Capital”) consists of:

·                  basic capital, which is composed of our paid-in capital, reserves and retained earnings, excluding capital attributable to subsidiaries and foreign branches (“Basic Capital”); and

·                  supplementary capital, which is composed of the following:  (i) our subordinated bonds, considered at issue price (reduced by 20% for each year during the period commencing six years prior to maturity), but not exceeding 50% of our Basic Capital; plus (ii) our voluntary allowances for loan losses (up to 1.25% of risk-weighted assets to the extent voluntary allowances exceed those that banks are required to maintain by law or regulation); minus (iii) our goodwill and unconsolidated investments in companies (“Supplementary Capital”).

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

Inflation figures are those reported by the Chilean National Statistics Institute, unless otherwise stated herein or required by the context.

MACRO-ECONOMIC AND MARKET DATA

In this annual report, all macro-economic data relating to the Chilean economy is based on information published by the Chilean Central Bank.  All market share data, financial indicators and other data relating to the Chilean financial system are based on information published periodically by the SBIF, which is published under Chilean GAAP and prepared on a consolidated basis.

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PART I

Item 1                                    Identity of Directors, Senior Management and Advisors

Not Applicable.

Item 2                                    Offer Statistics and Expected Timetable

Not Applicable.

Item 3                                    Key Information

SELECTED FINANCIAL DATA

The following tables present historical financial information about us as of the dates and for each of the periods indicated.  The following tables should be read in conjunction with, and are qualified in their entirety by reference to, our audited consolidated financial statements as of and for the year ended December 31, 2015 appearing elsewhere in this annual report.  The financial information for the years ended December 31, 2011, 2012, 2013, 2014 and 2015 is presented under IFRS.

Our audited consolidated financial statements have been prepared in accordance with IFRS for the years ended December 31, 2011, 2012, 2013, 2014 and 2015.

(See footnotes below)

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(See footnotes below)

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(1)         Translations of Chilean peso amounts into U.S. dollars are based on the exchange rate of accounting representation, or the spot exchange rate, which is determined on a daily basis by our Treasury, based on the average of the daily closing bid and offer rates reported by Bloomberg for the Santiago Stock Exchange.  Thus, amounts stated in U.S. dollars as of and for the fiscal year ended December 31, 2015 have been translated from Chilean pesos based on the spot exchange rate of Ch$708.24 to U.S. $1.00 as of December 31, 2015.

(2)         Earnings per share data have been calculated by dividing net income by the weighted average number of shares outstanding during the year.

(3)         Dividends per share data are calculated by dividing the amount of the dividend paid during each year by the previous year’s number of shares outstanding.

(4)         Annualized net interest income divided by average interest earning assets.  The average balances for interest earning assets, including interest and readjustments, have been calculated on the basis of our daily balances and on the basis of monthly balances for our subsidiaries.  Net interest margin does not include the interest earned on trading securities, which is accounted for under Other Income (Loss), Net.

(5)         Annualized net income (loss) divided by average total assets.  The average balances for total assets have been calculated on the basis of our daily balances and on the basis of monthly balances for our subsidiaries.

(6)         Annualized net income (loss) divided by average equity.  The average balances for equity have been calculated on the basis of our daily balances.

(7)         Total liabilities divided by bank regulatory capital.

(8)         See “Item 4.  Information on the Company—Selected Statistical Information—Analysis of Substandard and Past-Due Loans.”

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Exchange Rates

As a general matter, prior to 1989, Chilean law permitted the purchase and sale of foreign currency only in those cases explicitly authorized by the Central Bank.  The Ley Orgánica Constitucional del Banco Central de Chile 18,840 (the “Central Bank Act”) liberalized the rules governing the purchase and sale of foreign currency.  The Central Bank Act empowers the Central Bank to determine that certain purchases and sales of foreign currency specified by law must be carried out in the Mercado Cambiario Formal (the “Formal Exchange Market”).  The Formal Exchange Market is composed of banks and other entities so authorized by the Central Bank.  The observed exchange rate for any given day equals the average exchange rate of the transactions conducted in the Formal Exchange Market on the immediately preceding banking day, as certified by the Central Bank.  Even though the Central Bank is authorized to carry out its transactions at the rates it sets, it generally uses the spot rate for its transactions.  Authorized transactions by other banks are generally carried out at the spot rate.

Purchases and sales of foreign exchange are not required to be conducted in the Formal Exchange Market and therefore may be carried out in the Mercado Cambiario Informal (the “Informal Exchange Market”).  There are no price limits imposed on transactions carried out in the Informal Exchange Market.  On March 31, 2016, the average exchange rate in the Informal Exchange Market was Ch$671.9 per U.S.$1.00, or 0.47% lower than the observed exchange rate of Ch$675.10 per U.S.$1.00 as reported by the Central Bank on the same date.

The following table sets forth the annual low, high, average and period-end observed exchange rate for U.S. dollars for each referenced period, as reported by the Central Bank:

Source:  Central Bank.

(1)         Figures are expressed in nominal terms.

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

(3)         For full years, the average of monthly average rates during the year.  For full months, the daily average during the month.

(4)         As reported by the Central Bank on the first business day of the following period.

The observed exchange rate on April 25, 2016 was Ch$666.80 = U.S.$1.00.

The Federal Reserve Bank of New York does not report a noon buying rate for Chilean pesos.

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

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RISK FACTORS

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

We are also subject to market risks that are presented both in this subsection and in Note 42 to our audited consolidated financial statements as of and for the year ended December 31, 2015 appearing elsewhere in this annual report.

Risks Relating to our Operations and the Chilean Banking Industry

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

During the last five years, our total loan portfolio has grown at a compounded average growth rate of 11.3% per year.  This expansion has been primarily fostered by growth in both residential mortgage (17.0% per year on average) and consumer loans (11.7% per year on average), and, to a lesser extent, by an expansion in commercial loans (9.2% per year on average).  The growth in our loan book is aligned with our mid-term strategic goals, which seek to diversify our business model and optimize our risk-return relationship by prioritizing growth in the retail banking segment and maintaining a market-leading position in the wholesale banking segment.  In this regard, we recognize that our focus on the retail banking segment may expose us to higher levels of loan losses and may require us to establish higher levels of allowances for loan losses in the future.  For this reason, we are constantly striving to develop and utilize improved scoring and approval models and strengthen our collection procedures to mitigate the risks associated with business growth.  For the year ended December 31, 2015, our loan portfolio was Ch$24,573,426 million, which represented a 12.3% annual increase as compared to the Ch$21,891,333 million we recorded as of December 31, 2014.  Similarly, our allowances for loans losses increased 12.2% from Ch$490,558 million in 2014 to Ch$550,443 million in 2015.  As a result, our ratio of allowances for loan losses to total loans remained constant at 2.24% during 2014 and 2015.

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

We cannot assure you that our loan portfolio will continue to grow at the same rates as it has in the past.  The loan portfolio of the Chilean banking industry has grown at a compounded average growth rate of 12.3% over the last five years (excluding the operations of subsidiaries abroad).  This expansion has been fostered by an overall effort of all market participants to increase banking penetration of lower and middle income segments, as well as small and medium-sized companies by broadening their value offerings.  As a result, loan growth has mainly been prompted by the expansion in both mortgage loans (13.2% per year on average) and consumer loans (12.8% per year on average), and—to a lesser extent—by growth in commercial loans (11.8% per year on average).  These efforts have also been supported by the growth of the Chilean economy registered over the same five-year period.  However, the economic slowdown of the local economy over the last two years has also affected growth in the loan industry, as investment and consumption declined.  In this regard, a sharp slowdown or negative gross domestic product (“GDP”) growth, as well as a change in the behavior of banking customers, could adversely affect the growth rate of the industry and, therefore, the expansion of our loan portfolio.  Similarly, this could affect our credit quality indicators and, accordingly, lead us to increase the allowances for loan losses.  For more information, see “Item 4.  Information on the Company—Regulation and Supervision” and “Item 4.  Information on the Company—Selected Statistical Information.”

Restrictions imposed by regulations may constrain our operations and thereby adversely affect our financial condition and results.

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

Pursuant to the Ley General de Bancos (the “General Banking Law”) all Chilean banks may, subject to the approval of the SBIF, engage in certain non-banking businesses approved by the law.  The SBIF’s approval will

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depend on the risk of the activity and the strength of the bank.  Furthermore, the General Banking Law imposes on the Chilean banking system a modified version of the capital adequacy guidelines issued by the Basel Committee on Banking Regulation and Supervisory Practices (the “Basel Committee”) and limits the discretion of the SBIF to deny new banking licenses.

Regarding Basel III, the SBIF has suggested these guidelines may be implemented in Chile in the future, which could impose new requirements for all Chilean banks, including us.  In fact, the Chilean Ministry of Finance has announced that the implementation of Basel III is a priority for the current administration and, therefore, a set of amendments to the General Banking Law will be presented for approval to the Chilean congress.  In addition to Basel III, the Finance Ministry has announced that amendments to the General Banking Act will also include changes in the corporate governance of the SBIF to reinforce the independence of the local regulator, while establishing a dispute resolution system for Chilean banks.  Accordingly, during 2015, the Chilean Ministry of Finance convened a working-group of financial experts to analyze and recommend modifications to the General Banking Act.  This working-group released a final report in January 2016 recommending that modifications to the General Banking Act should be phased-in. Based on this report, the Ministry of Finance has announced that a bill reforming the Chilean Banking Act would be sent to the Chilean congress during 2016.  There is no certainty as to when these changes to the General Banking Act could go into effect.  Despite this, we do not expect this regulatory body will affect our profitability or results of operations in 2016. Nevertheless, we cannot assure you that these new rules will not affect our return on equity in the future, if adopted.

During 2015, the Chilean Central Bank published a final version of new liquidity standards for local banks, based on Basel III guidelines.  The SBIF is the institution empowered to put these guidelines into practice and monitor them on an ongoing basis.  Accordingly, the SBIF released a set of new liquidity requirements for banks (Circular No. 3,585) on July 31, 2015.  These guidelines established reporting requirements for local banks with respect to management and measurement of banks’ liquidity position, compelling banks to share financial information with the regulator and the general public regarding liquid assets, liabilities, concentration of financial instruments by type of liability and counterparty, weighted maturity by type of liability, among others.  Also, aligned with Basel III, these new rules require banks to report and monitor liquidity ratios such as Liquidity Coverage Ratio (“LCR”) and Net Stable Funding Ratio (“NSFR”).  The first stage of these new liquidity requirements is intended to improve the information—in quantity and quality—about the actual situation of banks without imposing specific limits, except liquidity mismatches for 30-day and 90-day periods, for which thresholds are already in place.  Regulatory limits are expected to be defined and implemented by 2017.  Accordingly, although this new regulatory body will not affect our operations and results for the year ended December 31, 2016, we cannot be sure that new liquidity requirements will not have a material impact on our financial condition or results of operations in the future.  See “Item 4.  Information on the Company—Regulation and Supervision.”

As for credit risk allowances, on December 30, 2014, the SBIF published a set of amendments to the regulations on allowances for potential loan losses.  These new rules established a standardized method for calculating provisions for loan losses for residential mortgage loans, based on past-due behavior and loan-to-value ratios, while providing new and more precise definitions for impaired loans and new requirements to remove loans from such portfolio.  In addition, this set of rules also addressed the possibility of putting into practice standardized credit risk provisioning models for consumer and commercial loan portfolios, evaluated on a grouped basis, in the future.  Lastly, the new guidelines also introduced changes to the treatment of provisions related to factoring loans.  This new set of rules went into effect on January 1, 2016.  See “Item 4.  Information on the Company—Regulation and Supervision.” Nevertheless, it is important to mention that the implementation of standardized credit risk provisioning models would only have an effect—if any—on our results of operations or financial condition prepared under Chilean GAAP, which differ to some extent from the International Financial Reporting Standards (the “IFRS”) as issued by the International Accounting Standards Board (the “IASB”).  The adoption of these guidelines will not have any impact on our results of operations or financial condition under IFRS.  Conversely, the changes and new definitions for impaired loans will have an effect on our results of operations under both Chilean-GAAP and IFRS as issued by the IASB.  However, believe that this effect will not have a material impact on our results of operations for the year ended December 31, 2016.

Additionally, in recent years the Chilean government has focused on consumer protection.  Since 2010 several legal and administrative regulations have been enacted, amended and revoked to reinforce consumer protection and the relationship of financial institutions.  For example, new modifications to the Consumer Protection

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Law (Law No. 19,496) are currently being discussed by the Chilean congress, which seek to improve the existing Consumer Protection Agency (“SERNAC”) by providing SERNAC with the authority to: (i) enact rules and guidelines, (ii) interpret legal or administrative regulations, (iii) preside over proceedings against financial institutions and (iv) impose fines, exercise class actions, and carry out collective mediations, among others.  In connection with the modifications and to ensure the due application and exercise of SERNAC’s new authority, the Chilean government is currently considering the application of “Chinese Walls” between SERNAC’s team members enacting rules and guidelines and interpreting legal or administrative regulations and the SERNAC’s team members imposing fines.

Although the final law has not been passed, the Chilean senate has approved some changes and the Chilean government has introduced amendments to: (i) enhance SERNAC’s corporate governance, (ii) provide consumers with adequate tools and improved access to file claims for violations of the Consumer Protection Law and (iii) impose fines for violations of the Consumer Protection Law, among others.  Although this bill is expected to be passed in 2016, there is no certainty as to when such law could go into effect.  In addition, as the final contents and extent of the law remain unknown, we cannot assure you that this law will not substantially affect the banking industry.  Furthermore, we cannot assure you that regulators will not impose more restrictive limitations in the future on the activities of banks, including us, than those that are currently in effect.  Any such change could have a material adverse effect on our results of operations or financial condition in a fashion that we cannot determine in advance.  For more information, see “Item 4.  Information on the Company—Regulation and Supervision.”

In September 2014, the Chilean government enacted a law reforming the Chilean tax system. This tax reform (Law No. 20,780) gradually increases the first category tax or corporate tax rate between 2014 and 2018 while establishing two alternative tax regimes from 2017 onwards: (i) the Semi-Integrated Regime and (ii) the Attribution Regime. Nevertheless, following this reform in the Chilean taxation system, in February 2016, a new tax law was enacted (Law No. 20,899), which simplified the previously mentioned reform (Law No. 20,780) by limiting the possibility of choosing between the two alternative tax regimes. According to this new law, publicly-traded companies will only be subject to a Semi-Integrated Regime. Modifications introduced by these two laws also affected taxes levied on cash dividends received by investors that hold shares of common stock or ADS from 2017 onwards. Although these reforms are currently in place, some rulings associated with their implementation are still under review by the Chilean Internal Revenue Service (the “Chilean IRS”). Accordingly, changes to or statements regarding the interpretation of new taxation guidelines by the Chilean IRS could affect our results of operations, performance indicators or the effective return earned by stockholders or ADS holders in a fashion that we cannot determine in advance. For more information, see “Item 4.  Information on the Company—Regulation and Supervision—Amendments to the Reform that Modified the Chilean Tax System” and “Item 10.  Additional Information—Taxation—Chilean Tax Considerations.”

Future changes in accounting standards could impact our results.

The IASB, or other regulatory bodies, periodically introduce modifications to financial accounting and reporting standards under which we prepare our consolidated financial statements. These changes can materially impact the means by which we report financial information, affecting our results of operations. Also, we could be required to apply new or revised standards retroactively. Currently, we cannot assure you that future changes in financial accounting and reporting standards will not substantially affect our results of operations or performance indicators, as we do not know the extent of future standards.

Increased competition and industry consolidation may adversely affect our operations.

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

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We also face competition from non-banking competitors in some of our credit products, especially credit cards and installment loans.  In these markets, competition from non-banking companies like large department stores, private compensation funds and saving and credit cooperatives has become increasingly significant.  In addition, we face competition from other types of lenders, such as non-banking leasing, factoring and automobile financing companies (especially in credit products), as well as mutual funds, pension funds and insurance companies within the market for savings products and mortgage loans.  Nevertheless, banks continue to be the main suppliers of leasing, factoring and mutual fund management, while growing quickly in insurance brokerage services.  However, we cannot assure you that this trend will continue in the future.

Lastly, in the past, increasing competition within the Chilean banking industry has been accompanied by a consolidation wave and the entry of international players to the system through multiple mergers and acquisitions.  We expect these trends will continue and result in the creation of larger and stronger banking conglomerates offering a wide range of products and services while targeting most of the segments in the Chilean banking market.  These trends may adversely impact our results of operations as they may translate into higher interest rates paid on deposits and lower interest rates earned on loans, resulting in decreased net interest margins.  For more detail regarding past and recent changes in the Chilean banking industry see “Item 4.  Information on the Company—Business Overview—Competition.”

Our exposure to certain segments of the retail market could lead to higher levels of total past-due loans and subsequent charge-offs.

Although we have historically been focused on wholesale banking, over the last five years we have reoriented our commercial strategy to increase penetration of the retail banking segment while maintaining our market-leading position in wholesale banking segments.  In fact, according to our management information systems, the share of the retail banking segment in our total loan book has increased from 47.9% in 2010 to 55.1% in 2015.  Although this trend has been associated with expansion in middle and higher income personal banking, our retail banking segment is also composed of small and medium-sized companies (approximately 11.3% of our total loan book as of December 31, 2015, which consists of companies with annual sales of up to Ch$1,600 million) and, to a lesser extent, of lower-income individuals (approximately 3.3% of our total loan book as of December 31, 2015, which consists of individuals with monthly incomes ranging from Ch$170,000 to Ch$500,000).  Since these customers are likely to be more severely affected by adverse developments in the Chilean economy than large corporations and higher-income individuals, we may be exposed to higher levels of past-due loans and subsequent write-offs, in the future, which could result in materially higher allowances for loan losses that could adversely affect our results of operations.

As of December 31, 2015, our past-due loans (loans 90 days or more past-due) reached Ch$299,792 million, which represented a 9.8% annual increase as compared to the Ch$272,983 million recorded in 2014. These figures translated into past-due ratios (loans 90 days or more past-due over total loans) of 1.25% in 2014 and 1.22% in 2015.  According to our management information systems, as of December 31, 2015 our past-due loans (loans 90 days or more past-due) were composed of 83.9% retail banking 90 days or more past-due loans (consumer and residential mortgage loans to individuals, as well as commercial loans to small and medium sized companies) and 16.1% wholesale banking 90 days or more past-due loans (commercial loans to large companies and corporations).  During the prior fiscal year, our past-due loans (90 days or more) portfolio was composed of 80.6% retail banking past due loans (90 days or more) and 19.4% wholesale banking past due loans (90 days or more).

The annual increase of Ch$26,809 million in the amount of past-due loans (loans 90 days or more past-due) was mainly attributable to the retail banking segment, including both SME and personal banking.  In fact, according to our management information system, past-due loans (loans 90 days or more past-due) in retail banking increased by approximately Ch$30,908 million in 2015 as compared to 2014, whereas past-due loans (loans 90 days or more past-due) in the wholesale banking segment decreased by approximately Ch$4,099 million on an annual basis.  This is in line with the growth displayed by both segments within our total loan book over time, as well as higher delinquency evidenced in mortgage loans and loans granted to small and medium sized companies.  This has been aligned with a less robust economic backdrop following the economic slowdown of the local economy that began in 2013 and continued through 2014 and 2015.  Although certain indicators that directly affect the retail banking segment—such as unemployment—remained constant at low levels during 2015, there has been a counterbalance between the employed and self-employed work force.  Similarly, real wages have decelerated over the last two years.  Moreover, consumer confidence has declined as individuals continue to hold a negative outlook with respect to the local economy.  In light of these trends, we have tightened the entire credit process, from assessment to collection, while

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introducing stricter requirements related to collaterals, financial burden, loan-to-value ratios, etc.  These measures have enabled us to maintain delinquency at adequate levels, despite loan growth and the economic slowdown, which has resulted in relatively low levels of provisions for loan losses.  Nonetheless, we cannot assure you the trend in past-due loans (90 days or more) will not continue if global or local economic conditions deteriorate in the future.

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

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

As of December 31, 2015, Sociedad Administradora de la Obligación Subordinada S.A. (“SAOS”), our affiliate, held 29.75% of our shares as a consequence of our 1996 reorganization.  This reorganization was due in part to the 1989 repurchase by the Central Bank of certain non-performing loans that we had previously sold to the Central Bank and later exchanged for subordinated debt without a fixed term.  For more information, see “Item 4.  Information on the Company—History and Development of the Bank—History—The 1982-1983 Economic Crisis and the Central Bank Subordinated Debt.”

In exchange for assuming the Central Bank debt, SAOS received from SM-Chile S.A. (“SM-Chile”), a holding company that controls SAOS, a stake of 63.6% of our shares as collateral for this debt.  Dividends received from us are the sole source of SAOS’s revenues, which—in turn—must be used to repay this debt.  To the extent distributed dividends were not sufficient to pay the amount due on this debt, SAOS is permitted to maintain a cumulative deficit balance with the Central Bank that SAOS commits to pay with future dividends.  If this cumulative deficit balance exceeds 20% of our paid-in capital and reserves, the Central Bank may require SAOS to sell a sufficient number of our shares to pay the entire amount of the accumulated deficit.  As of March 31, 2016, SAOS maintained a surplus with the Central Bank of Ch$603,592 million, equivalent to 23.0% of our paid-in capital and reserves as of the same date.

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

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

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

The results of our operations depend to a great extent on our net interest income, which represented 73.9% of our total operating revenues in 2015.  Changes in nominal interest rates and inflation could affect the interest rates earned on our interest-earning assets differently from the interest rates paid on our interest-bearing liabilities, resulting in net income reduction.  Inflation and interest rates are sensitive to several factors beyond our control, including the Central Bank’s monetary policy, deregulation of the Chilean financial sector, local and international economic developments and political conditions, among other factors.  Any volatility in interest rates could have a material adverse effect on our financial condition and results of operations.

The average annual short-term nominal interest rate in Chile for 90 to 360 day deposits received by Chilean financial institutions was 5.20% in 2013, 3.91% in 2014, and 3.77% in 2015.  The average long-term nominal interest rate based on the interest rate of the Central Bank’s five-year bonds traded in the secondary market was 5.19% in 2013, 4.43% in 2014 and 4.14% in 2015.

Inflation in Chile has been moderate in recent years, especially in comparison with periods of high inflation experienced in the 1980s and 1990s.  High levels of inflation in Chile could adversely affect the Chilean economy, consumer purchasing power, household consumption and investment in machinery and equipment and, therefore, the demand for financing and our business.  The annual inflation rate (as measured by annual changes in the CPI and

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as reported by the Chilean National Institute of Statistics) during the last five years and the first three months of 2016 was:

Source:  Chilean National Institute of Statistics

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

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

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

As all large financial institutions, we are exposed to many operational risks, including the risk of fraud by employees and outsiders, failure to obtain suitable internal authorizations, failure to properly document in-person and online transactions, equipment failures, mistakes made by employees and natural disasters, such as earthquakes, tsunamis and floods.  Furthermore, we are exposed to criminal events or terrorist attacks resulting in physical damage to our buildings (including our headquarters, offices, branches and ATMs) and/or injury to customers, employees and others.  Although we maintain a system of operational controls composed of both trained staff and world-class technological resources, as well as comprehensive contingency plans and security procedures, there can be no assurances that operational problems, errors, criminal events or terrorist attacks will not occur and that their occurrence will not have a material adverse impact on our results of operations, financial condition and the value of our shares and ADSs.

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

We have access to large amounts of confidential financial information and hold substantial financial assets belonging to our customers as well as to us.  In addition, we provide our customers with continuous online access to their accounts and the possibility of transferring substantial financial assets by electronic means while purchasing goods or withdrawing funds, in Chile and abroad with credit and debit cards issued by us.  Accordingly, cybersecurity is a material risk for us.

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

We are also exposed to cyber-attacks and other cybersecurity incidents in the normal course of business.  There has recently been an increased level of attention focused on cyber-attacks against large corporations that include, but are not limited to, obtaining unauthorized access to digital systems for purposes of misappropriating cash, other assets or sensitive information, corrupting data or causing operational disruption.  Cybersecurity incidents such as computer break-ins, phishing, identity theft and other disruptions could negatively affect the

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security of information stored in and transmitted through our computer systems and network infrastructure, which may result in significant liability to us in excess of insurance coverage, and may cause existing and potential customers to refrain from doing business with us.  Although we, with the help of service providers, intend to continuously implement security technology devices and establish operational procedures to prevent such damage, we cannot assure you that these security measures will be successful.

Any downgrade in Chile’s or our credit rating could increase our cost of funding, affecting our interest margins, results of operations and profitability.

Our current credit ratings determine the cost and the terms upon which we are able to obtain funding in the ordinary course of business. Rating agencies regularly evaluate us by taking into account diverse factors, including our financial strength, the business environment and the economic backdrop in which we operate. Thus, methodologies used by rating agencies evaluate Chile’s sovereign debt ratings when determining our ratings. Accordingly, if Chile’s sovereign debt is downgraded, our credit rating could also be downgraded to an equivalent level.

Any downgrade in our debt credit ratings could result in higher borrowing costs for us while requiring us to post additional collateral or limiting our access to capital markets. All of these factors could adversely impact our commercial business by affecting our ability to: (i) sell or market our products, (ii) obtain long-term debt and engage in derivatives transactions, (iii) retain customers who need minimum ratings thresholds to operate with us, (iv) maintain derivative contracts that require us to have a minimum credit rating and (v)  enter into new derivative contracts, which could impact our market risk profile, among other effects. Any of these factors could have an adverse effect on our liquidity, results of operations and financial condition.

Due to the volatility in the financial markets in recent years and concerns about the soundness of developed and emerging economies, we cannot assure you that rating agencies will maintain our and Chile’s sovereign debt current ratings and outlooks.

Risks Relating to our ADSs

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

As of April 25, 2016, LQ Inversiones Financieras S.A. (“LQIF”), a holding company beneficially owned by Quiñenco S.A. and Citigroup Chile S.A., holds directly and indirectly approximately 51.1% of the voting rights of our shares.  These principal shareholders are in a position to elect a majority of the members of our board of directors, direct our management and control all matters decided by a shareholder vote, including the approval of fundamental corporate transactions.

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

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

While our ADSs have been listed on the New York Stock Exchange (the “NYSE”) since the first quarter of 2002, there can be no assurance that an active trading market for our ADSs will be sustained.  During 2015, a daily average volume of approximately 50,366 of our American Depositary Receipts (“ADRs”) were traded on the NYSE, according to data provided by Bloomberg.  Although our shares are traded on the Santiago Stock Exchange, the Valparaiso Stock Exchange and the Chilean Electronic Stock Exchange, the Chilean market for our shares in Chile is small and somewhat illiquid.  As of April 25, 2016, approximately 31.3% of our outstanding shares were held by shareholders other than our principal shareholders, including LQIF, SM-Chile and SAOS, considering direct ownership.

If an ADS holder withdraws the underlying shares from the ADR facility, the small size of the market, its limited liquidity, as well as our concentrated ownership, may impair the ability of the ADS holder to sell the shares

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in the Chilean market in the amount and at the price and time such holder desires, and could increase the volatility of the price of our ADSs.

ADS holders may be unable to exercise voting rights at shareholders’ meetings and preemptive rights.

ADS holders may exercise voting rights associated with common stock only in accordance with the deposit agreement governing our ADSs. Accordingly, ADS holders will face practical limitations when exercising their voting rights because ADS holders must first receive a notice of a shareholders’ meeting from the Depositary and may then exercise their voting rights by instructing the Depositary, on a timely basis, on how they wish to vote. This voting process necessarily will take longer for ADS holders than for direct common stock holders, who are able to exercise their vote by attending our shareholders’ meetings. Therefore, if the Depositary fails to receive timely voting instructions from some or all ADS holders, the Depositary will assume that ADS holders agree to give a discretionary proxy to a person designated by us to vote their ADSs on their behalf. Furthermore, ADS holders may not receive voting materials in time to instruct the Depositary to vote. Accordingly, ADS holders may not be able to properly exercise their voting rights.

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

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

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

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

In particular, since August 2007, the worldwide financial markets have experienced various events of significant volatility resulting from the announcement, by several U.S. banks and financial institutions, of significant write-downs related to their exposure to mortgage-backed securities and other financial instruments.  This situation, also known as the subprime crisis, translated into several and significant government bail-outs for important banks worldwide, bankruptcy for some others and an active M&A market in the financial industry intended to rescue failing banks and maintain the confidence of investors and customers, as well as avoiding bank runs.  Although the Chilean economy was not directly exposed to the U.S. housing credit market and—historically—we have not directly held any assets related to such financial instruments, the subprime crisis impacted the Chilean economy by the end of 2008, including banking activity.  Currently, the U.S. economy seems to be overcoming the effects of the subprime crisis, as evidenced by recovering mid-term growth rates, improving employment rates and increasing consumption indicators.  Consequently, after seven years of an expansionary monetary policy the U.S. Federal Reserve is tapering the quantitative easing programs intended to increase the liquidity (money supply) and reduce interest rates by purchasing government and non-government securities from the market.  Accordingly, in December 2015, the U.S. Federal Reserve increased the marginal standing facility rate from the range of 0%-0.25% to 0.25%-0.50%.  Although this decision was perceived as a positive recovery signal worldwide, we cannot assure you that past developments will not occur again in the future or that any future developments in international markets will not affect us, including our results of operations and, consequently, the market price of our ADSs and shares.

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Financial deterioration in certain European countries was another indirect effect of the subprime crisis that occurred in the United States, resulting in numerous government bail-outs for distressed banks and also an in-depth revision to banking regulations and capital requirements. So far, main European economies have not been able to overcome low GDP growth rates and deflationary pressures, in spite of consecutive monetary stimuli programs executed by the European Central Bank.  During 2015, new doubts about the financial condition of European banks arose.  Similarly, the fiscal condition of many countries remained weak.  Even though our exposure to customers from troubled European countries such as Portugal, Ireland, Italy, Greece and Spain is only 0.03% of our total loans as of December 31, 2015, we cannot assure you that volatility in global financial markets due to the uncertainty regarding the fiscal condition of certain European countries will not continue and affect the Chilean economy and consequently the financial condition and results of operations of the entire Chilean banking system, including us.  Accordingly, the price of our ADS could be adversely affected by a new financial turmoil in the Eurozone, political issues, armed conflicts, uncertainty due to terrorism, a slower than expected recovery, or a deterioration in healthier economies, such as Germany, that could translate into increasing volatility and uncertainty all over the world.

Similarly, recent developments in the Chinese economy have led to increasing volatility in the financial markets and a sharp downward trend in international commodity prices.  The current Chinese economic slowdown has affected the Chilean economy due to the importance of copper exports and overall mining activity to local economic growth.  Although our exposure to the Chilean mining sector does not exceed 2.3% in terms of total loans, we cannot assure you that new developments affecting the Chinese economy will not have a material impact on Chilean economic activity and, therefore, in the local banking industry that could lead to lower loan growth for us and the Chilean financial industry as a whole, affecting the price of our shares and ADS.

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

Equity investments held in Chile by non-Chilean residents have historically been subject to various exchange control regulations that restrict the repatriation of investments and earnings from Chile.  In April 2001, the Central Bank eliminated most of the regulations affecting foreign investors, although they still have to provide the Central Bank with information related to equity investments and must conduct such operations within the Formal Exchange Market.  Additional Chilean restrictions applicable to holders of our ADSs, the disposition of the shares underlying them, the repatriation of the proceeds from such disposition or the payment of dividends may be imposed in the future, and we can neither determine in advance nor advise you as to when or how those restrictions could impact you, if imposed.

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

Risks Relating to Chile

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

Our core business and transactions are with customers doing business in Chile.  Accordingly, our ability to grow our business volumes and results of operations, as well as enhance our financial condition, in general, depends on the dynamism of the Chilean economy and specific macroeconomic variables such as inflation, unemployment, interest rates, consumption and investment.  The global financial crisis of 2008 that dramatically affected the economic growth in developed countries also affected the Chilean economy by the end of 2008 and during the first three quarters of 2009.  This translated into a subsequent slowdown in the local banking industry due to lower levels of consumption and deteriorated credit quality in loan portfolios prompted by unemployment and financial stress experienced by certain economic sectors.  Conversely, between 2010 and 2012 the local economy and the banking industry evidenced a significant upturn, fostered by real GDP growth that averaged 5.7% per year, mainly as a result of the recovery in consumption and investment, as well as higher fiscal spending associated with the reconstruction process after a significant earthquake in 2010.  During 2013, the Chilean economy entered into a moderate slowdown by recording a 4.0% GDP expansion, which deepened throughout 2014 as both corporate and individual confidence continued to deteriorate.  The slowdown was explained in part by both slower growth of Chile’s main commercial partners, especially China, and uncertainty associated with diverse reforms presented by the recently appointed administration that affected investment and consumption.  Accordingly, the Chilean economy grew by only 2.1% in 2015, which was influenced by a 1.5% decrease in investment that was offset by a moderate expansion

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of 1.5% in private consumption.  Although Chilean economic growth continues to be positive, we cannot assure you that the local economy will continue expanding in the future or that developments affecting the Chilean economy and the local banking industry will not materially affect our business, financial condition or results of operations.  For more information, see “Item 5.  Operating and Financial Review and Prospects—Operating Results—Overview”.

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

The Chilean Government’s economic policies and any future changes in the value of the Chilean peso with respect to the U.S. dollar could affect the dollar value of our common stock and our ADSs.  Given the floating exchange rate regime that exists in Chile, the Chilean peso has been subject to large fluctuations in the past and could continue this trend in the future.  According to information published by the Chilean Central Bank, between December 31, 2014 and December 31, 2015, the value of the U.S. dollar relative to the Chilean peso increased by approximately 16.9%, as compared to the increase of 15.3% recorded in the period from December 31, 2013 to December 31, 2014.  See “Item 3.  Key Information—Selected Financial Data—Exchange Rates.”

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

Our results of operations may be affected by fluctuations in the exchange rates between the Chilean peso and the U.S. dollar despite our policy and Chilean regulations related to the general avoidance of material exchange rate mismatches.  In order to reduce the effect of exchange rate mismatches we enter into foreign exchange derivative transactions that hedge our exposure.  As of December 31, 2015, our foreign currency-denominated assets and Chilean peso-denominated assets, which contain repayment terms linked to changes in foreign currency exchange rates, exceeded our foreign currency-denominated liabilities and Chilean peso-denominated liabilities, which contain repayment terms linked to changes in foreign currency exchange rates, by an amount of Ch$6,890 million, or 0.26% of our paid-in capital and reserves.

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

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

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

Chilean law may provide shareholders with fewer and less well-defined rights.

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

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

We are a party to collective bargaining agreements with various labor unions.  Disputes with regard to the terms of these agreements or our potential inability to negotiate acceptable contracts with these unions could result in, among other things, strikes, work stoppages, or other slowdowns by the affected workers.  If unionized workers were to engage in a strike, work stoppage, or other slowdown, or other employees were to become unionized, we could experience disruption of our operations or higher ongoing labor costs, either of which could have a material adverse effect on our results of operations.  See “Item 6.  Directors, Senior Management and Employees—Employees.”

On December 29, 2014, the Chilean government sent a labor reform bill to the Chilean congress for discussion and approval.  The government stated that this bill was intended to strengthen and give more power to Chilean unions.  As a result, unions would enhance their negotiation position in collective bargaining processes.  In addition, the reform modifies the current labor framework by introducing certain flexibility in the contractual relationship between workers and companies. Although the bill was approved by the Chilean congress on April 6, 2016, the Chilean Constitutional Court on April 27, 2016, has decided that certain provisions of the bill are unconstitutional; however, the resolution has yet to be published. Accordingly, the revised bill, excluding the provisions rejected by the Chilean Constitutional Court, must be submitted to the Chilean government for its promulgation or veto according to its authority. Consequently, there is no certainty about the outcome of this process and how this bill could affect the banking business or our results, if enacted.

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Item 4                                    Information on the Company

History and Development of the Bank

Overview

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

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

We are a full service financial institution that provides, directly and indirectly through our subsidiaries, a wide variety of lending and non-lending products and services to all segments of the Chilean financial market, providing our customers with powerful, differentiated and comprehensive value offerings.  Our business is not materially affected by seasonality.  We organize our operations and deliver our services to our customers through the following four principal business segments:

(i)             retail banking;

(ii)          wholesale banking;

(iii)       treasury and money markets; and

(iv)      subsidiaries.

Through our retail banking segment, we provide our individual customers with credit cards, installment loans and residential mortgage loans, as well as traditional deposit services, such as current accounts, demand deposits, demand accounts, savings accounts and time deposits.  Our retail customers also include micro, small and medium sized companies that we serve by providing them with short and long term financing, as well as diverse deposit and cash management solutions.  In addition, our banking services for wholesale customers include commercial loans (including factoring and leasing), trade finance, capital markets services, cash management and non-lending services, such as payroll, payment and collection services, as well as a wide range of treasury, financial advisory and risk management products.

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

As of December 31, 2015, we also offered international banking services through our Trade Services subsidiary in Hong Kong, our representative office in Beijing, and a worldwide network of correspondent banks.  However, in 2014, we voluntary began a dissolution process for our Trade Services subsidiary in Hong Kong, which should be completed during the second half of 2016.

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

According to the SBIF, under Chilean GAAP, as of December 31, 2015, we ranked first in the Chilean banking industry in terms of net income with a market share of 25.6%.  As of the same date and excluding operations of subsidiaries abroad, we continued to be the second largest bank in Chile in terms of total loans with a market share of 18.3%, we were the largest provider of commercial loans with a market share of 18.1%, we ranked second in consumer loans with a market share of 21.0% and we were also the second largest privately-owned bank in terms of residential mortgage loans with a market share of 17.6%.  As for liabilities, excluding operations of

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subsidiaries abroad, we led the market in terms of total current account balances with a market share of 23.1% and, more importantly, we ranked first in current account balances held by individuals with a market share of 28.8%, both as reported by the SBIF and as of December 31, 2015.  Lastly, according to the Chilean Association of Mutual Funds, as of December 31, 2015, we were the largest mutual funds manager with a market share of 21.3%.

As of December 31, 2015, we had:

·                  total assets of Ch$31,057,596 million (approximately U.S.$43,851.8 million);

·                  total loans of Ch$24,573,426 million (approximately U.S.$34,696.5 million), before deducting allowances for loan losses;

·                  total deposits of Ch$18,234,740 million (approximately U.S.$25,746.6 million), of which Ch$8,327,048 million (approximately U.S.$11,757.4 million) correspond to current account and demand deposits;

·                  equity (including net income, non-controlling interest and provisions for minimum dividends) of Ch$3,175,325 million (approximately U.S.$4,483.4 million);

·                  net income of Ch$609,905 million (approximately U.S.$861.2 million); and

·                  market capitalization of approximately Ch$6,938,602 million (approximately U.S.$9,797.0 million).

As of December 31, 2015, we had 14,973 employees and delivered financial products and services through a nationwide distribution network of 419 branches and 1,441 Automatic Teller Machines (“ATMs”).  Our ATMs are part of a larger network of 7,932 ATMs operated by Redbanc S.A., a company we partly own along with 10 other privately-owned banks).

History

We were founded in 1893 as a result of the merger of Banco Nacional de Chile, Banco Agrícola and Banco de Valparaíso, which created the largest privately-owned bank in Chile.  We have played an important role in the economic history of Chile.  Before the creation of the Central Bank in 1926 and prior to the enactment of the General Banking Law, we were the main stabilization agent of the Chilean banking system, a role that is now performed by the Chilean Central Bank.  Beginning in the early 1970s, the Chilean Government assumed control of a majority of Chilean banks, and all but one of the foreign banks that were operating at that time closed their branches and offices within the country.  Throughout this era, we remained as a privately-owned bank, with the exception of a portion of our shares owned by the Chilean Government that were sold to private investors in 1975.  Throughout our history we have developed a well-recognized brand name in Chile and expanded our operations in foreign markets, where we developed an extensive network of correspondent banks.  In the early twentieth century, we established a representative office in London, which we maintained until 1985, when our operations in Europe were moved to Frankfurt.  The office in Frankfurt was closed in 2000, when our foreign operations were centralized at the New York branch.  In 1987 and 1988, we established four subsidiaries to provide a full range of specialized financial products and services as permitted by the General Banking Law.  In 1999, we widened our scope of specialized financial services by creating our insurance brokerage and factoring subsidiaries.  According to our estimates, we remained the largest private bank in Chile until 1996.  During the early 2000s, the Chilean banking industry witnessed intense merger and acquisition activity.  In 2002, we merged with Banco de A. Edwards, which allowed us to expand our business to new customer segments.  In 2008, we sold our U.S. branch to Citigroup in connection with our merger with Citibank Chile that was carried out during the same year.  As a result of these consolidations, we currently operate a distribution network that is composed of three brand names, namely, “Banco de Chile” (which operates throughout Chile), “Banco Edwards-Citi” (which is primarily oriented to higher income segments) and “Banco CrediChile” (which is focused on consumer loans and demand accounts for lower and middle income segments).

In 2012, we became the market leader in net income and the most profitable bank (the highest return on average equity and average capital and reserves) within the Chilean banking industry, according to information released by the SBIF.  Similarly, among our peers we were the bank with the best credit quality indicators in terms

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of past-due loans (loans 90 days or more past-due), provisions for loan losses over average loans and coverage of past-due loans (loans 90 days or more past-due).  Also, during 2012 we maintained our leadership in mutual funds and current accounts for individuals, while our investment banking subsidiary maintained the market leading position in corporate bond placements within the local market, according to information available at the Chilean Association of Mutual Funds, the SBIF and the Superintendencia de Valores y Seguros (the “Superintendency of Securities and Insurance” or “SVS”), respectively.  In terms of funding diversification, we improved our access to foreign debt markets by placing senior bonds in Hong Kong and Peru for a total aggregate amount of approximately U.S.$193 million.  Similarly, we established a commercial paper program in the U.S. market of U.S.$1,000 million (the “Commercial Paper”).

In 2013, we completed a very successful year by leading the industry in operating revenues—for the first time in our recent history—and net income, according to information published by the SBIF.  These achievements enabled us to remain the most profitable bank in Chile in terms of return on average equity and average assets.  Our leading position in net income was also a consequence of our market leading performance in expenses, which allowed us to reach the lowest efficiency ratio in the local industry, according to information published by the SBIF.  Also, in order to maintain a convenient and well diversified liability structure, we have continued to seek alternative financing opportunities, especially overseas.  In this regard, during 2013 we carried out four placements in Switzerland for a total amount of approximately U.S.$785 million.  Also, we established a U.S.$2,000 million medium term notes program (the “MTN Program”) in Luxembourg.  Under this program we issued medium term notes in Hong Kong and Japan for approximately U.S.$168 million and U.S.$167 million, respectively.

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

During 2015, the economic backdrop remained a leading challenge for the banking industry.  However, we remained the most profitable bank in Chile (in terms of return of return on average capital and reserves and return of average assets for banks with market share in loans above 3.0%) and the first bank in net income generation.  These accomplishments were due to diverse initiatives implemented during the year, including innovation in IT solutions for our customers, which has become one of our main goals. Due to these initiatives, we were recognized as the Best Consumer Digital Bank in Chile by GlobalFinance and as the Best Internet and Mobile Bank in Chile by Global Banking & Finance Review in 2015.  In addition, we entered into two strategic partnerships with both a local and an international airline, which will benefit our 1.5 million credit card holders.  We also acquired a commercial loan portfolio from a local bank amounting to approximately Ch$564 billion.  Moreover, 2015 was a record year for Banco de Chile in terms of bond placements amounting to roughly Ch$1,342 billion, of which Ch$156 billion were placed abroad under the U.S.$3 billion MTN Program we maintain in Luxembourg.

Merger with Banco de A. Edwards

On December 6, 2001, our shareholders approved our merger with Banco de A. Edwards, which became effective on January 1, 2002.  Banco de A. Edwards had been listed on the NYSE since 1995, and since January 2002, we have been listed on the NYSE under the symbol BCH.  We concluded the merger process with the consolidation of a new corporate structure and the integration of our technological platforms.

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Merger with Citibank Chile

On December 27, 2007, our shareholders approved our merger with Citibank Chile, which became effective on January 1, 2008.  During 2008, we integrated Citibank Chile’s technological platforms with ours and established a new organizational structure in order to satisfy the needs of our customers and to achieve important synergies.  We concluded the merger process with the integration of Corporación Financiera Atlas S.A. (Citibank Chile’s consumer division) into our consumer division (CrediChile), which allowed us to nearly double our customer base and market share in consumer finance. As result of this merger and integration process, we entered into the following agreements with Citigroup Inc. to provide a framework for our relationship with Citigroup Inc., its services and trademarks in Chile: (i) the Global Connectivity Agreement, (ii) the Cooperation Agreement, (iii) the Trademark License Agreement and (iv) the Master Services Agreement.  On October 22, 2015, we entered into a new Global Connectivity Agreement, a new Cooperation Agreement and a new Trademark License Agreement with Citigroup Inc. All of these new agreements replaced the original agreements we entered into on December 27, 2008, which in turn were due to expire on January 1, 2016.  In addition, on October 22, 2015, we extended the Master Services Agreement with Citigroup Inc. for a period of six months, beginning on January 1, 2016. For more information, see “Item 7. Major Shareholders and Related Party Transactions—Related Party Transactions.

Technological Projects

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

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

During 2015, our efforts were concentrated on providing our customers with ground-breaking mobile applications intended to improve their access to banking products and services.  Similarly, we implemented initial stages of various technological projects to support commercial activities while reinforcing operational excellence and security in internet-based transactions.  Thus, in 2015, we launched three new smartphone applications, namely, MiCuenta, MiPass and MiSeguro, which allow our customers to execute various banking transactions through their mobile phones, including paying monthly bills, generating secure passwords for electronic money transfers and enrolling in and managing insurance policies offered by our insurance brokerage subsidiary.  Due to these applications, and those launched last year, in 2015, we were distinguished as the Best Consumer Digital Bank in Chile by GlobalFinance and the Best Mobile Banking and Internet Banking in Chile by Global Banking & Finance Review.  Similarly, we implemented the first stage of a new Internet Website with diverse functionalities especially designed for the needs of companies in the wholesale banking segment.  Additionally, we implemented a new internet-based service for money exchange.  From an operational point of view, we took several steps to improve efficiency.  Among these accomplishments, we implemented a paperless system for credit risk committees, a new platform for post-sale support for leasing operations and a pilot project for approving and clearing documentation based on images.  Also, we focused on reducing the likelihood of electronic fraud and criminality against banking services by setting a new password- generating system for cash management services while replacing approximately 60% of our ATMs with newer devices and more secure infrastructure as required by the SBIF.

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

The 1982-1983 Economic Crisis and the Central Bank Subordinated Debt

During the 1982-1983 economic crisis, the Chilean banking system experienced significant instability that required the Central Bank and the Chilean Government to provide assistance to most Chilean private sector banks, including us.  During this period, we experienced significant financial difficulties.  In 1985 and 1986, we increased our capital and sold shares representing 88% of our capital to more than 30,000 new shareholders.  As a result, no single shareholder held a controlling stake in the Bank.  In 1987, the SBIF returned complete control and administration of the Bank to our shareholders and our Board of Directors by ending our provisional administration based on our successful capital increases as required by Law No. 18,401.

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

The original repayment terms of our Central Bank subordinated debt, which at December 31, 1989 equaled approximately Ch$1,591,652 million (in real terms as of December 31, 2015), required that a certain percentage of our income before provisions for the subordinated debt be applied to repay this obligation.  The Central Bank subordinated debt did not have a fixed maturity, and payments were made only to the extent that we earned income before provisions for the subordinated debt.  In 1993 we applied 72.9% of our income before provisions to repay the Central Bank subordinated debt.  In 1994 we applied 67.6%, and in 1995 we applied 65.8% of our income before provisions to repay the Central Bank subordinated debt.

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

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

In exchange for assuming the Central Bank debt, SAOS received from SM-Chile 63.6% of our shares as collateral.  Although shares held by SAOS as collateral have economic rights that belong to the Chilean Central Bank, their voting rights are exercised by SM-Chile’s shareholders.  As a result of our merger with Banco de A. Edwards, the percentage of our shares held by SAOS decreased to 42.0%.  Subsequently, as of December 31, 2015 the percentage of our shares held by SAOS declined to 29.75%, as a result of:  (i) capital increases agreed to an Extraordinary Shareholders’ Meetings held in May 2007, January 2011 and October 2012, (ii) stock dividends paid in May 2006, May 2007, June 2009, April 2011, June 2012, May 2013, July 2014, and July 2015 and (iii) our merger with Citibank Chile in January 2008.

Dividends received from us are the sole source of SAOS’s revenues, to be applied by legal mandate to repay its debt to the Central Bank of Chile.  SAOS does not have any other material debt, as it is a special purpose

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legal entity created by Law No. 19,396 whose only business is to own Banco de Chile shares and repay the obligation to the Central Bank of Chile.  To the extent distributed dividends are not sufficient to pay the amount due on its debt, SAOS is permitted to maintain a cumulative deficit balance with the Central Bank that SAOS commits to pay with future dividends.  If the cumulative deficit balance exceeds an amount equal to 20% of our paid in capital and reserves, the Central Bank may require SAOS to sell a sufficient number of shares of our stock to pay the entire accumulated deficit amount.  As of March 31, 2016, SAOS maintained a surplus with the Central Bank of Ch$603,592 million, equivalent to 23.0% of our paid in capital and reserves as of the same date.  See “Item 3.  Key Information—Risk Factors—Risks Relating to our Operations and the Banking Industry—One of our affiliates may be obligated to sell shares of our stock in the public market if we do not pay sufficient dividends.”

As of December 31, 2015, the outstanding subordinated debt balance held by SAOS was Ch$465,445 million (including accrued interest).  SAOS paid to the Central Bank a total of Ch$151,560 million in 2013, Ch$145,123 million in 2014 and Ch$142,856 million in 2015, exceeding in each of those years the required minimum annual payment.

As of December 31, 2015, the major shareholder of SM-Chile was LQ Inversiones Financieras S.A. (a subsidiary of Quiñenco S.A.), which owned, directly and indirectly, 58.24% of SM-Chile’s total shares.  As of the same date, our major shareholders were SAOS, LQ Inversiones Financieras S.A. and SM-Chile, each having a direct participation of 29.75%, 26.02% and 12.63% in our total common stock, respectively.

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

Capital Expenditures

The following table sets forth our capital expenditures in each of the three years ended December 31, 2013, 2014 and 2015:

Our budget for capital expenditures for 2016 amounts to approximately Ch$68,334 million, of which expenditures in information technology investments represent 62.7%, while infrastructure projects represent the remaining 37.3%.  The budget for capital expenditures is in line with our mid-term strategic priorities of improving our efficiency and reinforcing our proximity to customers, particularly in our retail banking segment by expanding both physical and remote contact channels.  These capital expenditures will be principally financed by cash on hand and long-term debt financing.

Among the budgeted expenditures for information technology, 63.6% corresponds to new and ongoing IT projects intended to provide us with business solutions as well as productivity improvements, 8.1% is related to critical projects identified in a mid-term IT plan in its final stages and the remaining 28.3% consists of investments in technological equipment and improvements or renewal of our ATMs nationwide network, in response to the Chilean regulator’s new security requirements for the ATMs operation.

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Our 2016 budget for infrastructure expenditures includes disbursements associated with renovation and restoration of our main building, implementation and relocation of commercial branches and general maintenance investments.

All of the aforementioned investments have been or will be made in Chile.

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BUSINESS OVERVIEW

Our Competitive Strengths

Building on our knowledge of the Chilean financial market, we have historically been able to develop significant competitive advantages based on our strong brand recognition, our widespread branch network, the diversity and relative size of our customer base, our highly competitive funding structure, the superior asset quality of our loan portfolio as compared to our peers in Chile, an attractive risk-return relationship and our market leadership in a diverse range of financial products and services.

Our main competitive strengths are:

Brand Recognition and Strong Corporate Image

We have operated in the Chilean financial industry for over 120 years under the “Banco de Chile” brand name.  In order to provide our customers with specialized value offerings and a wider range of financial products and services, we have also developed the “Banco Edwards|Citi”, “Banco CrediChile” and “Banchile” brand names.  We believe our long standing history in the Chilean market is recognized by our customers and the general public, who associate us with quality, reliability and social responsibility within the Chilean financial industry, as demonstrated in various polls conducted by well-known market research companies.  According to market research conducted by Adimark GFK (part of the GFK Group), during 2015 we remained the most recognized brand among financial institutions operating in Chile.  We believe that our long history in the Chilean banking industry is a key element that differentiates us from our competitors.

Additionally, we believe that our merger with Citibank Chile reinforced our corporate image as a leading financial institution within Chile and allowed us to gain recognition among customers and investors all over the world.

We also believe that our strong corporate image is further strengthened by our commitment to social responsibility, which includes supporting the Teleton Foundation (a non-governmental organization dedicated to assisting and treating disabled Chilean children), our partnership with institutions dedicated to improving the quality of Chilean education, our participation in campaigns intended to improve the quality of life of needy people, our commitment to the development of sports in Chile and other initiatives intended to strengthen our role in, and contribution to Chilean society.

Business Scale and Leading Market Position

We are one of the largest financial institutions in Chile and a market leader in a broad range of financial products and services within the Chilean financial system, as listed in the following table:

Source:  SBIF and Chilean Association of Mutual Funds.

(1)         Excluding operations of subsidiaries abroad.

We have traditionally had a strong presence in the wholesale segment by maintaining long-term relationships with major local and multinational companies that operate in Chile.  We have been able to maintain this leading position by continuously improving our products and services and supplementing them with comprehensive and tailored service models that allow us to successfully serve our customers’ needs.  We have also

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added value to our service offerings by including treasury products for hedging purposes, together with investment banking, insurance brokerage and other specialized financial services provided by our subsidiaries.

In addition, in recent years we have been focused on further penetrating the retail banking business through diverse value offerings intended to cover all of the population and enterprises we target.  Therefore, in recent years we have prioritized expanding our residential mortgage portfolio and our presence in transactional services such as credit cards, current accounts and demand accounts, as we believe they are effective means to build long-term relationships and customer loyalty, while increasing cross-selling opportunities.  As a result, through our Individual and SME Banking Unit (which belongs to our Commercial Division), we lead the market in services offered to high income individuals for whom we have developed an attractive and complete portfolio of financial services, including a full range of wealth management services through one of our subsidiaries.  Also, our Consumer Finance Division (Banco CrediChile) has become one of the largest providers of consumer loans among the Chilean banks’ consumer divisions, based on comprehensive service offerings for low income individuals.  This has been recently supplemented by the implementation of value offerings satisfying small scale entrepreneurs’ financial needs and individual customers in outlying districts seeking deposit and transactional solutions.  This broad variety of services has also enabled us to lead the Chilean market in terms of income from fees and commissions.

We believe our financial strength, prestige and brand recognition among Chilean customers have allowed us to become the market leader in terms of current account balances within the Chilean financial system, especially among individuals, who have demonstrated their preference for our services.  Our position was further consolidated in the financial downturn that started in 2008, when we benefited from a “flight-to-quality” effect as investors were seeking a reliable institution to keep their funds.

Broad Customer Base and Nationwide Distribution Network

We believe that we have one of the largest customer bases among financial institutions in Chile.  In recent years, we have been able to expand our customer base by providing attractive and tailored value offerings based on continuously improving segmentation and by applying sophisticated business intelligence tools.  As of December 31, 2015, we had approximately 2,200,000 customers, including approximately 1,170,000 borrowers, roughly 760,000 current accounts holders, nearly 131,000 time deposit holders, approximately 368,000 saving account holders and approximately 1,540,000 credit card holders.  Our customer base is composed of the sum of individuals and companies holding and using at least one or a combination of the following products: a loan, a current account, a credit card or a demand account.

We believe that our broad customer base is both an essential driver of our business and a valuable asset that enables us to cross-sell our products and services.

In order to better serve our customers, we are present in all regions of Chile and strive to be accessible to every Chilean customer through our large branch network as well as non-physical contact channels.  As of December 31, 2015, we had a nationwide branch network of 419 branches, the second largest in Chile among privately-owned banks, according to information published by the SBIF.  This network is composed of 254 branches under our “Banco de Chile” brand name, 39 branches under our “Banco Edwards|Citi” brand name and 126 branches under our “Banco CrediChile” brand name.  We believe that our branch network enables us to develop close relationships with our customers and therefore we are constantly assessing new branch locations throughout Chile.

In addition, to improve our customer service, we are constantly reviewing the appearance and layout of our branches.  We aim to turn each of our branches into a business generating unit.  As a result, we have revised and re-designed our service models in most of our credit-lending units in order to maximize branch profitability and enable our on-site account executives to focus on serving customers and developing new businesses rather than focusing on administrative tasks, which have been mostly transferred to centralized back-office staff.

We have also enhanced our branch network with non-physical remote channels, such as ATMs, Internet-based online platforms and mobile banking applications.  As of December 31, 2015, we had 1,441 ATMs throughout Chile and launched diverse mobile banking applications including MiBanco, MiBeneficio, MiCuenta, MiPago, MiPass and MiSeguro.

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Diversified Value Offering of Financial Products and Services

In response to the diverse needs of our customers, we have become a full-service financial company that operates under a multi-brand approach, offering a wide range of traditional banking products and services to our customers that are supplemented by specialized financial services provided by our subsidiaries, including:

·                  securities brokerage,

·                  mutual funds management,

·                  securitization,

·                  financial advisory,

·                  insurance brokerage,

·                  collection services,

·                  credit pre-evaluation services,  and

·                  trade services.

In addition, our strategic alliance, backed by a Global Connectivity Agreement with Citigroup Inc., has allowed us to broaden our service offerings by adding a comprehensive portfolio of international financial services that previously we could only partially provide.

All of the above is supplemented by tailored service models based on the needs of consumers across all of our markets.

Competitive Funding Structure

We believe that we have a cost effective and highly competitive funding structure based on our leading market position in current accounts and demand deposits, especially among individuals.  According to the SBIF, as of December 31, 2015, we ranked first within the Chilean banking industry in current account and demand deposits held by individuals by attaining a 28.8% market share.  Similarly, as of that same date and excluding operations of subsidiaries abroad, we were the principal bank in Chile in terms of total balances of our non-interest bearing current accounts and demand deposits representing 23.1% of the industry, as reported by the SBIF.  Also, our total balances of current accounts and demand deposits represented 26.6% of our funding structure as of December 31, 2015, as compared to the 19.6% reported by the Chilean financial industry as a whole, excluding Banco de Chile.

Our funding structure provides us with a cost advantage over many of our competitors (which use a higher proportion of interest bearing liabilities), as current accounts and demand deposits are non-interest bearing in Chile.  Our solid market position in demand deposits, together with our high international credit ratings, translated into one of the lowest costs of funding from liabilities associated with interest bearing deposits and long-term debt, among the seven largest banks in Chile.

We are constantly striving to diversify our liability structure in order to maintain a competitive cost of funding and improve our liquidity.  During 2015 we completed long-term debt placements in Chile and abroad of approximately Ch$1,342,224 million, of which approximately Ch$155,844 million were issued abroad.  Unlike previous years, during 2015 we were less active in placing bonds abroad due to less attractive financial conditions, particularly associated with structuring hedging position.  Accordingly, local and international long-term debt have increased their joint share in our funding structure.  In fact, our issued long-term debt represented roughly 9.7% of our total assets in 2010 as compared to 19.5% as of December 31, 2015.  This increase has allowed us to replace deposits coming from institutional and wholesale customers, which are, in general, a less stable source of funding.  Thus, our funding diversification strategy has contributed to lengthen the maturity of our liabilities and, therefore, to improve our liquidity.

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Superior Asset Quality

We are one of the Chilean financial institutions with the highest credit quality and the healthiest loan portfolio in Chile. We believe this asset quality is the result of our well known prudent risk management approach and accurate credit risk models that are continuously being updated and have enabled us to maintain relatively low levels of past-due loans (loans 90 days or more past-due) and high coverage indicators over the last few years.  According to the SBIF, as of December 31, 2015, we had a delinquency ratio (loans 90 days or more past-due as a percentage of total loans) of 1.22%, which was well below the industry average delinquency ratio of 2.08% reported by the Chilean banking industry (excluding Banco de Chile) as of the same date.  Additionally, as of December 31, 2015 we had a coverage ratio (allowances for loan losses over loans 90 days or more past-due) of 200.8%, which was well above the industry average coverage ratio of 127.6% as of the same date (excluding Banco de Chile).

Our Business Strategy

Purpose

‘We are a company that contributes to the economic development of the country by generating favorable conditions for the development of individuals and enterprises, providing them with financial solutions that fit their needs.’

Mission

‘We are a leading and globally-connected corporation with a prestigious business tradition.  We provide excellent financial services to each type of customer by offering creative, fast and effective solutions for each segment, and ensuring that we add value for our customers, shareholders, employees and community as a whole.’

To accomplish this mission, we believe it is essential to attain industry leadership in all businesses and financial areas in which we operate, namely, profitability, efficiency, business scale, customer base, human resources development and corporate social responsibility.

This mission also requires initiatives to achieve comprehensive excellence in management, with customer satisfaction as our major goal.  We use high industry standards in information technology, business models and quality, all of which is summarized by the value creation cycle below:

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Vision

‘We aspire to be, in all things we do, the best bank for our customers, the best place to work and the best investment for our shareholders.  In order to accomplish this vision, we are committed to the development of our employees and the community as a whole.’

Throughout our history, we have aspired to be a leading bank in the Chilean financial system.  This vision involves and commits us to all of the diverse stakeholders related to our business, namely, customers, employees, investors and the community.  Our vision is shared and internalized by all areas across the corporation, senior management and the board of directors and constitutes the basis for our strategic objectives.

Commitments

We aim to satisfy the expectations of diverse stakeholders by:

·                  Our Customers

·                  Offering innovative and top-quality banking products and financial services.

·                  Providing customers with excellent service based on customized relationships and a proactive attitude.

·                  Ensuring the availability and stability of physical and non-physical service channels.

·                  Maintaining trusted relationships in order to be our customers’ main bank.

·                  Our Employees

·                  Providing employees with career opportunities based on merit.

·                  Promoting a respectful and friendly work environment.

·                  Offering competitive compensation and economic benefits.

·                  Supplying adequate technological tools and infrastructure.

·                  Our Community

·                  Improving quality of life and managing adversity.

·                  Strengthening the quality of education in Chile.

·                  Promoting entrepreneurship.

·                  Protecting the environment.

·                  Building strong relationships with suppliers.

·                  Our Shareholders

·                  Leading the industry in net income generation and profitability.

·                  Maintaining a strong market position in terms of business volume.

·                  Fostering operating efficiency and productivity.

·                  Developing a prudent approach to risk management.

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Strategic Priorities

Our long-term strategy is intended to maintain profitable growth by enhancing our market-leading position within the Chilean financial industry through a broad range of financial products and services to corporations and individuals nationwide.  As part of this strategy, we have developed a multi-brand approach to target different market segments.  We aim to leverage our strongly positioned brand names “Banco de Chile”, “Banco Edwards|Citi” and “Banco CrediChile” in traditional banking, which are supplemented by specialized financial services (such as securities brokerage, mutual funds management, securitization, financial advisory and insurance brokerage) provided by our subsidiaries that operate under the “Banchile” brand name.

Since the performance of our business depends on many factors, we cannot assure you that we will be able to implement our strategies successfully or that we will be able to reach our strategic goals.  For a discussion of certain risks applicable to our operations, industry and country we operate in, see “Item 3. Key Information—Risk Factors”.

Our business model is focused on those lines of business that add significant economic value to our shareholders, have appropriate levels of risk and allow us to strengthen long-term relationships with our customers.  We seek sustained growth, particularly in higher-margin segments and business areas that show strong growth potential.  Accordingly, in recent years we have reoriented our business focus towards the retail, large companies and treasury segments, in which we aim to achieve the same prominent position that we have obtained in the corporate segment.  Thus, we strive to:

·                  Lead the Retail Banking Business

In our retail banking segment, our aim is to lead the market by providing differentiated and comprehensive value offerings based on a deep and continuously improving segmentation that permits us to engage in profitable and high-growth potential business opportunities.  Thus, we expect to expand our business and customer base by developing tailored service models, optimizing our branch network, enhancing our presence in the small and medium companies market and reinforcing certain lending products that should enable us to consolidate long-term relationships with our upper and middle-income individual customers, especially through payment channels usage (such as credit cards), installment loans and residential mortgage loans.  Similarly, we aspire to target lower-income individuals and microbusinesses by promoting payroll-deduction lending and attracting customers previously unattached to any bank through a basic array of services, as well as providing commercial credit.

Following the trend of the past several years, in 2015, we continued to prioritize growth in middle and upper income segments in personal banking, based on our view of the local economy and the potential effects of the economic slowdown on the lower income segment’s payment capacity.  In addition, we promoted loan growth in less risky assets, such as mortgage loans, by taking advantage of specific trends seen in the real estate market.  Also, we continued to apply business intelligence tools while improving segmentation of our customer base.  This allowed us to develop tailored value offerings while avoiding competition among our in-person and online distribution channels, as a result of an accurate cost-based pricing.  We have also focused on transactional services, especially credit cards, by improving benefits to our 1.5 million credit card holders.  In this regard, during 2015, we entered into two strategic partnerships with a local and an international airline.  This strategy is intended to reinforce our loyalty programs by allowing customers to redeem their credit card points to purchase flight tickets or miles at special discounts.  All of these initiatives have been supplemented by the development of cutting-edge mobile banking applications.  In 2015, we launched three new smartphones applications (MiCuenta, MiPass and MiSeguro), which complemented those released in 2014 (MiBanco, MiPago, MiBeneficio).  These applications seek to improve access our customer’s access to various financial services, including monthly bill payments, online password generation for electronic money transfers and insurance premiums purchase and management.

In addition, we have continued to strengthen value offerings for CrediChile customers (lower-income segment customers with monthly income between Ch$170,000 and Ch$500,000).  Thus, CrediChile added more benefits to CuentaChile by creating ClubChile to increase transactions by improving customer loyalty.  Benefits for ClubChile members include discounts at a variety of stores and non-financial services.  Also, CuentaChile users can use the CajaChile network, which provides CuentaChile customers with a suite of basic financial services through a transactional platform located in local convenience stores in socially or geographically isolated communities.  As of December 31, 2015, we had 2,138 CajaChile locations covering approximately 74% of the country’s communities.

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These initiatives are intended to take advantage of the retail banking segment’s growth potential.  Even though Chile’s per capita GDP has increased fourfold over the last 26 years, banking penetration in the Chilean economy is still below that in developed countries, particularly within the low and middle income population segments and with respect to certain banking products such as residential mortgage and consumer loans.  In fact, as of December 31, 2015, the loan book of the Chilean banking industry (excluding operations of subsidiaries abroad) represented 85.2% of the Chilean GDP.  As of the same date, mortgage and consumer loans represented 23.0% and 11.5%, respectively.

Accordingly, all of the above contributed to an increase in loan balances managed by our retail banking segment of approximately 15.4% in 2015 as compared to 2014.  This increase was due to an 18.2% annual growth in mortgage loans, a 14.4% increase in commercial loans and a 11.6% increase in consumer loans.  For consumer, it is worth mentioning the annual increase of 15.1% in loans related to credit cards and an increase of 10.5% in installment loans.

We believe we can grow further in this segment since, according to the SBIF, as of December 31, 2015, we had a 17.6% market share in residential mortgage loans and a 21.0% market share in consumer loans, both below the market stake held by the market leader.  As for consumer loans, due to our effective strategies focusing on middle and upper income segments, the gap between us and the market leader decreased from 3.6% as of December 31, 2014 to 2.3% as of December 31, 2015 . With respect to residential mortgage loans, however, the gap between us and the market leader moderately increased from 3.8% as of December 31, 2014 to 3.9% as of December 31, 2015.  This increase is aligned with our prudent approach to risk-taking.  Given the boost observed in the housing market over the last five years, during 2015 we tightened the entire credit process, from admission to collection, and imposed stricter conditions to granting mortgage loans in order to maintain a balanced risk return relationship.

Despite our efforts to increase market penetration of retail banking, especially in lending products, we believe that the fierce competition in the banking industry compels us to innovate in terms of new products and services to diversify our revenue sources.  Accordingly, we have strived to build comprehensive value offerings for our retail segment, prioritizing fee based income. As a result, our consolidated income from fees and other services has become an important source of revenue for us, reaching Ch$272,188 million (or 16.4% of our total operating revenues) in 2014 and Ch$305,979 million (or 18.4% of our total operating revenues) for the year ended December 31, 2015.  We aim to generate increasing revenues from fees and commissions by developing innovative products and services and reinforcing cross-selling.

·                  Lead the Wholesale Banking Business

In our wholesale banking segment (which targets companies with annual sales over Ch$1,600 million), we aim to maintain our leading market position in terms of loans while achieving higher profitability in a market that is characterized by low margins and fierce competition. We intend to accomplish these goals by increasing our cross-selling of non-lending products and services through various initiatives.  We are focused on improving our offering of cash management services, enhancing our internet-based services, increasing the penetration of products designed by our treasury and money market operations segment, enhancing our presence in certain lending products such as leasing and factoring and promoting international businesses by taking advantage of the commercial synergies related to both our merger with Citibank Chile (such as the Global Connectivity Agreement with Citigroup) and the specialized financial services offered by our subsidiaries, such as securities brokerage, mutual funds management and financial advisory in order to meet the needs of certain niches within this business segment.

As a result, according to our management information system, we increased our cross-selling indicator of non-lending revenues to lending revenues from 1.31 times as of December 31, 2009 to 1.80 times as of December 31, 2015.  We expect to continue enhancing our cross-sell indicators in order to optimize the profitability of the wholesale banking segment.  This achievement took place together with a loan growth of 8.7% in year-end balances of total loans managed by our wholesale banking segment.  This expansion was mainly explained by loans granted by our Large Companies and Real Estate Unit (annual turnover between Ch$1,600 and Ch$70,000 million) with loan balances increasing by 10.6% and, to a lesser extent, by an annual increase of 5.9% in loan balances managed by our Corporate Division (annual sales above Ch$70,000 million).  This trend in loans has been the result of plans intended to enhance the closeness with the customers through a dual model of service that includes several on-site visits by a team composed of account officers and credit risk analysts.

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Also, part of the expansion in lending products during 2015 was associated with the acquisition of a portfolio of commercial loans from a local bank amounting to approximately Ch$564,000 million.  This was a strategic business opportunity to broaden our business relationship with certain customers who were also our customers, but also to gain new customers and improve our cross-selling platform.

We also promote diverse services such as leasing, factoring and cash management in this segment.  Based on this view, we remained one of the leaders in these markets in 2015 by ranking second in both factoring and leasing related loans with market shares of 21.5% and 19.6%, respectively (including operations of subsidiaries abroad).  Regarding cash management services, during 2015 we increased joint volumes related to collection and payment agreements by approximately 6.5%.

In our treasury and money market operations segment, we intend to take advantage of our specialized knowledge in order to increase the penetration of widely-used products in our current customer base while offering innovative products to potential clients.  Also, we continuously seek newer and more convenient funding choices, locally and internationally, in order to support our long term business strategy by promoting an adequate diversification of our funding structure.

·                  Improve Service Quality

We are convinced that in a highly competitive industry such as the Chilean banking system, a customer-centric focus is critical to generating loyalty and creating long-term, profitable relationships.  We believe that our high service quality is a competitive strength that differentiates us from competitors and supports our long term strategy by responding to the preferences of our current and potential customers.  Accordingly, we strive to continuously improve our relationships with customers by developing commercial strategies aligned with their needs, as well as improving our response time and customer satisfaction indicators.

Consistent with this view, during 2015 we continued to improve customer experience by enhancing our commitment to service quality.  In this regard, we strived to reinforce this concept across the corporation by embracing new service quality standards and communicating them not only to commercial units but also to back- and middle-office areas.  Thus, we made efforts to target those branches with service quality standards below the Bank’s average (outliers).  For these branches we designed special plans to enhance procedures and improve the treatment of specific situations.  In general, we achieved an overall improvement in service quality measures in all of the targeted branches.  Furthermore, we invested further resources in IT systems to support quality management. For example, we implemented a call-center system that meets our SMEs customers’ requirements and ensures our SMEs customers have access to prompt and adequate assistance. Similarly, we have automated the process for completion of certain commercial documentation to improve account officers’ productivity by allowing them to focus on commercial tasks.  On the other hand, we also concentrated on training our staff in specific methodologies and procedures for solving customer complaints.

Overall, based on customer satisfaction surveys, we believe that our current service quality standards meet our customers’ expectations. To maintain our customers’ satisfaction, we remain focused on continually improving our service quality standards to properly respond to increasing customers’ expectations and changes in competitors’ strategies.  For this reason, in 2015, we devoted efforts to developing “customer journeys” by enhancing processes in diverse products and contact channels to provide our customers with the best quality standards in all of their transactions with the Bank.

Promote Operating Efficiency

We believe that operating efficiency is a key competitive advantage that we have to maintain in order to grow profitably.  Accordingly, our strategy for efficiency intends to achieve the highest productivity and the tightest cost control.  We believe these elements will be increasingly important in our efforts to maintain high profitability ratios in a changing business environment that is under increasing regulatory focus.  To accomplish these goals, we have invested in information technology and the development of simpler, more manageable, secure and modern business processes and platforms to attain faster response times and higher productivity.  We also continue to enhance our strategic development capabilities, increase our business scale, develop economies of scope by incorporating new financially related businesses, reinforce the productivity of our branch network, enhance our

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remote transactional channels, improve our credit processes, develop a higher level of automation in our internal processes and consolidate our cost control policy and monitoring procedures.

In 2013, 2014 and 2015, we invested a total of approximately Ch$68,500 million (composed of approximately Ch$13,000 million, Ch$28,200 million and Ch$27,300 million in 2013, 2014 and 2015, respectively) in information technology, mainly software and hardware, as we believe this is one of the best ways to improve our service quality and operating efficiency while properly fitting customers’ needs, which are increasingly linked to IT services.  Similarly, we are continuously developing and optimizing internal processes in order to reduce and manage our expenses.

In this regard, during 2015, we continued to focus on operating efficiency through diverse projects intended to improve the quality and responsiveness of internal operating processes. Moreover, we invested additional resources in optimizing certain procedures that take advantage of imaging technology and improve electronic security for online transactions. For example, we have automated the process for completion of certain commercial documentation to improve account officers’ productivity by allowing them to focus on commercial tasks.  In addition, we began the initial stage of an electronic system for documentation approval. We also improved security in electronic transactional services by setting a new password-generating device for electronic money transfers and cash management services used by companies.  This should enable us to reduce operational risks and electronic frauds.  Lastly, as requested by the Chilean government, we have continued to renew our ATMs network by replacing older devices with new ATMs with more sophisticated technology. Similarly, we have reinforced the infrastructure and security standards for ATMs located within our branches and —more importantly— for those placed in convenience stores and public places.

As a result of these initiatives, our efficiency ratio, measured as consolidated operating expenses over consolidated operating revenues, has maintained suitable levels over the last three years.  During 2013, 2014 and 2015, our efficiency ratio was 41.9%, 43.8% and 43.7%, respectively.  Based on information published by the SBIF, under Chilean GAAP, as of December 31, 2015 we ranked second in terms of efficiency within the local banking industry.

·                  Enhance Corporate Reputation

We believe that improving our social reputation is crucial to meet our strategic goals in the midst of societal changes in Chile and worldwide, so we aim to create improved mechanisms in order to build positive connections with our communities.  Therefore, we have undertaken a wide range of initiatives intended to encourage active participation in different areas of society.  This view is shared by the Bank and its employees, who support the development of Chile through diverse methods such as promoting social progress, contributing to environmental protection, decreasing extreme poverty, providing high-quality education to needy people, assisting disabled young people, fostering cultural development and embracing campaigns intended to overcome the effects of specific adverse events such as natural disasters.

In line with this view, during 2015, we continued to support diverse social endeavors by collaborating with “Desafío Levantemos Chile,” which is an initiative intended to promote entrepreneurship throughout Chile and especially within lower income segments. Based on this partnership, we assisted people affected by earthquakes and floods that occurred in northern Chile during 2015 by donating both monetary and non-monetary resources to help re-establish many entrepreneurs’ working capacity.  In addition, we maintained our commitment to disabled people by supporting Teleton Foundation throughout the year by assisting disabled children and supporting disabled athletes and artists. However, our most significant contribution to Teleton in 2015 was our involvement, as every year since its foundation, in Teleton’s annual fund-raising campaign. For instance, we assisted Teleton’s fund-raising campaign by offering our physical infrastructure, our technological resources and making an important monetary donation. Similarly, we continued to make charitable contributions to improve the quality of education across lower income segments through Astoreca Foundation. Finally, we are also committed to the financial education of the Chilean population, especially the lower income segment in order to promote saving and avoid over-borrowing.  Accordingly, in 2015, we carried out various on-site workshops and e-learning programs to train approximately 28,000 individuals and entrepreneurs.

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·                  Alignment of Human Resources and Culture

We believe human resources are a key element of our long-term goals.  In order to consolidate profitable growth, achieve high standards of service quality, attain operating efficiency and build an excellent corporate reputation over the long run, we must have a motivated and highly qualified workforce committed to our corporate values, including ethical conduct, responsibility, integrity, prudence, justice, loyalty and respect.

Accordingly, we strive to develop a distinctive culture among our employees by promoting:  (i) a clear focus on the customer, (ii) confidence and responsibility, (iii) leadership and empowerment, (iv) collaboration and teamwork and (v) innovation and continuous improvement.

We also seek to remain one of the most respected employers in Chile.  For this reason, we have recently undertaken diverse projects and initiatives intended to emphasize our commitment to recruiting and retaining excellent employees, including a platform that manages the internal mobility of our employees. Also, we have improved our competence evaluation methodology to identify remarkable employees and enhance their career development. As for training activities, we have continued to focus on generating leadership capabilities through diverse programs. We believe these initiatives are aligned with our strategy and the professional development that our team aspires to achieve. Lastly, we have reinforced our commitment to the wellness of our employees. For this reason, during 2015, we launched new assistance programs intended to provide our team with psychological, health and legal support.  We also promoted biking among our staff located in the city center by providing bicycle parking racks.

Also, during 2015, we continued strengthening the connection with our employees in order to align corporate values and goals with their career development and personal goals.  Given the various merger processes that have taken place in Banco de Chile, our aim is to build a consistent culture, based on a commitment to our corporate values, attributes and beliefs, while making it a distinctive culture from other competitors to provide our customers with differentiated service.  Accordingly, during 2015, we executed various initiatives to promote staff’s involvement with our corporate values including the program “La Selección del Chile” (Chile’s Team), by which we rewarded more than 2,000 employees who we believed excelled in implementing and demonstrating our corporate beliefs.

Ownership Structure(1)

The following diagram shows our ownership structure as of April 15, 2016:

(1)         The ownership structure diagram reflects share ownership and not voting rights.  See “Item 7.  Major Shareholders and Related Party Transactions—Major Shareholders.”

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Principal Business Activities

We are a full-service financial institution that provides, directly and indirectly through our subsidiaries and affiliates, a wide variety of lending and non-lending products and services to all segments of the Chilean financial market.  Accordingly, for management purposes we organize our operations in the following four business segments:

The information related to our business segments presented in this section has been prepared in accordance with our internal reporting policies.  See “Item 5.  Operating and Financial Review and Prospects—Operating Results—Results of Operations for the Years Ended December 31, 2013, 2014 and 2015—Business Segments” and “Item 5.  Operating and Financial Review and Prospects—Operating Results—Results of Operations for the Years Ended December 31, 2013, 2014 and 2015—Summary of Differences between Internal Reporting Policies and IFRS” for a description of the most significant differences between our internal reporting policies and IFRS.

The following table sets forth information on the composition of our loan portfolio and our consolidated income before income tax in accordance with our internal reporting policies for the year ended December 31, 2015, allocated among our principal business segments: