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Derivative Instruments and Accounting Hedges

12 Months Ended

Dec. 31, 2021

Disclosure of derivative financial instruments [text block] [Abstract]

Derivative Instruments and Accounting Hedges

Derivative Instruments and Accounting Hedges:

(a)

As of December 31, 2020 and 2021, the Bank’s portfolio of derivative instruments is detailed as follows:

	As of December 31, 2020
			Fair value
	Notional amount contract		Asset		Liability
	MCh$		MCh$		MCh$
Derivatives held for hedging of fair value
Cross currency swap		5,031		—		1,646
Interest rate swap		29,508		—		4,873
Total derivatives held for hedging purposes		34,539		—		6,519
Derivatives held as cash flow hedges
Interest rate swap and cross currency swap		1,217,457		51,062		65,172
Total Derivatives held as cash flow hedges		1,217,457		51,062		65,172

Derivatives held-for-trading purposes
Currency forward		21,751,181		551,964		637,164
Interest rate swap		44,189,444		1,167,416		1,189,828
Cross currency swap and interest rate swap		18,893,219		845,831		940,565
Call currency options		71,914		269		306
Put currency options		57,395		1,462		2,099
Total derivatives held-for-trading purposes		84,963,153		2,566,942		2,769,962
Total		86,215,149		2,618,004		2,841,653

	As of December 31, 2021
			Fair value
	Notional amount contract		Asset		Liability
	MCh$		MCh$		MCh$
Derivatives held for hedging of fair value
Cross currency swap		1,788		—		608
Interest rate swap		—		—		—
Total derivatives held for hedging purposes		1,788		—		608
Derivatives held as cash flow hedges
Currency forward		3,099		—		88
Interest rate swap and cross currency swap		1,362,671		277,803		—
Total Derivatives held as cash flow hedges		1,365,770		277,803		88

Derivatives held-for-trading purposes
Currency forward		21,676,356		742,545		505,463
Interest rate swap		44,811,310		825,525		831,338
Cross currency swap and interest rate swap		18,798,439		1,132,717		1,432,794
Call currency options		117,001		4,509		2,726
Put currency options		93,433		199		459
Total derivatives held-for-trading purposes		85,496,539		2,705,495		2,772,780
Total		86,864,097		2,983,298		2,773,476

(b)

Fair Value Hedges (notional):

The Bank uses cross-currency swaps and interest rate swaps to hedge its exposure to changes in the fair value of the hedged elements attributable to interest rates. The aforementioned hedge instruments change the effective cost of long-term issuances from a fixed interest rate to a variable interest rate, decreasing the duration and modifying the sensitivity to the shortest segments of the curve.

Below is a detail of the hedged elements and hedge instruments under fair value hedges as of December 31, 2020 and 2021:

	As of December 31,
	2020		2021
	MCh$		MCh$
Notional Amounts
Hedged element
Commercial loans		5,031		1,788
Corporate bonds		29,508		—

Hedge instrument
Cross currency swap		5,031		1,788
Interest rate swap		29,508		—

(c)

Cash flow Hedges:

(c.1) The Bank uses cross currency swaps to hedge the risk from variability of cash flows attributable to changes in the interest rates and foreign exchange of borrowings from banks and bonds issued abroad in US Dollars, Hong Kong dollars, Swiss Franc, Japanese Yens, Peruvian Sol, Australian Dollars, Euros and Norwegian kroner. The cash flows of the cross currency swaps equal the cash flows of the hedged items, which modify uncertain cash flows to known cash flows derived from a fixed interest rate.

Additionally, these cross currency swap contracts used to hedge the risk from variability of the Unidad de Fomento (“CLF”) in assets flows denominated in CLF until a nominal amount equal to the portion notional of the hedging instrument CLF, whose readjustment daily impact the item “Interest Revenue” of the Income Financial Statements.

(c.2) Below are the cash flows of borrowings from banks and bonds issued abroad objects of these hedges and the cash flows of the asset part of the derivative:

	Up to 1 month						Over 1 month and up to 3 months						Over 3 months and up to 12 months						Over 1 year and up to 3 years						Over 3 years and up to 5 years						Over 5 years						Total
	2020			2021			2020			2021			2020			2021			2020			2021			2020			2021			2020			2021			2020			2021
	MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$

Hedge element
Outflows:
Corporate Bond EUR		—			—			—			—			(1,473	)		(1,626	)		(2,946	)		(3,252	)		(44,037	)		(47,854	)		(51,871	)		(56,380	)		(100,327	)		(109,112	)
Corporate Bond HKD		—			—			—			—			(13,352	)		(15,897	)		(90,988	)		(105,828	)		(78,369	)		(91,271	)		(269,894	)		(309,896	)		(452,603	)		(522,892	)
Corporate Bond PEN		—			—			(775	)		(841	)		(775	)		(841	)		(3,098	)		(3,366	)		(3,098	)		(3,366	)		(41,484	)		(43,383	)		(49,230	)		(51,797	)
Corporate Bond CHF		—			(64	)		—			—			(829	)		(958	)		(94,332	)		(249,008	)		(121,182	)		(764	)		—			(121,521	)		(216,343	)		(372,315	)
Corporate Bond USD		—			—			—			—			(1,515	)		(1,814	)		(3,030	)		(3,629	)		(3,030	)		(3,629	)		(40,140	)		(46,260	)		(47,715	)		(55,332	)
Obligation USD		(202	)		—			(76	)		—			(157,455	)		(427	)		—			(60,047	)		—			—			—			—			(157,733	)		(60,474	)
Corporate Bond JPY		—			—			—			(130	)		(2,115	)		(39,208	)		(38,110	)		(4,249	)		(3,472	)		(4,249	)		(191,351	)		(242,020	)		(235,048	)		(289,856	)
Corporate Bond AUD		—			—			(970	)		(1,220	)		(3,928	)		(4,794	)		(9,796	)		(12,024	)		(9,799	)		(12,023	)		(206,991	)		(264,901	)		(231,484	)		(294,962	)
Corporate Bond NOK		—			—			—			—			(2,275	)		(2,646	)		(4,550	)		(5,292	)		(4,550	)		(5,292	)		(71,491	)		(80,515	)		(82,866	)		(93,745	)

Hedge instrument
Inflows:
Cross Currency Swap EUR		—			—			—			—			1,473			1,626			2,946			3,252			44,037			47,854			51,871			56,380			100,327			109,112
Cross Currency Swap HKD		—			—			—			—			13,352			15,897			90,988			105,828			78,369			91,271			269,894			309,896			452,603			522,892
Cross Currency Swap PEN		—			—			775			841			775			841			3,098			3,366			3,098			3,366			41,484			43,383			49,230			51,797
Cross Currency Swap CHF		—			64			—			—			829			958			94,332			249,008			121,182			764			—			121,521			216,343			372,315
Cross Currency Swap USD		—			—			—			—			1,515			1,814			3,030			3,629			3,030			3,629			40,140			46,260			47,715			55,332
Cross Currency Swap USD		202			—			76			—			157,455			427			—			60,047			—			—			—			—			157,733			60,474
Cross Currency Swap JPY		—			—			—			130			2,115			39,208			38,110			4,249			3,472			4,249			191,351			242,020			235,048			289,856
Cross Currency Swap AUD		—			—			970			1,220			3,928			4,794			9,796			12,024			9,799			12,023			206,991			264,901			231,484			294,962
Cross Currency Swap NOK		—			—			—			—			2,275			2,646			4,550			5,292			4,550			5,292			71,491			80,515			82,866			93,745

Net cash flows		—			—			—			—			—			—			—			—			—			—			—			—			—			—

(c.2) Below are the cash flows of the underlying assets portfolio and the cash flow of the liability part of the derivatives:

	Up to 1 month						Over 1 month and up to 3 months						Over 3 months and up to 12 months						Over 1 year and up to 3 years						Over 3 years and up to 5 years						Over 5 years						Total
	2020			2021			2020			2021			2020			2021			2020			2021			2020			2021			2020			2021			2020			2021
	MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$

Hedge element
Inflows:
Cash flows in CLF		160			537			280			4,031			186,116			59,853			213,673			370,886			246,244			144,432			741,654			968,900			1,388,127			1,548,639

Hedge instrument
Outflows:
Cross Currency Swap HKD		(160	)		(171	)		—			—			(9,035	)		(9,630	)		(72,728	)		(75,575	)		(76,073	)		(79,358	)		(206,514	)		(214,067	)		(364,510	)		(378,801	)
Cross Currency Swap PEN		—			—			(48	)		(51	)		(49	)		(52	)		(194	)		(207	)		(194	)		(206	)		(31,965	)		(33,974	)		(32,450	)		(34,490	)
Cross Currency Swap JPY		—			—			—			(341	)		(4,195	)		(40,029	)		(40,526	)		(8,388	)		(6,596	)		(8,376	)		(201,852	)		(252,362	)		(253,169	)		(309,496	)
Cross Currency Swap USD		—			—			—			—			(165,634	)		(1,104	)		(1,311	)		(57,936	)		(1,317	)		(1,402	)		(37,584	)		(39,368	)		(205,846	)		(99,810	)
Cross Currency Swap CHF		—			(366	)		—			—			(3,929	)		(5,281	)		(91,923	)		(220,166	)		(114,409	)		(4,387	)		—			(115,104	)		(210,261	)		(345,304	)
Cross Currency Swap EUR		—			—			—			—			(1,912	)		(2,028	)		(3,805	)		(4,070	)		(44,464	)		(46,165	)		(45,439	)		(47,638	)		(95,620	)		(99,901	)
Cross Currency Swap AUD		—			—			(232	)		(540	)		(738	)		(1,064	)		(1,939	)		(3,212	)		(1,942	)		(3,208	)		(152,709	)		(197,125	)		(157,560	)		(205,149	)
Cross Currency Swap NOK		—			—			—			—			(624	)		(665	)		(1,247	)		(1,332	)		(1,249	)		(1,330	)		(65,591	)		(69,262	)		(68,711	)		(72,589	)
Forward UF		—			—			—			(3,099	)		—			—			—			—			—			—			—			—			—			(3,099	)

Net cash flows		—			—			—			—			—			—			—			—			—			—			—			—			—			—

With respect to CLF assets hedged, these are revalued monthly according to the variation of the UF, which is equivalent to monthly reinvestment of the assets until maturity of the relationship hedging.

(c.3)

The unrealized results generated during the year 2021 by those derivative contracts that conform the hedging instruments in this cash flow hedging strategy have been recorded with credit to equity in an amount totaling Ch$182,376 million (a credit to equity for Ch$10,358 million and a debit for Ch$37,546 million as of December 31, 2020 and 2019, respectively). The net effect of tax credit to equity amounts for Ch$133,135 million in 2021 (a credit to equity for Ch$7,561 million and a debit to equity for Ch$27,408 million as of December 31, 2020 and 2019, respectively).

The accumulated balance for this concept net of income tax as of December 31, 2021 corresponds to a credit to equity amounting to Ch$81,305 million (a debit to equity amounting to Ch$51,830 million and Ch$59,391 million as of December 31, 2020 and 2019, respectively).

(c.4)

The effect of the cash flow hedging derivatives that offset the result of the hedged instruments corresponds to a credit to income of Ch$123,100 million in 2021 (a debit to income for Ch$39,449 million in 2020 and a credit to income for Ch$84,684 million in 2019).

(c.5)

As of December 31, 2021 and 2020, there was no inefficiency in the Bank’s cash flow hedge, because as both the hedge item and hedge instruments are mirrors of the other, all variation of value attributable to rate and revaluation components are almost entirely netted.

(c.6)

As of December 31, 2021 and 2020, the Bank had no hedges of net investments in foreign businesses.