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Financial Derivatives Contracts for Hedge Accounting

12 Months Ended

Dec. 31, 2023

Financial Derivatives Contracts for Hedge Accounting [Abstract]

FINANCIAL DERIVATIVES CONTRACTS FOR HEDGE ACCOUNTING

NOTE 07 - FINANCIAL DERIVATIVES CONTRACTS FOR HEDGE ACCOUNTING

As of December 31, 2023 and 2022 the Bank holds the following portfolio of derivative instruments for hedging purposes:

	As of December 31, 2023
	Notional amount																Fair value
	Demand		Up to 1 month		Between 1 and 3 months		Between 3 and 12 months		Between 1 and 3 years		Between 3 and 5 years		More than 5 years		Total		Assets		Liabilities
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$
Fair value hedge derivatives
Interest rate swaps		-		12,562		3,656,708		2,971,608		2,219,138		349,780		612,115		9,821,911		96,729		1,319,275
Cross currency swaps		-		87,445		216,904		902,332		4,075,196		497,502		1,764,227		7,543,606		251,810		174,041
Subtotal		-		100,007		3,873,612		3,873,940		6,294,334		847,282		2,376,342		17,365,517		348,539		1,493,316
Currency forwards		-		43,242		177,000		2,207,656		8,745		-		-		2,436,643		5,539		64,624
Cross currency swaps		-		459,517		1,144,579		5,286,020		6,210,538		1,205,343		1,676,266		15,982,263		251,451		908,827
Subtotal		-		502,759		1,321,579		7,493,676		6,219,283		1,205,343		1,676,266		18,418,906		256,990		973,451
Total		-		602,766		5,195,191		11,367,616		12,513,617		2,052,625		4,052,608		35,784,423		605,529		2,466,767

	As of December 31, 2022
	Notional amount																Fair value
	Demand		Up to 1 month		Between 1 and 3 months		Between 3 and 12 months		Between 1 and 3 years		Between 3 and 5 years		More than 5 years		Total		Assets		Liabilities
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$
Fair value hedge derivatives
Interest rate swaps		-		206,630		447,773		722,845		7,300,878		608,013		1,728,916		11,015,055		213,478		1,166,339
Cross currency swaps		-		84,959		706,859		1,512,048		3,149,733		1,200,889		1,462,413		8,116,901		75,848		333,097
Subtotal		-		291,589		1,154,632		2,234,893		10,450,611		1,808,902		3,191,329		19,131,956		289,326		1,499,436
Cash flow hedge derivatives
Currency forwards		-		176,664		1,839,766		554,696		-		-		-		2,571,126		823		35,332
Cross currency swaps		-		486,032		932,204		2,019,072		6,703,372		2,077,260		2,261,958		14,479,898		187,613		1,254,026
Subtotal		-		662,696		2,771,970		2,573,768		6,703,372		2,077,260		2,261,958		17,051,024		188,436		1,289,358
Total		-		954,285		3,926,602		4,808,661		17,153,983		3,886,162		5,453,287		36,182,980		477,762		2,788,794

Micro-hedge accounting

Fair value micro-hedge

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

Below is a detail of the hedged elements and hedge instruments under fair value hedges as of December 31, 2023 and 2022, classified by term to maturity:

	As of December 31, 2023
	Demand		Up to 1 month		Between 1 and 3 months		Between 3 and 12 months		Between 1 and 3 years		Between 3 and 5 years		More than 5 years		Total
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$
Hedged item
Debt instruments at FVOCI
Chilean sovereign bonds		-		-		-		-		-		-		301,803		301,803
US Treasury bonds		-		-		-		-		655,838		349,780		262,335		1,267,953
Chilean Treasury bonds														50,795		50,795
Time deposits and other time liabilities
Time deposits		-		12,562		27,708		92,160		-		-		-		132,430
Instrumentos de deuda emitidos
Senior bonds		-		-		91,973		882,779		2,262,976		497,502		696,941		4,432,171
Subordinated bonds		-		87,445		-		-		183,946				505,998		777,389
Interbank borrowing
Chilean Central Bank loans		-		-		3,329,001		2,849,001				-		-		6,178,002
Total		-		100,007		3,448,682		3,823,940		3,102,760		847,282		1,817,872		13,140,543
Hedging instrument
Cross currency swaps		-		87,445		91,973		902,331		2,433,621		497,502		1,205,760		5,218,632
Forwards		-		12,562		3,356,709		2,921,609		669,139		349,780		612,112		7,921,911
Total		-		100,007		3,448,682		3,823,940		3,102,760		847,282		1,817,872		13,140,543

	As of December 31, 2022
	Demand		Up to 1 month		Between 1 and 3 months		Between 3 and 12 months		Between 1 and 3 years		Between 3 and 5 years		More than 5 years		Total
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$
Hedged item
Loans and account receivable at amortised cost
Commercial loans		-		-		-		180,963		-		-		-		180,963
Debt instruments at FVOCI
US Treasury bonds		-		-		-		-		-		594,713		1,389,080		1,983,793
Time deposits and other time liabilities
Time deposits		-		206,630		447,773		873,822		141,539		-		-		1,669,764
Instrumentos de deuda emitidos
Senior bonds		-		-		-		122,638		2,569,632		1,038,634		757,861		4,488,765
Subordinated bonds		-		-		-		-		84,959		175,555		485,917		746,431
Interbank borrowing
Interbank loans		-		84,959		706,859		1,057,470		-		-		-		1,849,288
Chilean Central Bank loans		-		-		-		-		6,178,000		-		-		6,178,000
Total		-		291,589		1,154,632		2,234,893		8,974,130		1,808,902		2,632,858		17,097,004
Hedging instrument
Cross currency swaps		-		84,959		706,859		1,512,048		2,573,252		1,200,890		903,942		6,981,950
Forwards		-		206,630		447,773		722,845		6,400,878		608,012		1,728,916		10,115,054
Total		-		291,589		1,154,632		2,234,893		8,974,130		1,808,902		2,632,858		17,097,004

Cash flow micro-hedges

The Bank uses cross currency swaps to hedge the risk from variability of cash flows attributable to changes in the interest rates of bonds and interbank loans at a variable interest rate. The inflation risk that arises in some items is covered by both forwards as well as cross currency swaps.

Below is the notional amount of the hedged items as of December 31, 2023 and 2022, and the period when the cash flows will be generated:

	As of December 31, 2023
	Demand		Up to 1 month		Between 1 and 3 months		Between 3 and 12 months		Between 1 and 3 years		Between 3 and 5 years		More than 5 years		Total
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$
Hedged item
Loans and accounts receivable at amortised cost
Mortgage loans		-		232,909		596,597		3,889,412		4,192,353		766,685		1,077,483		10,755,439
Debt instruments at FVOCI
Chilean Treasury bonds		-		-		-		-		492,370		-		191,905		684,275
Time deposits and other time liabilities
Time deposits		-		-		21,861		392,453		8,744		-		-		423,058
Issued debt instruments
Senior bonds		-		-		-		-		331,104		-		-		331,104
Subordinated bonds		-		269,850		124,236		549,555		893,024		263,768		406,878		2,507,311
Interbank borrowings
Interbank loans		-		-		578,885		2,662,256		301,688		174,890		-		3,717,719
Total		-		502,759		1,321,579		7,493,676		6,219,283		1,205,343		1,676,266		18,418,906
Hedging instrument
Cross currency swaps		-		459,518		1,144,579		5,286,018		6,210,539		1,205,343		1,676,266		15,982,263
Currency forward		-		43,241		177,000		2,207,658		8,744		-		-		2,436,643
Total		-		502,759		1,321,579		7,493,676		6,219,283		1,205,343		1,676,266		18,418,906

	As of December 31, 2022
	Demand		Up to 1 month		Between 1 and 3 months		Between 3 and 12 months		Between 1 and 3 years		Between 3 and 5 years		More than 5 years		Total
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$
Hedged item
Loans and accounts receivable at amortised cost
Mortgage loans		-		545,747		2,563,558		1,999,451		5,568,862		1,026,081		1,577,002		13,280,701
Debt instruments at FVOCI
Chilean Treasury bonds		-		-		-		-		-		492,370		191,906		684,276
Issued debt instruments
Senior bonds		-		-		-		-		315,999		-		-		315,999
Subordinated bonds		-		70,222		140,444		245,526		818,511		558,809		493,051		2,326,563
Interbank borrowings
Interbank loans		-		46,727		67,967		328,791		-		-		-		443,485
Total		-		662,696		2,771,969		2,573,768		6,703,372		2,077,260		2,261,959		17,051,024
Hedging instrument
Cross currency swaps		-		486,032		932,203		2,019,072		6,703,372		2,077,260		2,261,959		14,479,898
Currency forward		-		176,664		1,839,766		554,696		-		-		-		2,571,126
Total		-		662,696		2,771,969		2,573,768		6,703,372		2,077,260		2,261,959		17,051,024

Forecasted cash flows for interest rate risk

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

	As of December 31, 2023
	Demand		Up to 1 month			Between 1 and 3 months			Between 3 and 12 months			Between 1 and 3 years			Between 3 and 5 years			More than 5 years			Total
	MCh$		MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$
Hedged item
Inflows		-		-			-			-			-			-			-			-
Outflows		-		(7,483	)		(13,555	)		(68,956	)		(39,724	)		(7,913	)		(2,980	)		(140,611	)
Net flows		-		(7,483	)		(13,555	)		(68,956	)		(39,724	)		(7,913	)		(2,980	)		(140,611	)
Hedging instrument
Inflows		-		-			-			-			-			-			-			-
Outflows (*)		-		7,483			13,555			68,956			39,724			7,913			2,980			140,611
Net flows		-		7,483			13,555			68,956			39,724			7,913			2,980			140,611

(*)

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

	As of December 31, 2022
	Demand		Up to 1 month			Between 1 and 3 months			Between 3 and 12 months			Between 1 and 3 years			Between 3 and 5 years			More than 5 years			Total
	MCh$		MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$
Hedged item
Inflows		-		-			4,267			4,627			-			-			-			8,894
Outflows		-		(288	)		(733	)		(5,993	)		(10,273	)		(5,063	)		(4,310	)		(26,660	)
Net flows		-		(288	)		3,534			(1,366	)		(10,273	)		(5,063	)		(4,310	)		(17,766	)
Hedging instrument
Inflows		-		-			(4,267	)		(4,627	)		-			-			-			(8,894	)
Outflows (*)		-		288			733			5,993			10,273			5,063			4,310			26,660
Net flows		-		288			(3,534	)		1,366			10,273			5,063			4,310			17,766

(*)

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

ii.

Forecasted cash flows for inflation risk:

	As of December 31, 2023
	Demand		Up to 1 month			Between 1 and 3 months			Between 3 and 12 months			Between 1 and 3 years			Between 3 and 5 years			More than 5 years			Total
	MCh$		MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$
Hedged item
Inflows		-		23,515			91,152			302,604			72,206			19,206			33,221			541,904
Outflows		-		(78,300	)		(379,379	)		(784,238	)		(552,738	)		(49,350	)		(39,017	)		(1,883,022	)
Net flows		-		(54,785	)		(288,227	)		(481,634	)		(480,532	)		(30,144	)		(5,796	)		(1,341,118	)
Hedging instrument
Inflows		-		78,300			379,379			784,238			552,738			49,350			39,017			1,883,022
Outflows		-		(23,515	)		(91,152	)		(302,604	)		(72,206	)		(19,206	)		(33,221	)		(541,904	)
Net flows		-		54,785			288,227			481,634			480,532			30,144			5,796			1,341,118

	As of December 31, 2022
	Demand		Up to 1 month			Between 1 and 3 months			Between 3 and 12 months			Between 1 and 3 years			Between 3 and 5 years			More than 5 years			Total
	MCh$		MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$
Hedged item
Inflows		-		112,209			410,507			397,542			1,197,961			393,717			702,610			3,214,546
Outflows		-		(10,882	)		(24,505	)		(20,551	)		(98,565	)		(52,368	)		(52,297	)		(259,168	)
Net flows		-		101,327			386,002			376,991			1,099,396			341,349			650,313			2,955,378
Hedging instrument
Inflows		-		10,882			24,505			20,551			98,565			52,368			52,297			259,168
Outflows		-		(112,209	)		(410,507	)		(397,542	)		(1,197,961	)		(393,717	)		(702,610	)		(3,214,546	)
Net flows		-		(101,327	)		(386,002	)		(376,991	)		(1,099,396	)		(341,349	)		(650,313	)		(2,955,378	)

iii.

Forecasted cash flows for exchange rate risk

	As of December 31, 2023
	Demand		Up to 1 month			Between 1 and 3 months			Between 3 and 12 months			Between 1 and 3 years			Between 3 and 5 years			More than 5 years		Total
	MCh$		MCh$			MCh$			MCh$			MCh$			MCh$			MCh$		MCh$
Hedged item
Inflows		-		-			-			-			-			-			-		-
Outflows		-		(30,629	)		(168,812	)		(1,992,343	)		(22,684	)		(3,212	)		-		(2,217,680	)
Net flows		-		(30,629	)		(168,812	)		(1,992,343	)		(22,684	)		(3,212	)		-		(2,217,680	)
Hedging instrument
Inflows		-		-			-			-			-			-			-		-
Outflows		-		30,629			168,812			1,992,343			22,684			3,212			-		2,217,680
Net flows		-		30,629			168,812			1,992,343			22,684			3,212			-		2,217,680

	As of December 31, 2022
	Demand		Up to 1 month			Between 1 and 3 months			Between 3 and 12 months			Between 1 and 3 years			Between 3 and 5 years			More than 5 years			Total
	MCh$		MCh$			MCh$			MCh$			MCh$			MCh$			MCh$			MCh$
Hedged item
Inflows		-		-			-			-			-			-			-			-
Outflows		-		(5,687	)		(4,281	)		(20,192	)		(6,784	)		(3,208	)		(1,606	)		(41,758	)
Net flows		-		(5,687	)		(4,281	)		(20,192	)		(6,784	)		(3,208	)		(1,606	)		(41,758	)
Hedging instrument
Inflows		-		-			-			-			-			-			-			-
Outflows		-		5,687			4,281			20,192			6,784			3,208			1,606			41,758
Net flows		-		5,687			4,281			20,192			6,784			3,208			1,606			41,758

Other comprehensive income effect

The accumulated effect of the mark to market adjustment of cash flow hedges generated by hedge instruments used in hedged cash flow was recorded in the Consolidated Statements of Changes in Equity, within other comprehensive income, as of December 31, 2023 and 2022, is as follows:

	As of December 31,
Hedged item	2023			2022
	MCh$			MCh$
Interbank loans		(10,675	)		(2,343	)
Time deposits and other time liabilities		516			-
Issued debt instruments		(9,684	)		415
Debt instruments at FVOCI		(4,235	)		(22,571	)
Loans and accounts receivable at amortised cost		108,494			(94,339	)
Total		84,416			(118,838	)

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

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

P&L effect

The amounts recycling from other comprehensive income to income for the year related to cash flow hedges are as follows:

	For the years ended December 31,
	2023			2022			2021
	MCh$			MCh$			MCh$
Bond hedging derivatives		817			(826	)		(3,248	)
Interbank loans hedging derivatives		(4,775	)		(4,762	)		(286	)
Mortgage loans hedging derivatives		(36,154	)		(37,698	)		(22,160	)
Cash flow hedge net gain (loss)		(40,112	)		(43,286	)		(25,694	)

See Note 21 - Equity, letter e, for other comprehensive income reconciliation

Net investment hedges in foreign operations

As of December 31, 2023, and 2022, the Bank does not have any foreign net investment hedges nor hedge accounting.

Fair value macro-hedges

	Notional amount
As of December 31, 2023	Demand		Up to 1 month		Between 1 and 3 months		Between 3 and 12 months		Between 1 and 3 years		Between 3 and 5 years		More than 5 years		Total
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$
Hedge item
Loans and account receivable at amortised cost
Mortgage loans		-		-		-		-		-		-		377,928		377,928
Commercial loans		-		-		424,930		50,000		3,191,574		-		180,542		3,847,046
Total		-		-		424,930		50,000		3,191,574		-		558,470		4,224,974
Hedging instrument
Cross currency swaps		-		-		124,930		-		1,641,574		-		558,470		2,324,974
Interest rate swaps		-		-		300,000		50,000		1,550,000		-		-		1,900,000
Total		-		-		424,930		50,000		3,191,574		-		558,470		4,224,974

	Notional amount
As of December 31, 2022	Demand		Up to 1 month		Between 1 and 3 months		Between 3 and 12 months		Between 1 and 3 years		Between 3 and 5 years		More than 5 years		Total
	MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$		MCh$
Hedge item
Loans and account receivable at amortised cost
Mortgage loans		-		-		-		-		576,481		-		558,470		1,134,951
Commercial loans		-		-		-		-		900,000		-		-		900,000
Total		-		-		-		-		1,476,481		-		558,470		2,034,951
Hedging instrument
Cross currency swaps		-		-		-		-		576,481		-		558,470		1,134,951
Interest rate swaps		-		-		-		-		900,000		-		-		900,000
Total		-		-		-		-		1,476,481		-		558,470		2,034,951

As of December 31, 2023, and 2022 Other Assets include MCh$160,370 and MCh$160,531 respectively, related to fair value measurement of net assets or liabilities subject to macrohedges. See Note 14.

As of December 31, 2023, and 2022, Other Liabilities include MCh$68,781 and MCh$85,725 respectively, related to fair value measurement of net assets or liabilities subject to macrohedges. See Note 20.