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Risk Management

12 Months Ended

Dec. 31, 2024

Disclosure of risk management strategy related to hedge accounting [abstract]

Risk Management

RISK MANAGEMENT

Introduction and general description

Banco Santander Chile, in its position of leadership in the local banking industry, has placed risk management at the center of its activity to ensure that the entire organisation acts responsibly in the new social context, economic changes, customer demands and the business environment, always aligned with the strong corporate culture and the legal regulations in force. The risk management and control model is underpinned by a set of common principles, a risk culture embedded throughout the Bank, a strong governance structure, and advanced risk management processes and tools.

Banco Santander’s risk management and control principles are mandatory, must always be applied, and comprise the regulatory requirements and best market practices. They are:

1.A strong risk culture (Risk Pro) that all employees follow covers all risks and promotes socially responsible management, contributing to the Bank’s long-term sustainability.

2.All employees are responsible for risk management and must know and understand the risks generated by their daily activities, avoiding taking risks whose impact is unknown or exceeds the limits of the Bank’s risk appetite.

3.Involvement of senior management, by ensuring the consistent risk management and control through their conduct, actions and communications. In addition, promoting a risk culture, evaluating implementation degree and monitoring that the profile remains within the levels defined in the Bank’s risk appetite.

4.Independence of risk management and control functions.

5.Proactive and comprehensive risk management and control approach across all businesses and risk types.

6.Adequate and comprehensive information management enables risks to be identified, assessed, managed and communicated appropriately to the correct levels.

These Santander principles, together with several interrelated tools and processes that are part of its strategic planning, such as the risk appetite statement, risk profile assessment, scenario analysis and risk reporting structure, as well as the annual budget processes, form a holistic control structure for the entire Bank.

Governance structure

Banco Santander’s corporate governance is structured in three levels, each of which is accompanied by support committees:

-Board of Directors, which represents the highest governing body.

-Senior Management, headed by the Chief Executive Officer.

-Shareholders’ Meeting

The Board of Directors comprises 11 directors, with nine acting in the capacity of full directors and two alternate directors and six of them are independent directors. The mail role is to participate in the organisation’s strategic planning and to ensure that the commitments proposed in the short, medium and long term are fulfilled in a timely manner.

Risk committee structure

Banco Santander-Chile has five committees supporting the Board, appointed and modified by them as deemed necessary. The various committees respond and report their activity to the Board systematically, through meetings and based on subrogation schemes, bylaws, formal minutes and follow-up instances. The Bank’s Board support committees are responsible for decision-making on priority issues, including economic, environmental and social issues.

A.Directors and Audit Committee

The main responsibility is to support the Board of Directors in the continuous improvement of internal control, review of the external auditors’ work, the Internal Audit Department and the supervision of the financial statements elaboration, in order to provide adequate information for shareholders, investors and general public. The Committee also monitored Chilean regulatory standards updated and propose external auditors to the Board of Directors, which are subsequently approved at the shareholders meeting.

NOTE 37 - RISK MANAGEMENT, continued

B.Integral Risk Committee

The Integral Risk Committee is responsible for advising the Board of Directors in defining the risk appetite, risk framework as well as supervising the correct identification, measurement and control of all risks the Bank faces. Also, supervises the risk measurement and control systems.

C.ALCO and Market Committee

The main functions of the ALCO (Asset and liabilities committee) are to monitor and control the structural risks of the balance, such as limits of exposure to inflation, interest rate risk, capital and liquidity funding levels. Also, review the behavior of relevant local and international markets and local monetary policies.

D.Designation Committee

This committee constantly reviews and applies the policies and designation processes of those positions defined as “key positions” in particular, as well as the review of these with respect to the other members of the organization in general.

E.Remuneration Committee

This committee constantly reviews the regulatory documentation concerning the evaluation and remuneration of positions defined as ‘key positions’ and other persons in the organisation in general.

The Risk and Internal Audit functions have the appropriate separation and independence level and direct access to the Board and its committees. The Board delegates the identification, measurement and control of the various risks faced by the Bank to the Risk Division, which is led by the Chief Risk Officer (CRO), and reports directly to the CEO. The Chief Risk Officer (CRO) is responsible for monitoring all risks and reviewing and advising the business lines on managing these risks. This division is responsible for credit, market, non-financial, compliance, and reputational risks. The Director of Internal Audit reports directly to the Chairman of the Board of Directors to ensure independence from Senior Management and thus be an effective third line of defence in risk management and internal control.

Risk management

Banco Santander Chile has a solid risk culture known as Risk Pro, which defines how risks are understood and managed daily based on the principle that all employees are responsible for risk management. Therefore, their classification is fundamental for effective management and control. All identified risks are to be linked to their according risk category to organise their management, control and related information. Banco Santander Chile’s risk classification enables effective risk management, control and communication. Its corporate risk framework includes the following:

•Market risk: rises from holding financial instruments whose value may be affected by fluctuations in market conditions, generally including the following types of risk:

-Foreign exchange risk: this arises as a consequence of exchange rate fluctuations among currencies.

-Interest rate risk: this arises as a consequence of fluctuations in market interest rates.

-Price risk: this arises as a consequence of changes in market prices, either due to factors specific to the instrument itself or due to factors that affect all the instruments negotiated in the market.

-Inflation risk: this arises as a consequence of changes in Chile’s inflation rate, whose effect would be mainly applicable to financial instruments denominated in UFs.

•Credit risk: this is the risk that one of the parties to a financial instrument fails to meet its contractual obligations for reasons of insolvency or inability of the individuals or legal entities in question to continue as a going concern, causing a financial loss to the other party.

•Liquidity risk: is the possibility that an entity may be unable to meet its payment commitments, or that in order to meet them, it may have to raise funds with onerous terms or risk damage to its image and reputation.

•Operational risk: the risk of loss due to inadequate or failed internal processes, people or systems or external events, and have legal, regulatory and reputational effect.

•Capital risk: this is the risk that the Bank may have an insufficient amount and/or quality of capital to meet the minimum regulatory requirement to operate as a bank, respond to market expectations regarding its creditworthiness, and support its business growth and any strategic possibilities that might arise, in accordance with its strategic plan.

NOTE 37 - RISK MANAGEMENT, continued

Risk governance

The Bank has a robust risk governance structure that pursues effective control of the risk profile, following the appetite defined by the Board and based on the distribution of roles among the three lines of defence and a strong committee structure, which is reinforced by the Risk Pro culture that applies throughout the organisation.

First line

Business and all other functions that create risk are the first line of defence. These functions must ensure that the risks they generate are aligned with the approved risk appetite and the corresponding limits. Any unit that originates risk has primary responsibility for managing that risk.

Second line

The Risk and Compliance and Conduct functions. Their role is to independently monitor and challenge the risk management activities carried out by the first line of defence. These functions ensure risk management in accordance with the appetite defined by the Board of Directors and promote a solid risk culture throughout the organization

Third line

The Internal Audit function periodically evaluates that policies, methodologies and procedures are adequate and are effectively implemented in the management and control of all risks.

Risk governance assessment

Risk governance also has several internal and external assessment processes to verify that the governance and approach are adequate. The FMC shall permanently maintain banks’ management and solvency rating.

Banco Santander Chile is classified under Category 1 as it was graded as Level A in both solvency and management.

MARKET RISK

Market risk arises as a consequence of the market activity, through financial instruments whose value can be affected by changes in market conditions and reflected in financial assets/liabilities and financial risk factors. The risk can be diminished by means of hedging through other products (assets/liabilities or derivative instruments) or terminating the open transaction/position. The objective of market risk management is to manage and control market risk exposure within acceptable parameters.

There are four major risk factors that affect the market prices: type of interest, type of exchange, price, and inflation. In addition and for certain positions, it is necessary to consider other risks as well, such as spread risk, base risk, commodity risk, volatility or correlation risk.

Market risk management

The Market Risk Department is responsible for measurement and control of market risks that are overseen by the Risk Division. Market Committee and the Assets and Liabilities Committee are responsible for the approval of limits. The main market risks are also reviewed in the CIR.

The Finance Division, through the Financial Management Department, is responsible for managing the Bank’s balance sheet, supervised and controlled by the Assets and Liabilities Committee and the Risk Division. Among its functions is the elaboration of detailed policies and their application, as well as the following:

i.Optimization of the liabilities’ cost, searching the most efficient financing strategies, including bonds’ issuance and bank credit lines.

ii.Management of short and long-term liquidity regulatory limits.

iii.Inflation risk management.

iv.Rate risk management in local and foreign currency.

NOTE 37 - RISK MANAGEMENT, continued

The Bank’s internal management to measure market risk is mainly based on analyzing the three following portfolios:

•trading portfolio

•local financial management portfolio

•foreign financial management portfolio

The Treasury Department is responsible for managing the Bank’s trading portfolios and keeping them within the loss limits, calculated and estimated by the Market Risk Management. The trading portfolio (measured at fair value through profit and loss) is comprised of investments valued at fair market value and free of any restriction on their immediate sale, which are often bought and sold by the Bank with the intention of selling them in the short term to benefit from short–term price fluctuations. The trading portfolio also includes the Bank’s exposure to foreign currency. The financial management portfolios include all the financial investments not considered to be part of trading portfolio.

The main functions in connection with trading portfolio include the following:

i.applies the “Value at Risk” (VaR) techniques to measure interest rate risk,

ii.adjust the trading portfolios to market and measure the daily income and loss from commercial activities,

iii.compare the real VaR with the established limits,

iv.establish procedures to prevent losses in excess of predetermined limits, and

v.furnishes information on the trading activities to the ALCO, other members of the Bank’s management, and the Global Risk Department of Banco Santander Spain.

The main functions in connection with financial management portfolios include the following:

i.performs sensitivity simulations (as explained below) to measure interest rate risk for activities denominated in local currency and the potential losses forecasted by these simulations.

ii.provide daily reports thereon to the ALCO, other members of the Bank’s management, and the Global Risk Department of Banco Santander Spain.

Market risk – management of trading portfolio

The Bank applies VaR methodologies to measure the market risk of its trading portfolio. The Bank has a consolidated commercial position comprised of fixed–income investments and foreign currency trading. This portfolio is comprised mostly of Central Bank of Chile bonds, mortgage bonds, locally issued, low–risk corporate bonds and foreign currencies, mainly U.S. dollars. At the end of each year, the trading portfolio included no stock portfolio investments.

For the Bank, the VaR estimate is made under the historical simulation methodology, which consists of observing the behavior of the profits and losses that would have occurred in the current portfolio if the market conditions for a given historical period had been in force, in order to infer the maximum loss on the basis of that information, with a given degree of confidence. The methodology has the advantage of precisely reflecting the historical distribution of the market variables and not requiring any assumptions regarding the distribution of specific probabilities. All the VaR measures are intended to determine the distribution function for a change in the value of a given portfolio, and once that distribution is known, to calculate the percentile related to the necessary degree of confidence, which will be equal to the value at risk by virtue of those parameters. As calculated by the Bank, the VaR is an estimate of the maximum expected loss of market value for a given portfolio over a 1–day horizon, with a 99.00% confidence level. It is the maximum 1–day loss that the Bank could expect to experience in a given portfolio, with a 99.00% confidence level. In other words, it is the loss that the Bank would expect to experience only 1.0% of the time. The VaR provides a single estimate of market risk which is not comparable from one market risk to another. Returns are calculated through the use of a 2–year time window or at least 520 data points obtained since the last reference date for calculation of the VaR going backward in time.

We do not calculate three separate VaRs. We calculate a single VaR for the entire trading portfolio, which in addition is segregated by risk type. The VaR software performs a historical simulation and calculates a Profit and Loss Statement (P&L) for 520 data points (days) for each risk factor (fixed income, foreign currency and variable income.) The P&L of each risk factor is added together and a consolidated VaR is calculated with 520 points or days of data. At the same time a VaR is calculated for each risk factor based on the individual P&L calculated for each individual risk factor. Furthermore, a weighted VaR is calculated in the manner described above, but which gives a greater weighting to the 30 most recent data points. The larger of the two VaRs is the one that is reported. In 2024, 2023 and 2022, we used the same VaR model and there has been no change in methodology or assumptions for subsequent periods.

NOTE 37 - RISK MANAGEMENT, continued

The Bank uses the VaR estimates to provide a warning when the statistically estimated incurred losses in its trading portfolio would exceed prudent levels, and hence, there are certain predetermined limits.

Limitations of the VaR model

When applying a calculation methodology, no assumptions are made regarding the probability distribution of the changes in the risk factors; the historically observed changes are used for the risk factors on which each position in the portfolio will be valued.

It is necessary to define a valuation function fj(xi) for each instrument, preferably the same one used to calculate the market value and income of the daily position, This valuation function will be applied in each scenario to generate simulated prices for all the instruments in each scenario.

In addition, the VaR methodology should be interpreted taking into consideration the following limitations:

•Changes in market rates and prices may not be independent and identically distributed random variables and may not have a normal distribution. In particular, the assumption of normal distribution may underestimate the probability of extreme market movements;

•The historical data used by the Bank may not provide the best estimate of the joint distribution of changes in the risk factors in the future, and any modification of the data may be inadequate. In particular, the use of historical data may fail to capture the risk of potential extreme and adverse market fluctuations, regardless of the time period used;

•A 1-day time horizon may not fully capture the market risk positions which cannot be liquidated or covered in a single day, It would not be possible to liquidate or cover all the positions in a single day;

•The VaR is calculated at the close of business, but trading positions may change substantially in the course of the trading day;

•The use of a 99% level of confidence does not take account of, or make any statement about, the losses that could occur outside of that degree of confidence; and

•A model such as the VaR does not capture all the complex effects of the risk factors over the value of the positions or portfolios, and accordingly, it could underestimate potential losses,

We perform back-testing daily and generally find that trading losses exceed our VaR estimate approximately one out of every 100 trading days. At the same time, we set a limit to the maximum VaR that we are willing to accept over our trading portfolio. In both 2024 and 2023, the Bank has remained within the maximum limit established for the VaR, even in those circumstances in which actual VaR exceed the estimated VaR.

NOTE 37 - RISK MANAGEMENT, continued

High, low and average levels for each component for 2024 and 2023 were as follows:

VaR			2024 USD millions						2023 USD millions
Consolidated
High			4.06						6.81
Low			1.47						2.61
Average			2.40						4.09
Fixed-income investments
High			3.33						5.06
Low			1.41						2.11
Average			2.23						3.15
Variable-income investments
High			-						-
Low			-						-
Average			-						-
Foreign currency investments
High			3.93						5.79
Low			0.18						0.23
Average			1.55						2.20

Market risk - local and foreign financial management

The Bank’s financial management portfolio includes most of the Bank’s non-trading assets and liabilities, including the credit/loan portfolio. For these portfolios, investment and financing decisions are strongly influenced by the Bank’s commercial strategies.

The Bank uses a sensitivity analysis to measure the market risk of local and foreign currencies (not included in the trading portfolio). The Bank performs a simulation of scenarios, which will be calculated as the difference between the present value of the flows in the chosen scenario (a curve with a parallel movement of 100 bps in all its segments) and their value in the base scenario (current market). All the inflation–indexed local currency (UF) positions are adjusted by a sensitivity factor of 0.57, which represents a 57-basis, point change in the rate curve for the real rates and a 100-basis point change for the nominal rates. The same scenario is performed for the net foreign currency positions and the interest rates in U.S. dollars. The Bank has also established limits in regard to the maximum loss which these interest rate movements could impose on the capital and net financial income budgeted for the year.

For the consolidated limit, we add the foreign currency limit to the domestic currency limit and multiple by 2 the sum of the multiplication of them together both for net financial loss limit as well as for the capital and reserves loss limit, using the following formula:

Consolidated limit = square root of a2 + b2 + 2ab

a: domestic currency limit

b: foreign currency limit

Since we assume the correlation is 0; 2ab = 0, 2ab = 0

Limitations of the sensitivity models

The most important assumption is using an exchange rate of 100 bp based on yield curve (57 bp for real rates). The Bank uses a 100 bp exchange since sudden changes of this magnitude are considered realistic. Santander Spain Global Risk Department has also established comparable limits by country, to be able to compare, monitor and consolidate market risk by country in a realistic and orderly way. In addition, the sensitivity simulation methodology should be interpreted taking into consideration the following limitations:

NOTE 37 - RISK MANAGEMENT, continued

•The simulation of scenarios assumes that the volumes remain consistent in the Bank’s Consolidated Statements of Financial Position and are always renewed at maturity, thereby omitting the fact that certain credit risk and prepayment considerations may affect the maturity of certain positions.

•This model assumes an identical change along the entire length of the yield curve and does not take into account the different movements for different maturities.

•The model does not take into account the sensitivity of volumes which results from interest rate changes.

•The limits to losses of budgeted financial income are calculated based on the financial income foreseen for the year, which may not be actually earned, meaning that the real percentage of financial income at risk may be higher than the expected one.

Market risk – Financial management portfolio – December 31, 2024 and 2023

			2024												2023
			Effect on financial income						Effect on capital						Effect on financial income						Effect on capital
Financial management portfolio – local currency (MCh$)
Loss limit			138,957						373,566						124,904						353,718
High			49,174						170,622						79,657						173,389
Low			482						87,335						41,151						88,382
Average			20,482						136,617						62,740						133,464
Financial management portfolio – foreign currency (USD millions)
Loss limit			178,937						198,819						157,400						174,889
High			13,104						61,137						17,775						91,935
Low			442						47,615						227						53,436
Average			5,169						53,651						9,718						70,397
Financial management portfolio – consolidated (in MCh$)
Loss limit			138,957						373,566						124,904						353,718
High			46,970						357,867						75,816						283,550
Low			—						279,293						34,663						246,664
Average			19,678						311,333						64,477						268,776

Inflation risk

The Bank has readjustable assets and liabilities according to the variation of the Unidad de Fomento (UF). In general, the Bank has more assets than liabilities in UF and, therefore, moderate increases in inflation have a positive effect on income from readjustments, while a fall in the value of the UF negatively affects the Bank’s margin. The Assets and Liabilities Committee establishes a set of limits on the difference between UF-denominated assets and liabilities that cannot exceed 30% of the Bank’s interest-bearing assets. This mismatch is managed on a daily basis by Financial Management and the limits are calculated and monitored by the Market Risk Division.

Market Risk Position and measurement

Market Risk Exposure is measured and controlled through the difference between the balances of assets and liabilities in foreign currency (net position) and the cash flows payable (liabilities) and cash receivable (asset) in the Trading and Banking Books, for a specific term or time band.

Foreign currency positions and term mismatches are exposed to adjustment factors, sensitivity and rate changes.

The Exposure to Market Risks on a Standardized Base Policy was presented and approved by the Bank’s Board of Directors.

Market Risk Exposure is determined based on the following risks:

•Interest rate risk

•Currency Risk

•Indexation Risk

•Currency Options Risk

NOTE 37 - RISK MANAGEMENT, continued

The following table illustrates the exposure to market risk. The maximum exposure to long-term interest rate risk is 35% of the regulatory capital and is approved by the Board of Directors. The maximum exposure to short-term interest rate risk is 55% of net interest income and readjustments plus interest rate sensitive commissions:

			As of december 31,
			2024						2023
			MCh$						MCh$
Market risk – trading protfolio
Exposure to rate risk			459,161						371,203
Exposure to currency risk			13,931						9,130
Interest rate option risk			-						-
Currency option risk			4,284						3,167
Total exposure of trading portfolio			477,376						383,500
10% of RWA			596,720						479,374
Subtotal			1,074,096						862,874
Limit = Regulatory capital			6,961,316						6,978,733
Available margin			5,887,220						6,115,859
Market risk – short-term financial management portfolio
Short Term Exposure to Interest Rate Risk			95,219						97,410
Exposure to Inflation Risk			149,306						161,222
Short-term exposure of financial management portfolio			244,525						258,632
Limit = 35% net (net income from interest and readjustments + interest rates sensitive commissions)			909,152						575,483
Available margin			664,627						316,851
Market risk – long-term financial management portfolio
Long Term Exposure to Interest Rate Risk			697,405						1,057,637
Limit = 35% Regulatory capital			2,436,461						2,442,556
Available margin			1,739,056						1,384,919

IBOR – reform

In 2013, the IOSCO Principles for Financial Benchmarks were published with the aim of creating an overarching framework for the development of reference index. Subsequently, the FSB established an Official Sector Steering Group (OSSG) which worked in monitoring and supporting the implementing interest rate benchmark reforms and facilitate the transition away from LIBOR. Since then, different working groups worked to recommend alternative index for EONIA (Euro Overnight Index Average) and LIBOR (London Interbank Offered Rates).

In 2019, the Bank launched a global programme to manage risks and challenges of the IBOR transition. This programme facilitated the process of risk identification and the selection of the most appropriate response to mitigate those risks. The structure of the programme focuses on the following areas: Technology and Operations, Legal, Customer Relations, Risk Management and Models, Conduct and Communication, and Accounting and Finance.

In March 5, 2021, the Financial Conduct Authority (FCA) announced the cessation or loss of representativeness of the LIBOR benchmarks, published by ICE Benchmark Administration (IBA).

In July 2023, the global financial industry marked a significant milestone as the long anticipated transition away from LIBOR. This transition has been a comprehensive and collaborative effort involving market participants, regulatory authorities and industry bodies.

Since 2023, the Bank focused on monitoring the adequate transition of the pending to migrate loan operations, which was performed on the next interest settlement date, after the signing of the new contract referenced to SOFR or term-SOFR. As of the date, all contracts referenced to USD LIBOR have been renegotiated and all migrations have been successfully performed, thus the use of the synthetic USD LIBOR has not been necessary.

On 30 September 2024, the remaining synthetic LIBOR settings were published for the last time and all 35 LIBOR settings ceased permanently. This marks the final step in the global transition away from LIBOR. The cessation follows an extended transition period, during which financial institutions, corporates, and regulators have moved away from USD LIBOR to alternative rates such as the Secured Overnight Financing Rate (SOFR).

NOTE 37 - RISK MANAGEMENT, continued

CREDIT RISK

Credit risk is the risk that one of the parties to a financial instrument fails to meet its contractual obligations for reasons of insolvency or inability of the individuals or legal entities in question to continue as a going concern, causing a financial loss to the other party. The Bank consolidates all elements and components of credit risk exposure to manage credit risk (i.e., individual delinquency risk, inherent risk of a business line or segment, and/or geographical risk).

Credit Risk Management

The Bank has established a combined credit approval committees, which includes member from Board of Directors, Risk Division and commercial areas, who overally verify quantitative and qualitative parameters of each client.

The Board of Directors has delegated the responsibility for credit risk management to the Integral Risk Committee, as well as to the Bank’s risk departments, whose roles are summarised below:

•Formulate credit policies by consulting with the business units, meeting requirements of guarantees, credit evaluation, risk rating and submitting reports, documentation and legal procedures in compliance with the regulatory, legal and internal requirements of the Bank.

•Establish the structure to approve and renew credit requests. The Bank structures credit risks by assigning limits to the concentration of credit risk in terms of individual debtor, debtor group, industry segment and country.

•Limit concentrations of exposure to customers or counterparties in geographic areas or industries (for accounts receivable or loans), and by issuer, credit rating and liquidity.

•Approval levels are assigned to the corresponding officials of the business unit (commercial, consumer, SMEs) to be exercised by that level of management. In addition, those limits are continually revised. Risk evaluation team at the branch level interact on a regular basis with customers; however, for larger credit requests, the risk team from the head office and the Executive Risk Committee works directly with customers to assess credit risks and prepare risk requests.

•Develop and maintain the Bank’s credit risk classifications for the purpose of classifying risks according to the degree of exposure to financial loss that is exhibited by the respective financial instruments, with the aim of focusing risk management specifically on the associated risks.

•Revise and evaluate credit risk. Management’s risk divisions are largely independent of the Bank’s commercial division and evaluate all credit risks in excess of the specified limits prior to loan approvals for customers or prior to the acquisition of specific investments. Credit renewal and reviews are subject to similar processes.

Credit Approval: Loans approved on an individual basis

In preparing a credit proposal for a corporate client whose loans are approved on an individual basis, Santander-Chile’s personnel verify such parameters as debt servicing capacity (typically including projected cash flows), the company’s financial history and projections for the economic sector in which it operates. The Risk Division is closely involved in this process and prepares the credit application for the client. All proposals contain an analysis of the client, a rating and a recommendation. Credit limits are determined not on the basis of outstanding balances of individual clients, but on the direct and indirect credit risk of entire financial groups. For example, a corporation will be evaluated together with its subsidiaries and affiliates.

Credit Approval: Loans approved on a group basis

The majority of loans to individuals and small and mid-sized companies are approved by the Standardized Risk Area through an automated credit scoring system. This system is decentralized, automated and based on multiple parameters, including demographic and information regarding credit behavior from external sources and the FMC.

Credit approval: Investment on debt instruments

The Bank considers the probability of default of issuers or counterparties using internal and external information such as independent risk evaluators of the Bank. In addition, the Bank applied a strong governance and conservative policy which ensures that the issuers of investments and counterparties in derivative instrument transactions are of the highest quality.

Credit approval: Contingent loans

The Bank operates with contingent loans that entail exposure to credit risk such as: personal guarantees, letters of credit, performance guarantees, credit lines and credit commitments. Personal guarantees represent an irrevocable payment obligation. When a guaranteed client does not fulfill its obligations to third parties, the Bank will pay, then these operations represent the same exposure to credit risk as a common loan.

NOTE 37 - RISK MANAGEMENT, continued

Letters of credit are commitments documented by the Bank on behalf of the client that are guaranteed by the shipped goods to which they relate and, therefore, have less risk than direct indebtedness. The Bank guarantee corresponds to contingent commitments that become effective only if the client does not comply with the performance of engaged works.

Loans commitments to grant loans, the Bank is exposed to losses that arise from unused balances. The Bank monitors the maturity of credit lines because generally long-term commitments have a higher credit risk than short-term commitments.

Impairment assessment

a.Definition of default and cure

The Bank considers a financial instrument defaulted and therefore Stage 3 for ECL calculations when the past-due amounts of an exposure exceed materiality thresholds for 90 or more consecutive days.

As a part of a qualitative assessment of whether a customer is in default, the Bank also considers a variety of instances that may indicate unlikeliness to pay. Such events include:

•Restructured operations over 90 days.

•Pulling effect (defined as the entire outstanding amount on any loan which has an instalment 90 days or more past due)

•Operations with claimed’s amounts or its reimbursement has been judicially required by the entity

•The debtor (or any legal entity within the debtor’s group) filing for bankruptcy application/protection

•A material decreases in the underlying collateral value where the recovery of the loan is expected from the sale of the collateral

•Internal rating of the borrower indicating default or near default

•The borrower requesting emergency funding from the Bank

•The borrower having past due liabilities to public creditors or employees

•A material decreases in the borrower’s turnover or the loss of a major customer

•A covenant breach not waived by the Bank

•Debtor’s listed debt or equity has been suspended at the primary exchange because of rumors or facts about financial difficulties

Operations that not meet the conditions of Default must stay in probation period for 92 days, after that will be cured.

b.Internal rating and PD estimation

The Bank’s Credit Risk Department operates its internal rating models. The models incorporate both qualitative and quantitative information and, in addition to information specific to the borrower utilize supplemental external information that could affect the borrower’s behavior. The internal credit grades are assigned based on the internal scoring policy, PDs are then adjusted for IFRS 9 ECL calculations to incorporate forward looking information and the IFRS 9 Stage classification of the exposure.

The following table shows quality assets and its related provision, based on our internal scoring policy as of December 31, 2024 and 2023:

December 31, 2024
Corporate loans
Corporate Portfolio			Stage 1						Stage 2						Stage 3						Total Corporate						Percentage						Stage 1						Stage 2						Stage 3						Total ECL Allowance (*)						Percentage
			MCh$						MCh$						MCh$						MCh$						%						MCh$						MCh$						MCh$						MCh$						%
A1			29,920						-						-						29,920						0.07		%				1						-						-						1						0.00		%
A2			656,322						-						-						656,322						1.59		%				314						-						-						314						0.03		%
A3			2,264,646						53,680						-						2,318,326						5.61		%				1,901						307						-						2,208						0.19		%
A4			2,487,497						36,047						-						2,523,544						6.11		%				3,567						268						-						3,835						0.32		%
A5			2,749,203						41,239						777						2,791,219						6.75		%				6,645						1,046						63						7,754						0.65		%
A6			2,121,986						90,538						158						2,212,682						5.35		%				9,236						2,849						41						12,126						1.02		%
B1			613,063						192,023						-						805,086						1.95		%				4,458						9,526						-						13,984						1.17		%
B2			19,332						134,107						-						153,439						0.37		%				143						7,416						-						7,559						0.63		%
B3			-						136,901						2,500						139,401						0.34		%				-						7,545						696						8,241						0.69		%
B4			-						65,613						33,129						98,742						0.24		%				-						3,598						7,725						11,323						0.95		%
C1			-						29,632						185,235						214,867						0.52		%				-						2,771						60,382						63,153						5.30		%
C2			-						23,450						112,479						135,929						0.33		%				-						1,052						27,208						28,260						2.37		%
C3			-						1,785						66,545						68,330						0.17		%				-						237						28,343						28,580						2.40		%
C4			-						1,600						132,213						133,813						0.32		%				-						105						59,724						59,829						5.02		%
C5			-						1,710						97,139						98,849						0.24		%				-						302						67,170						67,472						5.66		%
C6			-						4,139						129,079						133,218						0.32		%				-						300						105,471						105,771						8.87		%
Subtotal			10,941,969						812,464						759,254						12,513,687						30.28		%				26,265						37,322						356,823						420,410						35.25		%
			Other loans
			Stage 1						Stage 2						Stage 3						Total Other loans						Percentage						Stage 1						Stage 2						Stage 3						Total ECL Allowance						Percentage
			MCh$						MCh$						MCh$						MCh$						%						MCh$						MCh$						MCh$						MCh$						%
Other Commercial			4,321,411						527,752						489,587						5,338,750						12.92		%				47,042						34,834						183,118						264,994						22.22		%
Mortgage			14,762,656						1,944,932						852,181						17,559,769						42.49		%				10,347						60,330						155,693						226,370						18.98		%
Consumer			4,928,084						679,756						303,798						5,911,638						14.31		%				58,679						87,609						134,628						280,916						23.55		%
Subtotal			24,012,151						3,152,440						1,645,566						28,810,157						69.72		%				116,068						182,773						473,439						772,280						64.75		%
Total			34,954,120						3,964,904						2,404,820						41,323,844						100.00		%				142,333						220,095						830,262						1,192,690						100.00		%

(*)Include MCh$165,935 of ECL allowance calculated on an Individual basis.

NOTE 37 - RISK MANAGEMENT, continued

December 31, 2023
Corporate loans
Corporate Portfolio			Stage 1						Stage 2						Stage 3						Total Corporate						Percentage						Stage 1						Stage 2						Stage 3						Total ECL Allowance (*)						Percentage
			MCh$						MCh$						MCh$						MCh$						%						MCh$						MCh$						MCh$						MCh$						%
A1			28,006						-						-						28,006						0.07		%				3						-						-						3						0.00		%
A2			785,654						-						-						785,654						1.93		%				452						-						-						452						0.04		%
A3			2,803,228						29,491						-						2,832,719						6.94		%				1,982						138						-						2,120						0.18		%
A4			2,482,922						12,265						-						2,495,187						6.11		%				2,474						60						-						2,534						0.22		%
A5			2,732,502						47,927						765						2,781,194						6.81		%				5,825						668						62						6,555						0.57		%
A6			2,055,756						106,770						-						2,162,526						5.30		%				8,905						2,227						-						11,132						0.97		%
B1			331,242						285,756						106						617,104						1.51		%				3,787						11,137						58						14,982						1.30		%
B2			23,222						165,717						1,201						190,140						0.47		%				242						7,717						289						8,248						0.72		%
B3			-						98,961						5,618						104,579						0.26		%				-						4,990						2,135						7,125						0.62		%
B4			-						64,864						32,177						97,041						0.24		%				-						3,682						8,656						12,338						1.07		%
C1			-						36,299						178,279						214,578						0.53		%				-						3,104						59,363						62,467						5.43		%
C2			-						8,595						77,832						86,427						0.21		%				-						733						25,793						26,526						2.31		%
C3			-						4,612						99,892						104,504						0.26		%				-						550						35,077						35,627						3.10		%
C4			-						2,385						104,054						106,439						0.26		%				-						311						45,025						45,336						3.94		%
C5			-						1,182						110,548						111,730						0.27		%				-						191						70,909						71,100						6.18		%
C6			-						1,940						112,428						114,368						0.28		%				-						206						95,689						95,895						8.34		%
Subtotal			11,242,532						866,764						722,900						12,832,196						31.44		%				23,670						35,714						343,056						402,440						35.00		%
			Other loans
			Stage 1						Stage 2						Stage 3						Total other loans						Percentage						Stage 1						Stage 2						Stage 3						Total ECL Allowance						Percentage
			MCh$						MCh$						MCh$						MCh$						%						MCh$						MCh$						MCh$						MCh$						%
Other Commercial			4,375,334						486,303						446,264						5,307,901						13.01		%				37,913						31,921						187,322						257,156						22.36		%
Mortgage			14,635,723						1,713,185						724,531						17,073,439						41.83		%				8,651						53,371						154,111						216,133						18.79		%
Consumer			4,512,156						790,276						295,918						5,598,350						13.72		%				57,429						83,897						132,936						274,262						23.85		%
Subtotal			23,523,213						2,989,764						1,466,713						27,979,690						68.56		%				103,993						169,189						474,369						747,551						65.00		%
Total			34,765,745						3,856,528						2,189,613						40,811,886						100.00		%				127,663						204,903						817,425						1,149,991						100.00		%

(*)Include MCh$155,903 of ECL allowance calculated on an Individual basis.

NOTE 37 - RISK MANAGEMENT, continued

In relation to the credit quality of the investment portfolio, local regulations establish that banks are able to hold only local and foreign fixed–income securities except in certain cases. Additionally, Banco Santander-Chile has internal policies to ensure that only securities approved by the Market Risk department, which are stated in the documents “APS” – Products and underlying Approval, are acquired. The Credit Risk Department sets the exposure limits to those approved APS’s. The APS is updated on daily basis. As of December 31, 2024, 99% our total investment portfolio corresponds to securities issued by the Chilean Central Bank, Chilean Treasury and US Treasury notes.

c.Exposure at default

The exposure at default (EAD) represents the gross carrying amount of the financial instruments subject to the impairment calculation, addressing both the client’s ability to increase its exposure while approaching default and potential early repayments too.

To calculate the EAD for a Stage 1 loan, the Bank assesses the possible default events within 12 months for the calculation of the 12mECL. However, if a Stage 1 loan that is expected to default in the 12 months from the balance sheet date and is also expected to cure and subsequently default again, then all linked default events are taken into account. For Stage 2, Stage 3 the exposure at default is considered for events over the lifetime of the instruments.

d.Loss given default

The credit risk assessment is based on a standardized LGD assessment framework that results in a certain LGD rate. These LGD rates take into account the expected EAD in comparison to the amount expected to be recovered or realized from any collateral held.

The Bank segments its retail lending products into smaller homogeneous portfolios, based on key characteristics that are relevant to the estimation of future cash flows. The applied data is based on historically collected loss data and involves a wider set of transaction characteristics (i.e., product type, wider range of collateral types) as well as borrower characteristics.

Further recent data and forward-looking economic scenarios are used in order to determine the IFRS 9 LGD rate for each group of financial instruments. Under IFRS 9, LGD rates are estimated for the Stage 1, Stage 2, Stage 3 IFRS 9 segment's of each asset class. The inputs for these LGD rates are estimated and, where possible, calibrated through back testing against recent recoveries. These are repeated for each economic scenario as appropriate.

e.Significant increase in credit risk (SICR)

The Bank continuously monitors all assets subject to ECLs. In order to determine whether an instrument or a portfolio of instruments is subject to 12-month ECL or Lifetime ECL, the Bank assesses whether there has been a significant increase in credit risk since initial recognition.

The Bank also applies a secondary qualitative method for triggering a significant increase in credit risk for an asset, such as moving a customer/facility to the watch list (Special vigilance). The Bank may also consider that events explained in letter a) above are a significant increase in credit risk as opposed to a default. Regardless of the change in credit grades, if contractual payments are more than 30 days past due, the credit risk is deemed to have increased significantly since initial recognition.

When estimating ECLs on groups of similar assets, the Bank applies the same principles for assessing whether there has been a significant increase in credit risk since initial recognition.

Quantitative criteria for SICR Stage 2:

The quantitative criteria are used to identify where an exposure has increased in credit risk and it is applied based on whether an increase in the lifetime PD since the recognition date exceeds the threshold set in absolute terms. The following formula is used to determine such threshold:

Threshold = Lifetime PD (at reporting date) – Lifetime PD (at origination)

Since December 2023 to November 2024, the Bank has applied the following threshold of significant increase in credit risk (SICR). In December 2023 this update generated an impact of MCh$ 863 a decrease of ECL allowance

Other commercial																								Corporate loans
Mortgages						Other loans						Revolving (Credit cards)						SME						SME						Middle market						Corporate and  Investment Banking
28.19		%				49.32		%				16.91		%				49.32		%				18.50		%				16.36		%				Santander Group criteria

There is also a relative threshold of 100% of all portfolios with the exception of the Corporate and Investment Banking Portfolio.

NOTE 37 - RISK MANAGEMENT, continued

The criteria exposed above were applied for most of the year, however, in November 2024, the threshold of significant increase in credit risk (SICR) was updated, generating an increase of ECL allowance amount of MCh$ 353. The new criteria are exposed:

Other commercial																								Corporate loans
Mortgages						Other loans						Revolving (Credit cards)						SME						SME						Middle market						Corporate and  Investment Banking
17.61		%				30.53		%				12.28		%				30.53		%				14.20		%				15.41		%				Santander Group criteria

In December 2023, the Bank performed a recalibration of the Significant Increase in Credit Risk (SICR) process, which covers the classification of contracts in Stages 1 and 2, moreover the Bank implement both type of thresholds (absolute and relative) for SICR assessment, using OR criteria (before was based on AND criteria). This recalibration was implemented at the end of 2023. The impact of the adjustment above described increase ECL allowance for an amount of MCh$ 22,175 and increase EAD in Stage 2 for an amount of MCh$ 1,723,190.

Qualitative criteria for SICR Stage 2:

The qualitative criteria are based on the existence of evidence that leads to an automatic classification of financial instruments in stage 2, mainly 30 days overdue and restructured. Thresholds of SICR are calibrated based on the average ECL of exposures that exceed materiality threshold for 30 days or more consecutive days or with a level of credit risk considered to be “significant”.

Other commercial

Corporate loans

Mortgages

Other loans

Revolving (Credit cards)

SME

SME

Middle market

Corporate and Investment Banking

Irregular portfolio > 30 days

Irregular portfolio > 30 days

Irregular portfolio > 30 days

Irregular portfolio > 30 days

Irregular portfolio > 30 days

Irregular portfolio > 30 days

Irregular portfolio > 30 days

Restructured marked for monitoring

Restructured marked for monitoring

Restructured marked for monitoring

Restructured marked for monitoring

Restructured marked for monitoring

Restructured marked for monitoring

Restructured marked for monitoring

Clients considered to be substandard or in incompliance (pre-legal action)

Clients considered to be substandard or in incompliance (pre-legal action)

Clients considered to be substandard or in incompliance (pre-legal action)

These thresholds are defined by the Model Committee and the Integral Risk Committee and are evaluated annually with updates made depending on impacts and definitions of the risk models associated to each portfolio.

f.Expected credit losses measurement

Expected credit losses are a probability-weighted estimate of credit losses over the expected life of the financial instrument. A cash shortfall is the difference between the cash flows that are due to an entity in accordance with the contract and the cash flows that the entity expects to receive. Because expected credit losses consider the amount and timing of payments, a credit loss arises even if the entity expects to be paid in full but later than when contractually due.

ECL allowance calculated on an individual basis

For financial assets, a credit loss is the present value of the difference between: the contractual cash flows that are due under the contract; and the cash flows that the Bank expects to receive. For undrawn loan commitments, a credit loss is the present value of the difference between: the contractual cash flows that are due if the holder of the loan commitment draws down the loan; and the cash flows that the Bank expects to receive if the loan is drawn down.

For financial assets that are credit-impaired at the reporting date, and in accordance with our internal procedures, the Bank calculates allowance for expected credit losses under the “Discounted Cash Flow Methodology” when the financial asset is classified in stage 3, with a PD equal to 100% and is individually significant. In this instance, the Bank measures the expected credit losses as the difference between the asset’s gross carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. Any adjustment is recognised in profit or loss as an impairment gain or loss.

NOTE 37 - RISK MANAGEMENT, continued

The allowances determined under a “Discounted Cash Flow Methodology” must take into account the financial information of the debtor, including available business strategies, as well as collateral associated with that debtor. The recovery analysis includes the following scenarios:

-Recovery of a possible sale of collateral.

-Recovery on the basis of common commercial activities (commercial plan).

The following table shows the allowance and assets before allowance of the loans that meet the conditions:

			2024						2023
			MCh$						MCh$
Loans and account receivable			382,737						347,477
Allowance for ECL – discounted cash flow methodology			165,935						155,903

As of December 31, 2024, the expected credit losses related to corporate commercial loans includes MCh$165,935 measured from cash flow discounted methodology (MCh$155,903 in 2023).

ECL allowance calculated on a collective basis

Commercial loans (except for those described within the “ECL allowance calculated on an Individual basis” description aforementioned), mortgage loans and consumer loans are grouped and assessed on a collective basis by using a credit loss allowance model. The estimation of the collective basis expected credit loss allowance considers qualitative and quantitative information that may affect changes in credit risk and the development of significant assumptions related to the probabilities of default and loss given default, related to forward looking information, multi-factor analysis such as type of portfolio or transaction and macroeconomic factors.

			2024						2023
			MCh$						MCh$
Loans and account receivable (commercial, mortgage and consumer loans)			40,941,107						40,464,409
Allowance for ECL – collective basis			1,026,755						994,088

As of December 31, 2024, the Bank maintains MCh$ 89,994 in residual overlays, to cover certain defaulted loans from mortgage and other commercial portfolios.

As of December 31, 2024, the Bank has released part of the post-model adjustment (overlay) recorded at the end of 2023 (MCh$ 93,614) due to improvement on the macro economical forward-looking information and scenarios and better behavior on SCIB clients.

g.Corporate and other commercial loans

In order to meet the objective of recognising lifetime expected credit losses for significant increases in credit risk since initial recognition, it is necessary to group or sub-group financial instruments, even if evidence of such significant increases in credit risk at the individual instrument level is not yet available.

Considering to the aforementioned, the Bank evaluates on corporate basis, commercial loans for which prepares individual credit proposals, where it verifies debt servicing capacity (projected cash flow), client’s financial history, evidence of impairment and projections for economic sector. All proposals include an analysis of the client, a rating and a recommendation. For corporations, the evaluation includes subsidiaries and affiliates. Other commercial loans are grouped into other homogeneous portfolios (smaller commercial, mortgages and consumer loans), based on a combination of instrument type, credit risk ratings, collateral type, date of initial recognition, remaining term to maturity, industry and others.

During 2024, and as part of the normal review process, the Bank has made minor adjustments to the internal rating models, in order to improve its ability to adequately detect the risk profile of the clients individually evaluated.

h.Modified loans

When a loan measured at amortised cost has been renegotiated or modified but not derecognised, the Bank assesses whether the transaction should be treated as a modified asset or derecognition. If the transaction does not result in derecognition the Bank must recognise the resulting gains or losses as the difference between the carrying amount of the original loans and modified contractual cash flows discounted using the EIR before modification.

NOTE 37 - RISK MANAGEMENT, continued

If the modification results in derecognition, then the modified asset is a new asset. The following table shows modification that results in deregonition and therefore and new operations:

			As of December 31, 2024																								As of December 31, 2023
			Stage 1						Stage 2						Stage 3						Total						Stage 1						Stage 2						Stage 3						Total
			MCh$						MCh$						MCh$						MCh$						MCh$						MCh$						MCh$						MCh$
Gross carrying amount			34,954,120						3,964,904						2,404,820						41,323,844						34,765,745						3,856,528						2,189,613						40,811,886
Modified loans			-						814,092						1,236,176						2,050,268						-						739,474						1,026,843						1,766,317
%			-						20.53		%				51.40		%				4.96		%				-						19.17		%				46.90		%				4.33		%
ECL allowance			142,333						220,095						830,262						1,192,690						127,663						204,903						817,425						1,149,991
Modified loans									52,474						403,125						455,599						-						48,419						360,975						409,394
%			-						23.84		%				48.55		%				38.20		%				-						23.63		%				44.16		%				35.60		%

i.Macro economical forward-looking information and scenarios

In November 2024, the Bank decided not to update the macro-economic information and scenarios, the main reason is that the macro-economic scenarios projected to 2027, compared to those of 2026, do not present diametrically different projections.

The annual growth forecasts for the most relevant macroeconomic variables for each of our scenarios mainly used during 2024 are the same used in 2023, and are as follows:

						Average estimates 2024
						Unfavorable scenario 2						Unfavorable  scenario 1						Base scenario						Favorable scenario 1						Favorable scenario 2
Chilean Central Bank interest rates						0.85		%				2.32		%				4.25		%				6.18		%				7.65		%
Unemployment rate						10.03		%				8.89		%				7.40		%				5.91		%				4.77		%
Housing Price growth						(1.02)		%				0.62%						2.78		%				4.94		%				6.59		%
GDP growth						(0.80)		%				1.10		%				3.58		%				6.06		%				7.97		%
Consumer Price Index						1.07		%				0.67		%				3.00		%				5.33		%				7.07		%

The highest probability of occurrence is associated to the base scenario, while the extreme scenarios have a lower probability than the more moderate scenarios.

The methodology used for the generation of the local scenarios is based on the corporate methodology and is applied to the loan portfolio with the exception of loans from the Corporate and Investment Banking segment which uses global scenarios as defined by the Santander Group.The probabilities for the scenarios must total 100% and be symmetrical.

Local scenario												Global scenario
						Probability weighting												Probability weighting
Favorable scenario 2						10		%				Favorable scenario 1						30		%
Favorable scenario 1						15		%				Base scenario						40		%
Base scenario						50		%				Unfavorable scenario 1						30		%
Unfavorable scenario 1						15		%
Unfavorable scenario 2						10		%

NOTE 37 - RISK MANAGEMENT, continued

The ECL allowance sensibility to future macro-economic conditions is as follows:

			As of December 31,
			2024						2023
			MCh$						MCh$
Reported ECL allowance			1,193,854						1,150,116
Gross carrying amount			41,399,911						40,917,268
Reported ECL Coverage			2.81		%				2.81		%
ECL amount by scenarios
Favorable scenarios 2			1,013,732						970,411
Favorable scenarios 1			1,082,296						1,032,708
Base scenarios			1,158,397						1,104,368
Unfavorable scenarios 2			1,234,421						1,176,477
Unfavorable scenarios 2			1,284,831						1,224,340
Coverage ratio by scenarios
Favorable scenarios 2			2.45		%				2.37		%
Favorable scenarios 1			2.61		%				2.52		%
Base scenarios			2.80		%				2.70		%
Unfavorable scenarios 2			2.98		%				2.88		%
Unfavorable scenarios 2			3.10		%				2.99		%

NOTE 37 - RISK MANAGEMENT, continued

j.Analysis of risk concentration

The following table shows the risk concentration by industry, and by stage before ECL allowance of loans and account receivable from customers and Interbak loans at amortised cost:

			As of December 31,
			2024																								2023
			Stage 1						Stage 2						Stage 3						Total						Stage 1						Stage 2						Stage 3						Total
			MCh$						MCh$						MCh$						MCh$						MCh$						MCh$						MCh$						MCh$
Commercial loans
Agriculture and livestock			427,626						67,010						81,628						576,264						478,676						70,687						74,110						623,473
Fruit cultivation			404,013						93,737						114,766						612,516						444,600						107,445						94,564						646,609
Forest			122,759						10,480						19,542						152,781						108,232						10,901						20,390						139,523
Fishing			389,857						3,876						6,904						400,637						290,978						14,655						7,763						313,396
Mining			454,735						5,817						6,595						467,147						228,565						5,578						7,656						241,799
Oil and natural gas			11,040						277						208						11,525						3,146						199						191						3,536
Manufacturing Industry:
Food, beverages and tobacco			296,297						25,383						19,684						341,364						301,193						15,366						25,278						341,837
Textile, leather and footwear			64,297						6,236						9,262						79,795						64,068						5,679						7,345						77,092
Wood and furniture			83,304						1,827						6,656						91,787						78,856						2,438						6,894						88,188
Cellulose, paper and printing			51,886						7,925						4,773						64,584						61,702						9,035						4,995						75,732
Chemicals and petroleum derivatives			129,701						1,415						1,223						132,339						108,011						3,187						1,306						112,504
Metallic, non-metallic, machinery, or other			365,864						13,202						17,924						396,990						319,322						13,870						21,715						354,907
Other manufacturing industries			214,957						11,143						21,523						247,623						194,742						19,248						19,392						233,382
Electricity, gas, and wáter			747,969						52,240						5,025						805,234						910,813						10,497						5,032						926,342
Home building			206,906						12,840						28,582						248,328						164,118						29,377						23,118						216,613
Non-residential construction			512,234						20,843						29,644						562,721						472,579						28,395						48,231						549,205
Wholesale trade			1,560,877						104,488						171,345						1,836,710						1,420,083						105,396						163,872						1,689,351
Retail trade, restaurants and hotels			1,367,697						79,765						105,453						1,552,915						1,501,379						74,975						87,365						1,663,719
Transport and storage			693,354						50,741						55,381						799,476						600,729						56,933						54,860						712,522
Telecommunications			504,811						17,183						10,265						532,259						450,555						16,341						7,261						474,157
Financial services			610,158						33,019						1,135						644,312						575,666						2,656						912						579,234
Real estate services			2,010,898						205,007						153,315						2,369,220						2,237,404						231,680						154,694						2,623,778
Social services and other community services			4,032,140						515,762						378,008						4,925,910						4,602,449						518,529						332,220						5,453,198
Subtotal			15,263,380						1,340,216						1,248,841						17,852,437						15,617,866						1,353,067						1,169,164						18,140,097
Mortgage loans			14,762,656						1,944,932						852,181						17,559,769						14,635,723						1,713,185						724,531						17,073,439
Consumer loans			4,928,084						679,756						303,798						5,911,638						4,512,156						790,276						295,918						5,598,350
Total			34,954,120						3,964,904						2,404,820						41,323,844						34,765,745						3,856,528						2,189,613						40,811,886

NOTE 37 - RISK MANAGEMENT, continued

The following table shows past due information related to loans and account receivable from customers and Interbak loans at amortised cost, and related ECL allowance:

			As of December 31, 2024
			Gross carrying amount																								ECL allowance
			Stage 1						Stage 2						Stage 3						TOTAL						Stage 1						Stage 2						Stage 3						TOTAL
			MCh$						MCh$						MCh$						MCh$						MCh$						MCh$						MCh$						MCh$
Interbank loans
Current			31,283						-						-						31,283						1						-						-						1
Commercial loans
Current			15,183,222						1,150,507						363,076						16,696,805						68,684						51,797						114,622						235,103
1-30 days past due			45,590						124,071						89,139						258,800						4,449						12,171						26,294						42,914
31-90 days past due			3,285						65,549						97,072						165,906						173						8,166						27,564						35,903
Over 90 days past due			-						89						699,554						699,643						-						22						371,461						371,483
Mortgage loans
Current			14,746,681						1,385,985						234,901						16,367,567						7,403						30,391						28,974						66,768
1-30 days past due			12,809						362,378						85,437						460,624						2,358						13,182						13,452						28,992
31-90 days past due			3,166						196,569						140,323						340,058						586						16,757						22,938						40,281
Over 90 days past due			-						-						391,520						391,520						-						-						90,329						90,329
Consumer loans
Current			4,903,711						455,722						69,745						5,429,178						52,683						34,770						29,390						116,843
1-30 days past due			21,323						135,203						29,654						186,180						5,638						27,780						12,065						45,483
31-90 days past due			3,050						88,115						81,657						172,822						358						24,865						35,037						60,260
Over 90 days past due			-						716						122,742						123,458						-						194						58,136						58,330
Total			34,954,120						3,964,904						2,404,820						41,323,844						142,333						220,095						830,262						1,192,690

			As of December 31, 2023
			Gross carrying amount																								ECL allowance
			Stage 1						Stage 2						Stage 3						TOTAL						Stage 1						Stage 2						Stage 3						TOTAL
			MCh$						MCh$						MCh$						MCh$						MCh$						MCh$						MCh$						MCh$
Interbank loans
Current			68,440																		68,440						2																		2
Commercial loans
Current			15,505,706						1,181,694						362,298						17,049,698						58,096						49,896						119,514						227,506
1-30 days past due			41,357						102,214						90,367						233,938						3,357						9,164						33,921						46,442
31-90 days past due			2,363						69,159						166,427						237,949						128						8,575						57,548						66,251
Over 90 days past due			-						-						550,072						550,072						-						-						319,395						319,395
Mortgage loans
Current			14,612,117						1,285,324						222,874						16,120,315						8,224						34,149						39,964						82,337
1-30 days past due			19,150						278,114						101,086						398,350						327						11,923						21,627						33,877
31-90 days past due			4,456						149,747						192,972						347,175						100						7,299						37,612						45,011
Over 90 days past due			-						-						207,599						207,599						-						-						54,908						54,908
Consumer loans
Current			4,492,189						561,846						61,444						5,115,479						54,038						32,294						26,654						112,986
1-30 days past due			18,497						133,011						26,198						177,706						3,150						25,139						10,968						39,257
31-90 days past due			1,470						95,419						94,189						191,078						241						26,464						39,259						65,964
Over 90 days past due			-						-						114,087						114,087						-						-						56,055						56,055
Total			34,765,745						3,856,528						2,189,613						40,811,886						127,663						204,903						817,425						1,149,991

NOTE 37 - RISK MANAGEMENT, continued

k.Collateral and other credit enhancement

Banco Santander controls the credit risk using collateral in its operations. Each business unit is responsible for credit risk management and formalizes the use of collateral in its lending policies. Guidelines are in place covering the acceptability and valuation of each type of collateral.

Banco Santander uses guarantees in order to increase their resilience in the subject to credit risk operation. The guarantees can be used fiduciary, real, legal structures with power mitigation and compensation agreements. The Bank periodically reviews its policy guarantees by technical parameters, normative and also its historical basis, to determine whether the guarantee is legally valid and enforceable.

Credit limits are continually monitored and changed in customer behavior function. Thus, the potential loss values represent a fraction of the amount available.

Collateral refers to the assets pledged by the customer or a third party to secure the performance of an obligation. The main type of collateral obtained are the following:

•For securities lending and reverse repurchase transactions, cash or securities

•For corporate and small business lending, charges over real estate properties, inventory and trade receivables and, in special circumstances, government guarantees

•For retail lending, mortgages over residential properties

The following table show the maximum exposure to credit risk by class of financial asset, associated collateral and the net exposure to credit risk:

			As of December 31,
			2024																								2023
			Maximum exposure to credit risk						Collateral						Net exposure						Associated ECL						Maximum exposure to  credit risk						Collateral						Net exposure						Associated ECL
			MCh$						MCh$						MCh$						MCh$						MCh$						MCh$						MCh$						MCh$
Interbank loans			31,283						11						31,272						1						68,440						3,677						64,763						2
Commercial loans			17,821,154						10,014,312						7,806,842						685,403						18,071,657						9,893,336						8,178,321						659,594
Mortgage loans			17,559,769						17,367,966						191,803						226,370						17,073,439						16,589,333						484,106						216,133
Consumer Loans			5,911,638						558,906						5,352,732						280,916						5,598,350						586,050						5,012,300						274,262
Contingent loans exposure			2,850,495						467,467						2,383,028						18,389						2,701,525						378,648						2,322,877						21,105
Total			44,174,339						28,408,662						15,765,677						1,211,079						43,513,411						27,451,044						16,062,367						1,171,096

One very important example of financial collateral is the collateral agreement. Collateral agreements comprise a set of highly liquid instruments with a certain economic value that are deposited or transferred by a counterparty in favor of another party in order to guarantee or reduce any counterparty credit risk that might arise from the portfolios of derivative transactions between the parties in which there is exposure to risk.

Collateral agreements vary in nature but, whichever the specific form of collateralization may be, the ultimate aim, as with the netting technique, is to reduce counterparty risk.

Transactions subject to a collateral agreement are assessed periodically (normally on a daily basis). The agreed-upon parameters defined in the agreement are applied to the net balance arising from these assessments, from which the collateral amount (normally cash or securities) payable to or receivable from the counterparty is obtained.

For real estate collateral periodic re-appraisal processes are in place, based on the actual market values for the different types of real estate, which meet all the requirements established by the regulator.

Specifically, mortgage loans are secured by a real property mortgage, and threshold mitigate counterparty credit risk of derivative instruments.

For the ECL allowance calculated on an Individual basis, the collaterals at fair value, are use for mitigating the loan amount and obtain the exposure. While for ECL allowance calculated on a collective basis LTV is used (defined as the Loan amount divided by value of collateral).

NOTE 37 - RISK MANAGEMENT, continued

Personal guarantees and credit derivatives

Personal guarantees are guarantees that make a third party liable for another party’s obligations to the Bank. Only guarantees provided by third parties that meet the minimum requirements established by the supervisor can be recognised for capital calculation purposes.

Credit derivatives are financial instruments whose main purpose is to hedge credit risk by buying protection from a third party, whereby the Bank transfers the risk of the issuer of the underlying instrument. Credit derivatives are OTC instruments, i.e. they are not traded in organized markets.

Credit derivative hedges, mainly credit default swaps, are entered into with leading financial institutions. According to the Bank’s policy when an asset (real state) is repossessed are transferred to assets held for sale at their fair value less cost to sell as non-financial assets at the repossession date (assets received in lieu of payments).

Assets Received in Lieu of Payment

Assets received or awarded in lieu of payment of loans and accounts receivable from clients are recognised at their fair value (as determined by an independent appraisal). The excess of the outstanding loan balance over the fair value is charged to net income for the period, under “Provision for loan losses”. Any excess of the fair value over the outstanding loan balance, less costs to sell of the collateral, is returned to the client. These assets are subsequently adjusted to their net realizable value less cost to sale (assuming a forced sale).

As of December 31, 2024, assets received or awarded in lieu of payment amounted to Ch$42,463 million (gross amount: Ch$42,489 million; allowance: Ch$26 million). As of December 31, 2023, assets received or awarded in lieu of payment amounted to Ch$35,622 million (gross amount: Ch$36,804 million; allowance: Ch$1,182 million).

l.Maximum exposure to credit risk

Financial assets and off-balance sheet commitments

For financial assets recognised in the Consolidated Statements of Financial Position, maximum credit risk exposure equals their carrying value. Below is the distribution by financial asset and off-balance sheet commitments of the Bank’s maximum exposure to credit risk as of December 31, 2024 and 2023, without deduction of collateral, security interests or credit improvements received:

									As of December 31,
									2024						2023
			Note						MCh$						MCh$
Deposits in banks			4						2,695,560						2,723,282
Cash items in process of collection			4						572,552						812,524
Financial assets for trading at FVTPL			5
Financial derivative contracts									12,309,770						10,119,486
Financial assets held for trading									329,327						98,308
Financial assets at FVOCI			6
Debt financial instruments									2,687,485						4,536,025
Other financial instruments									74,903						105,257
Financial derivative contracts for hedge accounting			7						843,628						605,529
Financial assets at amortised cost			8
Debt financial instruments									5,176,005						8,176,895
Interbank loans									31,282						68,438
Loans and account receivable at amortised cost /									40,099,872						39,593,457
Off-balance commitments:
Letters of credit issued									308,407						262,496
Foreign letters of credit confirmed									2,208,507						1,641,510
Performance guarantees									10,352,459						9,490,141
Available credit lines									365,932						494,104
Personal guarantees									406						813
Other irrevocable credit commitments									194,801						313,505
Total									78,250,896						79,041,770

NOTE 37 - RISK MANAGEMENT, continued

Foreign derivative contracts

As of December 31, 2024, the Bank’s foreign exposure -including counterparty risk in the derivative instruments’ portfolio- was USD 3 million or 25% of its assets. In the table below, exposure to derivative instruments is calculated by using the equivalent credit risk; which equals the replacement carrying amount plus the maximum potential value, considering the cash collateral that minimizes exposure.

Below, our foreign exposure for those countries classified above 1 and represents our majority of exposure to categories other than 1. As of December 31, 2024, considering fair value of derivative instruments.

Counterpart			Country						Classification						Derivative instruments (market adjusted)						Deposits						Loans						Financial Investments						Total Exposure
															USD millions
Santander Bank Hong Kong			Hong Kong						2						-						1						7						-						8
Santander Bank Mexico			Mexico						3						2						-						-						-						2
Santander Bank EEUU *			EEUU						1						37						130						-						-						167
Santander UK PLC			UK						1						-						2						-						-						2

*Includes BSCH SA New York and Santander Investment Securites

Our exposure to Banco Santander Spain is as follows:

Counterpart

Country

Classification

Derivative instruments (market adjusted)

Deposits

Loans

Financial Investments

Total Exposure

Banco Santander España

Spain

1

1

5

-

-

6

The total amount of the exposure to derivative instruments must be compensated daily with collateral and, therefore, there is no credit exposure.

As of December 31, 2024, we had no applicable sovereign exposure, no unfunded exposure, no credit default protection and no current developments.

Security interests and credit improvements

The maximum exposure to credit risk is reduced in some cases by security interests, credit improvements, and other actions which mitigate the Bank’s exposure. Based on the foregoing, the creation of security interests are a necessary but not a sufficient condition for granting a loan; accordingly, the Bank’s acceptance of risks requires the verification of other variables and parameters, such as the ability to pay or generate funds in order to mitigate the risk being taken on.

The procedures used for the valuation of security interests utilize the prevailing market practices, which provide for the use of appraisals for mortgage securities, market prices for stock securities, fair value of the participating interest for investment funds, etc. All security interests received must be instrumented properly and registered on the relevant register, as well as have the approval of legal divisions of the Bank.

The risk management model includes assessing the existence of adequate and sufficient guarantees that allow recovering the credit when the debtor’s circumstances prevent them from fulfilling their obligations.

NOTE 37 - RISK MANAGEMENT, continued

The Bank has classification tools that allow it to group the credit quality of transactions or customers. Additionally, the Bank has historical databases that keep this internally generated information to study how this probability varies. Classification tools vary according to the analyzed customer (commercial, consumer, SMEs, etc.).

Below is the detail of security interests, collateral, or credit improvements provided to the Bank as of December 31, 2024 and 2023:

			As of December 31,
			2024						2023
			MCh$						MCh$
Non-impaired financial assets
Properties/mortgages			27,463,548						29,279,845
Investments and others			11,083,172						5,300,893
Impaired financial assets
Properties/ mortgages			3,162,938						2,444,084
Investments and others			354,348						293,347
Total			42,064,006						37,318,169

Credit risk mitigation techniques

The Bank applies various methods of reducing credit risk, depending on the type of customer and product. As we shall see, some of these methods are specific to a particular type of transaction (i.e., real estate guarantees) while others apply to groups of transactions (i.e., netting and collateral arrangements).

m.PD scaling

The PD scaling applies for the Corporate loans (SME and Middle Market portfolio), which consists of replicating the PD escalation used today in the CIB portfolio, for the SME and Middle Market portfolio in Stage 1 and Stage 2.

PD scaling allows the annual PD of the last period to be weighted by the residual real months, that is, if:

a.If the operation has a residual term of 2 years and is in stage 1, there is no change.

b.     If the operation has a residual term of 2.5 years and is in stage 2, there will be a benefit for the last period. (6/12)

c.     If the operation has a residual term of 1 month, regardless of the stage, there will be a benefit (1/12)

LIQUIDITY RISK

Liquidity risk is the risk of incurring losses resulting from the inability to meet payment obligations in a timely manner.

Liquidity risk management

The Bank’s approach to liquidity management is to ensure-- whenever possible--to have enough liquidity on hand to fulfill its obligations at maturity, in both normal and stressed conditions, without entering into unacceptable debts or risking the Bank’s reputation.

The Financial Management area manages liquidity risk using a portfolio of liquid assets to ensure that the Bank always maintains enough liquidity to cover short-term fluctuations and long-term financing, complying with internal regulatory liquidity requirements. The Financial Management area is informed by all units of the Bank about the liquidity profile of their financial assets and liabilities, as well as the composition of any other projected cash flows arising from future businesses. Based on this information, Financial Management area maintains a portfolio of short-term liquid assets, composed mainly of liquid investments, loans and advances to other banks, to ensure that the Bank has sufficient liquidity. The liquidity required by the business units are covered by short-term transfers from Financial Management to cover short-term fluctuations and long-term financing to cover structural liquidity needs.

The Board establishes limits on a minimum portion of available funds close to maturity to fulfill payments and on a minimum level of interbank operations and other loan facilities that should be available to cover transfers at unexpected demand levels. This is constantly reviewed by the Assets and liabilities Committee, who has to monitor the strategies for liquidity risk management. Additionally, the Bank must comply with the regulation limits established by the FMC for maturity mismatches.

NOTE 37 - RISK MANAGEMENT, continued

The limit establishment is as dynamic process that address the level of acceptable risk appetite defined by the Bank and its entities. The limit system allows knowing at all times the level of exposure of each entity liquidity risks. In addition, the Bank includes alert indicators by concentration of: counterparties, type of products and terms, with the objective of diversifying the sources of financing and its maturity structure.

The Bank monitors liquidity position on a daily basis, determining the future inflows and outflows. Also, at the month-end, stress tests are performed, considering different scenarios in normal market conditions and fluctuation market conditions (stress).

The Bank has a structure of internal liquidity limits that must be met at all times by Financial Management and Treasury. The Market Risk Management calculates and control the consumption of internal limits as well as verifies their compliance and communicates the status to senior management and the Board of Directors.

At the beginning of the year, the limits are proposed by the Market Risk Management, approved in the ALCO Committee and ratified at the highest level.

The liquidity limits and early warning indicators and management measures defined internally can be grouped as follows:

•Limits associated with concentration and mismatches of cash flows and liquidity of the Bank’s operations.

•Liquidity Management Tools, which is a Structural liquidity or Financing Chart, whose objective is to determine the Bank’s structural liquidity position and allow active management, is an essential mechanism to ensure permanently the assets’s financing in optimal conditions.

•Early warning indicators associated with risks concentration and used as detection and anticipation tool of potential liquidity stress situations and, if necessary, the activation of the Liquidity Contingency Plan

The Market Risk Management establishes and updates the Liquidity Management Policy (PAL). The review and update is performed once a year. However, at any time it could be updated upon request, if any of the areas involved by the PAL have identified a required modification. The PAL is approved by the Board of Directors.

The Market Risk Management provides all necessary tools for the statistical analysis required by local liquidity regulations. The validity of the models are reviewed once a year. The conclusions must be approved by the Board of Directors.

In normal liquidity periods, the Financial Management Department applies the policies and perform the actions required to comply with internal and regulatory limits. If a situation is identified, even at low level, the Liquidity Crisis Committee applies the necessary actions to face potential liquidity deficits or restrictions, and contingency plans to control emergency situations, along with reporting situations to senior management and the respective committees.

Measurement and control of liquidity risk

1.Term mismatches subject to regulatory limits

The Regulatory Liquidity Ratio measures the mismatches of the inflows and outflows in relation to regulatory capital. In accordance with current regulations, the 30-day mismatch cannot exceed once the regulatory capital of the Bank, both for national and foreign currency, and the 90-day mismatch cannot exceed it twice.

2.Monitoring indicators and liquidity ratio subject to regulatory limits

An important component for liquidity risk management is High Quality Liquid Assets (ALAC). These are balance sheet assets, mainly financial investments that are not pledged as collateral, with low credit risk, and with a deep secondary market.

These assets are divided into three levels in accordance with Basel III standards, with Level 1 assets being the most liquid and Level 3 assets being the least liquid. Level 1 assets are bonds from Chilean Goverment entities, Central Bank bonds and United States Treasury bonds.

			As of December 31,
ALAC			2024						2023
			MCh$						MCh$
Level 1: cash and cash equivalent			2,416,812						1,969,547
Level 2: fixed income			7,241,318						6,072,282
Level 2: fixed income			4,517						6,240
Total			9,662,647						8,048,069

NOTE 37 - RISK MANAGEMENT, continued

3.Liquidity Coverage Ratio (LCR)

The Liquidity Coverage Ratio (LCR) is a measurement of liquid assets over 30-day net outflows. It is used by banks globally, as part of the Basel III standards. The requirements were gradually implemented, reaching 100% in 2023.

The objective of the LCR is to promote the short-term resistance of Banks’ liquidity risk profile. The LCR ensures that organizations have an adequate pool of unencumbered, High-Quality Liquid Assets, which can be readily and immediately converted to cash in private markets, in order to meet short-term liquidity needs.

			As of December 31,
Liquidity Coverage Ratio			2024						2023
			%						%
LCR			191						212

Banco Santander Chile’s RCL indicator is above the minimum required. This reflects the conservative liquidity policies imposed by the Board of Directors, through the Assets and Liabilities Committee

4.Net Stable Funding Ratio (NSFR)

The indicator is required by Basel III and provides a sustainable maturity structure for assets and liabilities, thus the banks maintain a stable funding profile in relation to their activities.

The Central Bank and the CMF defined a minimum NSFR level of 60% for 2022, reaching 100% by 2026.

			As of December 31,
Net Stable Funding Ratio			2024						2023
			%						%
NSFR			106						106

5.Information on the liquidity situation according to the requirements of the BCCH

i.Term mismatches

On March 8, 2022, the BCCh published Rules on the Management and measurement of the liquidity position of banking companies that modernize the liquidity regulation, aligning regulatory requirements of the CMF under Basel III implementation process.

In accordance with the provision of the BCCh, the liquidity position is measured and controlled through the difference between the cash outflows, related to liabilities and expense accounts, and cash inflows, which are related to asset and income accounts, for a certain term or time band, which is refered as term mismatch.

The liquidity policy on an Adjusted Base was presented and approved by the Board of Banco Santander Chile. Term mismatches are calculated severally for local currency and foreign currency.

Term mismatches will be made on the following time bands:

-First time band: up to 7 days, inclusive

-Second time band: from 8 days to 15 days, inclusive

-Third time band: from 16 days to 30 days, inclusive

-Fourth time band: from 31 days to 90 days, inclusive

NOTE 37 - RISK MANAGEMENT, continued

			As of December 31, 2024
			Individual																		Consolidated
			Up to 7 days						Up to 15 days						Up to 30 days						Up to 7 days						Up to 15 days						Up to 30 days
			MCh$						MCh$						MCh$						MCh$						MCh$						MCh$
Cash flow receivable (assets) and income			2,471,457						1,642,561						1,834,873						2,468,737						1,642,561						1,834,873
Cash flow payable (liabilities) and expenses			2,127,447						2,481,618						2,058,265						2,111,033						2,481,618						2,058,265
Mismatch			344,010						(839,057)						(223,392)						357,704						(839,057)						(223,392)
Mismatch affected by limits															(718,439)																		(704,745)
Limits:
1 time capital															4,292,440																		4,396,833
Margin available															3,574,001																		3,692,088
% used															17		%																16		%

			As of December 31, 2023
			Individual																		Consolidated
			Up to 7 days						Up to 15 days						Up to 30 days						Up to 7 days						Up to 15 days						Up to 30 days
			MCh$						MCh$						MCh$						MCh$						MCh$						MCh$
Cash flow receivable (assets) and income			2,298,917						1,113,501						1,112,052						2,296,445						1,113,501						1,112,052
Cash flow payable (liabilities) and expenses			1,840,243						835,978						1,250,098						1,818,643						835,978						1,250,098
Mismatch			458,674						277,523						(138,046)						477,802						277,523						(138,046)
Mismatch affected by limits															598,151																		617,279
Limits:
1 time capital															4,367,159																		4,491,893
Margin available															4,965,310																		5,109,172
% used															14		%																14		%

ii.Composition of financing sources

The main sources of financing with third parties are the following:

			As of December 31,
Main sources of financing			2024						2023
			MCh$						MCh$
Deposits and other demand obligations			14,260,609						13,537,826
Time deposits			17,098,625						16,137,942
Bank obligations			4,337,947						10,366,499
Debt instruments issued and regulatory capital			10,737,354						10,423,704
Total			46,434,535						50,465,971

The BCCh has authority to require banks to maintain reserves of up to 40% on average for demand deposits and up to 20% for time deposits to implement monetary measures. Also, if the aggregate amount of demand deposits exceeds 2.5 times the amount of a bank’s regulatory capital, it must maintain a 100% “technical reserve” in Central Bank bonds and notes.

As of December 31, 2024 and 2023, the Central Bank has required to the Bank to maintain a technical reserve of $0 million for both periods.

The volume and composition of liquid assets are presented above. The liquidity coverage ratio is presented above.

NOTE 37 - RISK MANAGEMENT, continued

6.Maturity of financial assets and liabilities

The maturity of financial assets and liabilities, and other commercial commitments is disclosed in Note 23.

The inherent liquidity management of derivatives and non-derivatives financial liabilities, employ different levers that allow to keep limited liquidity risk according to the Bank’s defined profile and using the available liquidity efficiently. For this reason, the Bank hold a high level of liquid assets along with a daily monitoring of the short-term expected income and expenses level, avoiding a high concentrations of maturities. Moreover, a solid diversified financing matrix is maintained both among the different types of products and types of clients.

Operational risk

The Bank defines operational risk as the risk of losses arising from defects or failures in its internal processes, people, systems or external events, thus covering risk categories such as operational incidents, cloud computing, cybersecurity, business continuity, outsourcing of strategic and non-strategic services.

Operational risk is inherent to all products, activities, processes and systems and is generated in all business and support areas. For this reason, all employees are responsible for managing and controlling the operational risks generated in their sphere of action. The Bank’s goal in terms of operational risk management and control is focused on identifying, evaluating and mitigating sources of risk, regardless of whether they have materialized or not. The analysis of operational risk exposure contributes to the establishment of risk management priorities.

Operational risk management

The operational risk model regulates the necessary elements for adequate management and control of operational risk, aligned with advanced regulatory standards and best management practices, and includes the following phases:

•strategy and planning.

•identification, assessment and monitoring of risks and internal controls.

•implementation and monitoring of mitigation measures.

•availability of information, adequate reports and escalation of relevant issues.

The main operational risk tools used are:

▪Internal events database. Record of operational risk events with financial impact (all losses are recorded, regardless of their amount) or non-financial (such as regulatory impact on customers and/or services). This information:

–allows root cause analysis.

–increases awareness of risks.

–allows escalation of relevant operational risk events to the senior management of the Risk division with maximum immediacy

–facilitates regulatory reporting.

▪Self-assessment of operational risks and controls. Qualitative process that evaluates the main operational risks associated with each function, the situation of the control environment and its assignment to the different functions within the Bank, through the criteria and experience of a group of experts from each function.

The objective is to identify and assess material operational risks that could prevent business or support units from achieving their objectives. Once the risks and the internal controls that mitigate them have been evaluated, mitigation measures are identified in the event that the risk levels are above the tolerable level.

This process integrates specific operational risk reviews that allow a cross-sectional identification of risks, especially technological risks, fraud, supplier risk and factors that could lead to other operational risks, as well as specific regulatory non-compliance.

▪External events database. Quantitative and qualitative information on external operational risk events. The database allows a detailed and structured analysis of the relevant events that have occurred in the sector, the comparison of the loss profile, and the adequate preparation of the self-assessment exercises and scenario analysis.

NOTE 37 - RISK MANAGEMENT, continued

▪Analysis of operational risk scenarios. Its objective is to identify events with a very low probability of occurrence that could generate significant losses for the Bank, as well as to establish adequate mitigation measures, through the evaluation and expert opinion of the business lines and risk managers

▪Recommendations from internal audit, external audit and regulators. They provide relevant independent information on inherent and residual risk and identify areas for improvement in controls and processes.

▪A statement establishing that the Bank has the commitment to control and limit non-financial risk events that lead or may lead to financial losses; fraud events, operational and technological incidents; legal and regulatory violations; conduct problems or damage to reputation. Although a certain volume of losses is expected, unexpected high severity losses as a result of control failure are not acceptable.

▪Capital model: a model that includes the Bank’s risk profile, based mainly on information collected in the internal loss database, external data and scenarios. The main application of the model is to determine the economic capital for operational risk and the estimate of expected and stressed losses, which are used in the operational risk appetite.

▪Other specific instruments that make it possible additionally analyze and manage operational risk, including the evaluation of new products and services, the management of business continuity plans, the review and update of the perimeter and review processes of the quality of the operational risk programme.

The Bank’s operational risk management and reporting system supports operational risk management programmes and tools with a focus on governance, risk, and compliance. It provides information for management and reporting, and contributes to improving decision-making in operational risk management, consolidating information, simplifying the process and avoiding duplication.

Operational continuity plan

The digital transformation is revolutionizing the way banks operate, presenting new business opportunities, but at the same time a wide range of emerging risks, such as technological risks, cyber risks and an increasing dependence on suppliers, which increases exposure to events that may affect the provision of services to our customers.

The Bank is highly committed to guaranteeing a robust control environment in accordance with the best industry standards, which allows us to reinforce our operational resistance against potential disruption events and thus ensure the adequate provision of services to our clients and stability of the system.

A main pillars is a business continuity management system aimed to guaranteeing the continuity of business processes in the event of a disaster or serious incident. This process identifies potential impacts that threaten the entity and its supplies, and provides the correct protocols and governance that ensure effective response capability. Its main objectives are:

-Protect the integrity of people in a contingency situation.

-Guarantee that the main functions are performed and minimize the impact over clients’services in case of contingency.

-Satisfy the Bank’s obligations with its employees, clients, shareholders and other interest groups.

-Comply with regulatory obligations and requirements.

-Minimize the potential economic losses for the entity and its impact on the business.

-Protect the brand image, credibility and trust in the entity.

-Reduce the operational effects by providing effective procedures, priorities and strategy for the recovery and restoration of business operations after a contingency.

-Contribute to stabilizing the financial system.

The pandemic challenged the frameworks and strategies of the business continuity plans and, although some of the protocols had to be adapted, this crisis showed that the Bank has a robust business continuity management system.

NOTE 37 - RISK MANAGEMENT, continued

Relevant mitigation measures

The Bank, through internal operational risk management tools and other external sources of information, implements and monitors mitigation measures related to the main sources of risk.

The transformation and digitalization of the business entail new risks and threats, such as the increase in payment fraud and origination fraud (credits). To mitigate these risks, we have improved control mechanisms and designed new products.

The use of reinforced authentication processes in the customer registration process and reinforcement of anti-fraud alerts in origination are increasingly widespread resources to mitigate the risk of fraud.

In the case of cards, the use of chip cards and numeric code in shops and ATMs has become widespread, two-step authentication with one-time passwords (dynamic verification passwords), security reinforcement in ATMs by incorporating physical protection and anti-skimming elements, as well as improvements in the logical security of the devices.

In the case of office banking (online services), verification of online banking transactions with a second security factor of one-time passwords, application of specific protection measures for mobile banking, such as the identification and registration of customer devices, monitoring of the security of the e-banking platform to avoid attacks on the systems, among others.

Cybersecurity

It is expected that cybersecurity threats will increase and the financial sector will be one of the main targets. This, together with the greater dependence on digital systems, makes cybersecurity one of the main non-financial risks of the business. For this reason, our objective is to make the Bank a cyber-resilient organization that can resist, detect and respond quickly to cyber-attacks, with constant evolution and improvement of its defences.

Outsourcing of services

Continuing with our digitization strategy, the Bank’s objetive is offer the best solutions and products on the market to our clients. This means an increase in the services provided by third parties and the intensive use of new technologies such as cloud services. Due to the increase in cyber risks and regulatory requirements, we have updated and strengthened the supplier management framework, the internal control framework and the risk culture to ensure that the risks associated with contracting third parties are adequately assessed and managed.

The Bank has identified those suppliers that could present a higher level of exposure for our operations and for the services provided to our clients and has reinforced monitoring of these suppliers to ensure that:

•They present an adequate control environment, depending on the level of risk of the service they provide.

•There are business continuity plans that guarantee service delivery in case of disruption events.

•They have controls aimed to guaranteeing the protection of sensitive information processed during the provision of the service.

•Contracts and agreements with third parties include the necessary clauses to protect the interests of the Bank and our customers, while providing coverage for current legal obligations.

•There are exit strategies, which include service reversion or migration plans, in the case of services with a strong impact on business continuity and high substitution complexity.

Insurance

In order to respond to the operational risk and other risks generated in the Bank's own operations, material damage insurance, general civil liability, fraud, expenses derived from cybersecurity breaches, third-party claims against executives, among others, have been contracted.

NOTE 37 - RISK MANAGEMENT, continued

Exposure to net loss, gross loss and recovery of gross loss due to operational risk event

			As of December 31,
			2024						2023
			MCh$						MCh$
Expenses for the gross loss period due to operational risk events
Internal fraud			3,153						1,367
External fraud			33,786						7,202
Labor Practices and Business Safety			7,129						6,887
Clients, products and business practices			809						950
Damage to physical assets			347						267
Business interruption and system failures			290						964
Process execution, delivery and management			6,505						7,303
Subtotal			52,019						24,940
Recoveries of expenses in the period due to operational risk events
Internal fraud			(1,720)						-
External fraud			(27,586)						(5,810)
Labor Practices and Business Safety			(2,160)						(1,276)
Clients, products and business practices			(250)						(189)
Damage to physical assets			(2)						(12)
Business interruption and system failures			(112)						(800)
Process execution, delivery and management			(1,555)						(2,885)
Subtotal			(33,385)						(10,972)
Net loss from operational risk events			18,634						13,968

CAPITAL RISK

The Bank defines capital risk as the risk that the Bank or any of its companies have an insufficient capital quantity and/or quality to meet the minimum regulatory requirements to operate as a bank; respond to market expectations regarding its solvency; and support the business growth and any strategic demand that may arise from strategic plan. The objectives includes:

•Satisfied internal capital and capital adequacy objectives.

•Adhere to regulatory requirements.

•Align the Bank's strategic plan with the capital expectations of external agents (rating agencies, shareholders and investors, clients, supervisors, etc.)

•Support business growth and any strategic opportunities that may arise.

The Bank has a capital adequacy position that surpasses the levels required by regulations.

Capital management seeks to optimize value creation at the Bank an at its different business segment. The Bank continuously evaluates it risk-return ratios through its basic capital, effective net equity, economic capital and return on equity. The Bank is conducting its internal process based on the FMC standards which are based on Basel Capital Accord (Basel III). Economic capital is the capital required to support all the risk of the business activity with an appropriate solvency level.

Capital is managed in accordance with the risk environment, Chile's economic performance and the economic cycle.

The respective Committee may amend our current capital policies to address changes in the aforementioned risk environment.

NOTE 37 - RISK MANAGEMENT, continued

Capital risk management

Capital is managed in accordance with the risk environment, Chile's economic performance and the economic cycle. The respective Committee may modify our current capital policies to address changes in the aforementioned risk environment.

Capital management is based on a Capital Framework whose objective is to ensure that the level of capital, structure and composition are adequate at any time considering the Bank's risk profile and under different scenarios, guaranteeing compliance with both the minimum regulations requirements such as risk appetite and the Recovery Plan, and that are in line with the interests of all stakeholders and support the growth strategy defined by the Bank.

The capital model defines the functional and governance aspects regarding the activities of capital planning, budget execution and monitoring, capital adequacy analysis, capital measurement and Reporting and disclosure of information related to capital. This model covers the main capital management activities:

1.Establish the Bank's solvency and capital contribution objectives aligned with the minimum regulatory requirements and with internal policies, to guarantee a solid level of capital, consistent with the Bank's risk profile, and an efficient use of capital in order to maximize shareholder value.

2.Capital plan development to achieve the strategic plan’s objective.

3.Capital adequacy assessment to ensure that the capital plan is consistent with the Bank's risk profile and its risk appetite (also stress scenarios).

4.Capital budget development as part of the Bank's budget process.

5.Monitoring and controlling budget execution and action plans’ elaboration to correct any digression from the budget.

6.Capital metrics calculation.

7.Internal capital reports as well as supervisory authorities’ reports and market reports.

The Bank trough ALCO supervises, authorizes, establishes the policies required as well as valuation of the capital and solvency. The Board of Directors has delegated to ALCO the knowledge and evaluation of the level of capital and profitability in accordance with the Bank's strategy. The CIR monitors and is responsible for the limits of primary and secondary metrics based on risk appetite.

Additionally, the Bank has developed the necessary policies to contribute with management and compliance with capital management strategies and objectives, including:

–Capital adequacy policy,

–Capital Planning Policy,

–Policy for managing impairment situations Capital,

–Capital Monitoring Policy

–Dividend Policy and Basel III implementation.

The Bank continuously assesses its risk-performance ratios through its core capital, effective net worth, economic capital and return on capital. Regarding capital adequacy, the Bank conducts its internal process based on the CMF standards in force since December 1, 2021 (Basel III). Economic capital is the capital required to support all the risk of business activity with a given level of solvency.

The ALCO monitors and controls the metrics and their limits, and evaluates the capital levels and risk appetite on a monthly basis, along with controls the solvency indicator “Effective Equity / Risk-Weighted Assets”, which is controlled through in the Phased in and Fully Loaded stages, considering in the latter the capital requirements at 100% of demandability.

BASEL III implementation

In January 2019, a new version of the General Banking Law (LGB) was published, including the adoption of the capital levels established in the Basel III standards. In 2021, the final versions of the regulations for the new capital models for Chilean banking system were published.

According to the new General Banking Law (updated through Law N°21,130), the minimum capital requirements have increased in terms of quantity and quality. Total regulatory capital remains at 8% of risk-weighted assets, but includes credit, market and operational risk. The minimum Tier 1 capital increased from 4.5% to 6% of risk-weighted assets, of which up to 1.5% may be Additional Tier 1 (AT1), either in the form of preferred stocks or perpetual bonds, which may be convertible into shares. Tier 2 capital is now set at 2% of risk-weighted assets.

NOTE 37 - RISK MANAGEMENT, continued

Additional capital requirements are incorporated through a conservation buffer of 2.5% of risk-weighted assets. In addition, the Chilean Central Bank, prior agreement with the FMC, can establish an additional countercyclical buffer of up to 2.5% of risk-weighted assets. Both buffers must be composed of core capital.

Further, the FMC was empowered, with the favorable agreement of the Council of the Chilean Central Bank, to define, through regulations, the new methodologies for calculating assets weighted by credit, market and operational risk; the issuance conditions of AT1 hybrid instruments, the determination and capital charges for local systemically important banks, prudential discounts to regulatory capital and require additional measures, including greater capital, to banks that present deficiencies in the supervisory capital evaluation process (Pillar II). Pillar II aims to ensure that banks maintain a level of capital in accordance with their risk profile, and encourage the development and use of adequate processes for monitoring and managing the risks faced. Then, the banks are responsible for developing an internal evaluation process of their capital adequacy, and supervisors must examine banks' internal strategies and evaluations and early intervene when they are not satisfied with the result of the process. Supervisors may require additional capital to the minimum required, in order to guarantee a sufficient level to face risks, especially in adverse credit cycles.

On January 17, 2025 the FMC issued additional capital requirements report according to Pillar II, in which the commission's council resolved not to apply capital requirements to Banco Santander Chile.

According to the General Banking Law, banks must maintain regulatory capital of at least 8% of risk-weighted assets, net of required credit losses, as well as a paid-in capital and reserves requirement ("core capital") of at least 3% of total assets, also net of required credit losses. Regulatory capital is defined as the aggregate of:

a.bank's paid-in capital and reserves, excluding capital attributable to foreign subsidiaries and branches or core capital;

b.the perpetual bonds and preferred shares referred to in Article 55 bis of the General Banking Law, which the bank has placed, valued at their placement price, up to one-third of its core capital;

c.the subordinated bonds, valued at their placement price (but decreasing by 20.0% for each year during the period beginning six years before maturity), for an amount up to 50.0% of its core capital; and

d.the voluntary provisions for credit losses for an amount of up to 1.25% of the assets weighted by credit risk.

Pillar III promotes market discipline and financial transparency through the disclosure of significant and timely information, allowing users of the information to know the risk profile of local banking institutions together with their capital structure, thus reducing information asymmetries. The Banks published the first Pillar 3 report in April 2023.

On April 1, 2024, the FMC issued a report with the annual rating of systemically important banks and established requirements, besides included the board approved resolution No. 3,019, which maintaining for one more year the requirement of 1.5% additional basic capital charge for the banks.

NOTE 37 - RISK MANAGEMENT, continued

The BCCh board at the Financial Policy Meeting (RPF) held on November 19, 2024, agreed to maintain the level of the Countercyclical Capital Requirement (RCC) at 0.5% of risk-weighted assets, which had been activated on May 24, 2023, The decision had been generated at the Central Bank's Financial Policy Meeting (RPF) of the first half of 2023, where the BCCh board agreed to activate the RCC at a level of 0.5% of risk-weighted assets, with a year term to be established by the chilean banks, and with a FMC previous unanimous favorable agreement, as a precautionary measure in the face of greater external financial uncertainty.

Capital metrics

Minimum required capital

According to the General Banking Law, a bank must have a minimum of UF800,000 (approximately $29,431 million or US$34 million as of December 31, 2024) of paid-in capital and reserves, calculated in accordance with the FMC Regulations.

Capital requirement

Under the General Banking Law, banks must maintain regulatory capital of at least 8% of risk-weighted assets, net of required credit losses, as well as a paid-in capital and reserve requirement ("tire capital") of at least 3% of total assets, also net of credit losses. Regulatory capital and basic capital are calculated on the basis of the Consolidated Financial Statements. As we are the result of a merger between two predecessors with significant market shares in the Chilean market, we are currently required to maintain a minimum regulatory capital to risk-weighted assets ratio of 9.63%.

Regulatory capital is defined as the aggregate of:

-the paid-in capital and reserves of a bank, excluding capital attributable to foreign subsidiaries and branches or core capital;

-subordinated bonds, valued at their placement price (but decreasing by 20.0% for each year during the period beginning six years before maturity), for an amount of up to 50.0% of its basic capital;

-voluntary provisions for credit losses in the amount of up to 1.25% of risk-weighted assets.

Regulatory capital and core capital are calculated based on Consolidated Financial Statements prepared in accordance with the FMC standards (Compendium of Accounting Standards). Since we are the result of the merger between two predecessors with a relevant market share in the Chilean market, we are currently required to maintain a minimum regulatory capital to risk-weighted assets ratio of 12.13%, to date the Bank presents a minimum regulatory capital to risk-weighted assets ratio of 17.06%.

Below is a summary of the changes to the minimum capital requirements:

			As of December 31,
Capital requirements			2024						2023
			MCh$						MCh$
Pillar II charge			—		%				—		%
Systemic Charge			1.13		%				0.75		%
Counter-cyclical Capital buffer			0.50		%				—		%
Capital Conservation buffer			2.50		%				1.88		%
Tier T2			2.00		%				2.00		%
AT1			1.50		%				1.50		%
CET1			4.50		%				4.50		%
Total			12.13		%				10.63		%

NOTE 37 - RISK MANAGEMENT, continued

Total assets, risk-weighted assets, and components of effective equity

						Total assets, risk-weighted assets and components of effective equity according to Basel III						Consolidated global 31-12-2024 MCh$						Consolidated global 31-12-2023 MCh$
1						Total assets according to the statement of financial position						68,458,932						70,857,886
2						Investment in subsidiaries that are not consolidated												-
3						Assets discounted from regulatory capital, other than item 2						13,243,643						10,823,906
4						Credit equivalents						3,402,423						3,446,909
5						Contingent credits						2,836,980						2,604,665
6						Assets generated by the intermediation of financial instruments						18,622						33,260
7						= (1-2-3+4+5-6) Total assets for regulatory purposes						61,436,070						66,052,294
8.a						Assets weighted for credit risk, estimated according to the standard methodology (RAW)						29,921,944						30,333,749
8.b						Assets weighted for credit risk, estimated according to internal methodologies (AWCR)						-						-
8						Market Risk Weighted Assets (MRWA)						5,967,201						4,793,740
10						Operational Risk Weighted Assets (OPWA)						4,923,679						4,424,739
11.a						= (8.a/8.b+9+10) Risk Weighted Assets (RWA)						40,812,824						39,552,228
11.b						= (8.a/8.b+9+10) Risk-weighted assets, after applying the output floor (RWA)						40,812,824						39,552,228
12						Shareholders equity						4,292,440						4,367,159
13						Non-controlling interest						104,394						124,735
14						Goodwill						-						-
15						Excess minority investment						-						-
16						= (12+13-14-15) Common Equity Equivalent Tier 1 Capital (CET1)						4,396,834						4,491,894
17						Additional deductions to common equity tier 1, other than item 2						128,425						94,013
18						= (16-17-2) Common Equity Tier 1 (CET1)						4,268,409						4,397,881
19						Voluntary (additional) provisions charged as additional capital tier 1 (AT1)						-						-
20						Subordinated bonds imputed as additional capital level 1 (AT1)						-						-
21						Preferred shares attributed to additional capital tier 1 (AT1)						-						-
22						Perpetual bonds attributed to additional capital level 1 (AT1)						693,382						608,721
23						Discounts applied to AT1						-						-
24						= (19+20+21+22-23) Additional Tier 1 Capital (AT1)						693,382						608,721
25						= (18+24) Equity Tier 1						4,961,791						5,006,602
26						Voluntary (additional) provisions allocated as Tier 2 (T2) capital						293,000						293,000
27						Subordinated bonds imputed as Tier 2 capital (T2)						1,706,525						1,679,130
28						= (26+27) Capital nivel 2 equivalente (T2)						1,999,525						1,972,130
29						Discounts applied to T2						-						-
30						= (28-29) Tier 2 Capital (T2)						1,999,525						1,972,130
31						= (25+30) Effective equity						6,961,316						6,978,732
32						Additional basic capital required for the constitution of the conservation buffer						1,020,321						741,604
33						Additional basic capital required to set up the countercyclical buffer						204,064						-
34						Additional core capital required for banks rated as systemic						459,144						296,642
35						Additional capital required for the evaluation of the adequacy of effective capital (Pillar 2)						-						-

NOTE 37 - RISK MANAGEMENT, continued

Solvency indicators and regulatory compliance indicators according to Basel III

						Solvency indicators and regulatory compliance indicators according to Basel III						Consolidated global 31-12-2024 %						Consolidated global 31-12-2023 %
1						Leverage indicator (T1_I18/T1_I7)						6.95		%				6.66		%
1.a						Leverage indicator that the bank must meet, considering the minimum requirements						3.00		%				3.00		%
2						Basic capital indicator (T1_I18/T1_I11,b)						10.46		%				11.12		%
2.a						Basic capital indicator that the bank must meet, considering the minimum requirements						6.13		%				5.25		%
2.b						Capital buffer shortfall
3						Tier 1 capital indicator (T1_I25/T1_I11,b)						12.16		%				12.66		%
3.a						Tier 1 capital indicator that the bank must meet, considering the minimum requirements						7.63		%				6.75		%
4						Effective equity indicators (T1_I31/T1_I11,b)						17.06		%				17.64		%
4.a						Effective equity indicator that the bank must meet, considering the minimum requirements						9.63		%				8.75		%
4.b						Effective equity indicator that the bank must meet, considering the charge for article 35 bis, if applicable						8.00		%				8.00		%
4.c						Effective equity indicator that the bank must meet, considering the minimum requirements, conservation buffer and anti-cyclical buffer						12.13		%				10.63		%
5						Credit rating						A						A
						Regulatory compliance indicators for solvency
6						Voluntary (additional) provisions allocated to Tier 2 capital (T2) in relation to APRCs (T1_I26/ (T1_I8,a or I8,b)						0.98		%				0.97		%
7						Subordinated bonds allocated to Tier 2 (T2) capital in relation to Tier 2 capital						39.98		%				38.18		%
8						Additional Tier 1 capital (AT1) in relation to basic capital (T1_I24/T1_I18)						16.24		%				13.84		%
9						Voluntary provisions (additional) and subordinated bonds that are charged to additional capital level 1 (AT1) in relation to the RWAs (T1_I19+T1_I20 / T1_I11,b)						0.00		%				0.00		%

X

- Definition

The disclosure of the entity's financial risk management practices and policies.

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