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

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

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

Yes x No o

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

Yes o No x

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

Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ox No o

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

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. o

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

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

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

o Item 17    o Item 18

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

Yes o No x

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FORWARD-LOOKING STATEMENTS

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

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

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

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

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

·                  statements of assumptions underlying such statements.

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

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

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

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

·                  increased costs;

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

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

·                  natural disasters;

·                  the effect of tax laws on our business; and

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

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

PRESENTATION OF FINANCIAL INFORMATION

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

Unless otherwise indicated, the financial information included in this annual report with respect to 2012, 2013, 2014, 2015, 2016, 2017 and 20162018 has been derived from financial statements that have been prepared in accordance with IFRS.  See Note 2(a) to our audited consolidated financial statements as of and for the year ended December 31, 20162018 appearing elsewhere in this annual report.  IFRS differs in certain significant respects from Chilean Generally Accepted Accounting Principles (the “Chilean GAAP”) as issued by the Superintendencia de Bancos e Instituciones Financieras de Chile (the “Superintendency of Banks and Financial Institutions” or “SBIF”).  As a result, our financial information presented under IFRS is not directly comparable to any of our financial information presented under Chilean GAAP.  Accordingly, readers should avoid such comparison.

In this annual report, references to “$,” “U.S.$,” “U.S. dollars” and “dollars” are to United States dollars, references to “pesos” or “Ch$” are to Chilean pesos (see Note 2(t)2(r)) to our audited consolidated financial statements as of and for the year ended December 31, 20162018 appearing elsewhere in this annual report), and references to “UF” are to “Unidades de Fomento.”  The UF is an inflation indexed Chilean monetary unit of account with a value in Chilean pesos that is linked to and adjusted daily to reflect changes in the Consumer Price Index (“CPI”) of the Instituto Nacional de Estadísticas (the “Chilean National Statistics Institute”). As of December 31, 20162018 and April 21, 2017,18, 2019, one UF equaled Ch$26,347.9827,565.79 and Ch$26,529.63,27,607.04, respectively.

This annual report contains translations of certain Chilean peso amounts into U.S. dollars at specified rates solely for your convenience.  These translations should not be construed as representations that the Chilean peso amounts actually represent such U.S. dollar amounts, were converted from U.S. dollars at the rate indicated in our audited consolidated financial statements as of and for the year ended December 31, 20162018 or could be converted into U.S. dollars at the rate indicated.  Until November 30, 2011, Banco de Chile applied the observed exchange rate reported by the Banco Central de Chile (the “Central Bank”) in order to translate its financial statements from Chilean pesos to U.S. dollars.  However, beginning December 1, 2011, Banco de Chile adopted the exchange rate of accounting representation, or spot exchange rate, for such matters. This is also described in “Item 3.  Key Information—Selected Financial Data—Exchange Rates.”  Thus, unless otherwise indicated, the U.S. dollar amounts have been translated from Chilean pesos based on the exchange rate of accounting representation as of December 31, 201628, 2018 as determined by our Treasury on a daily basis, based on the average of the daily closing bid and offer rates reported by Bloomberg for the Santiago Stock Exchange.  As of December 28, 2018 (the latest practicable date, as December 31, 20162018 was a banking holiday in Chile) and April 21, 2017,18, 2019, the exchange rates of accounting representation were Ch$670.40693.60 = U.S. $1.00 and Ch$652.46662.40 = U.S.$1.00, respectively.  As of the same dates, the observed exchange rates, as published by the Central Bank, were Ch$667.29695.69 = U.S.$1.00 and Ch$649.26  660.48 = U.S.$1.00, respectively.

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

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

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

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

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

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

Certain figures included in this annual report and in our audited consolidated financial statements as of and for the year ended December 31, 20162018 have been rounded for ease of presentation.  Percentage figures included in this annual report have not in all cases been calculated on the basis of such rounded figures but on the basis of such amounts prior to rounding.  For this reason, percentage amounts in this annual report may vary slightly from those obtained by performing the same calculations using the figures in our audited consolidated financial statements as of and for the year ended December 31, 2016.2018.  Certain other amounts that appear in this annual report may similarly not sum due to rounding.

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

MACRO-ECONOMIC AND MARKET DATA

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

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PART I

Item 1                                    Identity of Directors, Senior Management and Advisors

Not Applicable.

Item 2                                    Offer Statistics and Expected Timetable

Not Applicable.

Item 3                                    Key Information

SELECTED FINANCIAL DATA

The following tables present historical financial information about us as of the dates and for each of the periods indicated.  The following tables should be read in conjunction with, and are qualified in their entirety by reference to, our audited consolidated financial statements as of and for the year ended December 31, 20162018 appearing elsewhere in this annual report.  The financial information for the years ended December 31, 2012, 20132014,, 2014, 2015, 2016, 2017 and 20162018 is presented under IFRS.

Our audited consolidated financial statements have been prepared in accordance with IFRS for the years ended December 31, 2012, 2013, 2014, 2015, 2016, 2017 and 2016.2018.

(See footnotes below)(1)IFRS 9 replaced IAS 39 for financial statements from January 1, 2018 onwards and includes new classification and measurement requirements for financial assets and liabilities, impairment requirements for financial assets and hedge accounting policy. The application of this standard as of January 1, 2018 has had an impact on our consolidated financial statements at that date. The effect of the first application of IFRS 9 is detailed in Note 5 “Transition Disclosures” to our audited consolidated financial statements.

(See footnotes below)(1)IFRS 9 replaced IAS 39 for financial statements from January 1, 2018 onwards and includes new classification and measurement requirements for financial assets and liabilities, impairment requirements for financial assets and hedge accounting policy. The application of this standard as of January 1, 2018 has had an impact on our consolidated financial statements at that date. The effect of the first application of IFRS 9 is detailed in Note 5 “Transition Disclosures” to our audited consolidated financial statements.

(1)         Translations of Chilean peso amounts into U.S. dollars are based on the exchange rate of accounting representation, or the spot exchange rate, which is determined on a daily basis by our Treasury, based on the average of the daily closing bid and offer rates reported by Bloomberg for the Santiago Stock Exchange.  Thus, amounts stated in U.S. dollars as of and for the fiscal year ended December 31, 20162018 have been translated from Chilean pesos based on the spot exchange rate of Ch$670.40693.60 to U.S. $1.00 as of December 31, 2016.2018.

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

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

(4)         IFRS 9 replaced IAS 39 for financial statements from January 1, 2018 onwards and includes new classification and measurement requirements for financial assets and liabilities, impairment requirements for financial assets and hedge accounting policy. The application of this standard as of January 1, 2018 has had an impact on our consolidated financial statements at that date. The effect of the first application of IFRS 9 is detailed in Note 5 “Transition Disclosures” to our audited consolidated financial statements.

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

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

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

(7)(8)         Total liabilities divided by bank regulatory capital.

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

Exchange Rates

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

Purchases and sales of foreign exchange are not required to be conducted in the Formal Exchange Market and therefore may be carried out in the Mercado Cambiario Informal (the “Informal Exchange Market”).  There are no price limits imposed on transactions carried out in the Informal Exchange Market.  On March 31, 2017,April 18, 2019, the average exchange rate in the Informal Exchange Market was Ch$660.8669.0 per U.S.$1.00, $1.00, or 0.3% lower1.29% higher than the observed exchange rate of Ch$662.66660.48 per U.S.$1.00 as reported by the Central Bank on the same date.

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

Source:  Central Bank.

(1)         Figures are expressed in nominal terms.

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

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

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

The observed exchange rate on April 21, 2017 was Ch$649.26 = U.S.$1.00.

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

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

The observed exchange rate on April 18, 2019 was Ch$660.48 = U.S.$1.00. As of the same date, the exchange rate of accounting representation, or spot exchange rate, was Ch$662.40 = U.S.$1.00.

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

RISK FACTORS

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

We are also subject to market risks that are presented both in this subsection and in Note 4243 to our audited consolidated financial statements as of and for the year ended December 31, 20162018 appearing elsewhere in this annual report.

Risks Relating to our Operations and the Chilean Banking Industry

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

During the last five years, our total loan portfolio has grown at a compounded average growth rate (“CAGR”) of 7.9%6.0% per year. This expansion has been primarily fostered by growth in both residential mortgage (13.9%(11.2% per year on average) and consumer loans (9.1%(7.6% per year on average), and, to a lesser extent, by an expansion in commercial loans (5.3%(3.4% per year on average). The growth in our loan book has been aligned with our mid-term strategic goals, which aim to diversify our business model by optimizing our risk-return relationship in order to maintain profitable growth. In this regard, we recognize that our recentthe expansion in theexperienced by our retail banking segment over the last years may expose us to higher levels of charge-offs and may require us to establish higher levels of allowances for loan losses in the future. For this reason, we are constantly striving to develop and utilize improved scoring and approval models while strengthening our collection procedures in order to mitigate the risks associated with this business growth. For the year ended December 31, 2016,2018, our loan portfolio was Ch$25,398,42427,926,632 million, which represented a 3.4%9.7% annual increase as compared to the Ch$24,573,42625,451,513 million we recorded as of December 31, 2015.  Similarly, our2017.  Our allowances for loans losses increased 0.8%18.4% from Ch$550,443495,821 million in 20152017 to Ch$554,769585,378 million in 2016.2018, mainly attributable to the adoption of IFRS 9 in our consolidated financial statements. As a result, our risk-index ratio (allowances for loan losses to total loans) decreasedincreased from 2.24%1.95% in 20152017 to 2.18%2.10% in 2016.2018.

Our loan portfolio may not continue to grow at the same or similar rates as it has in the past.

TheAfter a decade of double-digit loan growth, particularly loan portfolio of the Chilean banking industry grew at a CAGR of 13.6% during the 10-year period from 2002 to 2012 (excluding the operations of subsidiaries abroad). This expansion was fostered by an overall effort of all market participants to increaseincreased banking penetration of lower and middle income segments, as well as small and medium-sized companies, by broadening their value offerings. Asresulting in a result, loan growth was mainly prompted by themarked expansion in both consumer, loans (16.9% per year on average)mortgage and mortgage loans (16.0% per year on average), and—to a lesser extent—by growth in commercial loans, (11.4% per year on average).  Although these efforts have been supported by the growth of the Chilean gross domestic product (“GDP”), the deceleration of the local economy over the last three yearsfrom 2013 to 2017, and the introduction of diverse reforms on general matters, including both banking and non-banking rules, have threatened both the pace of growth of the industry and banking penetration.penetration rate. In fact, in the threefive years ended 2016,2017, the loan portfolio of the Chilean banking industry grew at a CAGR of 8.9%8.3%, reflecting the decline in investment and lower consumer confidence, as evidenced by indices (Indice de Percepción Económica de los Consumidores(“IPEC”) and Indice Mensual de Confianza Empresarial (“IMCE”)) used by the Central Bank. Accordingly,This trend appears to have shifted in 2018, particularly toward the end of the year, when a sharprebound in investment spending prompted a recovery of commercial loans, all of which resulted in an 11.9% annual growth of loan balances managed by the local banking industry in Chile as a whole. Despite this recovery, given the cyclical nature of the banking business, a slowdown or negative GDP growth, changes in household or investment spending, as well as a change in the behavior of banking customers, could adversely affect the growth rate of the industry and, therefore, the expansion of our loan portfolio. Similarly, this could affect our credit quality indicators and, accordingly, lead us to establish higher allowances for loan losses. For more information, see “Item 4.  Information on the Company—Regulation and Supervision” and “Item 4.  Information on the Company—Selected Statistical Information.”

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

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

Pursuant to the Ley General de Bancos (the “General Banking Act”) all Chilean banks may, subject to the approval of the SBIF, engage in certain non-banking businesses approved by the law.  The SBIF’s approval will depend on the risk of the activity and the strength of the bank.  Furthermore, the General Banking Act imposes on the Chilean banking system a modified version of the capital adequacy guidelines issued by the Basel Committee on Banking Regulation and Supervisory Practices (the “Basel Committee”) and limits the discretion of the SBIF to deny new banking licenses.

Regarding Basel III,In 2014, the SBIF has suggested these guidelines may be implemented in Chile in the future, which could impose new capital and liquidity requirements, among other matters, for all Chilean banks, including us.  The Chilean Ministry of Finance has announced that the implementation of Basel III is a priority for the current administrationan overall review and therefore, a set of amendments to the General Banking Act will be presented for approvalvarious modifications to the Chilean congress. In May 2016Banking Act.  After convening a working-group of experts to address diverse topics related to the banking business and international evidence on capital adequacy matters, the Ministry of Finance Ministry announcedsubmitted a bill to the Chilean congress on June 12, 2017, modifying the current General Banking Act. The bill was passed by the Chilean congress on October 3, 2018 and, following that, these amendments will includeLaw No. 21,130 (the Modernization of Banking Legislation) was enacted on December 27, 2018 and published on January 12, 2019. The new law addresses four main topics aimed at modernizing the Chilean banking framework by adopting the Basel III Guidelines (considering a phased-in transition from Basel I to Basel III,be completed four years after the new specific banking framework is issued by the regulator), introducing changes into the corporate governance of the SBIF to reinforce the independence of the local regulator andsuch that all the establishment ofpowers currently vested in the SBIF will be transferred in the future to Chile’s Financial Market Commission (“CMF”), establishing a resolution regime for Chilean banks in the case of bankruptcy or insolvency. The transitioninsolvency, and introducing changes in relation to confidential information of banks’ customers, among others topics. According to the phase in period set by the law, the current SBIF has a maximum period of 12 months to merge into the CMF and within the 18 months following that integration, the specific regulation for the implementation of Basel III is intended to follow the recommendations made by a working-group of financial experts convenedmust be issued by the Ministry of Financenew regulator. Prior to that date, no additional capital requirements to those currently in 2015, specifically in terms of the phasing schedule. Despite these developments, the proposed amendments to the General Banking Act have not yet been sent to the Chilean congress for discussion and analysis and, therefore,force, will be imposed on local banks. In addition, there is no certainty asyet regarding the methodologies that will be used by the regulator in order to when these changes could goset potential buffers to local banks (countercyclical, D-SIB or pillar II), which will be defined once the specific regulation is released (no later than 18 months after the integration of the SBIF into effect. Accordingly,the CMF). The CMF was established in January 2018, pursuant to Law No. 21,000 and replaced the Superintendency of Securities and Insurance (SVS). It currently oversees the Chilean Financial Market (comprised of publicly traded companies, insurance companies, insurance brokers, mutual funds and investment funds). Since we have no certainty regarding the limits that will be finally imposed by the CMF to the banking industry and us in particular, either in terms of potential capital buffers and the precise timing for fulfilling them, we cannot rule outassure you that these new rules, if adopted, will affect our profitability or results of operationswill not be impacted by actions we may take in inorder to fulfil new regulatory thresholds. For more information see “Item 4.  Information on the future. Nevertheless, we do not expect material effect on our results of operations or profitability for the year ended December 31, 2017, since the rule is expected to have a gradual implementation.Company—Regulation and Supervision—New General Banking Act”

During 2015, the Central Bank published a final version of new liquidity standards for local banks, based on Basel III guidelines. The SBIF is the institution empowered to put these guidelines into practice and monitor them on an ongoing basis.  Accordingly, theThe SBIF released a set of new liquidity requirements for banks (Circular No. 3,585) on July 31, 2015. These guidelines2015, which established reporting requirements for local banks with respect to management and measurement of banks’ liquidity position, compellingposition. Accordingly, since 2016, banks to share financial information with the regulator and the general public regarding liquid assets, liabilities, concentration of financial instruments by type of liability and counterparty, weighted maturity by type of liability, among others metrics. Also, aligned with Basel III, these new rules require banksare required to report and monitor liquidity ratios such as Liquidity Coverage Ratio (“LCR”) and Net Stable Funding Ratio (“NSFR”). The first stageAligned with this requirement, on May 4, 2018 the Chilean Central Bank published for comment an amendment to Chapter III.B.2.1 of these new liquidity requirements,Compendio de Normas Financieras (the Compendium of Financial Norms), which is currentlyprimarily focused on proposing a minimum requirement for the LCR, considering a phase-in period of five years, starting at 60% in progress, is2019 and reaching the final limit of 100% in 2023 (with annual increments of 10% between 2019 and 2023). Aligned with this new framework, on October 2, 2018 the SBIF published for comment new amendments to Chapter 12-20 of Recopilación Actualizada de Normas (which addresses the management and measurement of banks’ liquidity position) while establishing a new report on liquidity matters (C49) intended to improverefine the information—in quantity and quality—aboutmeasurement of the actual situation of banks without imposing specific limits, except liquidity mismatches for 30-day and 90-day periods, for which thresholds with respect to banks’ capital, are already in place.  Regulatory limits for LCR and NSFR are expected to be defined and implemented by the second half of 2017. SinceNFSR. Given the phase-in period established for the LCR limit, we have no certainty regarding the limits to be imposed by the regulator to the banking industry and Banco de Chile in particular, we cannot assure you that new liquidity requirements willdo not have a materialsee any significant impact on our financial condition, or results of operationsoperation or profitability in the future. Nonetheless,medium term. Nevertheless, we expect the regulatorcannot comment as to phase in thesewhether any other new limits and, therefore, we do not foreseeliquidity requirements, if any, would have a material impact caused by this rule for the year ended December 31, 2017.  Seeadverse effect on us. For more information on liquidity matters see “Item 4.  Information on the Company—Regulation and Supervision.”

As for credit risk allowances, on December 30, 2014, the SBIF published a set of amendments to the regulations on allowances for potential loan losses.  These new rules establishedlosses establishing a standardized method for calculating provisions for loan lossesloss provisions for residential mortgage loans, based on past-duepast due behavior and loan-to-value ratios, while providing new and more precise definitions for impaired loans and new requirements to remove loans from such portfolio.  In addition, thisThis set of rules also addressed the possibility of putting into practice standardized credit risk provisioning models for consumer and commercial loan portfolios, evaluated on a grouped basis, in the future. The new guidelines also introduced changes to the treatment of provisions related to factoring loans and guarantors. This new set of rules went into effect on January 1, 2016. The Bank recognized the effect associated with the changes in mortgage loans provisioning in advance, by the end of 2015,2016 and foundhad no material impact on our results prepared under both IFRS and Chilean GAAP. However,GAAP for the years ended December 31, 2017 and 2018. Notwithstanding the above, it is important to note that in January 2018, the SBIF published for comment a set of amendments to provisioning rules for commercial loans evaluated on a grouped basis. Following this announcement, on July 6, 2018 the SBIF published the final amendments to the provisioning rules for commercial loans evaluated on a group basis by establishing standardized models for leasing loans, student loans and other commercial loans (not included in the former categories). In addition, the new set of rules also addressed other topics related to loan provisioning. The new provisioning criteria will go into effect in July 2019. Based on our assessment the change is not expected to have a material impact on our results of operations under both Chilean GAAP and IFRS. Nevertheless we cannot assure yourule out that future changes in provisioning rules for commercialother types of loans or consumer loans,related definitions, if introduced, will not affect our results under Chilean GAAP. It is important to mention that the implementation of standardized credit risk provisioning models would only have an effect—if any—on our results of operationsIFRS or financial condition prepared under Chilean GAAP, and will not have any impact on our results of operations or financial condition under IFRS. Further, the changes and new definitions for impaired

loans had no material effect on our results of operations under both Chilean-GAAP and IFRS as issued by the IASB in 2016.applicable.

Additionally, in recent years the Chilean government has focused on matters related to consumer protection. Since 2010 several legal and administrative regulations have been enacted, amended and revoked in order to reinforcestrengthen consumer protection and the relationship ofbetween financial institutions withand their customers.  For example, new modifications toOn March 14, 2019, Law 21,081 became effective, amending the Consumer Protection Law (Law No. 19,496) are currently being discussed. This amendment aims to strengthen consumer protection by the Chilean congress, which seekgranting new powers to improve the existing Consumer Protection Agency (“SERNAC”) by providing SERNAC within matters of oversight, such as the authority to:  (i) enact rules and guidelines, (ii) interpret legal or administrative regulations, (iii) preside over proceedings against financial institutions and (iv) impose fines, exercise class actions, and carry outto initiate collective mediations, among others.  In connection with the modifications and to ensure the due application and exercise of SERNAC’s new authority, the Chilean government is currently considering the application of “Chinese Walls” between SERNAC’s team members enacting rules and guidelines and interpreting legal or administrative regulations and the SERNAC’s team members imposing fines.

Although the final law has not been passed, the Chilean senate has approved some changes and the Chilean government has introduced amendments to:  (i) enhance SERNAC’s corporate governance, (ii) provide consumers with adequate tools and improved access to file claims for violations of the Consumer Protection Law and (iii) impose fines for violations of the Consumer Protection Law, among others.  There is no certainty as to when such law could go into effect.voluntary proceedings. In addition, this law increases fines up to the maximum amount of UTA 45,000 (Unidades Tributarias Anuales) that represented approximately Ch$26,110.6 million (or U.S$38.4 million) as of March 31, 2019. For further information, see “Item 4.  Information on the final contentsCompany—Regulation and extent of the law remain unknown, weSupervision— Consumer Oriented Regulation”. We cannot assure you thatwhether this new law will or will not substantiallysignificantly affect the local banking industry.

Since January 2017, a bill has been under consideration in the Chilean congress with the aim of regulating the possible liability for payment service providers (such as banks) and for customers of such services, in case of fraudulent transactions carried out with credit or debit cards, including electronic transactions. The bill establishes that funds charged to credit or debit cards associated with transactions that are not recognized by the customer must be returned to the holder of the card or account. It will be up to the service provider to prove either that the customer took part in the fraudulent payment, that the customer obtained an unlawful profit, or that the customer acted fraudulently or with gross negligence facilitating its completion, in which case the bank may request the return of the funds. The bill also contemplates not allowing for fraud insurance to be offered. The bill also establishes obligations for the payment provider to have adequate measures to protect the payment services in case of unlawful acts, holding them liable for damages caused by security and protection deficiencies in their technological systems through which such services are provided. We cannot assure the impact that this law may have in the banking industry or in Banco de Chile, particularly in cases of electronic fraud and, therefore, the consequences of a possible legal obligation to pay compensation for damages to customers.

On August 23, 2018 the Chilean government presented a bill intended to modernize the Chilean tax system. The proposed bill considers a return to the integrated system by permitting that 100% of the income tax borne by corporations be used as a tax credit by the final taxpayer (individuals). In addition, the proposal incorporates a series of modifications to the tax system, including a new taxation regime levied on digital services, the introduction of some tax benefits for SMEs, the simplification of requisites to recognize expenses that may be deducted from taxable income, an update to the Chilean Internal Revenue Service procedures and the creation of a Taxpayer Protection & Advisory agency, among other matters. For more information see “Item 5. Operating and Financial Review and Prospects—Operating Results—Results of Operations for the Years Ended December 31, 2016, 2017 and 2018—Income Tax”.

Lastly, we cannot assure you that regulators will not impose more restrictive limitations in the future on the activities of banks, including us, than those that are currently in effect.  Any such change in terms of capital adequacy, liquidity, credit risk provisioning, consumer protection, bankruptcy, taxation, among other matters, could have a material adverse effect on our results of operations or financial condition in a fashion that we cannot determine in advance.  For more information, see “Item 4.  Information on the Company—Regulation and Supervision.”

Future changesChanges in accounting standards could impact our results.

The IASB, or other regulatory bodies, periodically introduce modifications to financial accounting and reporting standards under which we prepare our consolidated financial statements.  These changes can materially impact the means by which we report financial information, affecting our results of operations.  Also, we could be required to apply new or revised standards retroactively.

In this regard, an array ofvarious amendments to international financial reporting standards isIFRS were adopted in 2018 and others are expected overduring the coming years. First, IFRS 9 “Financial Instruments” will go into effectbecame effective on January 1, 2018. Under this standard, new models of expected loss must be developed by companies in order to determine the impairment of loans and instruments available for sale. Similarly,Additionally, IFRS 9 provides new guidelines for the valuation and classification of financial instruments. Another standard, IFRS15Second, IFRS 15 “Revenues from Contracts with Customers” definesbecame effective on January 1, 2018. This standard establishes a new model for the recognition of recurrent income, which could differ to some extent from the current criteria. This amendment will also go into effectLastly, IFRS16 “Leases” became effective on January 1, 2018. Lastly, IFRS16 “Leases” introduces modifications to2019. This standard modifies accounting models associated with entities’an entity’s role as lessee or tenant in terms of recognizingthe recognition of assets and liabilities for all leases existing byon January 1, 2019 as well as for leases contracted afterwards. These2019. All of these standards when adopted, will require issuers to include new disclosures in the notes to their financial statements. Since becoming effective, IFRS 15 had no material impact on our results of operations and financial condition for the year ended December 31, 2018. Additionally, the first time application of IFRS 9, including the valuation of loans and financial assets, had a total negative effect of Ch$62,726 million (after taxes) that was recognized in equity accounts. For more information, see Note 435(c) to our audited consolidated financial statements as of and for the year ended December 31, 20162018 appearing elsewhere in this annual report. Finally, IFRS 16 is not expected to have a material impact on our results of operations or financial condition.

Currently, we cannot assure you that future changes in financial accounting and reporting standards will not substantially affect our results of operations or performance indicators, as we do not know the extent of future standards.

Increased competition and industry consolidation may adversely affect our operations.

The Chilean market for financial services is highly competitive.  We compete with Chilean and foreign banks, with Banco del Estado de Chile, which is state-owned, and with others providers of financial services that are

not part of the banking industry. In addition, the retail segment (which encompasses individuals and small and medium-sized companies) has become the target market of several banks, since banking penetration is still in progress in Chile, particularly in this segment. Accordingly, competition within this market is increasing as banks are continuously incorporating new and tailored products and services, while striving to improve service quality.  As a result, net interest margins (once deducted provisions for loan losses) in these sub-segments are likely to decline over time.

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

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

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

Although we have historically been focused on wholesale banking, over the last five years we have reorientedcontinued to reorient our commercial strategy to increase penetration of the retail banking segment while maintaining our market-leading position in wholesale banking.  In fact, according to our management information systems, the share of the retail banking segment in our total loan book has increased from 47.7%46.6% in 20112013 to 58.0%59.4% in 2016.2018. Although this trend has been associated with expansion in middle and higher income personal banking, our retail banking segment is also composed of small and medium-sized companies (approximately 12.0%13.7% of our total loan book as of December 31, 2016,2018, which consists of companies with annual sales of up to Ch$1,600 million) and, to a lesser extent, of lower-income individuals (approximately 3.2%2.4% of our total loan book as of December 31, 2016,2018, which consists of individuals with monthly incomes ranging from Ch$180,000 to Ch$500,000). Since these customers are likely to be more severely affected by adverse developments in the Chilean economy than large corporations and higher-income individuals, we may be exposed to higher levels of past-duepast due loans and subsequent write-offs, in the future, which could result in materially higher allowances for loan losses that could adversely affect our results of operations.

As of December 31, 2016,2018, our past-duepast due loans (loans 90 days or more past-due)past due) reached Ch$290,686305,530 million, which represented a 3.0%1.0% annual decreaseincrease when compared to the Ch$299,792302,595 million recorded in 2015.2017.  These figures translated into past-duepast due ratios (loans 90 days or more past-duepast due over total loans) of 1.22%1.19% in 20152017 and 1.14%1.09% in 2016.2018. According to our management information systems, as of December 31, 20162018 our past-duepast due loans (loans 90 days or more past-due)past due) were composed of 91.3%94.8% retail banking 90 days or more past-duepast due loans (consumer and residential mortgage loans to individuals, as well as commercial loans to small and medium sized companies) and 8.7%5.2% wholesale banking 90 days or more past-duepast due loans (commercial loans to large companies and corporations). During the prior fiscal year, our past-duepast due loans (90 days or more) portfolio was composed of 83.9%91.7% retail banking past due loans (90 days or more) and 16.1%8.3% wholesale banking past due loans (90 days or more).

The annual decreaseA combination of approximately Ch$9,100 million in the amount of past-duevarious market dynamics affecting our segments may affect our past due loans (loans 90 days or more past-due) was mainly attributable to improvementpast due) ratio year over year.  In fact, given specific market trends, for the year ended December 30, 2018, we experienced a moderate annual increase of approximately Ch$10,276 million in past due loans in the credit quality of our wholesale banking segment. In fact, according to our management information system, past-dueretail segment, whereas past due loans (loans 90 days or more past-due)past due) in retailthe wholesale banking increasedsegment decreased by approximately Ch$13,0009,215 million, in 2016each case as compared to 2015, whereas past-due2017. The trend for the retail banking past due loans (90 days or more) was primarily explained by an annual increase of Ch$11,942 million in the amount of past due loans (loans 90 days or more past-due)past due) related to the commercial loans granted to small and medium enterprises in the retail segment (SMEs) primarily, mainly due to the high growth rates shown by these types of credits over the last years. On the other hand, the past-due loan book of the wholesale banking segment significantly decreased by approximately Ch$23,000

million in 2016. These figures are the result of a comprehensive approach to credit risk management. In this regard,benefited from improvements in the midstfinancial condition of the ongoing economic slowdown that began in 2013, we have tightened our credit approval process from assessment to collection while introducing stricter requirements related to collaterals, financial burden, loan-to-value ratios, etc. These measures have enabled us to maintain delinquency at adequate levels. In addition, a fewspecific wholesale customers who experienced financial difficulties in 2015, saw their performance improve throughout 2016 as a resultand moderate loan growth. Given the unpredictability of more favorable business conditions or enhanced financial positions. Furthermore, we have benefited fromhow certain market fluctuations and related changes to macroeconomic indicators that directlymay affect the retail banking segment (e.g. unemployment), which remained at low levels during 2016, partly explaining the healthy expansion in our retail banking segment, as previously discussed. Thus, on the whole, our aim of promoting profitable growth by maintaining a balanced risk-return equation has translated into improved delinquency indicators. Nevertheless, given the current economic environment and the deterioration of certain indicators, such as real wages, consumer confidence and business sentiment,diverse customer segments, we cannot assure you that the positive trend in past-due loans (90 days or more) seen during 2016we will continuebe able to maintain a balanced risk-return equation if global or local economic conditions deteriorate in the future. In this regard, economic recessions or market volatility could adversely affect the financial condition of our borrowers, which could translate into an increase in our non-performing loans, impair our loan portfolio and result in lower demand for our loans. Any of these trends could have a material adverse effect on our business, financial condition and results of operations.

For more information on past due loans, see “Item 4.  Information on the Company—Business Overview—Principal Business Activities.Selected Statistical Information—Analysis of Substandard and Past due Loans.”

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

As of December 31, 2016, Sociedad Administradora de la Obligación Subordinada S.A. (“SAOS”), our affiliate, held 29.29% of our shares as a consequence of our 1996 reorganization. This reorganization was due in part to the 1989 repurchase by the Central Bank of certain non-performing loans that we had previously sold to the Central Bank and later exchanged for subordinated debt without a fixed term.  For more information, see “Item 4.  Information on the Company—History and Development of the Bank—History—The 1982-1983 Economic Crisis and the Central Bank Subordinated Debt.”

In exchange for assuming the Central Bank debt, SAOS received from SM-Chile S.A. (“SM-Chile”), a holding company that controls SAOS, a stake of 63.6% of our shares as collateral for this debt.  Dividends received from us are the sole source of SAOS’s revenues, which—in turn—must be used to repay this debt.  To the extent distributed dividends were not sufficient to pay the amount due on this debt, SAOS is permitted to maintain a cumulative deficit balance with the Central Bank that SAOS commits to pay with future dividends.  If this cumulative deficit balance exceeds 20% of our paid-in capital and reserves, the Central Bank may require SAOS to sell a sufficient number of our shares to pay the entire amount of the accumulated deficit. As of March 31, 2017, SAOS maintained a surplus with the Central Bank of Ch$712,420 million, equivalent to 25.1% of our paid-in capital and reserves as of the same date.

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

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

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

TheOur results of our operations depend to a great extent on our net interest income, which represented 71.4%71.6% of our total operating revenues in 2016.2018. Changes in nominal interest rates and inflation could affect the interest rates earned on our interest-earning assets differently from the interest rates paid on our interest-bearing liabilities, resulting in net income reduction.  Inflation and interest rates are sensitive to several factors beyond our control, including the Central Bank’s monetary policy, deregulation of the Chilean financial sector, local and international economic developments and political conditions, among other factors. In addition, changes in interest rates affect securities and other investments or assets that are recorded at fair value and are therefore exposed to potential negative fair value adjustments. Any volatility in interest rates could have a material adverse effect on our financial condition and results of operations.

The average annual short-term nominal interest rate in Chile for 90 to 360 day deposits received by Chilean financial institutions was 3.91% in 2014, 3.77% in 2015 and 4.04% in 2016.2016, 3.03% in 2017 and 2.97% in 2018.  The average long-term nominal interest rate based on the interest rate of the Central Bank’s five-year bonds traded in the secondary market was 4.43% in 2014, 4.14% in 2015 and 4.09% in 2016.2016, 3.73% in 2017 and 4.07% in 2018.

Inflation in Chile has been moderate in recent years, especially in comparison with periods of high inflation experienced in the 1980s and 1990s.  High levels of inflation in Chile could adversely affect the Chilean economy, consumer purchasing power, household consumption and investment in machinery and equipment and, therefore, the demand for financing and our business.  The annual inflation rate (as measured by annual changes in the CPI and as reported by the Chilean National Institute of Statistics) during the last five years and the first three months of 20172019 was:

Source:  Chilean National Institute of Statistics

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

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

Part of the information included in our financial statements considers assumptions, estimates and modellingmodeling which, if inaccurate, could have a material impact on our results of operations and financial position.

The preparation of our financial statements requires management to make judgments and estimates that affect the amounts of assets, liabilities, income and expenses reported in our financial statements. Estimates and assumptions are based on historical experience, expert judgment and other factors, including expectations of future developments under certain alternative scenarios. Although assumptions and estimates are evaluated and revised on a continuous basis, we cannot rule out that projected scenarios could dramatically change in the short term, causing a severe impact on fundamentals and estimates.

We are also subject to model risk since the valuation of financial instruments relies on models and inputs, which —in some cases— are not observable. Accordingly, computed values for securities and financial instruments may be inaccurate or subject to change, since the inputs used for specific models may not be available, particularly for illiquid assets or under scenarios of financial turmoil. In these cases, we will make assumptions and judgments in order to establish the fair value of certain instruments, which involves uncertainty and may translate into inaccurate estimates of actual results.

In this regard, the replacement of certain market indices or benchmarks extensively used in by financial markets for valuation purposes, such as for interest rates or foreign exchange rates indices could also impact the accuracy of the estimates we include in our financial statements. In fact, after 2021 banks will not be required to submit rates for the calculation of the London interbank offered rate (“LIBOR”) benchmark, which could produce changes in the LIBOR rate as we currently know it, affecting its precision or comprehensiveness when representing the worldwide fixed-income market. This reform and other changes in the same way may result in diverse risks for the financial and banking business, including but not limited to: (i) changes in the valuation of financial instruments; (ii) changes in pricing procedures for some instruments; (iii) misunderstandings with customers or counterparties; (iv) necessity of adapting current IT systems, trading platforms, financial reporting infrastructure and clearing processes; among others. The implementation of alternative benchmark rates may have an adverse effect on our business, results of operations or financial condition that we are not able to determine in advance. Although we expect to adapt our valuation processes, IT infrastructure and pricing systems as new information arises, we can neither assure you nor calculate the impact this could have in our business and results of operations, if any.

The main accounting items subject to risk of incorrect valuation include impairment of loans and advances, valuation of financial instruments, impairment of available-for-sale securities, deferred tax assets and provisions for liabilities. If our judgment, assumptions or models used in valuing these items are inaccurate, there could be a material effect on our results, funding requirements and capital ratios.

Market turmoil could result in material negative adjustments to the fair value of our financial assets, which could translate into a material effect on our results or financial condition.

Over the last decade worldwide financial markets have been subject to stress that has resulted in sharp temporary changes in interest rates and credit spreads. We have material exposures to debt securities issued by the local government and the Central Bank and other fixed-income investments in securities issued by local and foreign issuers, all of which are booked at fair value with direct impact on our profit and loss statement or in equity through other comprehensive income. These positions, therefore, expose us to potential negative fair value adjustments in the short or medium term and to impairments in the long-run, due to dramatic and unexpected changes in short- or long-term local and foreign interest rates and credit spreads. Any of these factors could have a material adverse effect on our results of operations and financial condition.

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

As all large financial institutions, we are exposed to many operational risks, including the risk of fraud by employees and outsiders, failure to obtain suitable internal authorizations, failure to properly document in-person

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

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

We have access to large amounts of confidential financial information and hold substantial financial assets belonging to our customers as well as to us.  In addition, we provide our customers with continuous online access to their accounts and the possibility of transferring substantial financial assets by electronic means while purchasing goods or withdrawing funds, in Chile and abroad with credit and debit cards issued by us. Among the most significant cyber-attack risks that we are constantly facing are internet fraud and loss of sensitive information, both from our customers and ourselves. In particular, loss from internet fraud occurs when cyber criminals extract funds directly from clients’ or our accounts using fraudulent schemes that may include internet-based fund transfers. We are also exposed to cyber-attacks, hacking and other cybersecurity incidents in the normal course of business. Thus, as a financial institution, we are under a constant threat of suffering losses due to such reasons. In addition, our risk and exposure to these matters remains heightened because of the evolving nature and complexity of these threats from cybercriminals and hackers, our plans to continue to provide and to enhance internet banking and mobile banking channels, and our plans to develop additional remote connectivity solutions to serve our customers.  Accordingly, cybersecurity is a material risk for us.

There has recently been an increased level of attention focused on cyber-attacks against large corporations that include, but are not limited to, obtaining unauthorized access to digital systems for purposes of misappropriating cash, other assets or sensitive information, corrupting data or causing operational disruption.  Cybersecurity incidents such as computer break-ins, phishing, identity theft and other disruptions could negatively affect the security of information stored in and transmitted through our computer systems and network infrastructure, which may result in significant liability to us in excess of insurance coverage, which may carry low coverage limits, and may cause that existing and potential customers to refrain from doing business with us.  Additionally, cyber-attacks on our network or other systems could have a material adverse effect on our business and results of operations, due to, among other things, financial losses, losses of sensitive information,  interruption or delays in our business and operations, regulatory fines, reimbursement or other compensation costs, compliance costs and reputational damage.

On May 24, 2018, we suffered a cybersecurity incident by international cyber-criminals involving the theft of funds that subsequently resulted in an operational write-off of approximately Ch$6,900 million (or U.S.$ 9.9 million). The incident also caused temporary interruptions to some of our operations, which during a short period of time affected the quality of certain services provided to our customers. In summary, our systems, some of our servers and part of the workstations deployed in our headquarters and a network were infected by zero-day malware that was introduced in our systems and scheduled to activate at a certain point of time. The damage caused by this malware on computers and servers was intended to distract us from the real objective of this attack, which was to obtain access to our swift system. When accessing this key platform, various international fund transfers were executed with charges to our accounts. Following the incident, we took immediate action to effectively contain and eradicate any disruption in our operations. At the same time, we took appropriate measures to recover the stolen funds, including but not limited to, (i) contacting our international network of correspondent banks to which some of the funds had been transferred without our approval, which enabled us to successfully recover significant part of the funds just hours after the incident , (ii) applying for the redemption of an insurance policy we hold for these issues, and (iii) requesting advice and technical support to restore our operating capacity while rebooting computers and servers, see “Item 5.  Operating Results—Results of Operations for the Years Ended December 31, 2016, 2017 and 2018—Other Income (Loss), Net” and “Item 5.  Operating Results—Results of Operations for the Years Ended December 31, 2016, 2017 and 2018—Operating Expenses”. In spite of this incident and the temporary damage to our IT infrastructure, we were able to deploy a contingency plan, which allowed us: (i) to maintain the continuity of our operations and customer assistance in branches and through remote channels, (ii) to take immediate measures in order to assure that the funds of our customers were absolutely secured, and (iii) to comply with our short-term financial commitments with third parties and customers based on liquidity management. Furthermore, in line with enhancements in our cybersecurity standards that were performed during the last years, and to further improve our protections against events such as the one that occurred in May 2018, during 2018 we put significant efforts and took steps in order to enhance our data security and IT infrastructure, including, among others, the purchase of protection systems and world-class infrastructure. In addition, we reinforced our organizational structure by creating the Cybersecurity Division in June 2018, which replaced our former Technological Security Area, whose main role is to be the first line of defense and be in charge of mitigating and managing cybersecurity threats, while at the same time improving cybersecurity policies, spreading related knowledge among our bank, customers and developing competences that all our employees must possess on this regard, see “Item 4. Information about the Company—Our Business Strategy—Operating Efficiency and Productivity”. However, notwithstanding every measure taken to address cybersecurity matters and although we have not experienced any material losses relating to this incident and are currently performing our best efforts to prevent them, we cannot assure you that we will not suffer additional losses in the future related to these kind of events.

The occurrence of any cyber-attack or information security breach could result in material adverse consequences to us including damage to our reputation and the loss of customers. We could also face litigation or additional regulatory scrutiny. Litigation or regulatory actions in turn could lead to significant liability or other sanctions, including fines and penalties or reimbursement of customers adversely affected by this security breach. As mentioned above, although we did not suffer any material adverse effects as a result of the cyber-attack, successful attacks or systems failures at our bank or at other financial institutions could lead to a general loss of customer confidence in financial institutions, including us.

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

We are also exposedAlthough we have substantially increased measures to cyber-attacksaddress cybersecurity during the last year and, other cybersecurity incidents in the normal course of business.  There has recently been an increased level of attention focused on cyber-attacks against large corporations that include, but are not limited to, obtaining unauthorized access to digital systems for purposes of misappropriating cash, other assets or sensitive information, corrupting data or causing operational disruption.  Cybersecurity incidents such as computer break-ins, phishing, identity theft and other disruptions could negatively affect the security of information stored in and transmitted through our computer systems and network infrastructure, which may result in significant liability to us in excess of insurance coverage, and may cause existing and potential customers to refrain from doing business with us.  Although we, with the help of service providers, intend to continuously implement security technology devices and establish operational procedures to prevent such damage, we cannot assure you that these security measures will be successful.

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

Our current credit ratings determine the cost and the terms upon which we are able to obtain funding in the ordinary course of business. Rating agencies regularly evaluate us by taking into account diverse factors, including our financial strength, the business environment and the economic backdrop in which we operate. Thus, methodologies used by rating agencies evaluate Chile’s sovereign debt ratings when determining our ratings. Accordingly, ifDuring 2018, both Standard & Poor’s Ratings Service (“S&P”) and Fitch Ratings Service (“Fitch”) did not change Chile’s sovereign debt iscredit rating, while Moody’s Investors Service (“Moody’s”) downgraded Chiles’s credit rating from Aa3 to A1 and updated the outlook from negative to stable. Following these rating actions, Moody’s also modified our credit rating could also be downgraded.from Aa3 to A1 and changed our outlook from negative to stable, in a similar fashion that the rating action for Chile’s sovereign debt. On the other hand, S&P and Fitch maintained our credit rating at A+ and A, respectively. While Chile’s current long-term debt credit ratings remain investment grade, these credit ratings may deteriorate further and adversely affect our credit rating.

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

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

As a financial institution, we are subject to reputational risk that could materially affect our results of operations or financial condition

Corporate reputation is a crucial competitive advantage for us, as it allows us to attract and retain customers, appeal to investors and avoid employee attrition. Also, reputation is a key element in banking since access to funding is driven by the confidence of depositors and the opinion of ratings agencies on the value of our franchise. Therefore, any disreputable event, including employee misconduct, legal proceedings, regulatory sanctions, failure to deliver minimum standards of service quality, failure to comply with regulatory requirements, unethical behavior by our staff or involvement in political issues or public scandals (or gossip related thereto) could damage our reputation and produce significant harm to our results of operations or financial condition. Furthermore, our reputation is highly aligned with the reputation of the banking industry in which we participate and, therefore, actions by other providers of financial services or the banking industry as a whole could also harm our own reputation.

Similarly, the ability to manage potential conflicts of interest has become increasingly important factor for our business given our widespread operations in many economic sectors with diverse third parties. Accordingly, the failure to address —or even the perceived failure to address— conflicts of interest could affect the willingness of customers and investors to work with us, or could lead to legal actions against us. In order to address and avoid these potential events we are continuously improving our corporate governance standards by detecting potential failures and adopting world-class principles and procedures.  Nevertheless, we cannot assure you that we will not face reputational events in the future that could harm our prospects or the value of our franchise. For more information on corporate governance, see “Item 6.  Directors, Senior Management and Employees—Board Practices”.

Risks Relating to our ADSs

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

As of April 21, 2017,18, 2019, LQ Inversiones Financieras S.A. (“LQIF”), a holding company beneficially owned by Quiñenco S.A. and Citigroup Chile S.A., holds directly and indirectly approximately 51.06%51.15% of the voting rights of our shares.  Subject to our bylaws and applicable law, these principal shareholders are in a position to elect a majority of the members of our board of directors direct our management and control all matters decided by a shareholder vote, including the approval of fundamental corporate transactions.

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

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

While our ADSs have been listed on the New York Stock Exchange (the “NYSE”) since the first quarter of 2002, there can be no assurance that an active trading market for our ADSs will be sustained.  During 2016,2018, a daily average volume of approximately 42,75937,973 of our American Depositary Receipts (“ADRs”) were traded on the NYSE, according to data provided by Bloomberg. Although our shares are traded on the Santiago Stock Exchange the Valparaiso Stock Exchange and the Chilean Electronic Stock Exchange, the Chilean market for our shares in Chile is small and somewhat illiquid. As of April 21, 2017,18, 2019, approximately 31.72%32.2% of our outstanding shares were held by shareholders other than our principal shareholders, including LQIF (and the participation of LQ-SM), SM-Chile and SAOS, considering direct ownership.ownership and voting rights.

If an ADS holder withdraws the underlying shares from the ADR facility, the small size of the market, its limited liquidity, as well as our concentrated ownership, may impair the ability of the ADS holder to sell the shares in the Chilean market in the amount and at the price and time such holder desires, and could increase the volatility of the price of our ADSs.

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

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

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

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

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

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

The global economy appears to be finally exitinghave overcome a long period of turbulence and volatility, which began in 2007 with the subprime mortgage crisis, when many U.S. banks and financial institutions disclosed significant write-downs related to their exposure to mortgage-backed securities and other similar financial instruments. This situation led to significant government intervention for important banks worldwide, bankruptcy for others and active M&A activity intended to rescue failing banks and maintain the confidence of investors and customers while avoiding bank runs.  Today, after seven yearsthese government actions are less frequent and the U.S. economy has shown signs of aggressive expansionary monetary policy,recovery such that in December 2015, the U.S. Federal Reserve has begunbegan to taper its quantitative easing programs undertaken after the subprime crisis. Thus, in December 2015,Since then, the U.S. Federal Reserve has gradually increased the marginal standing facility rate from the range of 0%-0.25% to 0.25%-0.50% and further increased this range to 0.50%-0.75% in December 20162015 to 2.5% in December of 2018. Investor sentiment around the marginal increases has fluctuated and to 0.75%-1.00% in March 2017.  Although this decision was expected and perceived as a positive signal worldwide for investors and traders, we cannot assure you that past developments will not occur again in the future or that any future developmentsrecent volatility in the international markets will not affect us, including our results of operations and, consequently, the market price of our ADSs and shares.

Additionally, during 2015, new doubts about the financial condition of European banks arose.  Similarly, the fiscal condition of many countries remained weak. Even though our exposure to customers from troubled European countries such as PIIGS countries (Portugal, Ireland, Italy, Greece and Spain) only represents 0.09% of our total loans as of December 31, 2016, weWe cannot assure you that volatility in global financial markets due to the uncertainty regarding the fiscal condition of these or othersome European countries will not continue and affect the Chilean economy and consequently the financial condition and results of operations of the entire Chilean banking system, including us. Accordingly, the price of our ADS could be adversely affected by a new financial turmoil in

the Eurozone, political issues, armed conflicts, uncertainty due to terrorism, a slower than expected recovery, or a deterioration in healthier economies, such as Germany.economies.

Similarly, recent developments in the Chinese economy have led to increasing volatility in the financial markets and a downward trend in international commodity prices. The Chinese economic slowdown has affected the Chilean economy due to the importance of copper exports and overall mining activity to local economic growth. Although our exposure to the Chilean mining sector does not exceed 1.7% in terms of total loans, we cannot assure you that new developments affecting the Chinese economy will not have a material impact on Chilean economic activity and, therefore, in the local banking industry that could lead to lower loan growth for us and the Chilean financial industry as a whole, affecting the price of our shares and ADS.

Lastly, uncertainty regarding the future of emerging and developed economies remains given specific issues emergingand continues to be a source of instability worldwide. In this regard,For example, the recent political developments such as“trade war” between the United States and China, by which the U.S. presidential election,administration seeks to revise tariffs on Chinese imported goods and China seeks to impose revised tariffs on imported U.S. goods, political and social instability in Latin America (particularly focused on Venezuela),  the materialization of the exit of Great Britain from the Eurozone, (Brexit), elections in Central Europe, armed conflicts in the Middle East and Asia, ongoing negotiations between the U.S. and North Korea, terrorism, in addition to the global migration crisis and waves of populism looming in different countries, illustrate volatile social and political environments that could harm foreign trade and economic growth.growth for both developed and developing countries and also generate significant volatility in international markets and commodity prices.  In particular, the recently elected administrationthis regard, deceleration in the U.S. has suggested an intention to re-negotiate the free trade agreements that the United States holds with variousdeveloped countries while implementing higher import taxes, among other measures. Although it is still unclear what specifically the new U.S. administration will or will not do, any policy undertaken by the U.S. government in this respect may have a material adverse effect onand Chile’s commercial partners and global trade and capital markets, which, in turn,volatility could adversely impact the Chileanlocal economy, the local banking industry and, ultimately, our results of operations, financial condition and the price of our ADS. OnAdditionally, the slowdown of the Chinese economy have led to increasing volatility in the financial markets in the past, affecting international commodity prices, including copper which is Chile’s main export. Due to the importance of copper exports and overall mining activity to Chilean economic growth, a prolonged slowdown in the Chinese economy, a Chinese-U.S. trade war or other hand, althoughdevelopments may drive copper prices down and adversely affect the potentialChilean economy.  Although copper prices have not been affected by the effect of economic slowdown in China or the Chinese-U.S. trade war (given optimism regarding negotiations between the Chinese and U.S. governments), our exposure to the Chilean mining sector does not exceed 1.6% in terms of total loans, we cannot assure you that new developments affecting the Chinese economy will not have a material impact on overall Chilean economic activity and, therefore, in the local banking industry which could lead to lower loan growth for us and the Chilean financial industry as a whole, affecting the price of our shares and ADS.

While we are not experiencing any immediate adverse impact on our financial condition as a direct result of Brexit, on our results of operations is unclear, its ultimate impact will depend on how the final terms of Brexit will affectadverse consequences such as deterioration in economic conditions, volatility in the United Kingdom and the European Union, which could translate intocurrency exchange rates or other adverse changes such as reduced growth and higher volatility in global capital markets. Thismarkets—all of which could similarly adversely affect the price of our ADS.ADSs.

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

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

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

Risks Relating to Chile

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

Our core business and transactions are with customers doing business in Chile.  Accordingly, our ability to grow our business volumes and results of operations, as well as enhance our financial condition, in general, depends on the dynamism of the Chilean economy and specific macroeconomic variables such as inflation, unemployment, interest rates, consumption and investment.  The global financial crisis of 2008 that dramatically affected the economic growth in developed countries also affected the Chilean economy by the end of 2008 and during the first three quarters of 2009.  This translated into a subsequent slowdown in the local banking industry due to lower levels of consumption and deteriorated credit quality in loan portfolios prompted by unemployment and financial stress experienced by certain economic sectors.  Conversely, between 2010 and 2012 the local economy and the banking industry evidenced a significant upturn, fostered by real GDP growth that averaged 5.7% per year, mainly as a result of the recovery in consumption and investment, as well as higher fiscal spending associated with the reconstruction process after a significant earthquake in 2010.

During 2013, the Chilean economy entered into a moderate slowdown, by recording only a 4.0% GDP expansion,growth, which deepened throughout 2014 and 2015the following years with GDP recording annual expansions of just 1.9%, 2.3%, 1.3% and 2.3%,1.5% in 2014, 2015, 2016 and 2017, respectively. This trend in GDP growth has beendeceleration was the result of low levels of both corporate and individual confidence, as evidenced by indicesindexes (IPEC and IMCE) used by the Central Bank, due to factors such as slower growth of Chile’s main commercial partners, especially China, and uncertainty associated with diverse reforms presented by the administration appointed in 2014. Similarly,During 2018, however, the Chilean economy continuedshowed positive signs of recovery, when compared to grow slowly in 2016the last four years, by recording a moderate 1.6%4.0% annual expansion of GDP, mainly supported by ana similar increase of 2.4%4.0% in private consumption, that helped offsetbetter performance of some key trade partners and a 0.8% decreasestrong recovery in investment spending (understood as fixed capital formation)., which experienced a 4.7% annual increase, which in turn was primarily the result of the recovery of copper prices that translated into new investment projects undertaken in the mining sector. Although the Chilean economy has growth potential of at least 3.5%3.2% per year and GDP expansion continues to be positive,behaved in line with that potential in 2018, we cannot assure you that the local economy will continue growing in the future or that developments affecting the Chilean economy and the local banking industry will not materially affect our business, financial condition or results of operations.  For more information, see “Item 5.  Operating and Financial Review and Prospects—Operating Results—Overview”.

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

The Chilean government’s economic policies and any future changes in the value of the Chilean peso with respect to the U.S. dollar could affect the dollar value of our common stock and our ADSs.  Given the floating exchange rate regime that exists in Chile, the Chilean peso has been subject to large fluctuations in the past and this trend could occur again in the future.  According to information published by the Central Bank, between December 31, 20152017 and December 31, 2016,2018, the value of the U.S. dollar relative to the Chilean peso decreasedincreased by approximately 5.3%13.1%, as compared to the increasedecrease of 16.9%7.8% recorded in the period from December 31, 20142016 to December 31, 2015.  See “Item 3.  Key Information—Selected Financial Data—Exchange Rates.”

2017.  Chilean trading in the shares underlying our ADSs is conducted in Chilean pesos.  Cash dividends associated with our shares of common stock are received in Chilean pesos by the depositary, which then converts such amounts to U.S. dollars at the then-prevailing exchange rate for making payments in respect of our ADSs.  If the value of the U.S. dollar increases relative to the Chilean peso, the dollar value of our ADSs and any distributions to be received from the depositary will decrease.  In addition, the depositary will incur customary currency conversion costs (to be borne by the holders of our ADSs) in connection with the conversion and subsequent distribution of dividends or other payments.  For more information, see “Item 10.  Additional Information—Exchange Controls.”

Our results of operations may be affected by fluctuations in the exchange rates between the Chilean peso and the U.S. dollar despite our policy and Chilean regulations related to the general avoidance of material exchange rate mismatches.  In order to reduce the effect of exchange rate mismatches we enter into foreign exchange derivative transactions that hedge our exposure.  As of December 31, 2016,2018, our foreign currency-denominated assets and Chilean peso-denominated assets, which contain repayment terms linked to changes in foreign currency exchange rates, exceeded our foreign currency-denominated liabilities and Chilean peso-denominated liabilities, which contain repayment terms linked to changes in foreign currency exchange rates, by an amount of Ch$4,4841,851  million, or 0.16%0.06% of our paid-in capital and reserves.

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

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

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

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

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

Our business growth, asset quality and profitability may be affected by political and social developments in Chile in the long run.

Our operations are highly dependent on the Chilean political and social environment, as most of our customers and borrowers do business in Chile. Thus our results of operations could be negatively impacted by unfavorable political and diplomatic developments, social instability or unrest, as well as dramatic changes in public policies, including expropriation, nationalization, international ownership legislation, interest rate caps and tax policy. Although Chile has a tradition of compliance with the rule of law, we cannot assure you that this trend will continue in the future.

Reforms to labor and pension laws as well as labor strikes or slowdowns could adversely affect our results of operations.

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

On September 8, 2016 the Chilean government passed a law reforming the Chilean labor framework, which went into effect on April 1, 2017. This law enhances and empowers labor unions’ negotiation position through amendments to the collective bargaining process, such as (i) a prohibition against replacing employees during a strike, (ii) the authorization for inter-company unions to collectively bargain in specific cases, (iii) the extension of a union´sunion’s access to information, such as the employer´semployer’s financial information and labor conditions, among others, and (iv) the establishment of minimum threshold requirements for the terms and conditions of the collective bargaining process, which cannot be more restrictive than the previous collective agreement.agreement, and (v) the definition of a company’s minimum services and emergency teams by the applicable labor regulator after negotiations between a company and each labor union prior to the commencement of a collective bargaining process. With respect to clause (v), minimum services refer to those functions of a company which must continue to be provided during a strike because they have been determined to be essential to protect assets and facilities, to prevent accidents, guarantee public utility services, meet the basic needs of the population and prevent environmental damage or harm to health.  A company’s emergency teams are made up of workers assigned by each union to fulfill such minimum services. As further explained in “Item 8 — Financial Information — Legal Proceedings — Setting of Minimum Services and Emergency Teams in Case of a Strike”, we are currently in the process of challenging the minimum services and emergency teams that have been assigned to us.  As of the date of this annual report, we cannot offer any assurance as to the final outcome of these legal proceedings. To the extent we are not able to prevail, in the event of futures strikes, we could face operational disruption due to an inadequate number of minimum services and insufficient staff for the emergency teams.

On April 12,In August 2017, the President of Chile announced a reform to the local pension system. Although no precise details were unveiled,system was presented by the former Chilean government to the Chilean congress for discussion. The main change to the current system would consist of an increase in the compulsory rate of savings, from the current 10% contribution rate to a 15% rate. The 5% net increase of 5% would be paid exclusively by employers.  TheHowever, in October 2018 the current government announced several changes to said reform, will not bewhich were presented to the Chilean congress for discussion before July 2017.  Becauseby the specific contents and extentbeginning of November, 2018. The main changes proposed in the current bill are the increase in the compulsory rate of savings, from the current contribution rate of 10% to 14%, of which 4% of the reform are unknown,net increase would also be paid by the employer but gradually applied over a period of eight years upon the passage of the bill and the increase of the state contribution for low income pensioners by means of enhancing public expenditure for these purposes. The bill also includes the opening of the pension fund management industry to new actors, lowering entrance barriers to this market, enhancing the powers of the Superintendency of Pensions and introduces the CMF as a supervisory entity, among other reforms. Because there is no certainty as to when and how this reform would go into effect, if approved, we cannot yet assess whether this reform would substantially affect our results of operations.

Item 4                                    Information on the Company

History and Development of the Bank

Overview

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

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

We are a full service financial institution that provides, directly and indirectly through our subsidiaries, a wide variety of lending and non-lending products and services to all segments of the Chilean financial market, providing our customers with powerful, differentiated and comprehensive value offerings. In addition to our traditional banking operations, our subsidiaries and affiliates permit us to offer a variety of non-banking but specialized financial services including securities brokerage, mutual funds management, investment banking, insurance brokerage, securitization and collection services.

Our business is not materially affected by seasonality.

We organize our operations and deliver our services to our customers through the following four principal business segments:

(i)             retail banking;

(ii)          wholesale banking;

(iii)       treasury and money markets; and

(iv)      subsidiaries.

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

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

As of December 31, 2014, we We also offeredoffer international banking services through our Trade Services subsidiary in Hong Kong, our representative office in Beijing and a worldwide network of correspondent banks. However, in 2014, we voluntary began a dissolution process for our Trade Services subsidiary in Hong Kong, which was formally declared dissolved as of July 5, 2016.

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

According to the SBIF, under Chilean GAAP, as of December 31, 2016,2018, we ranked first in the Chilean banking industry in terms of net income attributable to equity holders with a market share of 28.1%25.3%. As of the same date and excluding operations of subsidiaries abroad, we continued to bewere the second largest bank in Chile in terms of total loans with a market share of 18.0%16.9%, we were the largest provider of commercial loans with a market share of 17.7%16.7%, we rankedthe second inlargest provider of consumer loans with a market share of 20.9%17.9% and we were also the secondthird largest private sector bank in terms of residential mortgage loans with a market share of 17.3%16.8%.  As for liabilities, excluding operations of

subsidiaries abroad, we ledwere the marketlargest bank in Chile in terms of total current accountaccounts and demand deposit balances with a market share of 23.0%22.2% and, more importantly, we ranked first in current account balances held by individuals with a market share of 28.5%27.2%, both as reported by the SBIF and as of December 31, 2016.2018.  Lastly, according to the Chilean Association of Mutual Funds, as of December 31, 2016,2018, we were the largest provider of mutual funds managermanagement services in Chile with a market share of 20.9%21.1%.

As of December 31, 2016,2018, we had:

·                  total assets of Ch$31,357,30435,617,447 million (approximately U.S.$ 46,774.051,351.6 million);

·                  total loans of Ch$25,398,42427,926,632 million (approximately U.S.$ 37,885.540,263.3 million), before deducting allowances for loan losses;

·                  total deposits of Ch$18,874,04920,240,662 million (approximately U.S.$ 28,153.429,182.0 million), of which Ch$8,321,1489,584,488 million (approximately U.S.$ 12,412.213,818.5 million) correspond to current account and demand deposits;

·                  equity (including net income, non-controlling interest and provisions for minimum dividends) of Ch$3,307,6743,673,716 million (approximately U.S.$ 4,933.95,296.6 million);

·                  net income attributable to equity holders of Ch$575,051603,633 million (approximately U.S.$ 857.8870.3 million); and

·                  market capitalization of approximately Ch$7,663,51110,017,864 million (approximately U.S.$11,431.314,443.2 million).

As of December 31, 2016,2018, we had 14,61111,381 employees and delivered financial products and services through a nationwide distribution network of 423390 branches and 1,4531,485 a Automatic Teller Machinesutomatic teller machines (“ATMs”). Our ATMs are part of a larger network of 7,6227,254 ATMs operatedoperating in Chile, of which 4,385 ATMs operate under a network managed by Redbanc S.A., a company we partly own along with nine other private sector banks).banks.

History

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

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

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

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

During 2014, the Chilean economy entered into a slowdown cycle, which affected investment and the growth of commercial loans.  Amid this slowdown, we took advantage of our competitive strengths and continued to optimize our risk-return relationship by keeping our credit risk under control and developing innovative commercial strategies.  As a result, we remained at the top of the industry in terms of net income generation and return on average equity, according to information published by the SBIF as of December 31, 2014.  In order to achieve these goals, we improved customer experience by launching cutting-edge mobile banking solutions and applying world-class business intelligence methodologies.  Furthermore, we continued to diversify our funding structure by issuing long term bonds in Switzerland, Japan and Hong Kong, while taking advantage of our U.S.$1,000 million commercial paper program, which was established in 2010 (‘the Commercial Paper ProgramProgram”) to raise short-term funds.  Lastly, we recorded a 15.9% annual expansion in current accounts and demand deposit (year-end balances) that enabled us to rank first in these liabilities within the local banking industry, according to information released by the SBIF as of December 31, 2014.  These figures were reflected by the interest of investors in Banco de Chile’s stock, which recorded an 86.5% annual increase in trading volumes (excluding the effect of the LQIF secondary offering), the highest increase among all publicly listed Chilean banks.

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

Throughout 2016 we continued to face economic headwinds as the local economy’s growth continued to slowdown. Amid this environment, we focused on growing profitably by concentrating on those segments with a more balanced risk-return relationship. Thus, in spite of recording a moderate annual expansion of 3.4% in total loans, we managed to remain first in terms of net income attributable to equity holders and profitability (for banks with market share above 3.0% in total loans) within the local banking industry, with a market share of 28.1%28.4% and a ROAE of 19.6%, both under Internal Reporting Policies.our internal reporting policies. Our customer-centric approach has been crucial to these achievements and we believe our service quality makes a difference when compared to our competition. During 2016 we accomplished significant advances on this matter such as attaining the highest net promotion score among the main Chilean banks for first time in our recent history while also reducing our attrition rate. We believe these achievements were the result of

diverse projects and strategies intended to enhance customer proximity. Thus, during 2016 we launched a new personal banking website, with improved functionalities and enhanced our mobile banking solutions by adding new applications for smartphones. In terms of service quality, we revised and updated our portfolio of high income customers, opened new specifically-oriented branches for preferential customers and set up a new service model for premium customers called “Private Wealth Management.” Lastly, we continued to strengthen the benefits associated with our loyalty program for credit card users by adding new alliances, such as Iberia Airlines, to the package of already existing services and providers. Based on all of these initiatives, during 2016 we were recognized by various specialized publications covering multiple areas of banking activity including “Most Valuable Banking Brand” in Chile by The Banker, “Most Innovative Banking Solutions” in Chile by Global Business Outlook, “Best Consumer Digital Bank” in Chile by Global Finance and “Best Bank” in Chile by World Finance.