Requirements and Capital Management:

The main objectives of the Bank’s capital management are to ensure the adequacy and quality of its capital, at a consolidated level, based on the adequate management of the risks it faces in its operations, establishing sufficient capital levels, through the definition of internal objectives, that supports both the business strategy in both normal and stress scenarios in the short and medium term, thus ensuring compliance with regulatory requirements, coverage of its material risks, a solid credit classification and the generation of adequate capital clearances. During 2024, the Bank has met the required capital requirements and its internal sufficiency objectives.

As part of its Capital Management Policy, the Bank has established capital sufficiency alerts and limits approved by the Board of Directors, which are monitored by the governance structures that the Bank has established for these purposes, including the Capital Management Committee. During 2024, none of the internal alerts defined by the Bank were activated as part of the Capital Risk Appetite Framework. In this sense, the Bank manages capital based on its strategic objectives, its risk profile and its ability to generate cash flows, as well as the economic and business context in which it operates. If it requires strengthening its capital structure, the Bank may, among other options, propose to its shareholders meeting modifications to the dividend payment ratio, as well as issue basic capital, additional tier 1 capital or tier 2 capital instruments.

Capital Requirements

In accordance with the General Banking Law, the effective equity of a bank may not be less than 8% of its risk-weighted assets (RWA), net of required provisions. Additionally, it establishes that the Basic Capital may not be less than 4.5% of its APR or 3% of its total assets, net of required provisions. Regarding Tier 1 capital, corresponding to the sum of Basic Capital and Additional Tier 1 Capital, the latter in the form of bonds with no maturity date and preferred shares, it is established that it may not be less than 6% of their RWAs, net of required provisions. Likewise, banking entities must comply, as established by current regulations or regulators, with buffers and capital charges, such as the conservation buffer, the countercyclical buffer and capital charges by the systemically important buffer and/or Pillar 2.

Adoption of the Basel III standard

In 2019, the CMF began the regulatory process for the implementation of Basel III standards in Chile, as established in Law No. 21,130 that modernizes banking legislation. During the years 2020 and 2021, the CMF promulgated the different regulations for the adoption of the Basel III standard for local banking, which are applicable as of December 1, 2021. The regulation includes the standard methodologies to determine, among others, Credit, Operational and Market Risk-Weighted Assets, regulatory capital, leverage ratio and systemically important banks. Additionally, the regulations describe requirements and conditions applicable to: (i) the application of internal models for the calculation of certain risk-weighted assets, (ii) the issuance of additional tier 1 and tier 2 capital hybrid instruments, (iii) market disclosure requirements (Pillar 3), (iv) the principles for determining capital buffers (countercyclical and conservation), (v) additional requirements to which banks defined as systemically important and (vi) the criteria by which banks can be defined as atypical and subject to more exhaustive supervision, as well as additional capital requirements (Pillar 2) among others.

On May, 2023, the Central Bank reported that its board agreed to activate the counter-cyclical core capital requirement for banks, at a local banking industry level, equivalent to 0.5% of the risk-weighted assets of banking institutions, required starting from the month of May 2024. In the monetary policy meeting of November 2024, the central bank agreed to maintain the same level of 0.5% requirement.

On January 16, 2024, the Financial Market Commission (CMF) reported that, as a result of the supervision process, it resolved to apply additional capital requirements of Pillar 2 of 0.5% for Banco de Chile within an implementation period of four years. This requirement must be constituted in a ratio of 25% no later than June 30, 2024. Likewise, this requirement must be recognized at least 56.3% with basic capital in proportion to the minimum legal requirements. On January 17, 2025 the CMF communicated the resolution adopted by its board regarding the charge for Pillar 2, maintaining the current requirement for Banco de Chile on that date, equivalent to 0.13%, which must be constituted 100% as of 30 June 2025.

On April 1, 2024, the CMF reported the result of the annual review of the banks’ systemic importance rating, maintaining an additional basic capital charge of 1.25% of the APR for Banco de Chile, payable in accordance to the gradualness defined by the regulations, so the capital charge required as of December 2024 is equivalent to 75% of said percentage. As of the date of these financial statements CMF has not reported additional requirements or any changes linked to Banco de Chile’s status as a systemic bank.

It should be noted that the Basel III banking solvency standards still consider a series of transitory regulations. These measures include: i) the gradual adoption of requirements for systemic banks, ii) the gradual application of adjustments to regulatory capital, iii) gradualness to continue recognizing subordinated bonds issued by banking subsidiaries as effective equity, among other matters. It is important to mention that on December 1, 2024 the gradual adaption of the conservation buffer, reaching 2.5% of risk-weighted assets, which is fully constituted by Banco de Chile.

Information on regulatory capital and capital adequacy indicators is presented below:

For effective equity, 8% of the RWA is considered, adding to this value the additional charges for systemic bank and Pillar 2. The systemic bank and Pillar 2 requirements for Banco de Chile are equivalent to 1.25% and 0.5%, respectively (1.25% and 0% as of December 31, 2023). The transitional provisions require 75% of the capital charge per systemic bank as of December 31, 2024 (50% as of December 31, 2023) and 25% of the charge for Pillar 2, which is covered by 56. 3% with basic capital (there is no requirement for Pillar 2 as of December 31, 2023).