Banco Santander Chile : Pilar III Annual Report (Inglés)

Pillar III Annual Report / 2023

Introduction

Capital

Consolidation Perimeter

Overview of risk management

Credit risk

Riesgo de mercado

Riesgo operacional

Liquidity risk

Remunerations

Índice

1

Introduction

• Corporate culture
• The Business
• Regulatory framework
• Pilar III

2

Capital

• Capital Management & Solvency
• Regulatory Capital

3

Consolidation Perimeter

• Santander Chile Consolidation
• Comparison Between Accounting and Regulatory Perimeter

4

Overview of risk management

• Business Model & Risk Management
• Risk management and control tools
• Governance Structure

5

Credit risk

• Credit Risk Management Model
• Governance Structure
• Credit Risk Management Process
• General Mitigation Tools
• Classification of Transactions
  Based on Credit Risk
• Provision Estimation
• Distribution of exhibitions
• Credit Loss Management
• Credit Risk Recovery Management
• Credit Risk Reduction
  Techniques
• Standard Method
• Counterparty credit risk

6

Market Risk

Market Risk Model

• Governance and organizational structure
• Management and mitigation tools
• Risk Measurement and Information Systems

7

Operational risk

Operational Risk

Management Model

• Governance and organizational structure
• Mitigation Scoping and Tools
• Capital Requirements for Operational Risk

8

Liquidity risk

Liquidity risk management model

• Funding strategy
• Governance and organizational structure
• Mitigation tools

9

Remunerations

General features of the Policy

• Governance Structure
• Identification of collectives
• Application criteria for remuneration
• Remuneration awarded

Pillar III Annual Report / 2023

Introduction

Capital

Consolidation Perimeter

Overview of risk management

Credit risk

Market Risk

Operational risk

Liquidity risk

Remunerations

1

Introduction

Corporate culture

The Business

Regulatory framework

Pilar III

Pillar III Annual Report / 2023

Introduction

Capital

Consolidation Perimeter

Overview of risk management

Credit risk

Market Risk

Operational risk

Liquidity risk

Remunerations

Banco Santander Chile is part of Grupo Santander, a global financial institution. This group provides financial services on three continents, serving an extensive customer base of 165 million. With 3.7 million shareholders and

a workforce of more than 212,000 employees, Grupo Santander stands out for its global presence and its impact on the financial sector.

As for Santander Chile's presence, it is present throughout the national territory through its extensive network of branches and physical spaces of different kinds.

Largest bank in terms of loans and deposits

17.4%

market share according to the latest information from the FMC.

More than

167,000

people banked through the Life account and Más Lucas in 2023.

TSR1 of

35.8%

in 2023, the highest among Chilean banks.

Recognized as

Best

Bank

in Chile in 2023 by The Banker and Euromoney.

The only

Chilean bank included in the DJSI for emerging markets.

A total of

91Workcafés

in Chile, serving our customers and the community in their different formats.

First

JPY 8

billion green bond, equivalent to US$ 53 million, to finance green mortgages.

More than

US$ 450

million was committed to invest in infrastructure and technology between 2023 and 2026.

1. Total shareholder return, in CLP as of 31.12.2023 and based on the last 12 months.
2. Total operating income: Net interest income + income net of adjustments + net income from fees and commissions + net financial result + income from investments in companies + result from non-current assets and groups disposed of for sale not eligible as discontinued operations + other operating income.
3. Operating expenses: Employee benefit expense + administrative expenses + depreciation and amortization + other operating expenses + impairment of non-financial assets

Pillar III Annual Report / 2023

Introduction

Capital

Consolidation Perimeter

Overview of risk management

Credit risk

Market Risk

Operational risk

Liquidity risk

Remunerations

Priority in Regulatory Policies

The Bank advocates for the implementation of robust and high-quality regulation that reinforces the strength and solvency of banking institutions. To this end, it sets rigorous standards of consumer protection and market stability to promote transparency in relation to risks, both for investors and supervisors. Santander Chile is firmly committed to constructive and transparent collaboration with regulators regarding the objectives, design and implementation of regulations and policy frameworks that impact its banking activity and, therefore, the interests of its customers.

Banking & Capital Resilience

The reforms carried out over the last decade at the global level have contributed to increasing the strength of financial institutions in terms of capital. However, economic instability has raised some questions about the functioning of the regulatory framework that need to

be carefully addressed. In this case, Banco Santander Chile aligns itself with the challenges of Santander Group in the adapting to the European regulatory foundations regarding the implementation of the new Basel IV standards by 2025.

Main results

Banco Santander Chile

ROAE* accumulated 12M 2023

11.9%

*Net income attributable to owners of the bank annualized divided by the average equity attributable to equity holders

Net income attributable to owners of the owners of the bank totaled

$496 billion

($2.63 per share and $1.20 per share of ADR).

Pillar III Annual Report / 2023

Introduction

Capital

Consolidation Perimeter

Overview of risk management

Credit risk

Market Risk

Operational risk

Liquidity risk

Remunerations

Pillar III Annual Report / 2023

Introduction

Capital

Consolidation Perimeter

Overview of risk management

Credit risk

Market Risk

Operational risk

Liquidity risk

Remunerations

Corporate culture

"The Santander Way" is the name given to Santander's corporate culture. It establishes how things are done, and guides people to continue to progress as a team.

This corporate culture encompasses the mission, vision, values, risk culture and behaviors that must prevail in each of the Group's entities. Santander is confident that a company with

a strong internal culture attracts and retains talent, fostering a fruitful work environment and improved performance throughout the Bank's operations.

Our Corporate Culture:

The Santander Way

The Santander Way has been the guide of the organization, encompassing the mission, vision, values, risk culture and behaviors. Santander is confident that a Company with a strong internal culture attracts and retains talent, fostering a positive labor climate and improved performance throughout Bank's organization.

A

consolidated and talented team

Values

Everything we do must be simple, personal and fair.

Simple: Santander seeks to offer efficient and easy-to-understand products that meet the needs of customers. For this reason, it designs systems and processes that are simple to operate, which facilitates a clear and agile response from its collaborators.

Personal: SA priority is to have different service channels, which offer each customer a service and response tailored to their needs. This also refers to our commitment to the personal development of each employee, through the fulfillment of their professional goals.

Fair: Above all Santander advocates transparency in its relations with its various stakeholders and to promote the progress of the community.

Business

Credit risk

Market Risk

Operational risk

Liquidity risk

Remunerations

Santander Chile seeks to be the best open financial services platform to contribute to the progress of companies and individuals, through a wide range of products with a high level of service for its customers.

The Bank focuses its business on a wide range of commercial and retail banking services for its clients in Chile. These include lines of credit, current account plans, loans in Chilean pesos and foreign currencies, mortgage loans, and various other types of financing for clients. In recent years, mortgage loans for sustainable housing and financing for renewable energy projects have also been included. In conjunction with the above, it offers financial services such as financial advisory, mutual fund management, securities and insurance brokerage, and leasing.

The business areas by which Santander segments its operations are as follows:

Retail Banking:

Retail Banking's customers are individuals and SMEs with sales of less than Ch$3 billion annually. For all of them, it has a differentiated value proposition. In turn, retail banking is subdivided into:

• Personal Banking: Medium, high-, and mass-income customers are served.
• SME Banking: Focuses on providing financial services based on plans to accompany small and medium-sized enterprises in their growth.
• Santander Consumer: Offers financial solutions with greater flexibility for vehicle purchases.
• Select Private Banking: Aimed at high- net-worthclients, through personalized attention, which includes a wealth manager and the support of specialized advisors.

Middle Market:

The middle-market offers products and services to medium and large companies with annual sales of over Ch$3 billion to Ch$15 billion and includes the following subsegments:

• Companies: Companies with annual sales from Ch$3 billion to Ch$15 billion.

• Large Companies: Companies with annual sales greater than Ch$15 billion.
• Real Estate: Companies that execute projects for third parties and construction companies, with annual sales of more than Ch$800 million.
• Institutions: Organizations such as municipalities, regional governments, government agencies, and universities.

Santander Corporate and Investment

Banking (CIB):

CIB focuses on companies with sales above Ch$10 billion, whether they are foreign or Chilean multinationals. This segment has four specialized units:

• Corporate Finance: The Corporate Finance team provides global advice and execution in Mergers and Acquisitions
  (M&A) and Capital Markets (DCM).
• Global Transaction Banking: This team provides tailor-madebanking solutions for some of the world's largest and most demanding clients. All of their products are designed to fit your business.
• Global Debt Financing: Global Debt Financing combines knowledge, experience and in-depthunderstanding of the financial markets to provide its clients with tailor-madeaccess to all sources
  of solutions to help them achieve their capital structure and financing objectives.
• Global Markets: The Global Markets team provides risk management

solutions, investment products, and execution services to a wide range of clients, including corporate clients, financial institutions, financial sponsors, and individuals.

Wealth Management & Insurance

Attends clients are those who wish to make investments through the bank. To this end, a homogeneous and consistent model of products is generated with different advice and contracting according to the needs of the clients.

All this is supported by a solid and capable governance structure, together with

the approach of strategic pillars aimed at meeting goals with a focus on the customer and promoting the processes of digital transformation, sustainability, and cybersecurity.

As for Santander Chile's strategy, the concept "Chile First: together, with you" was implemented as an action plan that will be the roadmap to help build a great country and a better Banco Santander. Each letter represents a central concept that should guide the Bank's work for a better future.

Pillar III Annual Report / 2023

Introduction

Capital

Consolidation Perimeter

Overview of risk management

Credit risk

Market Risk

Operational risk

Liquidity risk

Remunerations

Retail Banking (Individuals &

SMEs)

It comprises individuals and small companies with annual sales of less than Ch$3 billion. This segment offers a variety of services to customers including consumer loans, credit cards, auto credit, business loans, foreign trade, mortgage loans, debit cards, checking accounts, savings products, securities brokerage, securities, and insurance. SME clients are also offered state-guaranteed loans, leasing and factoring.

Middle-market

It includes companies and large companies with annual sales of over Ch$3 billion institutional organizations such as universities, government agencies, municipalities and regional governments, and companies in

the real estate sector that execute projects to sell to third parties and all construction companies with annual sales in excess of $800 million without cap. A wide variety of products are offered to this segment, including commercial loans, leasing, factoring, foreign trade, credit cards, mortgage loans, checking accounts, transactional services, treasury services, financial consulting, savings products, securities brokerage and insurance. In addition to companies in the real estate sector, specialized services are offered for the financing of mainly residential projects, with the intention of increasing the sale of mortgage loans.

Corporate Investment

Banking (CIB)

It comprises foreign multinational companies or Chilean multinational companies that have sales above Ch$10 billion. This segment offers a wide variety of products, including commercial loans, leasing, factoring, foreign trade, credit cards, mortgage loans, checking accounts, transactional services, treasury services, financial consulting, investment banking, savings products, securities brokerage, and insurance. This segment has

a Treasury Division that provides sophisticated financial products mainly to companies in the Wholesale Banking and Corporate areas. Products such as derivatives, securitization, and other products designed according to the needs of customers are included. The treasury area also handles the brokerage of positions, as well as the portfolio of own investments.

Pillar III Annual Report / 2023

Introduction

Capital

Consolidation Perimeter

Overview of risk management

Credit risk

Market Risk

Operational risk

Liquidity risk

Remunerations

Regulatory framework

The regulatory framework under which Banco Santander Chile operates includes:

1. the General Banking Law, (ii) the Updated Compilation of Rules (UCR) of the Financial Market Commission (FMC), (iii) the Securities Markets Law 18,045 and (iv) the Groups Law 18,046.

The bank's three regulatory entities are: the

Financial Market Commission (FMC), the

Financial Analysis Unit, and the Chilean Internal Revenue Service.

During the year 2023, a series of modifications were made to the regulatory framework that had an effect on the bank's activities.

For more details on these, visit the bank's 2023 report, available on the website.

The Bank also operates with an internal regulatory framework based on a series of policies, codes and strategies that establish the criteria and methodologies that guide each of the Bank's procedures.