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Corporate Governance Practices
The corporate governance of Banco de Chile is governed by its statutes, the General Banking Law, the Companies Law, the Securities Market Law and the regulations of the Super intendancy of Banks and Financial Institutions of Chile, and the Super intendancy of Securities and Insurance apply.
Principals: Corporate governance practices of Banco de Chile is governed by its statutes, the General Banking Law, the Companies Law, the Securities Market Law and the regulations of the Superintendence of Banks and Financial Institutions of Chile, and the Superintendence of Securities and Insurance applicable.
Its practices and corporate governance principles are aimed at continuous improvement of the internal mechanisms of self-regulation to ensure full compliance of the current regulations, looking after the continued adherence to the values of the corporation. The priorities of Banco de Chile are governed by ethical principles, which are set out in its Code of Ethics, which acts as a guide for their decisions and conduct of business of the organization.
Structure: The Bank Board, composed by eleven directors and two alternate directors is the body that defines the strategic guidelines of the organization and participates in a key role in corporate governance.
All the directors of Banco de Chile are elected every three years. The last election of Directors was in March 2008 when the shareholders' meeting endorsed the all members for another period.
The General Manager is appointed by the Directory and remains in his position as long the Directory decides the opposite . According to the law and statutes, ordinary meetings of the Board should take place at least once a month. The Directory meets in regular session twice a month except in February. Special meetings can be called by the Chairman of the Board, or as a request from one or more directors.
The Board delegates some functions and activities of the Committees of Directors. This allows a detailed analysis of specific subjects and provides the necessary information to the Board for discussion and debate about general policies and guidelines that rule the Bank's business.
Directors Committee and Audit: The Directors and Audit Committee is responsible for reviewing external audit reports, balance sheets and other financial statements, the porpoise of the external auditors and risk valuators is to examine the background of related operations, and analysis of the pay systems and remuneration plans for executives. The Committee has a budget for operating expenses that is approved annually by the shareholders' meeting.
According to the Chilean law, the Directors and Audit Committee should be composed by three members, most of whom must be independent. Each one shall serve for a maximum period of three years or until the end of the duration of the Directory, if the Directory concluded before three years. In December 2010, the Committee was composed of Messrs. Jorge Awad Mehech, who presides and is the expert in financial matters, Don Jaime Estevez Valencia Raúl Anaya Elizalde.
The Committee has as objectives ensure efficiency, maintenance, implementation and operation of internal control systems, meet the standards and procedures governing the banking activity and identify business risks for the Bank and its subsidiaries; monitor the functions of the Risk Management Division, ensuring its independence from the management; oversee the functions of the Global Compliance Division, serving as a link and coordinator of tasks between internal audit and external auditors, being as well as a link between them and the Bank's Board, and fulfill the duties and responsibilities established in the limited Corporations law and the norms of Superintendence of Banks and Financial Institutions.
Risk Portfolio Committee: The main task of this Committee is to know the composition evolution and risk of the Bank's credits portfolio, with both a global perspective and a segmented by sector and business lines perspective, . This Committee reviews in detail the mains debtors, the indicators of overdue loans, the penalties and provisions for loan portfolio, for each segment and proposes different management strategies.
In addition, the Portfolio Risk Committee discusses and prepares proposals for the credit policies which will approved by the Board, the portfolio assessment methodologies and calculation of provisions to cover expected losses. Is responsible for knowing the provisions adequacy analysis, authorize special punishment portfolio when there is no more option of recovery and settlement management control of the foreclosed assets.
The Portfolio Risk Committee meets monthly. The Portfolio Risk Committee are the Chairman of the Board, a director, general manager and managers of the Divisions Risk Business and Market, Risk Persons, and Risk Control and Monitoring Risk.
Credit Committee: The corporate governance structure of the Bank considers several credit committees, each one responsible for credit decisions associated to each business segments and the types of risks involved, this committees are people with sufficient powers for decision-making, in this regard, the Division of Risk Companies and Risk Market is involved in each committee independently and autonomously of the commercial areas.
For segments of persons, there are credit committees that operate by exception, corresponding to cases where the operations do not meet the costumer profile policies payment behavior, or parameters associated with maximum amounts to be financed.
A member of the Business and Market Risk Division is present In most of the decisions that consider a group risk amount over UF 6,000 conforming various credit committees which finally is the Credit Committee of the Board consisting of the CEO, the manager of Business and Market Risk Division, and at least three directors who review each week all transactions that exceed 750,000 UF
International finance and financial risk Committee: The main function of International finance and financial risk Committee is the evolution review of financial positions and market risks - price and liquidity that they have generated both past and present, and most important, the control of regulatory source risks for limits and / or internal alerts.
The knowledge of current state of market risks allows the prediction with some confidence level, potential future losses in the event of adverse movements in key market variables (exchange rates, interest rates and volatility of options) or a tightening of liquidity (being this liquidity of financial instruments or funds liquidity).
Additionally, the Committee reviews specially the estimated financial results that generate these positions separately, in order to measure the risk / return relation of business related to the management of financial positions of the Treasury, the evolution of the capital use, and estimation of credit risk and market that the Bank will face in the future. The Committee also analizes the international financial liability exposure and major exposures generated by derivative transactions.
The Committee is responsible for the design of policies and procedures related to the establishment of limits and alerts of financial positions, as well as monitoring and reporting of them. Subsequently, policies and procedures are delivered to Directory for their final approval.
The International finance and financial risk Committee is composed of the Chairman of the Board, four directors, general manager, the manager of the Business and Market Risk Division, the manager of the Corporate and Investment Banking division, the division manager management and Financial Control, Treasurer and managing Financial Risk Area, acting as secretary.
Prevention of Money Laundering Committee: Banco de Chile has the Committee for the Prevention of Money Laundering and Terrorist Financing. Its main objective is to define policies and procedures that form the "System of Prevention of Money Laundering and Terrorist Financing", along with monitoring their compliance and evaluate all the issues associated with these matters.
The policies associated with the Money Laundering Prevention aim to prevent the Bank of Chile is used to legitimize illicit assets from operations and / or to obtain financing for terrorism. They should also ensure no exposure of the organization to risks associated with its reputation, operations and / or law, and adhere to the current law or future regulations on it.
The Committee comprises the Chairman of the Board, the general manager, the prosecutor, the manager of the Operations and Technology Division and Banchile General Funds Management general manager, Are also integrated with voice to this Committee, the Controller, the manager of the Global Compliance Division and the Area Manager Money Laundering Prevention.
Cooperation Agreement with Citigroup Bank of Chile Committees : The strategic partnership between Banco de Chile and Citigroup is part of the Cooperation Agreement signed by both and the Global Connectivity Agreement which depends on the above. In order to monitor and review the development of joint initiatives, the Steering Committee of Global Connectivity Agreement has established four instances of action: Global Transaction Services Committee (GTS), Committee on International Personal Banking (IPB), Committee Investment Banking and Financial Control Committee of the Cooperation Agreement.
The Steering Committee of Global Connectivity Agreement, and therefore the four sub-committees listed above, are integrated by theBank's president, general manager and two board members who are members of the administration of Citigroup. Also participate in the sessions the division managers associated with each business area managers directly responsible for the respective businesses.
- Committee of Global Transaction Services (GTS)
- Committee of International Personal Banking (IPB)
- Investment Banking Committee
- Financial Control Committee of the Cooperation Agreement
Management Committee: This Committee is chaired by the CEO and is the highest level of coordination of the senior management of Banco de Chile. At its sessions market and industry are analyzed, discusses the main strategic guidelines of the Bank take place, and decides on internal policies, and analyzes the performance of the Bank. Also, the various divisions exchange points ofviews and prioritize joint initiatives.
Each year the Management Committee defines the foundations for an annual plan. After the annual plan of each individual business area is decided by the general manager and the manager of each division, under the coordination of the Financial Management and Control Division, the overall plan is submitted for Board consideration. The Management Committee reviews the progress in the implementation of the plan and budget every month.
Ethics Committee: Created in 2005, this Committee's mission is to define, promote and regulate professional behavior and personal excellence from all employees of Banco de Chile, consistent with the philosophy and values of the company, responding to the confidence given by customers.
To meet these objectives, the Committee encourages a culture of ethical behavior and develops a set of activities in the field of standards, training and communications. Additionally, the Committee is the instance of resolution of the different situations in which there is a conflict between a given behavior and the values promoted by the Bank.
Chaired by the manager of the Human Resources Division, the Committee is composed of the fiscal managers of the divisions of the Comptroller, Global Compliance, Commercial Banking, Operations and Technology Division and Wholesale, Large Companies and Real Estate.
Disclosure Committee: Established in 2003, the Disclosure Committee is responsible for ensuring proper disclosure of the consolidated financial information of the organization and its affiliates.
This Committee consists of the chief accountant, chief counsel in charge of international issues, the manager of the Research and Planning, the manager of the Financial Management and Control Division, and the Comptroller Division Manager, the latter entitled to voice.
They are mandated to review the quarterly reports and all financial information disclosed by the Bank prior to publication.
Executive Committee of Operational Risk : The Committee´s mission is to identify, prioritize and set strategies to mitigate major operational risk events, is responsible for ensuring compliance of the programs, policies and procedures related to Privacy and Information Security, Business Continuity and Operational Risk of Banco de Chile.
This Committee, consisting of the CEO and members of senior management of the institution, overseeing the Operational Risk Management and Technology, who has the mission to coordinate, manage, advise and carry out proper monitoring and control to the above programs. For this has the support of a PMO (Project Management Office) that tracks the process continuously.
Executive Committee of Operational Risk provides a set of operational committees hold sessions regularly, and have a particular relationship to each of the programs to implement the above policies. These correspond to: Operations Committee Business Continuity, Incident Committee on Security and Fraud Prevention, Security Operations Committee Information and Operational Risk Operational Committee.
Banco de Chile also has Privacy coordinators and Information Security coordinators , Business Continuity and Operational Risk, who under the supervision of the Executive Committee of Operational Risk are active across all areas of the Bank, enabling implementation of programs across the organization.
Internal Communications Committee: The Internal Communications Committee's mission definition and design of policies and action plans to ensure that relevant information reaches all members of the organization.
This Committee ensures that the communicated information is the necessary for each person to properly perform its functions, at the same time allows people to know the strategies and major policies of the organization know about the institution's overall performance, promote collaboration and team work, promote personal development, encourage performance excellence and promote a friendly work environment.
The Internal Communications Committee is chaired by the Division Manager Human Resources and managers also integrate the following divisions: Management and Financial Control, Operations and Technology, Commercial Banking, Corporate and Investment, Wholesale, Large Companies and Real Estate, Consumer and Development and Quality.
Other Matters of the Corporate Governance
Global Compliance: One of the most important tasks of the Global Compliance Division is the definition of internal rules, along with Fiscalía, commercial areas and operations. To this is added the verification of compliance of the regulatory requirements in order to prevent money laundering and financing terrorist. On the other hand, is in charge of the process of implementing policies and procedures defined because of the fusion between Banco de Chile and Citibank. The Division, which has responsibility for all businesses of Banco de Chile and its subsidiaries, has an independent character and reports directly to the Directors and Audit Committee.
Banco de Chile has a Policy on Prevention of Money Laundering and Terrorist Financing adopted by the Board, which includes roles and responsibilities, committee structure, decision-making processes, processes for Customer knowledge , Transaction Monitoring and report to the Financial Analysis Unit. All these procedures ensure compliance of the regulations concerning the subject matter, both Bank´s business as the Bank's subsidiaries.
In relation to this matter, Global Compliance Division focused its efforts on the continued strengthening of the existing automated monitoring process, including new alert scenarios and new types of transactions. It has also continued the process of training to all employees of the corporation.
In compliance with regulatory requirements on Customer knowledge and in line with current policies, the Division conducts an annual campaign to update the customer record. In this task participates the commercial and operational areas.
Regarding the normative compliance function, Global Compliance Division continued in 2010 with the implementation process and review of policies and procedures relating to subjects such as Personal Investment Management and Information, Code of Ethics, Fiduciary Relationships, Operational Risk, Prevention Practices contrary to probity and Model Crime Prevention under the Act on Criminal Responsibility of Legal Persons, etc.
Expenses and Remuneration of Directors: During the last year the total amount paid as remuneration to the Board, totaled $ 2,358 millions as compensation for their services and for attending meetings. Wasn´t establish any provision for pension, retirement or other similar benefit to directors or other senior executives. The Law does not establish a Compensation Committee, notwithstanding the Directors Committee must review the pay systems and compensation plans for managers and executives.