NOTE 34
TRANSACTIONS WITH RELATED PARTIES
In addition to affiliates and associated entities, the Bank’s “related parties” include its “key personnel” from the executive staff (members of the Bank’s Board of Directors and Managers of Banco Santander Chile and its affiliates, together with their close relatives), as well as the entities over which the key personnel could exercise significant influence or control.
The Bank also considers the companies that are part of the Santander Group worldwide as related parties, given that all of them have a common parent, i.e., Banco Santander S.A. (located in Spain).
Transactions between the Bank and its related parties are specified below. To facilitate comprehension, we have divided the information into four categories:
Santander Group Companies
This category includes all the companies that are controlled by the Santander Group around the world, and hence, it also includes the companies over which the Bank exercises any degree of control (affiliates and special-purpose entities).
Associated companies
This category includes the entities over which the Bank, in accordance with section b) of Note 1 to these Financial Statements, exercises a significant degree of influence and which generally belong to the group of entities known as “business support companies.”
Key personnel
This category includes members of the Bank’s Board of Directors and managers of Banco Santander Chile and its affiliates, together with their close relatives.
Other
This category encompasses the related parties that are not included in the groups identified above and which are, in general, entities over which the key personnel could exercise significant influence or control.
The terms for transactions with related parties are equivalent to those which prevail in transactions made under market conditions or to which the corresponding considerations in kind have been attributed.
a) Loans to related parties:
Below are loans and accounts receivable as well as contingent loans that correspond to related entities:
| As of December 31, | ||||||||||||||
| 2017 | 2016 | 2015 | ||||||||||||
Companies of the Group |
Associated companies |
Key personnel |
Other | Companies of the Group |
Associated companies |
Key personnel |
Other | Companies of the Group |
Associated companies |
Key personnel |
Other | |||
| MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||
| Loans and accounts receivable: | ||||||||||||||
| Commercial loans | 80,076 | 771 | 3,947 | 7,793 | 81,687 | 533 | 4,595 | 7,100 | 77,388 | 565 | 5,841 | 1,963 | ||
| Mortgage loans | - | - | 18,796 | - | - | - | 18,046 | - | - | - | 20,559 | - | ||
| Consumer loans | - | - | 4,310 | - | - | - | 3,783 | - | - | - | 2,274 | - | ||
| Loans and accounts receivable: | 80,076 | 771 | 27,053 | 7,793 | 81,687 | 533 | 26,424 | 7,100 | 77,388 | 565 | 28,674 | 1,963 | ||
| Allowance for loan losses | (209) | (9) | (177) | (18) | (209) | (35) | (87) | (34) | (213) | (190) | (62) | (20) | ||
| Net loans | 79,867 | 762 | 26,876 | 7,775 | 81,478 | 498 | 26,337 | 7,066 | 77,175 | 375 | 28,612 | 1,943 | ||
| Guarantees | 361,452 | - | 23,868 | 7,164 | 434,141 | - | 23,636 | 5,486 | 499,803 | - | 25,493 | 1,632 | ||
| Contingent loans: | ||||||||||||||
| Personal guarantees | - | - | - | - | - | - | - | - | - | - | - | - | ||
| Letters of credit | 19,251 | - | - | 33 | 27,268 | - | - | - | 29,275 | - | - | - | ||
| Guarantees | 377,578 | - | - | - | 437,101 | - | - | - | 510,309 | - | - | 2 | ||
| Contingent loans: | 396,829 | - | - | 33 | 464,369 | - | - | - | 539,584 | - | - | 2 | ||
| Allowance for contingent loans | (4) | - | - | 1 | (5) | - | - | - | (11) | - | - | - | ||
| Net contingent loans | 396,825 | - | - | 34 | 464,364 | - | - | - | 539,573 | - | - | 2 | ||
Loan activity to related parties during 2017, 2016 and 2015 is shown below:
| As of December 31, | ||||||||||||||
| 2017 | 2016 | 2015 | ||||||||||||
| Companies of the Group | Associated companies | Key Personnel |
Other |
Companies of the Group | Associated companies | Key Personnel |
Other |
Companies of the Group | Associated companies | Key Personnel |
Other | |||
| MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||
| Opening balances as of January 1, | 546,058 | 532 | 26,423 | 7,100 | 616,968 | 565 | 28,675 | 1,966 | 500,449 | 9,614 | 27,087 | 9,516 | ||
| Loans granted | 78,214 | 318 | 7,777 | 1,050 | 122,729 | 203 | 8,580 | 6,808 | 276,383 | 7 | 8,991 | 4,113 | ||
| Loans payments | (147,366) | (79) | (7,149) | (324) | (193,189) | (236) | (10,832) | (1,674) | (159,864) | (9,056) | (7,403) | (11,663) | ||
| Total | 476,906 | 771 | 27,051 | 7,826 | 546,508 | 532 | 26,423 | 7,100 | 616,968 | 565 | 28,675 | 1,966 | ||
b) Assets and liabilities with related parties
| As of December 31, | ||||||||||||||
| 2017 | 2016 | 2015 | ||||||||||||
| Companies of the Group | Associated companies | Key personnel | Other | Companies of the Group |
Associated companies | Key personnel |
Other | Companies of the Group |
Associated companies | Key personnel |
Other | |||
| MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||
| Assets | ||||||||||||||
| Cash and deposits in banks | 74,949 | - | - | - | 187,701 | - | - | - | 23,578 | - | - | - | ||
| Trading investments | - | - | - | - | - | - | - | - | - | - | - | - | ||
Obligations under repurchase agreements Loans |
- | - | - | - | - | - | - | - | - | - | - | - | ||
| Financial derivative contracts | 545,028 | 86,011 | - | - | 742,851 | 33,433 | - | - | 771,774 | 24,773 | - | - | ||
| Available for sale investments | - | - | - | - | - | - | - | - | - | - | - | - | ||
| Other assets | 8,480 | 118,136 | - | - | 4,711 | 67,454 | - | - | 3,218 | 19,101 | - | - | ||
| Liabilities | ||||||||||||||
| Deposits and other demand liabilities | 24,776 | 25,805 | 2,470 | 221 | 6,988 | 7,141 | 2,883 | 630 | 9,987 | 8,535 | 2,454 | 1,373 | ||
Obligations under repurchase agreements Loans |
50,945 | - | - | - | 56,167 | - | - | - | 12,006 | - | - | - | ||
| Time deposits and other time liabilities | 785,988 | 27,968 | 3,703 | 3,504 | 1,545,835 | 6,219 | 2,525 | 2,205 | 1,360,572 | 234 | 2,728 | 898 | ||
| Financial derivative contracts | 418,647 | 142,750 | - | 7,190 | 954,575 | 54,691 | - | - | 1,323,996 | 23,326 | - | - | ||
| Interbank borrowing | - | - | - | - | 6,165 | - | - | - | - | - | - | - | ||
| Issued debt instruments | 482,626 | - | - | - | 484,548 | - | - | - | 398,565 | - | - | - | ||
| Other financial liabilities | 4,919 | - | - | - | 8,970 | - | - | - | 2,409 | - | - | - | ||
| Other liabilities | 164,303 | 58,168 | - | - | 446 | 44,329 | - | - | 376 | 19,541 | - | - | ||
| c) | Income (expense) recorded due to transactions with related parties |
| For the years ended December 31, | ||||||||||||||
| 2017 | 2016 | 2015 | ||||||||||||
| Companies of the Group | Associated Companies | Key personnel | Other | Companies of the Group | Associated companies | Key personnel | Other | Companies of the Group | Associated Companies | Key personnel | Other | |||
| MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | MCh$ | |||
| Income (expense) recorded | ||||||||||||||
| Interest income and inflation-indexation adjustments | (43,892) | - | 1,051 | - | (39,279) | 40 | 1,164 | 115 | (10,986) | - | 1,664 | 116 | ||
| Fee and commission income and expenses | 72,273 | 15,404 | 224 | 1 | 56,952 | 22,322 | 204 | 20 | 35,955 | 77 | 208 | 39 | ||
| Net income (expense) from financial operations and net foreign exchange gain (loss) (*) | 363,108 | (48,453) | (3) | 19 | (343,963) | (48,373) | (88) | 2 | (321,985) | (16,845) | 15 | 6 | ||
| Other operating income and expenses | 21,670 | (1,454) | - | - | 931 | (2,239) | - | - | 955 | (1,027) | - | - | ||
| Key personnel compensation and expenses | - | - | (43,037) | - | - | - | (37,328) | - | - | - | (39,323) | - | ||
| Administrative and other expenses | (48,246) | (47,220) | - | - | (35,554) | (43,115) | - | - | (30,591) | (41,691) | - | - | ||
| Total | 364,913 | (81,723) | (41,765) | 20 | (360,913) | (71,365) | (36,048) | 137 | (326,652) | (59,486) | (37,436) | 161 | ||
(*) Primarily relates to derivative contracts used to financially cover exchange risk of assets and liabilities that cover positions of the Bank and its subsidiaries.
| d) | Payments to Board members and key management personnel |
The compensation received by key management personnel, including Board members and all the executives holding manager positions shown in the “Personnel salaries and expenses” and/or “Administrative expenses” items of the Consolidated Statement of Income, corresponds to the following categories:
| For the years ended December 31, | |||||
| 2017 | 2016 | 2015 | |||
| MCh$ | MCh$ | MCh$ | |||
| Personnel compensation | 16,863 | 17,493 | 18,605 | ||
| Board members’ salaries and expenses | 1,199 | 1,269 | 1,374 | ||
| Bonuses or gratifications | 16,057 | 14,404 | 12,861 | ||
| Compensation in stock | 1,923 | 331 | 66 | ||
| Training expenses | 68 | 161 | 122 | ||
| Seniority compensation | 3,842 | 2,619 | 4,154 | ||
| Health funds | 273 | 285 | 314 | ||
| Other personnel expenses | 773 | 916 | 1,396 | ||
| Pension plans (*) | 2,039 | (150) | 431 | ||
| Total | 43,037 | 37,328 | 39,323 | ||
(*)Some of the executives that qualified for this benefit left the Group for different reasons, without complying with the requirements to receive the benefit, therefore the obligation amount decreased, which generated the reversal of provisions.
| e) | Composition of key personnel |
As of December 31, 2017, 2016 and 2015, the composition of the Bank’s key personnel is as follows:
| Position | No. of executives | ||
| As of December 31, | |||
| 2017 | 2016 | 2015 | |
| Director | 11 | 13 | 12 |
| Division manager | 13 | 17 | 16 |
| Department manager | 63 | 76 | 79 |
| Manager | 46 | 61 | 53 |
| Total key personnel | 133 | 167 | 160 |