A N N U A L R E P O R T G R U P O S E C U R I T Y ... - Banco Security

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6.2.3 Regulatory changes
The banking and insurance industries, in which the company participates, are regulated by state entities which are subject to possible
regulatory changes over time. However, in view of the level of transparency, the advanced level of development and the excellent
reputation of these industries at the global level, it is believed that this risk should be low.
6.3 Risks associated with the finance business
6.3.1 Credit Risk
Credit risk is conditioned by monetary policy which eventually determines customers’ repayment capacity. During the second half
of the 1990s, the banking system experienced a deterioration in credit quality in some segments, with the consequent generalized
impact on its loan portfolio. Despite this, there has been a recovery in the quality of the system’s loan portfolio in recent years which
is reflected in better risk and past-due loan ratios.
Banco Security has been characterized for consistently maintaining risk levels that are below those of the system.
6.3.2 Market Risk
The principal market risks faced by the Chilean banking system are the effects of inflation and interest-rate fluctuations. Grupo Security
has therefore developed market-risk policies, procedures and limits that enable it to manage its exposures with respect to maturities
and currencies according to its own objectives and the limits imposed by regulations, particularly the bank and its subsidiaries, and the
insurance companies have a special system for controlling interest-rate risks together with a constant monitoring of their medium and
long-term investments which enables an active follow-up of the investment portfolios.
6.3.3 Risks related to international financial market volatility
The Chilean economy and its markets are generally involved in the international markets and may be affected by external shocks. The
volatility of global financial markets and changes in global economic conditions may negatively affect the performance of the local
assets and the risk premium demanded by investors.
6.3.4 Interest-Rate Risk
As of December 31, 2008, the company shows loans at reasonable rates for the existing market conditions.
6.3.5 Exchange Risk
The policy of Grupo Security status that operations held in foreign currency with financial institutions are duly matched with sale
transactions in the same currency.
6.3.6 Commodities Risk
Grupo Security has no assets or liabilities in commodities as of December 31, 2008 and 2007.