PA - Banco Security

7) Regulatory Capital Requirement
In accordance with the Chilean General Banking Law, the Bank should have a minimum 8% effective equity/risk-weighted consolidated
assets ratio, net of required provisions, and a minimum 3% Basic Capital/Total Consolidated Assets ratio, net of required provisions. For
that purpose the effective equity is calculated based on the Equity and Reserves or the Basic Capital, with the following adjustments:
a) Junior bonds with a ceiling of 50% of the Basic Capital are added. b) The balance of assets corresponding to goodwill or markups
paid and investments in companies not participating in the consolidation are deducted.
Assets are weighted according to their risk category, to which a risk percentage is assigned depending on the amount of capital
needed to support each of the assets. Five risk categories are applied (0%, 10%, 20%, 60% and 100%). For example, cash, deposits in
other banks and financial instruments issued by the Chilean Central Bank have 0% risk, which means that, under current regulations,
no capital is needed to back up these assets. Fixed assets have a 100% risk, which means that a minimum capital equivalent to 8%
of the amount of such assets needs to be maintained.
All derivative instruments traded over the counter are considered in calculating assets at risk by using a conversion factor on notional
values, thereby obtaining the amount of exposure to credit risk (or “credit equivalent”). Off-balance sheet contingent credits are also
considered as a “credit equivalent” for weighting.
The levels of Basic Capital and Effective Equity at December 31, 2010 and 2009 are as follows:
Consolidated Assets
Risk weighted Assets
2010 2009 2010 2009
THCH$ THCH$ THCH$ THCH$
Assets (net of provisions)
Cash and banks deposits 114,409 64,852 - -
Unsettled transactions 131,111 116,161 40,022 44,463
Instruments held for trading 389,522 396,043 92,448 158,347
Repurchase agreements - 20,807 - 19,876
Derivative contacts 83,309 125,642 35,742 45,207
Interbank loans 11,325 312,431 10,022 5,507
Trade and other receivables 1,939,372 1,845,419 1,821,748 1,746,877
Instruments available for sale 278,007 484,353 117,965 122,064
Investments in assocaites - - - -
Intangible assets 621 621 621 621
Property, plant and equipment 21,755 16,124 21,755 16,124
Current taxes 22,695 22,491 22,695 22,491
Deferred taxes 650 3,021 65 1,204
Other assets 36,131 36,185 3,613 3,337
Off-balance sheet assets 115,984 67,584 115,984 67,322
Contingent loans
Créditos contingentes 252,233 142,248 151,340 85,349
Total risk weighted assets 3,397,124 3,653,982 2,434,020 2,338,789