Banco de Chile is required to make annual payments until 2036 to regain a stake held as collateral by the central bank. This obligation goes back to a central bank-led bailout during the country's financial crisis at the beginning of the 1980s.
On March 17, Banco de Chile's shareholders approved distributing 70% of last year's profits, as well as capitalizing the remaining 30% by issuing paid-up no-par value shares among shareholders.
After weighing the pros and cons of the 70:30 deal, the central bank decided to go for the cash. Banco de Chile must now transfer to the central bank 122bn pesos (US$255mn), or 35.3% of last year's earnings, the press release reads.
Banco de Chile's good results in 2010 allowed the bank not only to pay 3.2mn of the country's UF inflation-linked units (or 69bn pesos) of its annual debt with the central bank, but also to allocate an additional 2.5mn UFs to the account.