As filed with the Securities and Exchange Commission on June 30, 2003
--------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 20-F
                               ------------------

(Mark One)
      [ ]     REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                                       OR
      [X]         ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                  For the fiscal year ended: December 31, 2002
                                       OR
      [ ]       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

               For the transition period from         to

                         Commission file number 1-14402

                   BANCO BILBAO VIZCAYA ARGENTARIA, CHILE S.A.
                           (formerly BBVA Banco BHIF)
             (Exact name of Registrant as specified in its charter)

                      BILBAO VIZCAYA ARGENTARIA, CHILE BANK
                 (Translation of Registrant's name into English)

                                      Chile
                         (jurisdiction of incorporation)

                                 Huerfanos 1234
                                 Santiago, Chile
                            Telephone: (562) 679-1000
       (address and telephone of Registrant's principal executive offices)

                    Securities registered or to be registered
                      pursuant to Section 12(b) of the Act.

                                                       Name of each exchange
Title of each class                                     on which registered
-------------------                                   -----------------------
American Depositary Shares, each representing         New York Stock Exchange
   the right to receive 10 Shares of Common
   Stock of Banco Bilbao Vizcaya Argentaria,
   Chile S.A. without par value
Shares of Common Stock of Banco Bilbao Vizcaya        New York Stock Exchange*
   Argentaria, Chile S.A. without par value

------------------
* Shares are not listed for trading, but only in connection with the
registration of American Depositary Shares pursuant to the requirements of the
New York Stock Exchange.

Securities registered or to be registered pursuant to Section 12(g) of the Act:

                                      None
                                (Title of Class)

        Securities for which there is a reporting obligation pursuant to
                           Section 15(d) of the Act:

                                      None
                                (Title of Class)

The number of outstanding shares of each class of common stock of Banco Bilbao
Vizcaya Argentaria, Chile S.A. at December 31, 2002 was:

              361,222,027 Shares of Common Stock, without par value

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                 Yes [X] No [ ]

 Indicate by check mark which financial statement item the registrant
                             has elected to follow.

                             Item 17 [ ] Item 18 [X]

--------------------------------------------------------------------------------
<PAGE>


                                TABLE OF CONTENTS


<TABLE>
                                                                                                 Page
                                                                                                 ----
<S>                                                                                               <C>
PART I
   Item 1.    Identity of Directors, Senior Management and Advisers...............................  3
   Item 2.    Offer Statistics and Expected Timetable.............................................  3
   Item 3.    Key Information.....................................................................  3
   Item 4.    Information on the Company.......................................................... 15
   Item 5.    Operating and Financial Review and Prospects........................................ 65
   Item 6.    Directors, Senior Management and Employees.......................................... 93
   Item 7.    Major Shareholders and Related Party Transactions...................................100
   Item 8.    Financial Information...............................................................102
   Item 9.    The Offer and Listing...............................................................104
   Item 10.   Additional Information..............................................................106
   Item 11.   Quantitative and Qualitative Disclosures About Market Risk..........................120
   Item 12.   Description of Securities Other than Equity Securities..............................121

PART II
   Item 13.   Defaults, Dividend Arrearages and Delinquencies.....................................121
   Item 14.   Material Modifications to the Rights of Security Holders and Use of Proceeds........122
   Item 15.   Controls and Procedures.............................................................122
   Item 16A.  Audit Committee Financial Expert....................................................122
   Item 16B.  Code of Ethics......................................................................122

PART III
   Item 17.   Financial Statements................................................................122
   Item 18.   Financial Statements................................................................122
   Item 19.   Exhibits............................................................................122
</TABLE>


<PAGE>

                      PRESENTATION OF FINANCIAL INFORMATION

     As a Chilean bank, Banco Bilbao Vizcaya Argentaria, Chile S.A. ("BBVA
Chile", and together with its consolidated subsidiaries, the "Bank" or "us" or
"we" or "ours" as the case may be) maintains its financial books and records in
Chilean pesos and prepares its consolidated financial statements in conformity
with accounting principles generally accepted in Chile ("Chilean GAAP") and the
rules of the Superintendencia de Bancos e Instituciones Financieras (the
Superintendency of Banks and Financial Institutions, which is referred to herein
as the "Superintendency of Banks") relating thereto, which together differ in
certain significant respects from accounting principles generally accepted in
the United States ("US GAAP"). References to "Chilean GAAP" in this Annual
Report are to accounting principles generally accepted in Chile, as supplemented
by the applicable rules of the Superintendency of Banks. See Note 28 to our
audited consolidated financial statements contained elsewhere in this Annual
Report (together with the notes thereto, the "Consolidated Financial
Statements") for a description of the principal differences between Chilean GAAP
and US GAAP, as they relate to us, and a reconciliation to US GAAP of net income
and shareholders' equity.

     Pursuant to Chilean GAAP, unless otherwise indicated, financial data for
all full-year periods included in the Consolidated Financial Statements and
elsewhere throughout this Annual Report have been restated in constant Chilean
pesos of December 31, 2002. See Note 1.c) to the Consolidated Financial
Statements.

     Unless otherwise specified, all references herein (except in the
Consolidated Financial Statements) to our loans are to loans and financial
leases before deduction of allowances for loan losses, and, except as otherwise
specified, all market share data presented herein is based on information
published periodically by the Superintendency of Banks. Past due loans include,
with respect to any loan, the portion of principal or interest that is 90 or
more days overdue; the entire outstanding balance of any loan is included in
past due loans only after legal collection proceedings have been commenced. This
practice differs from that normally followed in the United States where the
amount classified as past due would include the total principal and interest on
loans which have any portion overdue by 90 days or more. See "Selected
Statistical Information--Classification of Loan Portfolio Based on the
Borrower's Payment Performance".

     Unless otherwise specified, all references herein (except in the
Consolidated Financial Statements) to "shareholders' equity" as of December 31
of any year are to shareholders' equity after deducting our net income for such
year, but all references to "average shareholders' equity" for any year are to
average shareholders' equity including our net income for such year.

     Outstanding loans and the related percentages of our loan portfolio made to
middle and lower-middle income individuals and small, medium and large-size
companies in the section entitled "Business Overview" are categorized based on
the nature of the borrower. In the section entitled "Selected Statistical
Information", outstanding loans and related percentages of our loan portfolio
made up of such individual and corporate loans are categorized in accordance
with the reporting requirements of the Superintendency of Banks which are based
on the type and term of loans.

     References in this Annual Report to the Chilean financial system include
all financial institutions operating in Chile (i.e., banks and finance
companies) and references to the Chilean banking system include only banks
operating in Chile.


                                       1
<PAGE>


                           FORWARD-LOOKING STATEMENTS

     This Annual Report on Form 20-F contains statements that constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements appear throughout this Annual
Report on Form 20-F and include statements regarding our intent, belief or
current expectations, our officers or our management with respect to (i) our
asset growth and financing plans, (ii) trends affecting our financial condition
and results of operations, including the effects of the acquisition of the Bank
by Banco Bilbao Vizcaya S.A. and the merger between Banco Bilbao Vizcaya S.A.
and Argentaria S.A., (iii) the impact of competition and regulations, and
(iv) our exposure to various types of market risks, such as interest rate risk,
foreign exchange rate risk and market price risk. Forward-looking statements
include known and unknown risks and uncertainties and are indicated by words
such as "anticipate", "believe", "expect", "intend", "risk", "could", "may",
"will", "seeks", and similar words and phrases and the negatives and variations
thereof. Such forward-looking statements are not guarantees of future
performance and involve risks and uncertainties, and actual results may differ
materially from those described in such forward-looking statements in this
Annual Report on Form 20-F, including, without limitation, "Business Overview",
"Operating and Financial Review and Prospects" and "Quantitative and Qualitative
Disclosures About Market Risk".

     Some factors that could cause actual results to differ materially from
those estimated by the forward-looking statements contained in this Annual
Report on Form 20-F include, but are not limited to: general economic conditions
in Chile and Latin America and the other countries in which we have significant
business activities or investments, including the United States; the monetary
and interest rate policies of the Central Bank; inflation; deflation;
unanticipated turbulence in interest rates, foreign exchange rates, equity
prices or other rates or prices; changes in Chilean and foreign laws,
regulations and taxes; changes in competition and pricing environments; natural
disasters; the inability to hedge certain risks economically; the adequacy of
loss reserves; technological changes; changes in consumer spending and saving
habits; and our success in managing the risks involved in the foregoing.

     The forward-looking statements contained in this document speak only as of
the date of this report, and we do not undertake to update any forward-looking
statement to reflect events or circumstances after the date hereof or to reflect
the occurrence of unanticipated events.


                                       2
<PAGE>

                                     PART I


Item 1.  Identity of Directors, Senior Management and Advisers

     Not applicable.

Item 2.  Offer Statistics and Expected Timetable

     Not applicable.

Item 3.  Key Information

     A.  Selected Financial Data

     The following table presents selected consolidated and other financial and
operating information for us and certain statistical information for Chile as of
the dates and for the periods indicated. This information should be read in
conjunction with the Consolidated Financial Statements and the sections entitled
"Operating and Financial Review and Prospects" and "Selected Statistical
Information" appearing elsewhere in this Annual Report. The selected
consolidated financial information as of December 31, 2001 and 2002 and for the
years ended December 31, 2000, 2001 and 2002 has been derived from the
Consolidated Financial Statements included elsewhere in this Annual Report which
have been audited by PricewaterhouseCoopers, independent accountants. The
selected financial data as of December 31, 1998, 1999 and 2000 and for the years
ended December 31, 1998 and 1999 has been derived from the Consolidated
Financial Statements audited by PricewaterhouseCoopers that are not included in
this Annual Report.

     The Consolidated Financial Statements have been prepared in accordance with
Chilean GAAP (including the rules of the Superintendency of Banks), which differ
in certain significant respects from US GAAP. Note 28 to the Consolidated
Financial Statements provides a description of the principal differences between
Chilean GAAP and US GAAP as they relate to us and a reconciliation to US GAAP of
net income and shareholders' equity for periods and the dates covered thereby.

     The financial data in the following tables as of and for all full-year
periods through December 31, 2002 is restated in constant Chilean pesos of
December 31, 2002. See Note 1.c) to the Consolidated Financial Statements.

     Until December 31, 2001, mortgage finance bonds issued by the Bank were
considered permanent investment securities and classified under the caption
Other financial investments. On October 7, 2002, the Superintendency of Banks
issued Circular No. 3,196 which requires mortgage finance bonds issued by the
Bank to be presented net of its corresponding liability. To conform with current
year presentation, outstanding Mortgage finance bonds issued as of December 31,
2001, have also been presented net of its corresponding liability. Outstanding
mortgage finance bonds issued prior to year 2001 have been presented as in the
previous reports and have not been presented net of its corresponding liability.


                                       3
<PAGE>


<TABLE>
                                                             As of or for the Year ended December 31,
                                         -------------------------------------------------------------------------------------

                                         1998           1999            2000           2001           2002            2002
                                         ----           ----            ----           ----           ----            ----
                                               (in millions of constant Ch$ of December 31, 2002)(1)             (in thousands
                                                                                                                   of US$(2))
<S>                                         <C>            <C>             <C>            <C>            <C>             <C>
CONSOLIDATED INCOME STATEMENT
   DATA
Chilean GAAP:
Interest revenue......................      212,216        192,247         225,990        218,194        216,464         303,860
Interest expense......................     (141,787)      (112,767)       (145,911)      (124,852)      (107,450)       (150,832)
Net interest revenue..................       70,429         79,480          80,079         93,342        109,014         153,028
Provision for loan losses.............      (29,568)       (35,220)        (24,459)       (31,556)       (31,316)        (43,960)
Net interest revenue after
   provision for loan losses..........       40,861         44,260          55,620         61,786         77,698         109,068
Income from services, net.............       11,361         11,282          11,795         17,228         21,762          30,548
Other operating income, net:
   Gains (losses) on financial
     instruments, net.................          116          3,095           3,951          8,554          6,140           8,619
   Foreign exchange
     transactions, net................        4,677          2,448           1,377         (4,162)       (14,335)        (20,123)
   Recovery of loans previously
     charged off......................        3,407          4,993           7,674          7,500          9,696          13,611
   Other income and expenses, net.....         (511)        (1,589)            (15)         1,093          1,169           1,641

Operating expenses....................      (56,893)       (57,563)        (62,074)       (71,295)       (75,159)       (105,503)
Loss from price-level restatement.....       (2,509)        (2,657)         (5,388)        (4,464)        (4,164)         (5,845)
Minority interest in
   consolidated subsidiaries..........          (80)           (50)            (20)           (24)           (34)            (48)
Income before income taxes............          430          4,219          12,920         16,215         22,773          31,968
Income taxes..........................          (62)         5,401           1,984           (881)        (2,518)         (3,535)
Net income ...........................          368          9,620          14,904         15,335         20,255          28,433
Net income per Share (3)..............         1.50          33.17           48.39          42.48          56.11          0.0788
Net income per ADS (3) (4)............        15.00         331.70          483.90         424.80         561.10          0.7876
Dividends per Share ..................        36.29           1.14           30.91          43.31          42.39          0.0595
Dividends per ADS (4).................       362.90          11.40          309.10         433.10         423.90          0.5950
Weighted average shares
   outstanding (in millions)..........          245            290             308            361            361             361

US GAAP:
Interest revenue......................      211,303        191,217         225,224        217,385        215,698         302,785
Interest expense......................     (142,275)      (116,627)       (151,298)      (129,316)      (111,614)       (156,678)
Net interest revenue..................       69,029         74,591          73,926         88,069        104,084         146,107
Provision for loan losses.............      (26,393)       (30,727)        (16,887)       (24,136)       (21,637)        (30,373)
Net income (loss) ....................       (1,347)          (625)          9,510         15,620         16,917          23,747
Net income (loss) per Share (4).......        (5.50)         (2.16)          30.88          43.27          46.86          0.0658
Net income (loss) per ADS (4)(5)......       (55.00)        (21.60)         308.80         432.70         468.60          0.6578
</TABLE>


                                       4

<PAGE>


<TABLE>
                                                             As of or for the Year ended December 31,
                                         -------------------------------------------------------------------------------------

                                         1998           1999            2000           2001           2002            2002
                                         ----           ----            ----           ----           ----            ----
                                               (in millions of constant Ch$ of December 31, 2002)(1)             (in thousands
                                                                                                                   of US$(2))
<S>                                         <C>            <C>              <C>          <C>            <C>              <C>
CONSOLIDATED BALANCE SHEET DATA
Chilean GAAP:
Cash and due from banks...............      142,807        151,882          164,499      205,110        311,023          436,597
Investments...........................      157,972        319,875          495,062      390,266        645,880          906,651
Loans, net of allowance for
   loan losses........................    1,350,872      1,442,558        1,666,211    1,797,895      2,053,519        2,882,618
Other assets..........................       86,367         94,738          187,953      150,590        185,782          260,791
Total assets..........................    1,738,018      2,009,053        2,513,726    2,543,861      3,196,204        4,486,657
Deposits..............................      911,083      1,139,012        1,231,066    1,425,332      1,912,485        2,684,641
Borrowings............................      577,382        608,299          846,137      732,956        868,696        1,219,429
Other liabilities.....................       80,015         81,978          186,071      135,365        157,888          221,634
Minority interest in
   consolidated subsidiaries..........           69            127               64           88            113              159
Shareholders' equity (6)..............      169,100        170,016          235,485      234,785        236,767          332,361

US GAAP:
Total assets..........................    1,662,236      1,928,960        2,435,316    2,411,417      3,114,139        4,371,458
Shareholders' equity(7)...............      192,423        188,691          252,466      245,775        255,345          358,439
Long-term borrowings..................      435,441        436,403          415,241      401,964        452,661          635,421

CONSOLIDATED RATIOS
Chilean GAAP:
Profitability and Performance:
Net interest margin(8)................          4.68%         4.64%           4.30%          4.22%          4.46%
Return on average total
   assets(9)..........................          0.02%         0.49%           0.68%          0.59%          0.71%
Return on average shareholders'
   equity(10).........................          0.31%         5.58%           7.63%          6.28%          8.21%
Capital:
Average shareholders' equity as
   a percentage of average
   total assets.......................          6.84%         8.70%           8.95%          9.34%          8.67%
Bank regulatory capital as a
   percentage of minimum
   regulatory capital required
   (11)...............................        185.00        167.09          192.20         177.16         145.30
Basic capital to total assets.........         10.30          8.70            9.64           9.44           7.60
Total capital to risk adjusted
   assets.............................         14.80         13.40           15.40          14.17          11.62
Credit Quality:
Past due amounts/total loans(12)......          1.78%         1.77%           1.82%          2.10%          1.97%
Category B-, C and D
   loans/total loans(13)..............          3.72          5.01            5.11           4.86           4.24
Non-performing loans/total
   loans(14)..........................          3.37          3.45            3.25           3.41           2.97
Allowance for loan losses/total
   loans..............................          1.92          2.62            2.25           2.35           2.15
</TABLE>


                                       5
<PAGE>

<TABLE>
                                                             As of or for the Year ended December 31,
                                         -------------------------------------------------------------------------------------

                                         1998           1999            2000           2001           2002            2002
                                         ----           ----            ----           ----           ----            ----
                                               (in millions of constant Ch$ of December 31, 2002)(1)             (in thousands
                                                                                                                   of US$(2))
<S>                                         <C>            <C>              <C>          <C>            <C>          <C>
Allowance for loan losses/past
   due amounts(12)....................        106.39        152.09          126.00         111.93         108.99
Allowance for loan losses/
   category B-, C and D
   loans(13)..........................         51.72         52.20           43.92          48.37          50.65
Allowance for loan
   losses/non-performing
   loans(14)..........................         44.93         75.73           69.01          68.82          72.36
Past due amounts/shareholders'
   equity(6)..........................         14.69         14.98           12.90          16.46          17.46
Productivity:
Loans per employee (net of
   allowances)(Ch$)...................        801.70        828.10          918.53         959.90       1,163.47
Operating Ratios:
Operating expenses/operating
   revenue, net(15)...................         65.71         59.77           63.86          62.02          61.31
Operating expenses/average
   total assets(10)(16)...............          3.25          2.91            2.84           2.73           2.64

OTHER DATA
Inflation Rate(17)....................           4.3          2.3             4.5            2.6            2.8%
Revaluation (devaluation) rate
   (Ch$/US$)..........................           4.6         11.4             8.5           12.7            7.9
Employees.............................         1,685        1,742           1,814          1,873          1,765
</TABLE>

----------------------
(1)  Except per share and per American Depositary Share ("ADS") data,
     percentages, ratios, number of shares and number of employees.

(2)  Except per share and per ADS data, percentages and ratios. Amounts stated
     in U.S. dollars as of or for the year ended December 31, 2002 have been
     translated from Chilean pesos at the Observed Exchange Rate of Ch$712.38 =
     US$1 for December 31, 2002.

(3)  Net income per share and per ADS data under both Chilean and US GAAP have
     been calculated on the basis of the weighted average number of shares
     outstanding during the period. Shares which are not fully paid for are not
     entitled to receive dividends and have not been considered. As of December
     31, 2002, 361,222,027 shares were entitled to receive dividends.

(4)  Calculated on the basis of 10 common shares per ADS. Dividends per ADS do
     not reflect any deductions of Chilean withholding taxes or for the charges
     described in "Description of American Depositary Receipts--Charges of
     Depositary" and "Taxation".

(5)  Net income under US GAAP for the year 1998 reflects charges relating to the
     amortization of goodwill on the purchase of Banesto Chile of Ch$4,404
     million. The goodwill has been fully amortized in 1999 with charges of
     Ch$3,160 million. See Notes 1.n) and 28.1.q) to the consolidated financial
     statements.

(6)  Shareholders' equity at December 31, 1998, 1999, 2000, 2001 and 2002
     excludes net income for the year then ended, as applicable. The amounts so
     excluded are Ch$368 million, Ch$9,620 million, Ch$14,904 million, Ch$15,335
     million and Ch$20,255 million, for the years ended December 31, 1998, 1999,
     2000, 2001, and 2002 respectively.

(7)  Including the mandatory dividend described in Note 28.1.c to the
     consolidated financial statements.

(8)  Net interest revenue divided by average interest earning assets.


                                       6
<PAGE>

(9)  Net income divided by average total assets in 1998, 1999, 2000, 2001 and
     2002. Average total assets were calculated on the basis of daily balances
     of BBVA Chile and on the basis of monthly balances for its subsidiaries.

(10) Net income divided by average shareholders' equity in 1998, 1999, 2000,
     2001 and 2002. Average shareholders' equity used in the calculation
     includes our net income for the applicable period.

(11) According to the current General Banking Law, banks should have a minimum
     ratio of Total Capital to Risk Adjusted Assets of 8%, net of required
     allowances for loan losses, and a minimum ratio of Basic Capital to Total
     Assets of 3%, net of required allowances for loans losses.

(12) Past due loans include, with respect to any loan, the portion of principal
     or interest that is 90 days or more overdue; the entire outstanding balance
     of any loan is included in past due loans only after legal collection
     proceedings have been commenced.

(13) All loans in categories B-, C and D are substandard loans. See "Selected
     Statistical Information--Classification of Loan Portfolio".

(14) Non-performing loans includes loans which do not accrue interest and
     restructured loans. See "Selected Statistical Information--Classification
     of Loan Portfolio Based on the Borrower's Payment Performance".

(15) Operating expenses divided by net operating revenue. Net operating revenue
     consists of net interest revenue, income from services (net), other
     operating income (net) and other income and expenses.

(16) Average total assets were calculated as an average of the beginning and
     ending balance for each period.

(17) As measured by the percentage change in the official Consumer Price Index
     ("CPI") of the Instituto Nacional de Estadisticas (the Chilean National
     Institute of Statistics) of the previous month. Such inflation differs from
     the inflation rate used for purposes of price-level restatements of our
     financial statements, which has a one-month lag. See Note 1.c) to the
     Consolidated Financial Statements.

Exchange Rates

     In this Annual Report on Form 20-F, references to "$", "US$", "U.S.
dollars" and "dollars" are to United States dollars, references to "pesos" or
"Ch$" are to Chilean pesos and references to "UF" are to Unidades de Fomento.
The UF is an inflation-indexed Chilean monetary unit with a value in Chilean
pesos that changes daily to reflect changes in the official Consumer Price Index
("CPI") of the Instituto Nacional de Estadisticas (the Chilean National
Institute of Statistics) of the previous month. See Note 1.c) to the
Consolidated Financial Statements.

     This Annual Report on Form 20-F contains translations of certain Chilean
peso amounts into U.S. dollars at specified rates solely for the convenience of
the reader. These translations should not be construed as representations that
the Chilean peso amounts: (i) actually represent such U.S. dollar amounts, (ii)
were converted from U.S. dollars at the rate indicated in preparing the
Consolidated Financial Statements, (iii) could be converted into U.S. dollars at
the rate indicated or (iv) were converted at all. Unless otherwise indicated,
such U.S. dollar amounts, in the case of information concerning BBVA Chile as of
and for the years ended December 31, 1999, 2000 and 2001, have been translated
from Chilean pesos based on the Observed Exchange Rate (as defined herein)
reported by the Banco Central de Chile (the "Central Bank") on December 31,
2002, which was Ch$712.38 per US$. The rate reported by the Central Bank on
December 31, 2002 is based upon the actual exchange rate of December 30, 2002
and is the exchange rate specified by the Superintendency of Banks for use by
Chilean banks in the preparation of their financial statements for the period
ended December 31, 2002. The Federal Reserve Bank of New York does not report a
noon buying rate for Chilean pesos.

     Since the enactment of the Chilean Central Bank Act in 1989, any person may
freely buy and sell foreign exchange. The Central Bank, however, may require
that certain purchases and sales of foreign exchange specified by law must be
carried out exclusively in the Mercado Cambiario Formal (the "Formal Exchange
Market"), may impose restrictions on foreign exchange transactions, and may
intervene in the Formal Exchange Market purchasing and selling foreign currency.


                                       7
<PAGE>


     The Formal Exchange Market is formed by local banks and other entities so
authorized by the Central Bank. Authorized transactions are generally carried
out at spot rates. The daily observed exchange rate "dolar observado" (the
"Observed Exchange Rate") is, for any date, the average exchange rate of
transactions in the Formal Exchange Market on the previous day, as certified and
published by the Central Bank on the banking day immediately following such day.

     For purposes of the operation of the Formal Exchange Market and until
September 1999, authorized transactions by banks were generally transacted
within a certain band above or below that of a reference exchange rate. The
reference exchange rate (dolar acuerdo) (the "Reference Exchange Rate") was
reset monthly by the Central Bank, taking internal and external inflation into
account, and was adjusted daily to reflect variations in parities among the U.S.
dollar, the Japanese yen and the Euro in the international markets. The
Reference Exchange Rate is the rate at which the Central Bank carried out its
foreign exchange operations. In order to maintain the average exchange rate
within such limits, the Central Bank intervened by selling and buying foreign
currencies on the Formal Exchange Market.

     On September 2, 1999, the Central Bank resolved to eliminate the exchange
rate band as an instrument of exchange rate policy, introducing more flexibility
to the exchange market. At the same time, the Central Bank announced that an
intervention in the exchange market by buying or selling foreign exchange on the
Formal Exchange Market would take place only in special and qualified cases.

     Purchases and sales of foreign exchange may be effected outside the Formal
Exchange Market, through the Mercado Cambiario Informal (the "Informal Exchange
Market"), which is a recognized currency market in Chile. The Informal Exchange
Market reflects the supply and demand for foreign currency by entities not
authorized to operate in the Formal Exchange Market, such as stock brokers,
travel agencies and others. There are no limits imposed on the extent to which
the rate of exchange in the Informal Exchange Market can fluctuate above or
below the Observed Exchange Rate. We estimate that since 1991, the year-end rate
of exchange for Chilean pesos into dollars on the Informal Exchange Market has
fluctuated between approximately 1.0% below and 5.0% above the Observed Exchange
Rate. As of December 30, 1998, the rate of exchange for Chilean pesos into U.S.
dollars on the Informal Exchange Market was 0.27% below the Observed Exchange
Rate, 1.1% above the Observed Exchange Rate as of December 31, 1999, 0.21% above
the Observed Exchange Rate as of December 31, 2000, and 0.7% above the Observed
Exchange Rate as of December 31, 2001. As of December 31, 2002, the Informal
Exchange Market was 1.1% above the Observed Exchange Rate.

     The following table sets forth for each of the last five years, the annual
low, high, average and year-end Observed Exchange Rates for dollars as reported
by the Central Bank. No representation is made that the Chilean peso or the
dollar amounts referred to herein actually represent, could have been or could
be converted into dollars or Chilean pesos, as the case may be, at the rates
indicated, at any particular rate or at all.

                            ----------------------------------------------------
                                Observed Exchange Rates of Ch$ per US$1.00
                            ----------------------------------------------------
                            Low(1)      High(1)         Average        Year-End
                            ------      -------      --------------    --------
Year
1998....................    439.18      475.41        460.29   (2)     473.77
1999....................    468.69      550.93        508.78   (2)     527.70
2000....................    501.04      580.37        538.87   (2)     572.68
2001....................    557.13      716.62        633.69   (2)     656.20
2002....................    641.75      756.56        689.24   (3)     712.38
Months
   December 2002........    692.94      712.38        701.95   (3)
   January 2003.........    709.22      738.87        722.48   (3)
   February 2003........    733.10      755.26        745.21   (3)
   March 2003...........    725.79      758.21        743.28   (3)
   April 2003...........    709.32      731.56        718.58   (3)
   May 2003.............    694.22      713.73        703.58   (3)

----------------------


                                       8
<PAGE>

Source: Central Bank

(1)  Exchange rates are for the actual low and high days for each period.

(2)  The average of monthly average rates during the period.

(3)  The average of daily average rates during the period. The Observed Exchange
     Rate reported by the Central Bank on December 27, 2002 was Ch$712.38 =US$1
     and on June 30, 2003 was Ch$707.19 =US$1.

     B.  Capitalization and Indebtedness

     Not applicable.

     C.  Reasons for the Offer and Use of Proceeds

     Not applicable.

     D.  Risk Factors

     You should consider the following risks with respect to an investment in
our company and investments in Chilean corporations that are not normally
associated with investments in securities of issuers in the United States and
other jurisdictions.

   OUR GROWTH, ASSET QUALITY AND PROFITABILITY MAY BE AFFECTED BY VOLATILE
MACROECONOMIC CONDITIONS IN CHILE.

     All of our operations are conducted and substantially all of our customers
are located in Chile. Accordingly, our ability to recover on our loans and our
financial condition and results of operations are substantially dependent on
economic conditions prevailing from time to time in Chile, particularly in those
segments of the retail and corporate markets in which our business is primarily
focused. During the first three months of 2003, the Chilean economy is estimated
to have grown 3.5% as compared to the first quarter of year 2002. While the
Chilean economy has experienced growth as evidenced by annual increase in
Chile's gross domestic product ("GDP") of 6.6%, 3.2%, -0.8%, 4.2%, 3.1% and
2.1%, respectively, for the years 1997 through 2002, and an average annual
increase of 2.4% over the ten year period 1993-2002, there can be no assurance
that such annual growth will continue in the future. Future developments in the
Chilean economy could impair our ability to proceed with our business
strategies, our financial condition or our results of operations. Our financial
condition and results of operations could also be adversely affected by changes
in economic or other policies of the Chilean government, which has been
exercising substantial influence over many aspects of the private sector, or
other political or economic developments in or affecting Chile, as well as
regulatory changes or administrative practices of Chilean authorities, over
which we have no control. See "Chilean Regulation and Supervision".

     In addition, our financial condition and results of operations could be
affected by changes in the level of economic activity in other Latin American
countries as well as countries outside Latin America, as a significant portion
of our loans are to finance Chilean foreign trade. Although economic conditions
are different in each country, investor reaction to developments in one country
can have significant effects on the economic environment in other countries,
including Chile. For example, political and economic developments in December
1994 and early 1995 in Mexico, the economic crisis in several Asian nations in
the second half of 1997 and the Brazilian Real devaluation on January 12, 1999,
have had a negative impact on the financial and securities markets in many
emerging market countries, including Chile. The Mexican currency crisis and its
aftermath had a negative impact on emerging markets generally, including Chile,
although in Chile the impact was negligible, mainly a temporary decrease in
Chilean exports to Mexico from US$212 million in 1994 to US$132 million in 1995,
while total Chilean exports increased from US$11,604 million in 1994 to
US$16,039 million in 1995. The economic crisis in several Asian nations in the
second half of 1997 had a significant negative impact on the Chilean economy, on
two levels. First, it affected negatively our terms of exchange, driving the
price of our exports (and particularly the price of copper) to their lowest
level in many years; second, it invited speculative activity towards the Chilean
peso, thus causing a marked increase in local interest rates and, consequently,
causing a decrease in the GDP growth from levels around 7%, sustained over most
of the 90's, to a negative growth of around 1% in 1999. The recovery of the


                                       9
<PAGE>

economy has been slow, and has been affected by the Brazilian Real devaluation
on 1999 and by the recent Argentine crisis. The most visible effect of the
latter crisis has been a sustained devaluation of the local currency during most
of 2001, a process that started to reverse itself slowly but steadily since
November 2001. Inflation has remained low due to the reduced economic activity.

     ALTHOUGH CHILE HAS A HISTORY OF MODERATE INFLATION, THERE IS A RISK THAT WE
COULD EXPERIENCE INFLATIONARY PRESSURES WHICH WOULD HAVE AN ADVERSE IMPACT ON
OUR BUSINESS.

     The annual rate of inflation (as measured by changes in the CPI and as
reported by the Chilean National Institute of Statistics) in 1997, 1998, 1999,
2000, 2001 and 2002 was 6.0%, 4.7%, 2.3%, 4.5%, 2.6% and 2.8%, respectively.
Within this context, the Central Bank changed its reference interest rate from
a real interest rate definition to a nominal definition. Thus, on July 26, 2001,
this rate was changed from a 3.5% real interest rate to a 6.5% nominal interest
rate, assuming a 3% inflation for the year. From then on, the reference rate has
been expressed in nominal terms.

     The reduced level of inflation (by local standards) is explained by a low
level of consumer expenditures as well as by the decreasing dollar prices of
imported consumer goods. This moderate inflationary trend allowed the Central
Bank to reduce the reference interest rate eight times during the year 2002,
bringing it from 6.5% in January to 3.0% at the end of the year. The downward
trend was immediately followed (and at times anticipated) by the interest rate
on long term instruments from the Central Bank.

     Inflation for the twelve months ended March 31, 2003 was 4.5%. Although
Chilean inflation has proved moderate in recent years, in the past Chile has
experienced high levels of inflation. A return to high levels of inflation in
Chile could adversely affect the Chilean economy and have an adverse impact on
our business and results of operations. There can be no assurance that Chilean
inflation will not change significantly from the current level. See "Operating
and Financial Review and Prospects--Inflation".

     Although we currently benefit from inflation in Chile due to the structure
of our assets and liabilities (i.e., a significant portion of our deposits are
not indexed to the inflation rate and do not accrue interest (such as checking
accounts, the majority of which do not earn interest), and a significant portion
of our loans are indexed to the inflation rate), there can be no assurance that
our operating results in the future will not be adversely affected by changing
levels of inflation or by changes in the Chilean regulations such as the one
allowing payment of interest on deposit accounts, which became effective June 1,
2002.

     BECAUSE ECONOMIC STABILITY IN CHILE HAS DEPENDED, TO SOME EXTENT, ON THE
STABILITY OF THE EXCHANGE RATE, A POLITICAL DECISION TO MODIFY THE CURRENT
STATUS OF THE REGULATION COULD HAVE AN ADVERSE EFFECT ON THE ECONOMY AND OUR
PROFITABILITY.

     The Chilean peso has been subject to large nominal devaluations in the past
and may be subject to significant fluctuations in the future. In the five-year
period ended December 31, 2002, the value of the Chilean peso relative to the
U.S. dollar decreased approximately 60% in nominal terms and approximately 5% in
real terms, based on the Observed Exchange Rates for U.S. dollars on December
31, 1997 and December 31, 2002. See "Exchange Rates". Our results of operations
have not been significantly affected by fluctuations in the exchange rates
between the Chilean peso and the dollar because of our policy and Chilean
regulations relating to the control of material exchange transactions. At March
31, 2003, we had a net foreign currency exposure of Ch$15,493 million (US$21.3
million), equal to 6.0% of our capital and reserves (below the 20% permitted
under regulations of the Superintendency of Banks) See "Operating and Financial
Review and Prospects--Exchange Rate Risk". No assurance can be given that our
policy or the regulations will continue. In the absence of this policy and
regulations, and in the event of a devaluation of the Chilean peso, the
financial condition and results of operations of Chilean companies, including
us, and the ability of the Chilean companies to meet their obligations in
foreign currencies, could be adversely affected. The Chilean government's
economic policies and future fluctuations in the value of the Chilean peso
against the U.S. dollar could adversely affect our operating results.


                                       10
<PAGE>


     OUR CUSTOMER BASE IS PARTICULARLY SENSITIVE TO ADVERSE DEVELOPMENTS IN THE
CHILEAN ECONOMY, WHICH RENDERS OUR LENDING ACTIVITIES RELATIVELY RISKIER THAN
LENDING TO HIGHER-INCOME CUSTOMERS.

     We have developed our lending business with particular emphasis on the
Personal Banking and Corporate Banking divisions, although restricted by
conservative risk policies. At December 31, 2002, those divisions accounted for
67.4% of our loan portfolio (excluding contingent and past due loans). Adverse
changes affecting any of the above mentioned sectors is likely to have a
significant adverse impact on our loan portfolio and, as a result, on our
financial condition and results of operations.

     A significant part of our customers consists of :

          o    large and corporate  companies, with annual sales over US$10
               million; and

          o    individual customers in all income segments, most of them
               customers with monthly income between Ch$200,000 (US$350) and
               Ch$1.5 million (US$2,600).

     Medium and small-size companies and middle and lower-middle income
individuals typically have less financial strength and accordingly can be
expected to be more adversely affected by adverse developments in the Chilean
economy than large companies and high income individuals. As a result, it is
generally accepted that lending to these segments of our existing customer base
represents a relatively higher degree of risk than lending to other groups.

     Important features of our strategy are to increase lending and the
provision of other services through cross-sales, and to gain new customers in
every customer segment, particularly in the upper income and corporate segments.
Consequently, though we may experience higher levels of past due amounts which
could result in higher levels of allowance for loan losses, the probability is
lower than in previous years since we have reduced the proportion that the more
vulnerable segments represent in our portfolio. Moreover, we believe that the
net interest margins on lending to the lesser income groups more than compensate
for the higher risk. We also believe that our experience in making loans to
these groups gives us an advantage over our competitors in identifying the less
risky customers in these groups, since we have historical evidence of the
factors that correlate with good payment behavior. However, we cannot assure you
that we will not suffer substantial adverse effects on our base portfolio in the
event of adverse developments in the Chilean economy.

     SIGNIFICANT  COMPETITION  AS A RESULT OF THE LIMITED  BARRIERS TO ENTRY AND
CONTINUED  CONSOLIDATION  OF THE CHILEAN BANKING  INDUSTRY COULD INTENSIFY PRICE
COMPETITION AND LIMIT OUR ABILITY TO INCREASE MARKET SHARE.

     Because Chilean regulations do not impose barriers to entry into the
Chilean market and do not restrict capital movements, we face significant
competition from both domestic and foreign commercial and investment banks. The
regulatory framework in the Chilean financial system has led to increased
consolidation both in the universal bank sector and in the sectors of financial
institutions specializing in specific products or markets. Concentration, as
measured by the participation of the 10 major banks in total deposits, increased
from 72.4% at December 31, 1998 to 76.0% at December 31, 2002. The increase in
concentration occurred mainly in 2002, when Banco Chile merged with Banco
Edwards and Banco Santander merged with Banco Santiago.

     Consolidation in the Chilean market has given the opportunity to other
competitors to increase their branch network and gain proximity to compete for
banking penetration. Traditional competitors with international name recognition
and easy access to financial and technical resources made the market more
competitive, thereby constraining our growth strategy.

     Furthermore, we also face competition from non-bank competitors, such as:

     o    department stores (for some credit products);

     o    leasing companies;


                                       11
<PAGE>

     o    factoring companies;

     o    mutual funds;

     o    pension funds; and

     o    insurance companies.

     Such competitors generally enjoy regulatory advantages vis-a-vis banks. The
banking rules subject banks like us to the more stringent capital requirements
described in "Chilean Regulation and Supervision". Our advertising and promotion
is also subject to stricter transparency requirements, which compel banks to
disclose in fine print the total financial cost of the bank products they
advertise. For more details regarding our competitive position, see "Business
Overview--Competition".

     A REVERSAL IN THE RATE OF GROWTH OF THE  CHILEAN  ECONOMY  COULD  ADVERSELY
AFFECT THE RECENT  GROWTH OF OUR LOAN  PORTFOLIO  AND INCREASE THE POTENTIAL FOR
REQUIREMENTS OF ALLOWANCES FOR LOAN LOSSES.

     During the period from 1997 through 2002, the volume of our loans has grown
at an average annual rate of 11.3%, from Ch$1,341,730 million at December 31,
1997 to Ch$2,098,564 million at December 31, 2002. Our portfolio grew
approximately 2.3% to Ch$2,145,762 million at March 31, 2003 from Ch$2,098,564
million at December 31, 2002. The growth in our loan portfolio during these
periods can be attributed generally to the continued growth of the Chilean
economy, an increased level of savings and investment, and to our increased
efforts in commercial activity and creativity, which enabled us to gain market
share. During 2002, the volume of our loans grew by 14.0% principally as a
result of our branch network expansion in previous years, of marketing
campaigns, and mostly of the launching of innovative and convenient new
products. No assurance can be given that the trends described will continue in
the future. A reversal in the rate of growth of the Chilean economy could
adversely affect the rate of growth of the our portfolio and its risk index and,
accordingly, increase the amount of allowance for loan losses it is required to
maintain. Also, the further expansion in our loan portfolio may expose us to a
higher level of loan losses and require us to establish higher levels of
allowance for such losses. See "Loans" and "Risk Index".

   OUR LOAN PORTFOLIO IS CONCENTRATED IN CERTAIN SECTORS.

     We have developed our lending business with particular emphasis in the
residential mortgage, foreign trade and business segments. At March 31, 2003,
those segments accounted for 67.8% of our loan portfolio (excluding contingent
and past due loans). See "Selected Statistical Information--Analysis of our Loan
Classifications". The quality of our loan portfolio is dependent on domestic
economic conditions affecting medium and small-size companies and the middle and
lower-middle income segments of the population, as well as on international
economic conditions affecting Chile's foreign trade. Adverse changes affecting
any of the above mentioned sectors is likely to have an adverse impact on our
loan portfolio and, as a result, on our financial condition and results of
operations.

   OUR BUSINESS IS PARTICULARLY VULNERABLE TO VOLATILITY IN INTEREST RATES.

     Our results of operations are substantially dependent upon the level of our
net interest income, which is the difference between interest income from
interest-earning assets and interest expense on interest-bearing liabilities.
Interest rates are highly sensitive to many factors beyond our control,
including deregulation of the financial sector, monetary policies, domestic and
international economic and political conditions and other factors.

     Changes in market interest rates could affect the interest rates charged on
the interest-earning assets differently from the interest rates paid on
interest-bearing liabilities. This difference could result in an increase in
interest expense relative to interest income leading to a reduction in our net
interest income. Income from treasury operations is particularly vulnerable to
interest rate volatility. Rising interest rates may also bring about an
increasing non-performing loan portfolio.


                                       12
<PAGE>

     SINCE OUR PRINCIPAL SOURCES OF FUNDS ARE SHORT-TERM DEPOSITS, A SUDDEN
SHORTAGE OF FUNDS COULD CAUSE AN INCREASE IN OUR COSTS OF FUNDING AND AN ADVERSE
EFFECT ON OUR OPERATING REVENUES.

     Historically, funding in Chile has been short-term, being today's average
funding duration approximately 80 days. Consistent with this funding structure,
our principal sources of funds have traditionally been short-term savings,
certificates of deposit and demand deposits. Since we rely heavily on short-term
deposits for our funding, we cannot assure you that, in the event of a sudden or
unexpected shortage of funds in the banking systems and money markets in which
we operate, we will be able to maintain our levels of funding without incurring
higher funding costs or the liquidation of certain assets.

     At December 31, 2002, 94.8% of our time deposits were in amounts greater
than Ch$25 million (US$35,000). Time deposits have represented 71.9%, 73.2% and
73.05% of total funding from clients at the end of 2000, 2001 and 2002,
respectively. Large-denomination time deposits may, under some circumstances, be
a less stable source of deposits. However, our management believes that, by
having 69.3% of our time deposits coming from individuals, and by having 8,329
clients with large-denomination deposits, we enjoy greater bargaining power
vis-a-vis this type of customer, which would allow us to adjust our lending
rates to a sudden increase in our funding costs. Therefore, we believe we are
well positioned to deal with the risks associated with these time deposits.

     SIGNIFICANT  COMPETITION  AS A RESULT  OF  LIMITED  BARRIERS  TO ENTRY  AND
CONTINUED  CONSOLIDATION  OF THE CHILEAN BANKING  INDUSTRY COULD INTENSIFY PRICE
COMPETITION AND LIMIT OUR ABILITY TO INCREASE OUR MARKET SHARE.

     The Chilean market for financial services is highly competitive. We compete
with other Chilean private banks, and with BancoEstado, that make consumer
credit available to an important portion of the Chilean population. The upper
and upper-middle income segments of the Chilean population and the corporate and
large companies have become the target of several banks and competition in those
segments is likely to increase. Accordingly, net interest margins are likely to
be subject to greater pressure. Although we believe that demand for financial
products and services from all income segments of the population and for
companies of all sizes will continue to grow during the remainder of the decade,
no assurance can be given that net interest margins will continue at present
levels.

     The Chilean banking industry has experienced competition in recent years,
which has led to, among other things, consolidation in the industry. We expect
the trends of increased competition and consolidation to continue, and result in
the formation of new large financial groups. Recently, Banco Edwards was merged
into Banco de Chile, allowing the latter to reach a 18.6% loan market share, and
Banco Santiago merged with Banco Santander, a merger that created the largest
bank in Chile (24.4% loan market share). See "Operating and Financial Review and
Prospects--Competition".

     A DISPOSITION OF OUR SHARES BY OUR PRINCIPAL  SHAREHOLDERS  COULD ADVERSELY
AFFECT THE TRADING PRICE OF OUR SHARES AND ADS.

     We are controlled by BBVA and as of December 31, 2002, BBVA controlled
65.55% of the outstanding shares. See "Major Shareholders and Related Party
Transactions--Principal Shareholders". A disposition by BBVA or the other
significant shareholders, or by entities controlled by any of them, of a
significant portion of the shares of our common stock (the "Common Shares"), or
the perception that such a disposition may occur, could adversely affect the
trading price of the Shares on the Chilean Stock Exchanges (and, consequently,
the trading prices of the ADS) and could affect our control. See "Major
Shareholders".

     THE RELATIVE ILLIQUIDITY AND VOLATILITY OF CHILEAN SECURITIES MARKETS COULD
ADVERSELY AFFECT THE PRICE OF BBVA CHILE ADS AND THE COMMON SHARES.

     The Chilean securities markets are substantially smaller and less liquid
than the major securities markets in the United States. In addition, the Chilean
securities markets may be affected materially by developments in other emerging
markets, particularly other countries in Latin America. The low liquidity of the
Chilean market may impair the ability of holders of ADS to sell Shares withdrawn
from the ADS program into the Chilean market in the amount and at the price and
time they wish to do so.


                                       13
<PAGE>

     The current Argentine crisis may also affect foreign investors' risk
perception of investing in Chile. After prolonged periods of recession, followed
by political instability, Argentina in 2001 announced that it would not service
its public debt. In order to address the worsening economic and social crisis,
the Argentine government abandoned its decade-old fixed US dollar/ Chilean peso
exchange rate and created a floating exchange rate regime in January 2002.
Argentina is a trading partner of Chile, and the continuation of the Argentine
crisis could affect the revenues and profitability of companies with ties to
Argentina.

     CHILEAN CONTROLS ON FOREIGN INVESTMENT AND REPATRIATION OF INVESTMENTS AND
CHILEAN WITHHOLDING TAX REQUIREMENTS ARE RELATIVELY ONEROUS.

     Equity investments in Chile by persons who are not Chilean residents are
generally subject to various exchange control regulations that govern the
repatriation of the investments and earnings therefrom. Holders of the ADS and
The Bank of New York ("the Depositary") have the benefit of a contract, the
"Foreign Investment Contract" among the Depositary, us and the Central Bank. See
"The Central Bank". The Foreign Investment Contract grants the Depositary and
the holders of the ADSs access to Chile's Mercado Cambiario Formal, the "Formal
Exchange Market", permits the Depositary to remit dividends it receives from
BBVA Chile to the holders of ADSs and permits the holders of ADSs to repatriate
the proceeds of the sale of the Shares withdrawn from the ADS facility thereby
enabling them to acquire on more favorable terms the foreign exchange necessary
to repatriate investments in the Shares and earnings therefrom. See "Chilean Tax
Considerations". Pursuant to current Chilean law, the Foreign Investment
Contract may not be amended unilaterally by the Central Bank, and there are
judicial precedents (which are not binding with respect to future judicial
decisions) indicating that a contract such as the Foreign Investment Contract
may not be abrogated by future legislative changes. Owners of the ADSs will be
entitled to receive dividends on our underlying shares to the same extent as the
holders of Common Shares. Dividends received by holders of ADS will be paid in
U.S. dollars net of foreign currency exchange fees and expenses of the
Depositary and will be subject to Chilean withholding tax, currently imposed at
a rate of 35% (subject to credits in certain cases as described under
"Taxation"). See "Taxation--Chilean Tax Considerations".

     A SIGNIFICANT CHANGE IN THE CHILEAN ECONOMIC LIBERALIZATION AND
DEREGULATION POLICIES COULD DISRUPT OUR BUSINESS AND CAUSE MATERIAL ADVERSE
EFFECTS.

     We are subject to regulation by the Central Bank and the Superintendency of
Banks. During the Chilean financial crisis of 1982 and 1983, the Central Bank
and the Superintendency of Banks strictly controlled the funding, lending and
general business activities of the banking industry in Chile. See "Central Bank
Subordinated Debt" and "Chilean Regulation and Supervision".

     Pursuant to an amendment to the Chilean General Banking Law enacted on
November 4, 1997, all Chilean banks may engage in additional businesses
depending on the strength of the bank and the approval by the Superintendency of
Banks of a feasibility study. Such businesses include offering commercial
banking services outside of Chile and providing factoring, underwriting,
transportation of securities, financial services, leasing, direct financial
advising services and securitisation products. See "Chilean Regulation and
Supervision--Other Businesses". The Chilean General Banking Law also applies a
modified version of the capital adequacy guidelines issued by the Basle
Committee on Banking Regulation and Supervisory Practices (the "Basle
Committee") to the Chilean banking system and limits the discretion of the
Superintendency of Banks to deny new banking licenses. There can be no assurance
that regulators will not in the future impose more restrictive limitations on
the activities of banks, including us, than those that are currently in effect.
Any such change could have a material adverse effect on our business, financial
condition and results of operations.

     BECAUSE THE CHILEAN FINANCIAL SYSTEM HAS DIFFERENT CORPORATE DISCLOSURE AND
ACCOUNTING STANDARDS FROM THE U.S., OUR FINANCIAL STATEMENTS MAY NOT GIVE YOU
THE SAME INFORMATION AS FINANCIAL STATEMENTS PREPARED UNDER THE U.S. ACCOUNTING
RULES.

     As a regulated financial institution, we are required to submit unaudited
unconsolidated balance sheets and income statements prepared in accordance with
Chilean GAAP to the Superintendency of Banks on a monthly basis. This
information is subsequently made public by the Superintendency of Banks within
approximately one month of


                                      14
<PAGE>

receipt.  Such unaudited  financial  information is prepared in summary form, is
not sent directly to our shareholders and differs in other significant  respects
from information  generally  available in the United States with respect to U.S.
financial institutions.

     The securities laws of Chile, which govern open or publicly listed
companies such as us, impose disclosure requirements that are more limited than
those in the United States in certain important respects. In addition, although
Chilean law imposes restrictions on insider trading and price manipulation, the
Chilean securities markets are not as highly regulated and supervised as the
U.S. securities markets.

     There are also important differences between Chilean and U.S. accounting
and financial reporting standards. As a result, Chilean financial statements and
reported earnings generally differ from those reported based on U.S. accounting
and reporting standards. See Note 28 to the Audited Consolidated Financial
Statements.

     OUR BY-LAWS HAVE FEWER AND LESS WELL-DEFINED SHAREHOLDERS' RIGHTS AS
COMPARED TO THE BY-LAWS OF A U.S. CORPORATION.

     Our corporate affairs are governed by our estatutos (the "By-laws"), which
function as our articles of incorporation and our by-laws, and by the laws of
Chile. See "Description of By-laws". Under such laws, our shareholders may have
fewer or less well-defined rights than they might have as shareholders of a
corporation incorporated in a U.S. jurisdiction. For example, under legislation
applicable to Chilean banks our shareholders would not be entitled to appraisal
rights in the event of a merger or other business combination undertaken by us.
See "Description of By-Laws--Shareholders' Meetings and Voting Rights".


Item 4.  Information on the Company

     A.  History and Development of the Company

   Banco Bilbao Vizcaya Argentaria

     Banco Bilbao Vizcaya Argentaria S.A. ("BBVA") financial group resulted from
the merger between Banco Bilbao Vizcaya S.A. ("BBV") and Argentaria S.A.,
formerly a Spanish retail banking, asset management and insurance provider, that
took place in December, 1999. The merger was a strategic response to the
economic environment, where size is a fundamental competitive factor for
achieving sustainable gains. BBVA has over 27 million clients and a presence in
37 countries with 7,504 offices and approximately 93,093 employees throughout
the world.

     BBVA is a global banking organization with a presence in the following
businesses: retail banking, wholesale banking, European banking, Latin American
banking, asset management and private banking, investment banking, industrial
group, insurance, and e-business, among others.

     Our integration into the BBVA Group has provided us with tangible benefits
including the following: (i) sharing of technology; (ii) expanding range of
banking products and services that can better serve the Chilean market; (iii)
BBVA's global client relationships to serve those clients operating in Chile;
and (iv) broad financial support from a powerful shareholder whose investment in
us is both long-term and strategic.

   The Acquisition

     On September 24, 1998, BBVA (then BBV), obtained a 55% controlling stake in
us through: (i) the acquisition of 40,637,415 of our shares for an aggregate
price of Ch$20,821,157,368 (historical pesos) and (ii) the subscription of
158,034,393 of our newly-issued shares that were issued in accordance with the
shareholders' resolution passed at the Extraordinary Shareholders' Meeting held
on August 21, 1998. BBVA undertook these transactions in accordance with a
subscription and share purchase agreement, which had been entered into by BBVA
and the former principal shareholders on June 18, 1998. In addition, pursuant to
such agreement, BBVA and the former principal shareholders entered into a
separate agreement, which governs our future administration. The former
principal shareholders also entered into an agreement among themselves with
respect to our future administration.


                                       15
<PAGE>

See "Major  Shareholders--Principal  Shareholders".  On March 25,  1999,  our
shareholders voted to change our name from Banco BHIF to BBV Banco BHIF.

     As a result of the merger between BBV and Argentaria that took place in
December 31, 1999, on May 17, 2000 our shareholders voted to change our name
from BBV Banco BHIF to BBVA Banco BHIF. On March 17, 2003, our shareholders
voted to change our name to Banco Bilbao Vizcaya Argentaria, Chile S.A.

   Overview

     Banco Bilbao Vizcaya Argentaria, Chile S.A. is a Chilean private commercial
bank incorporated on September 22, 1883 under Chilean General Banking Law. We
provide a wide range of financial products and services to the retail and
corporate banking markets throughout Chile. We are domiciled in Chile and our
principal executive office is located at Huerfanos 1234, Santiago, Chile. Our
telephone number is 56-2-679-1000. Our agent in the United States for U.S.
federal securities law purposes is the office of BBVA in New York, 1345 Avenue
of the Americas, 45th Floor, New York, NY 10105. BBVA's telephone number is
(212) 728-1660.

     We conduct our business through our 78 full-service branches, two
limited-service branches, 64 pension payment centers and seven subsidiaries. Our
business activities are targeted principally at high, middle and lower-middle
income individuals and large, medium and small-size companies. At December 31,
2002, we had assets of Ch$3,196,204 million (US$4,487 million), total deposits
of Ch$1,912,485 million (US$2,685 million), and shareholders' equity of
Ch$257,022 million (US$360.8 million), including our net income for the year
ended December 31, 2002, which was Ch$20,255 million (US$28.4 million). This
resulted in a return on average shareholders' equity of 8.21% and a return on
average total assets of 0.71%. See "Key Information--Selected Financial Data".

     Our retail banking business includes products such as residential mortgage
lending, the extension of other personal loans (including consumer loans),
automobile financing and credit cards, and services such as electronic banking,
custodial arrangements and foreign exchange transactions. Our corporate banking
business includes the extension of credit to small, medium and large-size
companies in the form of commercial loans, working capital lines of credit,
trade financing and other products and services such as payment services and
assistance to medium and small-size companies in connection with foreign trade
operations. This business is conducted through our Corporate and Business
Banking Divisions.

     Through our branches and pension payment centers, we offer the
aforementioned products and services as well as payment and cash management
services to, and take deposits from, our customers. In addition, we make
electronic and phone banking services available to our customers on a 24-hour
basis. At December 31, 2002, we had 1,770 employees.

     We, through our subsidiaries, BBVA BHIF Brokerage, BHIF Advisory, BHIF
Residential Housing Fund Manager, BBVA BHIF Residential Leasing, BHIF Closed End
Fund Manager, BBVA BHIF Mutual Fund Manager and BBVA BHIF Insurance Brokerage,
are becoming increasingly active in the Chilean financial leasing, securities
and insurance brokerage, financial advisory services, investment fund
management, residential housing fund management, residential leasing and mutual
fund markets. See "Business Overview--Lines of Business--Financial Services
Subsidiaries".

     Under Chilean law, banks may conduct only those activities allowed by the
General Banking Law, which include, without limitation, lending, accepting
deposits and, subject to limitations, investing and providing financial
services. Investments are restricted to real estate for the bank's own use,
gold, foreign exchange and debt securities. Through subsidiaries, Chilean banks
may also engage in certain activities, such as securities brokerage services and
mutual fund management. Subject to certain limitations, Chilean banks may own
majority or minority interests in foreign banks. As a result of the amendment to
the General Banking Law passed by the Chilean Congress in December 1997, Chilean
banks are authorized in principle to conduct additional activities such as
factoring, underwriting, transportation of securities, financial services
(portfolio management), leasing and direct financial advisory services, and,
through subsidiaries, to engage in securitizations, brokerage of non-pension
fund insurance, loan collection, factoring, custody and transportation of
securities. Banks are required to conduct these activities in


                                       16
<PAGE>

accordance with general instructions of the Superintendency of Banks. The
activities that banks have engaged in after the referred amendment to the
General Banking Law have translated into increased competition in those areas,
with subsidiaries of Chilean banks gradually becoming more important players. In
1998, we acquired a majority stake at an insurance brokerage company, Corredora
Tecnica de Seguros, and began to offer non-pension fund insurance brokerage
services through our branch network. In June 1999, we absorbed our leasing
subsidiary and integrated her leasing operations with ours. In 2000 we acquired
the remaining stake at Corredora Tecnica de Seguros.

     B.  Business Overview

   General

     The Chilean economy has grown at a compound average rate of 5.5% per annum
during the years 1992 through 2002 and at a compound average rate of 2.4% per
annum during the years 1998 through 2002. Inflation for the year 2002 reached
2.8%, within the official target range of 2%-4% for the year. The rate of
investment has decreased from 26.9% of Chile's gross domestic product in 1998 to
22.7% of gross domestic product in 2002. The growth of the economy has generated
a demand for financial services from an increasing number of individuals in all
income segments of the population and from an increasing number of companies,
although at a slower pace over the last few years due to the current economic
environment. Our business strategy has shifted to target the growing demand for
banking products and services from upper to lower-middle income individuals and
from large corporations to small-size companies. Our strategy aims to increase
lending and to provide services through cross-selling to all customer segments.
Our historical strength in residential mortgages and with medium and small-size
companies serves as a natural and strong base for expansion in those markets.
While we believe that this strategy has the potential to provide higher net
interest margins, it also has the potential to expose us to a higher degree of
credit risk. We continuously seek to improve the quality of our loan portfolio
and our risk index through the adherence to our new loan origination procedures
and credit management policies.

     The Chilean market is highly competitive. We intend to maximize our
competitiveness by offering new and more sophisticated products and
higher-quality services to our actual and potential clients through our branch
network and through modern electronic and home-banking facilities. With that
objective, beginning in 1993 we undertook an investment and modernization
program aimed at improving our operating efficiency and expanding the scope and
variety of products and services offered to our customers. We reformulated this
program in 1999 and in furtherance thereof we opened 20 full-service branches in
1999, 6 more in the year 2000, one branch in the year 2001, and none in the year
2002, waiting for an improvement in the economic environment. We continue to
renovate our existing branches and maintain state-of-the-art electronic and home
banking facilities, and we will resume a moderate expansion plan of opening a
few branches in 2003 and 2004.

     Our strategy in respect of our net interest margin is to continue our
policies designed to attract demand deposits as a less expensive source of
funding, while promoting all products oriented towards all market segments. We
will also continue to promote our fee-generating products, emphasizing the
cross-selling of our subsidiaries' products and services to our clients.

   Retail Market

     Management believes that our future growth in the retail market will derive
from our ability to serve a larger customer base and to increase the
cross-selling of our products and services to our customers. Our present
strategy for the retail market is to target upper to lower-middle income
individuals, which represent approximately 70% of the population Through our
consumer lending division, we have been able to capture a growing portion of the
demand for consumer credit from middle and upper-middle income individuals who
previously did not resort to credit or borrowed from our bank. See "--Lines of
Business--Retail Banking Division". We also conduct promotional campaigns
designed to enhance our image and target new customers. We launched a new
consumer loan product El Crediton(R) , aimed at attracting customers from the
upper income brackets due to its special attributes, such as receiving up to 15%
of the interest paid as a reward for good payment history. The product was
successful, and was the main driver behind our 14.8% growth in consumer loans
during 2002.


                                       17
<PAGE>


     We will continue to build on our marketing concept of BHIFamilia(R), which
promotes a variety of special packages of banking products designed to appeal to
various segments of the retail market. We conducted a promotional campaign aimed
at positioning our new image as Banco Bilbao Vizcaya Argentaria, Chile S.A., a
member of the BBVA Group. In 1999, we launched a new residential mortgage loan
product El Hipotecon(R), aimed at attracting customers from the middle to upper
income brackets. El Hipotecon(R) loans start at a higher loan amount than
traditional mortgage loans and has some unique attributes like a variable
interest rate with a cap at 8.5%, and it includes incentives for obtaining the
loan as part of a package including a current account and a credit card. This
product has been successful, bringing our self-financed mortgage loans
(classified under "commercial loans") up by 30.9% in 2002 (See "--Loan
Portfolio"). We intend to continue to capitalize on the strength of our
residential mortgage lending business and promote the cross-selling of our other
retail products to our residential mortgage customers, who totaled approximately
35,950 at December 31, 2002.

     In the first quarter of the year 2000, we launched our Cuenta 7(R)
campaign, aimed at increasing our checking accounts, particularly amongst upper
to upper middle income clients. During that year, we also increased the range
and scope of the Mutual Funds it offers its clients, with success.

     In order to improve our capacity to serve a larger customer base, we plan
to extend our network of electronic and home banking facilities to a larger
geographic area. See "--Branch Network and Electronic Banking". We have adopted
and will continue to implement credit approval and management and review
policies designed to improve steadily the quality of our retail loan portfolio.
We also seek to increase cross-selling, to improve our net interest margin by
increasing non-interest bearing checking account deposits and other deposits as
a source of funding, and to increase the volume of higher interest rate loans to
lower-middle income individuals.

     Corporate Market: Small and Medium-Size Companies and Large (Corporate)
Companies

     We principally target two distinct segments in the corporate banking
market--small and medium-size companies and large (corporate) companies--and
have developed specific strategies and customized products for each segment.
These segments are served by two specialized divisions, our Business Banking
Division and our Corporate Banking Division, respectively. As a consequence of
this change, since 2001 we have changed our "Lines of Business" report to better
reflect this structure and, therefore, we no longer report our Construction and
Infrastructure Financing business as a separate line of business but included it
in our Corporate Banking Division.

     In Chile, a smaller company will tend to rely on a limited number of banks
(generally two or three) and these banks are frequently banks with which the
company's managers have had personal banking relationships. Smaller companies
also consider criteria such as proximity, efficiency and image in their
selection of banks. Accordingly, we seek to continue to take advantage of our
customer base in the retail market to promote our business with small companies.
In addition, we will continue developing standardized products particularly
suited to the needs of this segment of the market, such as Trade Point(R), a
facility developed to assist small-size companies with their foreign trade
transactions. In the large company segment of the market, we seek to expand our
customer base, particularly in sectors of the economy with strong potential for
growth such as consumer product retailers, mining, construction, fisheries,
automobile distribution, and telecommunications.

     Through the continued implementation of our investment and modernization
program, we seek to enhance our ability to provide electronic banking and
related services to our corporate customers. Benefiting from our increased
capital base, the strength of the BBVA Group and the expanded range of products
and services that we can provide overseas as a member of the BBVA Group, we are
aiming to expand our corporate client base. We will also continue our efforts to
attract deposits, particularly from medium and small-size companies, as a means
of broadening our funding base and controlling our funding costs.

Lines of Business

     The following tables provide daily average unconsolidated information as to
our retail and corporate banking business for the months of December 2000, 2001
and 2002.


                                      18
<PAGE>

<TABLE>
                                                          Average daily balances for the month of December 2000
                                                         ----------------------------------------------------------
                                                                        Percentage of                Percentage of
                                                         Outstanding     Total Loans     Past Due    Total Past Due
                                                         -----------     -----------     --------    --------------
                                                            (in millions of constant Ch$ of December 31, 2002,
                                                                         except for percentages)
Retail banking division
<S>                                                             <C>           <C>              <C>         <C>
       Residential mortgage lending................             376,879       23.3%            4,053       12.8%
       Consumer lending............................             172,191       10.7             1,888        6.0
            Subtotal...............................             549,070       34.0             5,941       18.8
Business banking division                                       409,508       25.4            21,601       68.5
Corporate banking division                                      656,242       40.6             4,015       12.7
                                                              ---------      -----            ------      -----
            Total..................................           1,614,820      100.0%           31,557      100.0%
                                                              =========      =====            ======
</TABLE>

<TABLE>
                                                          Average daily balances for the month of December 2001
                                                         ----------------------------------------------------------
                                                                        Percentage of                Percentage of
                                                         Outstanding     Total Loans     Past Due    Total Past Due
                                                         -----------     -----------     --------    --------------
                                                            (in millions of constant Ch$ of December 31, 2002,
                                                                         except for percentages)
Retail banking division
<S>                                                             <C>           <C>              <C>         <C>
       Residential mortgage lending................             389,271       21.9%            3,999       10.0%
       Consumer lending............................             198,640       11.2             2,228        5.6
            Subtotal...............................             587,911       33.1             6,227       15.6
Business banking division                                       459,263       25.8            30,131       75.6
Corporate banking division                                      731,577       41.1             3,494        8.8
                                                              ---------      -----            ------      -----
            Total..................................           1,778,751      100.0%           39,852      100.0%
                                                              =========      =====            ======
</TABLE>


<TABLE>
                                                          Average daily balances for the month of December 2002
                                                         ----------------------------------------------------------
                                                                        Percentage of                Percentage of
                                                         Outstanding     Total Loans     Past Due    Total Past Due
                                                         -----------     -----------     --------    --------------
                                                            (in millions of constant Ch$ of December 31, 2002,
                                                                         except for percentages)
Retail banking division
<S>                                                             <C>           <C>              <C>         <C>
       Residential mortgage lending................             447,347       22.9%            4,138       10.1%
       Consumer lending............................             221,951       11.3%            1,870        4.6%
            Subtotal...............................             669,298       34.2%            6,008       14.7%
Business banking division                                       564,460       28.9%           33,027       80.7%
Corporate banking division                                      722,262       36.9%            1,866        4.6%
                                                              ---------      -----            ------      -----
            Total..................................           1,956,020      100.0%           40,901      100.0%
                                                              =========      =====            ======      =====
</TABLE>


   Retail Banking Division

     For the month of December 2002, we had a daily average of Ch$669,298
million (US$940 million) in retail loans outstanding, accounting for 34.2% of
the average daily balance of our total loan portfolio for such month.
Approximately 0.9% of our daily average of retail loans outstanding for the
month of December 2002 were past due, accounting for 14.7% of the average daily
balance of all past due loans for such month, and the risk index for retail
loans was 1.37%.

     We offer our products and services to all segments of the Chilean
population through BBVA Chile and have organized our retail banking division to
satisfy the demands of these segments. Our personal banking offers customers a
diversified range of products, including residential mortgage loans, other
personal loans (including consumer loans), automobile financing and credit
cards, and services such as electronic banking, custodial arrangements and
foreign exchange transactions. Building on our residential mortgage loan
business, since 1992 we have steadily expanded the scope of our activities to
offer innovative as well as traditional products to our retail customer base.

     Residential Mortgage Lending. For the month of December 2002, we had a
daily average of Ch$447,347 million (US$628 million) in residential mortgage
loans outstanding, accounting for 22.9% of the average daily balance of our
total loan portfolio for such month. For the month of December 2002, our daily
average of past due residential mortgage loans totaled Ch$4,138 million (US$6
million), accounting for 10.1% of the average daily balance of our total past
due loans, and the risk index for residential mortgage loans was 0.70%.

     At December 31, 2002, we were the fourth largest private bank in Chile in
terms of residential mortgage loans and accounted for 6.9% of the residential
mortgage loans in the Chilean banking system and 8.7% of such loans made by the
Chilean privately-owned banks, based on information prepared by the
Superintendency of Banks.


                                      19
<PAGE>

     Mortgage lending is our oldest and most developed retail business. Our
portfolio of 35,950 residential mortgage loans at December 31, 2002, which
amortize on a monthly basis, represents our widest and strongest credit
relationships with retail customers. For this reason, our mortgage lending
business continues to play a significant role as part of our strategy of
cross-selling our products to the retail market. At December 31, 2002,
approximately 17% of our residential mortgage customers had consumer loans with
us.

     Our residential mortgage loans are denominated in UF, bear interest at a
fixed rate (which is at a spread above the cost of funding) and have maturities
between five and 30 years, with a weighted average life of approximately 19
years at December 31, 2002. We fund an important proportion of our residential
mortgage loans and certain of our commercial mortgage loans through the issuance
of UF-denominated notes ("Mortgage Finance Bonds") which enable us to limit our
exposure to interest rate fluctuations and inflation.

     Consumer Lending. For the month of December 2002, we had a daily average of
Ch$221,951 million (US$312 million) outstanding in retail loans (other than
residential mortgage loans), accounting for 11.3% of the average daily balance
of our total loan portfolio for such month. Our average daily balance for the
month of December 2002 of past due retail loans (other than residential mortgage
loans) totaled Ch$1,870 million (US$3 million), accounting for 4.6% of the
average daily balance of total past due loans for such month, and the risk index
for such loans was 2.85%. Our retail loans (other than residential mortgage
loans) included personal loans (such as consumer loans), automobile financing
and credit cards.

     Consumer Lending - Personal Loans. For the month of December 2002, we had
an average daily balance of approximately Ch$206,163 million (US$289.4 million)
in personal loans outstanding, accounting for 10.5% of the average daily balance
of our total loan portfolio and 92.9% of the aggregate amount of our retail
loans for such month. The risk index for personal loans was 2.80% at such date.

     Our personal lending business targets middle and upper income individuals.
Personal lending on a short to medium-term basis involves loans and overdraft
facilities. We offer our personal lending products through our branches to our
existing customers (mainly holders of checking accounts). In response to the
increasing demand for small consumer loans from the lower-middle income segment
of the Chilean population as the Chilean economy has expanded during the past
decade, most Chilean private banks have established separate consumer loan
divisions. Unlike certain other Chilean banks which have their consumer credit
divisions operating out of premises physically separate from their full-service
branches and under a different name, our Consumer Credit division operates
through all of our full-service branches.

     Consumer Lending - Automobile Loans. We offer special retail credit lines
to finance partially or, in the case of selected customers, up to 100% of the
purchase price of automobiles. For the month of December 2002, we had a daily
average balance of approximately Ch$7,862 million (US$11.0 million) in
automobile loans outstanding, representing 3.44% of our average daily balance of
total retail loans for such month and 0.4% of our average daily balance of total
loans outstanding for such month. For the month of December 2002, our daily
average of past due automobile loans totaled Ch$9 million (US$10,000),
accounting for 0.0% of our average daily balance of total past due loans for
such month, and the risk index for such loans was 10.42%. Automobile loans have
maturities that range from six months to four years, are denominated in Chilean
pesos, accrue interest on a fixed rate basis and are payable monthly. We
generally require that the automobile purchased with the proceeds of the loan be
pledged as collateral, together with the purchaser's rights to proceeds under
the applicable insurance policy.

     Consumer Lending - Credit Cards. For the month of December 2002, we had a
daily average of Ch$7,926 million (US$11.1 million) credit card balances
outstanding, accounting for 0.4% of the average daily balance of its total loan
portfolio for such month. Our average daily balance for the month of December
2002 of past due credit card balances was Ch$242 million (US$0.34 million),
accounting for 0.6% of our average daily balance of total past due loans for
such month. The risk index for credit card balances was 3.53%. We issue BBVA
Chile credit cards to our customers under the Visa trademark pursuant to an
agreement with Visa, the largest credit company in Chile. In addition, we issue
affinity cards also under the Visa trademark pursuant to agreements with the
Chilean lawyers' association, the Chilean medical association, the Chilean
teachers' association and the Chilean engineers'


                                      20
<PAGE>

association.  BBVA Chile credit cards are issued for personal and  corporate use
and they allow  customers  access to national and  international  credit.  As of
December 31, 2002, we had 62,799 active Visa credit cards.

     We process our credit cards through Nexus S.A., a credit card processing
facility owned by 8 Chilean banks in which we had a 9.7% interest at December
31, 2002. Our management believes that acceptance of credit cards as a means of
payment for goods and services in Chile will increase in the future as it has
over the past five years. Accordingly, we will continue to promote the use of
our credit cards. Our revenues arising from our credit card business take the
form of commissions charged to merchants and annual fees, commissions and
interest charged to cardholders on their balances.

     Consumer Lending - Credit Approval Process. In reviewing credit
applications, our policy is to verify that a series of quantitative and
qualitative parameters are met. We have developed a credit scoring system which
allows loan officers to classify applicants on the basis of their income,
overall level of indebtedness, liquidity and assets, as well as on qualitative
factors such as the applicant's educational, professional and financial
background. We obtain credit information on each applicant from DICOM S.A.
("DICOM"), which provides a broad and updated nationwide credit database that we
can readily access. Our evaluation of loan applications is centralized and based
on information obtained by loan sales managers. In the credit analysis, emphasis
is placed on different factors, depending upon the credit requested and whether
the applicant is an existing customer of BBVA Chile, among other considerations.
See "Selected Statistical Information--Credit Approval Process". We consider our
credit approval policies in respect of retail loans generally comparable to
those of other Chilean private banks and stricter than those of the finance
company.

     After credit is extended, we monitor the credit quality of the debtor and
reclassify a debtor loan on the basis of our scoring system based on the our
appraisal of changes in such debtor's ability to meet the qualitative and
quantitative parameters described above. In addition, our general policy is to
initiate legal collection proceedings on any retail loan as promptly as possible
upon such loan becoming overdue and to charge off the entire consumer loan four
months after any payment of principal or interest is overdue, which is earlier
than the six months allowed by the regulations of the Superintendency of Banks.
See "--Chilean Regulation and Supervision--Loan Loss Reserves".

   Corporate Banking

     Relying on a team of account managers and through specialized branch
offices, we provide a full range of financial products and services to small,
medium and large-size companies in Chile through BBVA Chile and its
subsidiaries, including commercial loans, working capital lines of credit, trade
financing, payment services and short-term and other deposits.

     For the month of December 2002, BBVA Chile had a daily average of
Ch$1,286,722 million (US$1,806 million) of outstanding corporate loans,
accounting for 65.8% of the average daily balance of BBVA Chile's total loan
portfolio for such month. BBVA Chile's daily average of past due corporate loans
for the month of December 2002 totaled Ch$34,893 million (US$49.0 million),
accounting for 85.3% of our average daily balance of total past due loans for
such month, and the risk index for such loans was 1.79%.

     Business Banking Division. Within BBVA Chile's corporate banking business,
companies with annual sales between US$750,000 and US$20 million are considered
medium and small-size companies. Loans to such companies, which are made through
our personal banking branches as well as through our specialized commercial
banking branches, totaled a monthly average of Ch$564,460 million (US$792
million) in December 2002 and accounted for 28.9% of BBVA Chile's total loan
portfolio. As a result of the predominance of loans to small and medium-size
companies within Banco Nacional's loan portfolio, following the merger with
Banco Nacional in 1989, BBVA Chile became a significant source of credit for
such companies in Chile and had approximately 14,874 such customers at December
31, 2002. Our strategy in this market is to continue targeting medium and
small-size companies that operate in the sectors of the Chilean economy with the
highest growth potential, such as mining, construction, automobiles, trade,
telecommunications and other services. Small and medium-size companies tend to
rely on two or three banks to cover their financing requirements, principally
for the acquisition of capital goods, foreign trade and working capital.


                                      21
<PAGE>


     We also lend to small businesses (companies with annual sales of less than
US$750,000), providing loans and other services specifically designed for such
businesses. In this segment of the market, we employ credit approval policies
largely based on the verification of objective conditions and generally requires
collateral at least equal to 90% of the value of its loans.

     Through our foreign trade business, we provide our banking customers with a
wide range of products and services designed to facilitate their export and
import transactions, including issuing, confirming and negotiating letters of
credit, extending credit lines for pre-export/import financing from foreign
banks, fund transfers and foreign exchange transactions. In this connection, we
developed the Trade Point(R) facility to assist small and medium-size companies
with their foreign trade transactions. Trade Point(R) was successful in
attracting business from midsize companies with foreign trade business. See
"--Business Overview--Corporate Market: Small and Medium-Size Companies and
Large (corporate) Companies".

     Corporate Banking Division. Large (corporate) firms are a segment of the
market that has become increasingly competitive in recent years, largely due to
the internationalization of the financial markets and the growth in the capital
base of Chilean institutional investors. As a result, domestic lenders have
generally experienced narrowing spreads and a decrease in the profit margins
generated by loans to large corporate borrowers (companies with annual sales
greater than US$20 million). In an effort to increase its profits in this
important segment of the corporate market, BBVA Chile continues to explore
business opportunities with large corporate borrowers, seeking to offer products
that are subject to less competitive pressure such as payment services and other
tailored services, and to leverage on the capability of the Bank to provide
world wide services through the network of banks that form part of the BBVA
Group. Loans to other corporate borrowers, mostly large companies, totaled a
daily average of Ch$722,262 million (US$1,014 million) for the month of December
2002 and accounted for 36.9% of the daily average of our loan portfolio in such
month.

     Our cross-border loans are principally trade-related. These include credit
lines to foreign financial institutions, some of them under the ALADI
(Asociacion Latinoamericana de Integracion, "ALADI" or "Latin American
Association for Integration") payment system. ALADI is a series of arrangements
among Latin American countries designed to facilitate trade financing by
providing to a cross-border lender in a participating country the guarantee of
its own central bank of amounts due in connection with a qualifying transaction.
At December 31, 2002, our cross-border lending was US$123.5 million, of which
approximately 0.03% was under the ALADI program and, accordingly, was guaranteed
by the Central Bank. Loans to Brazilian borrowers at December 31, 2002, amounted
to Ch$26,749 million (US$37.5 million), approximately 30.4% of our loan
portfolio at that date. None of the loans to Brazilian borrowers was under the
ALADI program.

     BBVA Chile offers payment services and cash management services to its
corporate banking customers. BBVA Chile is a party to a number of payment
service contracts with large and medium-size companies. Under those contracts,
in exchange for a fee BBVA Chile allows customers, through a secure Internet
connection, to manage their accounts and make payments to suppliers, pension
funds and employees, avoiding administrative costs. BBVA Chile believes that
payment and cash management service contracts provide it with a low-cost, stable
deposit base and the opportunity to cross-sell its products.

     Credit Approval Process. BBVA Chile's credit approval policy in respect of
medium and small-size companies is defined mainly by certain quantitative
parameters such as the applicant's debt servicing capacity, net worth, leverage,
results of operations and reputation among financial institutions. In addition,
loan officers are required to prepare a file containing information regarding
the applying company's track record and prospects, as well as projections for
the economic sector in which it operates. The information is transmitted to BBVA
Chile's principal executive offices, where the corporate banking division
operates and decisions regarding corporate credit are made. In the case of large
companies, the credit analysis focuses on the applicant's financial condition as
well as an evaluation of developments and projections relating to the
applicant's market. In addition, we monitor the borrower's financial condition
and results of operations while the loan is outstanding, including the use of
reports prepared by DICOM, and seek to maintain contact with our customers so as
to anticipate developments that could impact adversely the customer's repayment
capacity. See "Selected Statistical Information--Allowance for Loan Losses".


                                      22
<PAGE>

   Deposits and Pension Payment Services

     Deposits. Time deposits are denominated in Chilean pesos, UF and dollars
and generally bear interest at a fixed rate. Checking accounts are
peso-denominated, non-interest bearing accounts, and savings accounts are
UF-denominated and generally bear interest at a relatively low floating rate. At
December 31, 2002, BBVA Chile's deposit balances amounted to Ch$1,397,036
million (US$1,961 million) and accounted for 73% of our total liabilities at
that date.

<TABLE>
                                                                      Total Deposits
                                                                   (as of December 31,
                                                                         2002)              % of Total Deposits
                                                                   --------------------     -------------------
                                                                         (in millions of constant Ch$ of
                                                                    December 31, 2002, except for percentages)
                              Product
------------------------------------------------------------------
<S>                                                                    <C>                       <C>
Time deposits.....................................................     1,397,036                 73.05%
Checking accounts.................................................       224,790                 11.75%
Bankers demand drafts and other deposits..........................       233,011                 12.18%
Savings...........................................................        57,648                  3.01%
                                                                       ---------                -------
                                                                       1,912,485                100.00%
                                                                       =========                ======
</TABLE>


     Our strategy in the retail market is to attract deposits from a large
number of individuals as a means of maintaining a relatively stable and
cost-effective source of funding. As part of this strategy, BBVA Chile has
developed a variety of deposit accounts designed to appeal to the various
segments of the retail market. We conduct promotional campaigns aimed at these
specific segments, which have rendered satisfactory results. These accounts
include BHIFamilia Mujer(R) (BHIFamily for Women), BHIFamilia Profesional
Joven(R) (BHIFamily for Young Professionals) and Ahorro Infantil (Child
Savings). In 2000, we launched our Cuenta 7(R) campaign, aimed at increasing our
checking accounts, particularly amongst upper to upper middle income clients. In
2001, with the help of the improved systems platform, we launched the Cuenta
Libreton (R), a savings account associated with a checking acount that enabled
our clients to optimize their checking account balances by keeping their money
in the associated savings account and receive interest on them. Such product
revived a national discussion on the convenience of allowing banks to pay
interest on checking accounts balances, and resulted in a change in regulations
that allowed banks to do that. After the new regulation became effective, we
relaunched the Cuenta Libreton (R) as a remuneratory checking account, with
limited success since the interest rate environment made it difficult to offer
an attractive interest on those balances. The same happened to all banks who
offer a remuneratory checking account.

     Pension Payment Services. Since 1992 we have been party to a payment
service contract with the INP, an agency of the Ministry of Labor, providing
monthly pension payments to approximately 750,000 of Chile's 1.5 million
pensioners (the "INP Contract"). Under the INP Contract - which expires in 2003
with an option to continue for another two years - we receive pension funds from
the INP and are required to pay such funds to the pensioners shortly thereafter.
We are paid a fee for this service, which depends on the amounts held by the INP
with us on its current accounts. This fees are liquidated and entered on a
monthly basis ( See "Operating and Financial Review and Prospects -- Operating
results----Income from services, net"). This arrangement allows us to have
access to an important non-interest bearing source of funds.

     The majority of our payments to pensioners are made through our 64
special-service pension payment centers exclusively engaged in providing
services under the INP Contract. Payments are also made by mail, through
independent contractors in rural areas or by direct deposit. For the year ended
December 31, 2002, average daily amounts on deposit with us in connection with
the INP Contract totaled Ch$36,000 million and represented approximately 2.1% of
our average daily outstanding demand deposits and savings accounts, or
approximately 1.7% of average total deposits daily, as a result of the
advantages of the INP contract.

     BBVA Chile has capitalized on the experience gained under the INP Contract
and developed systems to provide payment services to pension funds,
beneficiaries of insurance companies and pensioners under the privately run
social security system.


                                      23
<PAGE>

Branch Network and Electronic Banking

     We had a network of 78 full-service branches, 2 limited-service branches
and 64 pension payment centers at December 31, 2002.

     Our full-service branches accept deposits, disburse cash, offer the full
range of our retail banking products such as residential mortgages, consumer
loans, automobile financing and credit cards, open checking accounts, lend to
small and medium-size companies, offer leasing, securities brokerage and housing
fund management services and provide information to customers and potential
customers. Our limited-service branches are equipped to take deposits and to
offer payment services. The role of our special-service payment centers is to
provide check cashing and cash disbursement services to Chilean pensioners
pursuant to the INP Contract. See "--Lines of Business--Deposits and Pension
Payment Services".

     We are expanding our geographic penetration to be in a position to readily
provide our customers throughout the country our wide range of products and
services. The financing needs of companies located in regions of Chile outside
the Santiago area have increased as a result of gradual changes affecting the
Chilean economy. Corporate clients with operations throughout Chile need banking
services in all of Chile's regions. As the Chilean middle class has grown,
demand for consumer banking services has also increased. See "--Lines of
Business--Retail Banking". In addition to increasing the number of our branches,
we are constantly investing in telecommunication and computer equipment, so as
to offer customers up-to-date electronic and home-banking facilities. We believe
this expansion has been instrumental in supporting the outstanding growth
achieved by the bank in the past two years.

     We offer electronic banking services to our customers. BBVA Chile has made
arrangements for its individual customers to have access to the REDBANC system
with their BHIF Global or Visa cards. The REDBANC system was recently integrated
with the BancoEstado network to conform a network of ATMs at nearly 3,500
locations throughout Chile at December 31, 2002. Such access allows customers
holding a checking or savings account or a BHIF Visa card to obtain balance and
account related information, withdraw cash and make payments. At December 31,
2002, BBVA Chile had 277,225 active BHIF labeled cards, all of which provide
access to the REDBANC system. At December 31, 2001, we had 284,011 active BHIF
labeled cards.

     In addition, through Fono BHIF, we offer a 24-hour phone-banking service to
our customers that grant them access to account information and allows them to
effect fund transfers and certain payments. BBVA Chile was the first Chilean
bank to offer this service on a toll-free basis in all cities served by the
Compania de Telecomunicaciones de Chile. We have been providing certain
information and limited transaction services through the Internet since June
1996, and such services have been fully available since October 1996. In October
1997, we expanded our Internet services by adding new services providing
customers with financial information and the ability to perform transactions.
During the month of December 2002, 433,789 inquiries and transactions were made
through the Internet.

     BBVA Chile, in conjunction with a number of other Chilean banks, is a
shareholder of Transbank S.A., a corporation that carries out the electronic
transfer services which are necessary for our business and provides support to
our shareholders' operations, through the installation, operation, maintenance
and development of equipment and systems for the automatic and electronic
transfer of funds. The availability of this transfer capability has facilitated
our ability to serve our customers efficiently.

Financial Services Subsidiaries

     Chilean banks may conduct only those activities allowed by the General
Banking Law. Chilean banks were historically prohibited from providing services
other than traditional banking activities. However, in 1986 banks were permitted
to offer, through subsidiaries, services deemed to be complementary to
commercial banking activities. Furthermore, as a result of the amendment to the
General Banking Law passed by the Chilean Congress in December 1997, Chilean
banks are authorized in principle to conduct additional activities such as
factoring, underwriting, transportation of securities, financial services
(portfolio management), leasing and direct financial advisory services, and,
through subsidiaries, to engage in securitizations, brokerage of non-pension
fund insurance,


                                      24
<PAGE>

loan collection, factoring and custody and transportation of securities.  In
1998, we acquired 80% of a non-pension fund insurance brokerage and in 2000
acquired the remaining 20%.

     In an effort to confront the growing trend towards financial
disintermediation, broaden the scope of products and services offered to
customers and increase its fee income, we have established subsidiaries that
operate in various financial markets. Our business strategy, particularly with
respect to our corporate customers, is to increase the cross-selling of the
products and services offered by the subsidiaries, which are made available at
BBVA Chile's full-service branches. See "--Business Strategy".

     As approved by the Superintendency of Banks on July 1, 1999, we acquired
0.01% minority interest in BHIF Leasing S.A., resulting in the dissolution of
the latter. As of December 31, 2000, the net assets of BHIF Leasing S.A. were
absorbed by us.

     The following table sets forth information with respect to BBVA Chile's
financial services subsidiaries at December 31, 2002:

<TABLE>
                                                                     Shareholders'                      Ownership
                                                       Assets           Equity         Net Income       Interest
                                                       ------        -------------    ------------      ---------
                                                                                      Twelve-month
                                                                                      period ended
                                                     At December      At December     December 31,     At December
                     Company                          31, 2002         31, 2002           2002          31, 2002
------------------------------------------------     -----------      -----------     ------------     -----------
                                                    (in millions of constant Ch$ of December 31, 2002, respectively,
                                                                        except for percentages)
<S>                                                    <C>               <C>              <C>             <C>
BBVA BHIF Brokerage.............................       108,958.0         8,513.4          1,449.4         100.00
BHIF Advisory...................................         1,124.2         1,050.1            372.0          98.60
BHIF Closed-end Fund Manager....................         1,480.2         1,482.7             11.4         100.00
BHIF Residential Housing Fund Management........           315.1           652.6             23.9         100.00
BBVA BHIF Residential Leasing...................         6,620.4         3,917.4          1,141.8          97.48
BBVA BHIF Mutual Fund ..........................         5,880.8         5,576.1          1,425.2         100.00
BBVA BHIF Insurance Brokerage...................         3,174.7         2,632.7          1,055.8         100.00
                                                       ---------        --------          -------
   Total........................................       127,553.4        23,825.0          5,479.5
                                                       =========        ========          =======
</TABLE>

   Securities Brokerage Services

     BBVA BHIF Brokerage, which has operated since 1988, is registered with the
Superintendencia de Valores y Seguros (the "Superintendency of Securities and
Insurance") as a securities broker, and is a member of the Santiago Stock
Exchange and of the Electronic Stock Exchange. In 1997, we acquired 29.6% of the
ownership of BBVA BHIF Brokerage, increasing our ownership level to 100.0%. In
connection with this acquisition, we changed BBVA BHIF Brokerage's name from
"BHIF - Transvalores" to "BHIF Corredora de Bolsa". According to information
released by the Santiago Stock Exchange, business transacted by BHIF Brokerage
as a stockbroker during 2002 totaled approximately Ch$2,011,441 million, and
accounted for approximately 14.12% of the market. For the year ended December
31, 2002, BBVA BHIF Brokerage recorded net income of Ch$1,449.4 million (US$2.0
million). After a reorganization at the end of 1996, BBVA BHIF Brokerage is
consolidating its position in the markets where it currently operates and
enhancing its access to the domestic markets by utilizing our distribution
networks. Our policy is to capitalize 100% of any profits generated by BBVA BHIF
Brokerage to increase its capital base. This subsidiary offers our high income
individual and corporate clients a wide range of services, acting as an entity
complementary to us. BBVA BHIF Brokerage operates actively in the different
markets, including equity, variable and fixed income (debt instruments) and the
trading of foreign currency.

   Financial Advisory Services

     BHIF Advisory, a 98.6%-owned subsidiary of BBVA Chile, was established by
us in 1987. The subsidiary adopted its current name in 1992 and focuses on
providing consulting and advisory services, mainly to our customers. Such
services include debt restructuring, asset and company valuations, debt and
equity offerings and


                                      25
<PAGE>

syndication of loans, among other activities.  For the year ended December 31,
2002, BHIF Advisory recorded a net income of Ch$372 million (US$0.5 million).

   Closed-end Fund Management

     BHIF Closed-end Fund Manager, a 100%-owned subsidiary of BBVA Chile, was
established in 1995 to conduct our investment fund management business. BHIF
Closed-end Fund Manager attracts investments from institutional investors which
are managed through two separate closed-end funds: BHIF Equity and BHIF Real
Estate. BHIF Equity invests in a diversified equity portfolio (including venture
capital arrangements) of both established companies and start-up companies in
growing sectors of the economy. BHIF Real Estate invests in an equity portfolio
with new and established companies conducting real estate related businesses.
For the year ended December 31, 2002, BHIF Closed-end Fund Manager recorded a
net income of Ch$11.4 million (US$16,000). In 1997, BHIF Closed-end Fund Manager
reached important strategic agreements with Vontobel Fund Managers to manage
Chilean resources abroad, with Bear Stearns as the operator. In addition, BHIF
Closed-end Fund Manager reached an agreement with Banco do Spirito Santo,
Portugal, to manage foreign capital in Chile. A law passed in 1997 allows BHIF
Closed-end Fund to invest part of the funds' capital outside of Chile.

   Residential Housing Fund Management

     In 1995, we obtained authorization from the Superintendency of Banks and
the Superintendency of Securities and Insurance to establish BHIF Residential
Housing Fund Management to participate in the market for the financing of
residential housing through leasing schemes. BHIF Residential Housing Fund
Management, a 100.0% owned subsidiary of BBVA Chile, was established and began
operations in February 1996. For the year ended December 31, 2002, BHIF
Residential Housing Fund Management recorded net income of Ch$23.9 million
(US$33,550). As of December 31, 2002, the funds managed by this subsidiary
totaled Ch$3,000 million, generating Ch$123.6 million in fees and commissions.

   Residential Leasing

     In 1996, we obtained authorization from the Superintendency of Banks and
the Superintendency of Securities and Insurance to establish BBVA BHIF
Residential Leasing to participate in the market for the management of funds
applied to the financing of residential housing. BBVA BHIF Residential Leasing,
a 97.48%-owned subsidiary of BBVA Chile, was established and began operations in
October 1996. BBVA BHIF Residential Leasing is the leading firm in the
residential leasing industry, owning Ch$4,019 million in leasing contracts as of
December 2002. For the year ended December 31, 2002, BBVA BHIF Residential
Leasing recorded a net income of Ch$1,141.8 million (US$1.6 million).

   Mutual Fund

     In February 1997, we obtained authorization from the Superintendency of
Banks and the Superintendency of Securities and Insurance to establish BBVA BHIF
Mutual Fund, which commenced operations in March 1997. For the year ended
December 31, 2002, BBVA BHIF Mutual Fund recorded net income of Ch$1,425.2
million (US$2.0 million).

   Insurance Brokerage

     Our Board of Directors, in an Extraordinary Session held on September 4,
1998, agreed to purchase 80% of the rights of Corredora Tecnica de Seguros
Limitada, an insurance brokerage firm, for approximately US$5.5 million. On
September, 2000, we agreed to purchase the remaining 20% of the rights of
Corredora Tecnica de Seguros Limitada, for approximately US$1.4 million. The
acquisition had been authorized by the Superintendency of Banks on August 24,
1998. For the year ended December 31, 2002, BBVA BHIF Insurance Brokerage
recorded a net income of Ch$1,055.8 million (US$1.5 million).




                                      26
<PAGE>

                                   COMPETITION

   Overview

     The Chilean financial system is comprised of 26 private-sector banks (of
which 16 are banks established in Chile and 9 are subsidiaries of banks
established abroad, and one public-sector bank (BancoEstado). At December 31,
2002, the Chilean financial system had a total of Ch$31,674,779 million
(US$44,463 million) of loans outstanding. In the last five years, the average
annual rate of increase in outstanding loans for the Chilean financial system
was 3.6% (compared with an average annual rate of increase in GDP of 2.1% during
the same period) and the average annual return on average shareholders' equity
was 13.1%.

     The following table provides certain statistics on the Chilean banking
system at December 31, 2002:


<TABLE>
                                     Assets                     Loans                   Deposits         Shareholders' Equity
                                 ----------------------   -------------------    ---------------------   --------------------
                                   Amount        Share      Amount      Share       Amount       Share       Amount     Share
                                 -----------     -----    ----------    -----    -----------     -----    -----------   -----
                                 Ch$ Million       %      Ch$ Million     %      Ch$ Million       %      Ch$ Million     %
                                 -----------     -----    ----------    -----    -----------     -----    -----------   -----
<S>                               <C>            <C>       <C>           <C>       <C>           <C>      <C>           <C>
Banco del Estado                  6,587,881      14.1      4,055,309     12.8      4,093,343     14.6         352,611    9.8
Banks established in Chile       35,870,479      76.8     25,477,723     80.4     21,137,058     75.5       2,705,770   75.3
Subsidiaries of banks
   established abroad             4,051,903       8.7      1,994,737      6.3      2,637,565      9.4         511,013   14.2
Private sector total             39,922,382      85.5     27,472,460     86.7     23,774,623     84.9       3,216,783   89.5

Total banks                      46,510,607      99.6     31,527,769     99.5     27,867,967     99.5       3,569,394   99.3
Finance company                     166,944       0.4        147,010      0.5        135,278      0.5          23,473    0.7
                                 ----------     -----     ----------    -----     ----------    -----       ---------  -----
Financial system                 46,677,551     100.0     31,674,779    100.0     28,003,245    100.0       3,592,868  100.0
                                 ==========     =====     ==========    =====     ==========    =====       =========  =====

</TABLE>
----------------------
Source: Superintendency of Banks

     The Chilean banking industry has experienced increased competition in
recent years, which has led to, among other things, consolidation in the
industry. We expect the trends of increasing competition and consolidation to
continue. In 1996 Banco Santander-Chile agreed to merge with Banco Osorno and
the Superintendency of Banks approved the merger of Banco de Santiago and Banco
O'Higgins, effective January 1, 1997. Additionally, the former owners of Banco
Osorno acquired a controlling interest in Banco Concepcion, the ninth largest
private bank in Chile, pursuant to which the name of the institution was changed
to Corpbanca.

     During 1998 Corpbanca purchased from Banco Sud Americano its consumer loan
division, "Corfinsa", and acquired 100% of the rights to Financiera Condell.
Financiera Condell was merged into Corpbanca, effective July 1, 1999. Also, in
July 1998 the former ING Bank reopened as Banco Falabella, and in October 1998
ABN AMRO Bank acquired Banco Real (worldwide), which led to a merger between the
two institutions in Chile, effected January 2000. The merger had no effect on
the financial system, given the small size of both banks.

     In March 1999, Citibank acquired Financiera Atlas, a finance company with
an 8.3% market share in consumer loans, and integrated it into its Retail
Banking Division. In July 1999, Corpbanca acquired Financiera Condell, a
finance company with a consumer loan portfolio totaling Ch$146,513 million.
After such purchase, the only finance company left in the market was Financiera
Conosur, the largest one, with a consumer loan market share of 11.5%. In late
2002 Financiera Conosur was authorized by the Superintendency to become Banco
Conosur. Therefore, there are no finance companies left in the market.

     During 2001, a Chilean financial group (the Luksic Group), which had a
controlling participation at Banco de A. Edwards, acquired control of Banco de
Chile and completed procedures to merge it with Banco de A. Edwards. The merger
became effective on January 1, 2002. On the first half of 2002 the Central Bank
sold its participation in Banco Santiago (See "--The Central Bank") to Grupo
Santander, following an agreement signed with them in 2000 and after a failed
attempt to sell those shares at a public offering. As a consequence of this
operation, Grupo Santander achieved full control of both Banco Santander and
Banco Santiago and proceeded to merge both


                                       27
<PAGE>

institutions. The merger gave birth to the largest banking institution in Chile,
Banco  Santander Santiago with a 24.4% combined loan market share (27.9%
proforma).

     The largest bank in Chile in terms of assets is Banco Santander Santiago,
with outstanding loans at December 31, 2002 of Ch$7,731,346 million (US$10,852.8
million), representing 24.4% of the total amount of loans made by the Chilean
financial system We face significant competition in the retail market from Banco
Santander Santiago and more generally from other large privately-owned Chilean
banks as well as BancoEstado, the only bank owned by the Republic of Chile. Most
Chilean private-sector banks have adopted the universal banking model and, like
us, are seeking to expand the range of products and services offered to
customers.

     Subsidiaries from foreign banks have been operating in Chile since the
1930s. At December 31, 2002, such banks accounted for only 6.3% of total loans
made by the Chilean financial system. Banco Santander Santiago, accounting for
approximately 24.4% of total loans, was the Bank established in Chile (though
foreign-owned ) with the largest loan portfolio at December 31, 2002. Some of
the banks established in Chile are classified as foreign-owned, including
ourselves, since a controlling participation in them is owned by foreign
institutions and/or individuals. See "Major Shareholders -- Principal
Shareholders".

     In the retail banking business, we compete with other private Chilean banks
and with BancoEstado. Among private Chilean banks, our strongest competitors in
the retail market were Banco Santander Santiago, Banco de Chile and Banco de
Credito e Inversiones. We consider that our most relevant competitors in the
corporate market are Banco de Chile, Banco Santander Santiago, and Banco de
Credito e Inversiones.

     Commercial banks in Chile also compete with other financial intermediaries
that can provide larger companies with access to the capital markets as an
alternative to traditional bank financing.

     In the markets served by our subsidiaries, i.e., financial consulting,
leasing, securities and insurance brokerage, investment fund management services
and mutual fund management services, we compete with other financial
institutions that offer similar services.

   Loans

     At December 31, 2002, we accounted for 6.62% of all loans made by the
Chilean financial system and 7.60% of the loans made by private Chilean banks.

     The following table sets forth the percentage of the aggregate outstanding
principal amount of all loans made by the Chilean financial system at the end of
each of the last three years, that was held by each of the 12 largest private
sector banks:

                                        Market Share of Loans at December 31,
                                        ---------------------------------------
                                           2000          2001          2002
                                        -----------    ---------     --------
Banco Santander Santiago (1) .........      11.3          11.9          24.4
Banco de Chile (2) ...................      12.4          11.9          18.6
Banco de Credito e Inv. ..............       8.2           8.9          10.4
BBVA Chile (3) .......................       5.7           5.9           6.6
Corpbanca ............................       4.3           4.8           5.4
Banco del Desarrollo .................       3.5           3.6           3.7
Scotiabank Sudamericano (4) ..........       3.5           3.5           3.7
Citibank .............................       3.8           3.4           3.2
Banco Bice ...........................       2.7           2.6           2.6
Banco Santiago (1) ...................      15.4          16.0             -
Banco Edwards (2) ....................       8.1           7.3             -
                                           -----         -----         -----
Total ................................      78.9          79.6          78.6
                                           =====         =====         =====
Total Private Banks ..................      88.0          87.8          86.7
                                           =====         =====         =====
Financial System .....................     100.0         100.0         100.0
                                           =====         =====         =====


                                       28
<PAGE>
----------------------
Source: Superintendency of Banks

(1) Banco Santander and Banco Santiago merged, effective August 2002
(2) Banco de Chile and Banco Edwards merged effective January 2002
(3) BBVA Banco BHIF changed its name to BBVA Chile, effective March 17, 2003
(4) Banco Sud Americano changed its name to Banco Scotiabank Sud Americano
    effective November 15, 2001


Risk Index

     Our performance until 1996 was largely attributable to our policy of
charging off all D loans and certain C loans. Upon reaching a 1% risk level, we
abandoned this policy, and since then have relied on our credit approval process
and credit policies to keep control and enhance the quality of our loan
portfolio. For a complete explanation of Chilean regulations on loan portfolio,
see "--Selected Statistical Information--Classification of Loan Portfolio".

     In 1997 the Superintendency of Banks established new rules applicable to
the definition of risk and provision requirements. This change was directed
towards a more adequate assessment of the true quality of the loans, reducing
the rating of consumer loans that had been subject to a certain degree of
rescheduling. This measure implicated a significant increase in the level of
provisions for those banks and finance companies that carried an old and
important consumer loan portfolio. That was not our case, and the increase in
provisions related to rescheduled consumer loans required by the rules adopted
in 1997 was not significant.

     In 1998, soon after the BBVA Group took control of BBVA Chile, we conducted
an extensive revision of our loan portfolio, which resulted in the downgrading
of a part of our portfolio and a significant increase in the level of provisions
and in our risk level.

     The following table illustrates the five year history of BBVA Chile`s
unconsolidated loan portfolio risk index compared to the unconsolidated loan
portfolio risk index of the largest private Chilean banks and that of the
financial system as a whole. See "--Selected Statistical
Information--Classification of Loan Portfolio".

                                                     Risk Index(1)
                                                     At October 31,
                                  --------------------------------------------
                                  1998     1999         2000     2001     2002
                                  ----     ----         ----     ----     ----
                                                   (Percentages)
Banco de Chile ................   1.60     2.07         2.01     2.03     3.0
Banco del Desarrollo ..........   2.03     3.25         3.49     2.85     2.6
Scotiabank Sudamericano .......   2.00     2.77         3.76     3.18     2.0
Corpbanca .....................   1.52     2.00         1.87     1.80     2.0
BBVA Chile ....................   1.55     2.11         2.18     1.81     1.7
Banco Bice ....................   1.86     1.22         1.53     1.41     1.7
Banco Santander Santiago ......   1.16     1.23         1.42     1.38     1.6
Banco de Credito e Inv. .......   0.91     1.57         1.95     1.63     1.3
Security ......................   0.86     1.12         0.87     0.99     1.2
Banco Edwards .................   1.32     2.79         2.9      3.23     -
Banco Santiago ................   0.93     1.39         1.34     1.26     -
Financial System ..............   1.50     1.98         2.08     1.90     2.0


----------------------
Source: Superintendency of Banks
(1)  Information with respect to the Chilean financial system as of a later date
     in 2002 is not publicly available. The risk index of BBVA Chile was 1.67%
     at December 31, 2002. See "--Selected Statistical
     Information--Allowance for Loan Losses--Global Allowance for Loan Losses."

   Deposits

     We held total deposits of Ch$1,912,485 million at December 31, 2002, which
represented 8.0% of deposits held by Chilean private banks at that date. The
following table sets forth the percentage of the aggregate amount of all
deposits in the Chilean financial system at the end of each of the last three
years, that was held by each of the twelve largest private Chilean banks.


                                       29
<PAGE>

                                       Market Share of Deposits at December 31,
                                       ----------------------------------------
                                            2000           2001          2002
                                            ----           ----          ----
Banco Santander ...................         12.5           13.1          21.6
Banco de Chile ....................         12.8           12.8          16.3
Banco de Credito e Inv. ...........          7.2            7.8           8.8
BBVA Chile ........................          5.0            5.6           7.3
Corpbanca .........................          4.9            5.2           5.5
Citibank ..........................          3.8            3.7           4.8
Security ..........................          3.2            2.7           3.1
Scotiabank Sudamericano ...........          3.2            2.6           3.0
Banco del Desarrollo ..............          3.0            2.8           2.9
Banco Bice ........................          2.8            3.2           2.6
Banco Santiago ....................         12.4           13.7             -
Banco Edwards .....................          7.6            7.0             -
                                          ------         ------        ------
Total .............................         78.4           80.3          76.0
                                          ======         ======        ======
Total Private Banks ...............        88.26          88.33         85.25
Financial System ..................       100.0%         100.0%        100.0%

----------------------
Source: Superintendency of Banks

   Return on Equity

     At December 31, 2002, our unconsolidated return on equity was 9.1%. It was
substantially lower than the 14.4% average for the entire Chilean financial
system. During the last three years, we have maintained a profitability index
averaging around 7.3% each year.

     The following table sets forth for the last three years, the unconsolidated
return on shareholders' equity of the largest private Chilean banks and the
Chilean financial system as a whole, in each case at December 31 in each of the
last three years.

                                                                    Ranking at
                                Return on Equity At December 31,   December 31,
                              ----------------------------------   ------------
                              2000          2001           2002        2002
                              ----          ----           ----        ----
Banco de Credito e Inv. ...   20.2%         23.8%          22.6%         1
Banco Santander ...........   25.1%         25.5%          19.5%         2
Banco Bice ................   13.2%         25.7%          18.2%         3
Citibank ..................   10.8%         15.1%          14.1%         4
Corpbanca .................   12.0%         20.1%          13.3%         5
Banco del Desarrollo ......   15.1%         14.2%          13.1%         6
Security ..................   14.1%         13.1%          12.9%         7
Banco de Chile ............   27.2%         27.9%           9.3%         8
Scotiabank Sudamericano ...    4.9%          6.2%           9.3%         9
BBVA Chile ................    6.3%          6.5%           9.1%        10
Banco Santiago ............   21.9%         28.3%            --         11
Banco Edwards .............    1.4%          4.4%            --         12
                              ----          ----           -----       ----
Financial System ..........   12.8%         17.7%          14.4%

----------------------
Source: Superintendency of Banks


                                       30
<PAGE>

                       CHILEAN REGULATION AND SUPERVISION

     In Chile, only banks may maintain checking accounts for their customers,
conduct foreign trade operations by means of the issuance of letter of credits
and, together with finance companies, accept time deposits. The principal
authorities that regulate financial institutions in Chile are the
Superintendencia de Bancos e Instituciones Financieras (the "Superintendency of
Banks") and the Central Bank. Chilean banks are subject to the General Banking
Law and, to the extent not inconsistent therewith, the Chilean Companies Law.

     The Chilean banking system was established in 1925 and has been
characterized by periods of substantial regulation and state intervention, as
well as periods of deregulation. The most recent period of deregulation
commenced in 1974 and resulted in substantial amendment to the General Banking
Law. As a result of the amendment to the General Banking Law passed by the
Chilean Congress in December 1997, Chilean banks are authorized in principle to
conduct additional activities such as underwriting, transportation of
securities, financial services (portfolio management), and direct financial
advisory services, and, through subsidiaries, to engage in securitizations,
brokerage of non-pension fund insurance, loan collection, leasing, factoring,
management of investment, mutual and foreign capital investment funds, brokerage
of securities, custody and transportation of securities.

     In response to the Chilean banking crisis during 1982 and 1983, the
Superintendency of Banks assumed control of 19 banks and financial institutions
accounting for approximately 51% of the total loans in the banking system. As
part of the solution to this crisis, the Central Bank permitted these
institutions to sell to the Central Bank certain of their non-performing loans
in exchange for cash, third party drafts and a promissory note of the Central
Bank. Each institution was to repurchase the loans sold by it to the Central
Bank out of its future income.

     In addition, Law No. 18,818, promulgated in 1989, permitted institutions
with outstanding repurchase obligations with the Central Bank to evidence a
portion of such obligations by a subordinated obligation with no fixed term. In
the case of liquidation of the institution, the subordinated debt obligations
would be paid only after the bank's other debts had been paid in full. See
"--The Central Bank".

The Central Bank

     The Central Bank is an autonomous legal entity created by the Chilean
Constitution. It is subject to the Central Bank Act and, to the extent
applicable and not inconsistent, to the laws and regulations applicable to the
private sector. It is governed and administered by a Board of Directors composed
of five members designated by the President of the Republic subject to prior
approval by the Senate.

     The Central Bank's principal regulatory responsibilities is to provide for
the stability of the currency system and the due payment of both internal and
foreign debts. The Central Bank's powers include setting reserve requirements,
regulating the amount of money and credit in circulation, and establishing
regulations and guidelines regarding the financial system and the capitals
market, the Formal Exchange Market and banks' deposit-taking activities, and
operating as a bank's lender of last resort.

   Background

     During 1982 and 1983, the Chilean banking system experienced significant
instability due to, among other factors, a recession in the United States and
other countries accompanied by high international interest rates, the
overvaluation of the Chilean peso, a lack of stringent banking regulation and a
lack of effective credit policies at most Chilean banks. The situation resulted
in a banking crisis which required the Central Bank and the Chilean government
to provide assistance to most Chilean private sector banks and, in the case of
certain institutions (accounting for approximately 51% of the total loans in the
banking system), the Superintendency of Banks was required to assume control. We
were not among the institutions subjected to control by the Superintendency of
Banks.

     As one form of assistance to private sector financial institutions, the
Central Bank permitted certain banks to sell to the Central Bank certain of
their non-performing loans in exchange for cash, third party drafts and a


                                       31
<PAGE>

promissory note of the Central Bank. Each bank which sold non-performing loans
to the Central Bank agreed to repurchase the loans out of its future income. In
1989, the Chilean government enacted Ley No. 18,818, which permitted banks with
outstanding repurchase obligations to reacquire the loans still being held by
the Central Bank for a price payable in cash equal to the actual economic value
of such loans at the time of repurchase as appraised by the Superintendency of
Banks. Ley No. 18,818 also provided that the obligation to pay the difference
between the price initially paid to each bank by the Central Bank for the loans
and the amount paid by such bank to the Central Bank to reacquire its loans
would constitute subordinated obligations of the bank with no fixed term, known
as deuda subordinada ("Central Bank Subordinated Debt"). In the case of
liquidation of the bank, the subordinated debt obligations were to be paid only
after the bank's other debts had been paid in full. The law provided, however,
that until the subordinated debt obligations of a bank were discharged in full,
the bank was required to make certain payments in respect of the subordinated
debt obligations to the Central Bank out of net profits. As a result, a bank
with subordinated debt obligations was limited in its ability to retain net
income to support its growth and for general corporate purposes. In addition,
the law provided that holders of common shares of the bank outstanding at the
time the subordinated debt obligations were created were not permitted to
receive dividends until the subordinated debt obligations were paid in full.
However, holders of shares issued after the creation of the subordinated debt
obligations and with the prior approval of the Central Bank ("shares of
preferred stock" or "preferred shares") could receive dividends, to the extent
declared, but only in an amount expressed as a percentage of the dividends that
would have been payable to a holder of common shares in the absence of the
prohibition on payment of dividends on common shares described above. Holders of
shares of preferred stock could therefore receive as dividends a portion of the
bank's income before provision for the subordinated debt obligations ("Surplus")
to the extent otherwise permitted by law unless such income was further
capitalized.

     In 1995, the Chilean Congress enacted the Subordinated Debt Bill enabling
banks owing subordinated debt obligations to the Central Bank to agree with the
Central Bank to modify the repayment terms of such debt. Banks that elected not
to be governed by the Subordinated Debt Bill would be obligated to repay their
subordinated debt obligations in accordance with prior law. Banks that elected
to be governed by the Subordinated Debt Bill would be required to repay and
discharge their subordinated debt obligations in accordance with a repayment
schedule agreed upon with the Central Bank, and in any event within 40 years.
The amount of each installment depended upon whether or not at the time the bank
makes such election it was deemed capable of repaying its subordinated debt
obligation within 40 years, based on a series of parameters set forth in the
Subordinated Debt Bill. The Subordinated Debt Bill further provided that if a
bank was deemed incapable of repaying its subordinated debt obligation within 40
years, such bank could enter into an agreement with the Central Bank stipulating
that its subordinated debt obligation would be repaid with the proceeds of the
sale of shares of such bank in the context of a program approved by the Central
Bank. Such program could involve one or more offerings but had to be completed
within a maximum of ten years. The shares sold pursuant to the program
established by the bank and the Central Bank would be entitled to receive
dividends, if and when such dividends were declared by the shareholders, in
accordance with Chilean corporate law and subject to legal reserve requirements.
Holders of record of shares of preferred stock of any such bank on the day the
program was approved by the Central Bank, which were entitled to receive a
percentage of the bank's annual Surplus, had the right to subscribe for shares
offered pursuant to the program in proportion to such percentage.

     We chose to be governed by the Subordinated Debt Bill, and pursuant thereto
agreed with the Central Bank to enter into a program involving the issuance and
sale of 91,348,388 Common Shares and the repayment and cancellation of the
Central Bank Subordinated Debt with the proceeds of the sale of such shares (the
"Program"). Pursuant to the Program and the Subordinated Debt Bill, the Central
Bank Subordinated Debt was repaid and discharged in full upon payment to the
Central Bank of the net proceeds of an offering of our shares of common stock in
Chile and internationally, completed on June 24, 1996.

The Superintendency of Banks

     Banks are supervised and regulated by the Superintendency of Banks, an
independent Chilean governmental agency. The Superintendency of Banks authorizes
the creation of new banks and has broad powers to interpret and enforce legal
and regulatory requirements. Furthermore, in the case of non-compliance, the
Superintendency of Banks has the ability to impose sanctions. In extreme cases
it can appoint, with the prior approval of the Board of


                                       32
<PAGE>

Directors of the Central Bank, a provisional administrator to manage a bank. It
must also approve any amendment to a bank's by-laws or any increase in its
capital.

     The Superintendency of Banks examines randomly all banks from time to time,
generally at least once a year. Banks are also required to submit their
financial statements monthly to the Superintendency of Banks, and the banks
financial statements are published four times a year at the end of each quarter,
in any newspaper with national coverage. In addition, banks are required to
provide extensive information regarding their operations at various periodic
intervals to the Superintendency of Banks. A bank's annual financial statements
and the opinion of its independent auditors must also be submitted for review by
the Superintendency of Banks.

     Any person acquiring 10% or more of the share capital of a bank must obtain
the prior approval of the Superintendency of Banks. Noncompliance with this
requirement results in the suspension of the voting rights with respect to the
acquired shares.

     Pursuant to the regulations of the Superintendency of Banks, the following
ownership disclosures are required: (a) banks are required to inform the
Superintendency of Banks of the identity of any person owning, directly or
indirectly, 5% or more of such bank's shares, (b) holders of ADSs must disclose
to the Depositary the identity of beneficial owners of ADSs registered under
such holders' names, and (c) the Depositary is required to notify either the
bank or the Superintendency of Banks as to the identity of beneficial owners of
ADSs which such Depositary has registered.

Limitations on Types of Activities

     Chilean banks may only conduct activities expressly allowed by the General
Banking Law, which include the following activities: lend, accept deposits, and,
subject to limitations, invest and perform financial services. Investments are
restricted to real estate for their own use, gold, foreign exchange and debt
securities. Through subsidiaries, they may also engage in certain specific
activities, such as securities brokerage services and mutual fund management.
Subject to certain limitations and the prior approval of the Superintendency of
Banks and the Central Bank, Chilean banks may own majority or minority interests
in foreign banks. As a result of an amendment to the General Banking Law passed
by the Chilean Congress in December 1997, Chilean banks and their subsidiaries
are authorized in principle to conduct additional activities. See "Chilean
Regulation and Supervision--Other Businesses".

Deposit Insurance

     In Chile, the State guarantees up to 90% of the principal amount of certain
time deposits of individuals. The State guarantee is subject to a maximum
payment of UF108 per person for each calendar year (Ch$1.8 million, or US$2,538
at December 31, 2002).

Reserve Requirements

     Deposits are subject to a reserve requirement of 9% for Chilean
peso-denominated demand deposits, 3.6% for Chilean peso-denominated time
deposits, 19% for dollar and other foreign currency-denominated demand deposits,
and 13.6% for dollar-denominated time deposits and other foreign
currency-denominated obligations of ours. The Central Bank has statutory
authority to increase reserve requirements up to an average of 40% for demand
deposits and up to 20% for time deposits, to implement monetary policy. For the
purposes of reserve requirements, demand deposits include any deposit that can
be withdrawn in a time period less than 30 days.

     In addition, a 100% special reserve (reserva tecnica) applies to demand
deposits, deposits in checking accounts, other dividend deposits received or
obligations payable on sight incurred in the ordinary course of business, other
deposits unconditionally payable within a term of less than 30 days and other
time deposits payable within a term of 10 days to the extent their aggregate
amount exceeds 2.5 times the amount of a bank's paid-in capital and reserves.


                                       33
<PAGE>

Minimum Capital

     Under the General Banking Law, a bank must have a minimum of UF800,000 of
paid-in capital and reserves (Ch$13,395 million or US$18.8 million at December
31, 2002).

Capital Adequacy Requirements

     According to the current General Banking Law, banks should have a minimum
ratio of Total Capital to Risk Adjusted Assets of 8%, net of required allowances
for loans losses, and a minimum ratio of Basic Capital to Total Assets of 3%,
net of required allowances for loan losses. For these purposes, "Total Capital"
means the aggregate of: (a) a bank's paid-in capital and reserves, excluding
capital attributed to certain subsidiaries and foreign branches, (b) its
subordinated bonds, calculated at the placement price but not exceeding 50% of
its Basic Capital, and (c) its voluntary allowances for loan losses, up to 1.25%
of the Risk Adjusted Assets. Basic Capital includes paid-in capital and
reserves, but excludes the net income for the period. Risk Adjusted Assets are
based on total assets, which are then classified into five categories, each of
which has a different weight.

Lending Limits

     Under the General Banking Law, Chilean banks are subject to certain lending
limits, including the following:

     (i)  a bank may not extend to any one entity (or group of related
          entities), directly or indirectly, unsecured credit in an amount that
          exceeds 5% of the bank's Total Capital; or secured credit in an amount
          that exceeds 25% of its Total Capital. In the case of foreign export
          trade financing, the 5% ceiling for unsecured credits is raised to 10%
          and the 25% ceiling for secured credits to 30%. In the case of
          financing of infrastructure projects under concession, the ceiling is
          raised to 15% if secured by a pledge on the concession or if granted
          by two or more banks or financial institutions that have executed a
          credit agreement with the constructor or the holder of the concession;

     (ii) a bank may not extend loans to another financial institution in an
          aggregate amount exceeding 30% of its Total Capital;

    (iii) a bank may not directly or indirectly grant a loan, the purpose of
          which is to allow an entity or individual to acquire shares of the
          lender bank;

     (iv) a bank may not lend, directly or indirectly, to a director or any
          other person who has the power to act on behalf of the bank or to
          certain related parties of the same; and

     (v)  a bank may not grant loans to related parties (including holders of 1%
          or more of its shares) on more favorable terms than those generally
          offered to non-related parties. Loans to directors, management and
          companies in which such individuals have a participation of 5% or more
          of equity or net earnings are not permitted under the General Banking
          Law. The aggregate amount of loans to related parties may not exceed a
          bank's Total Capital. See "Related Party Transactions--Interest of
          Management in Certain Transactions".

     In addition, the General Banking Law limits the aggregate amount of loans
that a bank may grant to its employees to 1.5% of its Total Capital, and
provides that no individual employee may receive loans in excess of 10% of this
1.5% limit. Notwithstanding these limitations, a bank may grant to each of its
employees a single home mortgage loan for personal use once during such
employee's term of employment.

Loan Loss Reserves

     Chilean banks are required to provide to the Superintendency of Banks
detailed information regarding their loan portfolio on a monthly basis. Each
bank is also required to maintain a global allowance for loan losses, the amount
of which must equal the aggregate amount of its outstanding loans multiplied by
the greater of (i) its "risk index", or (ii) 0.75%. See "Selected Statistical
Information--Allowance For Loan Losses" for an explanation of the "risk


                                       34
<PAGE>

index" and other information regarding our allowance for loan losses. At
December 31, 2002, our risk index was 1.65% compared with an average for the
financial system as a whole (i.e., all banks and finance companies) of 1.95% as
of October 31, 2002, the last date in 2002 for which public information was
available. See "--Competition--Risk Index".

     Banks in Chile are also required to maintain an individual allowance for
loan loss for each past due loan (loans that are overdue as to any payment of
principal or interest by 90 or more days). An individual allowance for loan loss
equal to 100% is required for each such past due loan or the part thereof that
is unsecured if (and to the extent) such past due loans exceed in the aggregate
a bank's global allowance for loan loss. At December 31, 2002, the aggregate
amount of our potential individual allowances for loan loss was 4.22% of its
global allowance for loan losses. A bank may also voluntarily maintain
additional allowances for loan losses in excess of the minimum amounts required
as global and individual allowances. See "--Selected Statistical
Information--Allowance for Loan Losses--Voluntary Allowance For Loan Losses" and
Note 1.k) to the Consolidated Financial Statements.

Foreign Exchange

     The foreign exchange operations of Chilean banks are subject to the
following limitations: First, the balance, whether positive or negative, between
the bank's assets and liabilities denominated in foreign currency (including
assets and liabilities denominated in US$ dollars but payable in Chilean pesos,
as well as those denominated in Chilean pesos and adjusted by the variation of
the US$ dollar exchange rate) cannot exceed 20% of its paid-in capital and
reserves; provided that if its assets are higher than its liabilities it may
exceed such 20% in an amount equal to its allowances and reserves in foreign
currency (excluding those which correspond to profits to be remitted abroad).
Second, there is a reserve requirement of 13.6% applicable to all foreign
currency-denominated obligations owed by a bank including demand deposits, time
deposits and foreign loans (including international board offerings), regulated
under Chapter XIII of the Compendio de Normas de Cambios Internacionales (the
"Compendium"). The Central Bank has agreed to pay interest on 10% of the amounts
that are deposited to comply with the foregoing reserve requirements.

Capital Markets

     Under the General Banking Law, banks in Chile may only purchase, sell,
place, underwrite and act as a paying agent with respect to certain debt
securities. Banks may also place and underwrite certain equity securities of
public companies. Bank subsidiaries may also engage in debt placement and
dealing, equity issuance advice and securities brokerage, as well as in mutual
funds, investment management advisory services, merger and acquisition services,
factoring, insurance brokerage (excluding insurance in connection with
pensions), securitization and leasing activities. These subsidiaries are
regulated by the Superintendency of Banks and, in some cases, also by the
Superintendency of Securities and Insurance.

Financial Institutions with Economic Difficulties

     Unless under voluntary liquidation, banks may not be declared in
bankruptcy. The General Banking Law provides that if certain specified adverse
circumstances exist at any bank, its Board of Directors must correct the
situation within 30 days from the date of receipt of the relevant financial
statements. If the Board is unable to do so, it must call a special
shareholders' meeting to increase the capital of the bank by the amount
necessary to return the bank to financial stability. If the shareholders reject
the capital increase, if it is not effected within the term agreed at the
meeting or if the Superintendency of Banks does not approve the Board's
proposal, the bank will be barred from increasing its loan portfolio beyond that
stated in the financial statements presented to the Board and from making any
further investments in any instrument other than in instruments issued by the
Central Bank. In such a case, or in the event that a bank is unable to make
timely payment in respect of its obligations, the General Banking Law provides
that the bank may receive a two-year term loan from another bank. The terms and
conditions of such loans must be approved by the directors of both banks, as
well as by the Superintendency of Banks, but need not be submitted to the
borrowing bank's shareholders for their approval. In any event, a creditor bank
may not grant loans to an insolvent bank in an amount exceeding 25% of the
creditor bank's regulatory capital and reserves.


                                       35
<PAGE>

Dissolution and Liquidation of Banks

     The Superintendency of Banks may determine that a bank should be liquidated
for the benefit of its depositors or other creditors when the bank does not have
the necessary solvency to continue its operations. The Superintendency of Banks
may revoke a bank's authorization to exist and order its mandatory liquidation
subject to agreement by the Board of Directors of the Central Bank. The
resolution by the Superintendency of Banks must state the reason for ordering
the liquidation and must name a liquidator, unless the Superintendency of Banks
itself assumes such responsibility. When a liquidation is declared, all deposits
on checking accounts, other demand deposits received or obligations payable on
sight incurred in the ordinary course of business, other deposits
unconditionally payable immediately or within 30 days, and any other deposits
and receipts payable within 10 days are required to be paid by using existing
funds of the bank, its deposits with the Central Bank or its investments in
instruments that represent its reserves. If these funds are insufficient to pay
these obligations, the liquidator may seize the rest of the bank's assets, as
necessary. If necessary, the Central Bank will lend the bank the funds necessary
to pay these obligations. Any such Central Bank loans are preferential to any
claims of other creditors of the liquidated bank.

Foreign Operations

     Under current Chilean banking regulations, banks may invest in certain
foreign currency securities and may grant loans to foreign individual and
entities. With respect to equity securities, banks in Chile may only invest in
equity securities of foreign banks and certain other foreign companies in which
Chilean banks would be able to invest, if those companies were incorporated in
Chile. Banks may only invest in debt securities traded in formal secondary
markets located in countries where its sovereign rating is at least BB-. Such
debt securities shall qualify as (i) securities issued or guaranteed by foreign
sovereign states or their Central Banks or other foreign or international
financial entities, and (ii) bonds issued by foreign companies. Such debt
securities must have a minimum rating as follows:

                      Rating Agency             Short-Term   Long-Term
---------------------------------------------   ----------   ---------
Moody's......................................       P2         Baa3
Standard & Poor's............................       A3         BBB-
Fitch Ratings................................       F2         BBB-


     Banks may also invest in (i) unrated debt securities as long as such
securities are issued or guaranteed by foreign sovereign states or their Central
Banks. For this purpose, it will be assumed that the rating of the debt security
is the international rating of the country where the issuer is located, and (ii)
structured notes issued by investment banks that are rated higher than the
ratings described above, so long as such notes are linked to a debt instrument
issued by a sovereign or corporate entity and rated at least at the ratings
described above.

     The debt securities to be purchased by Chilean banks may have a lower
rating, as long as certain other conditions specified in the regulations of the
Central Bank are met.

     Subject to certain conditions, a bank may grant loans in foreign currency
to subsidiaries or branches of Chilean corporations located abroad, to companies
listed on foreign stock exchanges rated at least BB-, and in general to
individuals and entities domiciled abroad, as long as the Central Bank is kept
informed of such activities.

     Additionally, banks may acquire loans granted to the individuals or
entities described in the foregoing paragraph as well as participation in
syndicated loans granted to individuals or entities domiciled abroad.

     Lastly, banks may grant loans to finance export transactions to Chilean
residents or to individuals or entities domiciled abroad.

     In the event the sum of the investments of a bank in foreign currency
securities and of the loans granted to foreign individuals and entities exceeds
70% of the Total Capital of such bank, the excess is subject to a mandatory
reserve of 100%.


                                       36
<PAGE>

Other Businesses

     In December 1997, the Chilean Congress amended the General Banking Law,
authorizing Chilean banks in principle to conduct additional activities such as
factoring, underwriting, transportation of securities, financial services
(portfolio management), leasing and direct financial advisory services.
Furthermore, such amendment gave the Superintendency of Banks discretionary
power to allow banks to engage through subsidiaries in other types of
activities, such as securitizations, brokerage of non-pension fund insurance,
loan collection, factoring and custody and transportation of securities.

     As a result of the amended General Banking Law, Chilean banks are now
allowed to establish, in addition to branches and representative offices outside
Chile, foreign subsidiaries (or have minority interests in foreign entities)
engaged in banking activities or in any of the types of non-banking activities
in which Chilean banks can engage through domestic subsidiaries. It also permits
Chilean-based banking offices, under certain conditions, to make loans to many
types of entities located in other countries.

     Besides the activities linked to the subsidiaries, the operations profile
of the bank was expanded by permitting the execution of underwriting agreements
for public placement of stocks and the possibility of development for financial
services for third parties.

   Mark to Market Requirements for Financial Investments

     In September 1998, the Superintendency of Banks modified the regulations
regarding the valuation of financial investments. Pursuant to the new
regulations, a bank may differentiate its financial investments between
permanent investments and short-term investments. The value of the permanent
investment portfolio cannot exceed such bank's basic capital. In addition, once
a financial investment is classified as a permanent investment, it can only be
removed when it reaches maturity or when it is sold. The fluctuation in the
market value of the financial investments transferred to the permanent
investment account is not recorded in the income statement but is recorded in
other reserves in shareholders' equity.

   Allowance Requirements for Consumer Lending

     Pursuant to requirements for consumer lending established by the
Superintendency of Banks, a bank must revise the credit rating of all loans made
to a particular borrower if the bank renegotiates any loan with that borrower.
In addition, a bank must classify all consumer loans of a single borrower
according to the borrower's worst rated loan. Finally, a bank must establish and
abide by more stringent follow-up procedures relating to a borrower's consumer
loans with other financial institutions. For example, a bank must automatically
review a borrower's allowance amount when the borrower's records display a
non-performing loan or other kind of negative credit behavior in the databases
of the Superintendency of Banks or a private information service, even if the
borrower is not in default vis-a-vis the bank.


                        SELECTED STATISTICAL INFORMATION

     The following information is included for analytical purposes and should be
read in conjunction with our Consolidated Financial Statements as well as
"Operating and Financial Review and Prospects". The financial data in the
following tables as of and for all year-end periods have been restated in
constant Chilean pesos of December 31, 2002. See Note 1.c) to Consolidated
Financial Statements.

Average Balance Sheets and Interest Rate Data

     The average balances for interest earning assets and interest bearing
liabilities have been calculated on the basis of daily balances of BBVA Chile
and on the basis of month end balances for our subsidiaries. Such average
balances are presented in Chilean pesos (Ch$), in UF and in foreign currencies
(principally US$).


                                       37
<PAGE>

     The nominal interest rate has been calculated by dividing the amount of
interest and principal readjustment gain or loss during the period by the
related average balance, both amounts expressed in constant Chilean pesos. The
nominal rates calculated for each period have been converted into real rates
using the following formulas:

           1+Np                            (1+Nd)(1+D)
     Rp=   ---- -1                     Rd= ---------- -1
           1+I                                 1+I
Where:

Rp   =   real average rate for Chilean peso-denominated assets and liabilities
         (in Ch$ and UF) for the period;

Rd   =   real average rate for foreign currency-denominated assets and
         liabilities for the period;

Np   =   nominal average rate for Chilean peso-denominated assets and
         liabilities for the period;

Nd   =   nominal average rate for foreign currency-denominated assets and
         liabilities for the period;

D    =   depreciation rate of the Chilean peso to the dollar for the period; and

I    =   inflation rate in Chile for the period (based on the variation of
         the CPI).

     The real interest rate can be negative for a portfolio of Chilean
peso-denominated loans when the inflation rate for the period is higher than the
average nominal rate of the loan portfolio for the same period. A similar effect
could occur for a portfolio of foreign currency-denominated loans when the
inflation rate for the period is higher than the sum of the depreciation rate
for the period and the corresponding average nominal rate of the portfolio.

     The formula for the average real rate for foreign currency-denominated
assets and liabilities (Rd) reflects a gain or loss in purchasing power caused
by the difference between the depreciation rate of the Chilean peso and the
inflation rate in Chile during the period. The following example illustrates the
calculation of the real interest rate for a US$-denominated asset earning a
nominal annual interest rate of 10% (Nd = 0.10), assuming a 5% annual
depreciation rate (D = 0.05) and a 12% annual inflation rate (I = 0.12):

         (1+0.10)(1+0.05)
     Rd= ---------------- -1 = 3.125% per year
            1 + 0.12

     In the example, since the inflation rate was higher than the depreciation
rate, the real rate is lower than the nominal rate in dollars. If, for example,
the annual depreciation rate were 15%, using the same numbers, the real rate in
Chilean pesos would be 12.9%, which is higher than the nominal rate in dollars.
Using the same numbers, if the annual inflation rate were greater than 15.5%,
the real rate would be negative.

     Contingent loans (consisting of guarantees and outstanding and undrawn
letters of credit) have been treated as interest earning assets. Although the
nature of the income derived from such assets is similar to a fee, Chilean
banking regulations require that such income be accounted for as interest
revenue. As a result of this treatment, the comparatively low rates of interest
earned on these assets have a distorting effect on the average interest rate
earned on total earning assets.

     The real rate for contingent loans has been stated as the nominal rate,
since we do not have an effective funding obligation for these loans. The
foreign exchange gains or losses on foreign currency-denominated assets and
liabilities have not been included in interest revenue or expense. Similarly,
interest on financial investments does not include trading gains or losses on
these investments.

     Non-performing loans that are not yet 90 or more days overdue, as well as
restructured loans earning interest at two or more percentage points below our
average rate for similar types of performing loans at the date of the
restructuring, have been included in each of the various categories of loans
and, therefore, affect the various averages. Non-performing loans that are 90 or
more days overdue are shown as a separate category of loans ("Past due loans").
Interest and/or indexation readjustments received on all non-performing loans
during the periods are included as interest revenue.


                                       38
<PAGE>

     Included in interbank deposits are current accounts maintained in the
Central Bank and overseas banks. Such assets have a distorting effect on the
average interest rate earned on total interest earning assets because (i)
balances maintained in the Central Bank only receive interest on the amounts
which are legally required to be held for liquidity purposes, and (ii) balances
maintained in overseas banks earn interest only for certain accounts in certain
countries. Consequently, the average interest earned on such assets is
comparatively low. These deposits are maintained by us in these accounts to
comply with statutory requirements and to facilitate international business,
rather than to earn income.

     The monetary gain or loss on interest earning assets and interest bearing
liabilities is not included as a component of interest revenue or interest
expense because inflation effects are taken into account in the calculation of
real interest rates.

     The following tables show, by currency of denomination, average balances
and, where applicable, interest amounts earned and paid average nominal rates
and average real rates for our interest earning assets and interest bearing
liabilities for the years ended December 31, 2000, 2001 and 2002.

     Outstanding Mortgage finance bonds issued as of December 31, 2002 and those
issues as of December 31, 2001, have been presented net of its corresponding
liability. Outstanding Mortgage finance bonds issued prior to year 2001 have not
been presented net of its corresponding liability, the same presentation as in
previous reports.

<TABLE>
                                                                     Year ended December 31,
                     --------------------------------------------------------------------------------------------------------------
                                      2000                                  2001                                2002
                     -----------------------------------  ----------------------------------  -----------------------------------
                                        Average  Average                    Average  Average                     Average  Average
                     Average  Interest  nominal   real    Average Interest  nominal   real    Average  Interest  nominal   real
                     balance   earned    rate     rate    balance  earned    rate     rate    balance   earned    rate     rate
                     -------  --------  -------  -------  ------- --------  -------  -------  -------  --------  -------  -------
ASSETS
INTEREST
 EARNING ASSETS
Interbank
  deposits
<S>                   <C>         <C>     <C>    <C>       <C>         <C>    <C>     <C>       <C>          <C>      <C>    <C>
  Ch$..............   13,944      467     3.3%   (1.1)%    22,433      482    2.1%    (0.4)%    23,703       432      1.8    (1.0)
  UF...............        0        0     0.0     0.0           0        0    0.0      0.0           0         0      0.0     0.0
  Foreign currency.   11,523       50     0.4     4.3       4,536       89    2.0     13.9      10,819       104      1.0     6.6
                    --------  -------    ----    ----   ---------  -------   ----     ----   ---------   -------     ----    ----
     Total.........   25,467      517     2.0     1.3      26,969      571    2.1      2.0      34,522       536      1.6     1.4
                    ========  =======                   =========  =======                   =========   =======
Investments
  Ch$..............   95,636   11,018    11.5     6.7     196,317   18,572    9.5      6.7     179,715     7,215      4.0     1.2
  UF...............  180,997   17,946     9.9     5.2     181,207   15,699    8.7      5.9      93,502     5,124      5.5     2.6
  Foreign
   currency........   59,981    6,910    11.5    15.8      66,861    2,009    3.0     15.0     238,374    27,203     11.4    17.7
                    --------  -------    ----    ----   ---------  -------   ----     ----   ---------   -------     ----    ----
     Total.........  336,614   35,874    10.7     7.5     444,385   36,280    8.2      7.6     511,591    39,542      7.7     9.1
                    ========  =======                   =========  =======                   =========   =======
Commercial loans
  Ch$..............   87,960   13,530    15.4    10.4     114,338   14,233   12.4      9.6     192,077    15,953      8.3     5.4
  UF...............  482,501   57,944    12.0     7.2     497,389   50,421   10.1      7.3     423,875    53,956     12.7     9.7
  Foreign currency.   42,741    4,144     9.7    13.9     101,184    2,360    2.3     14.3     157,116     8,138      5.2    11.1
                    --------  -------    ----    ----   ---------  -------   ----     ----   ---------   -------     ----    ----
     Total.........  613,202   75,618    12.3     8.1     712,911   67,014    9.4      8.7     773,068    78,047     10.1     8.9
                    ========  =======                   =========  =======                   =========   =======
Consumer loans
  Ch$..............  118,916   26,506    22.3    17.0     142,109   30,595   21.5     18.4     163,122    32,550     20.0    16.7
  UF...............   20,611    2,733    13.3     8.4      19,805    2,203   11.1      8.3      20,632     1,992      9.7     6.7
  Foreign currency.      198        0     0.0     3.9         191        0    0.0     11.7         194         3      1.5     7.2
                    --------  -------    ----    ----   ---------  -------   ----     ----   ---------   -------     ----    ----
     Total.........  139,725   29,239    20.9    15.7     162,105   32,798   20.2     17.2     183,948    34,545     18.8    15.6
                    ========  =======                   =========  =======                   =========   =======
Mortgage loans
  Ch$..............        0        0     0.0     0.0           0        0    0.0      0.0           0         0      0.0     0.0
  UF...............  248,868   34,129    13.7     8.8     239,109   36,736   15.4     12.4     237,765    25,222     10.6     7.6
  Foreign currency.        0        0     0.0     0.0           0        0    0.0      0.0           0         0      0.0     0.0
                    --------  -------    ----    ----   ---------  -------   ----     ----   ---------   -------     ----    ----
     Total.........  248,868   34,129    13.7     8.8     239,109   36,736   15.4     12.4     237,765    25,222     10.6     7.6
                    ========  =======                   =========  =======                   =========   =======
Foreign trade loans
  Ch$..............        0        0     0.0     0.0           0        0    0.0      0.0      29,876       507      1.7    (1.1)
  UF...............        0        0     0.0     0.0           0        0    0.0      0.0           0         0      0.0     0.0
  Foreign currency.  128,873   10,047     7.8    11.9     164,040   10,225    6.2     18.6     169,479     7,335      4.3    10.2
                    --------  -------    ----    ----   ---------  -------   ----     ----   ---------   -------     ----    ----
     Total.........  128,873   10,047     7.8    11.9     164,040   10,225    6.2     18.6     199,355     7,842      3.9     8.5
                    ========  =======                   =========  =======                   =========   =======
Interbank loans
  Ch$..............    3,162      288     9.1     4.4       2,855      140    4.9      2.2       3,107       699     22.5    19.2
  UF...............        0        0     0.0     0.0           0       11    0.0      0.0         783       461     58.9    54.5
</TABLE>

                                       39
<PAGE>

<TABLE>
                                                                     Year ended December 31,
                     --------------------------------------------------------------------------------------------------------------
                                       2000                                  2001                                2002
                     ------------------------------------- ---------------------------------- -------------------------------------
                                        Average   Average                   Average  Average                     Average  Average
                     Average  Interest  nominal    real   Average  Interest nominal   real    Average  Interest  nominal   real
                     balance   earned    rate      rate   balance   earned   rate     rate    balance   earned    rate     rate
                     -------  --------  -------  -------  -------  -------- -------  -------  -------  --------  -------  -------

<S> <C>                <C>        <C>     <C>     <C>       <C>        <C>    <C>      <C>       <C>         <C>     <C>     <C>
  Foreign currency.      261        0     0.0     3.9         112        0    0.0     11.7           1         0      0.0     5.6
                    --------  -------    ----    ----   ---------  -------   ----     ----   ---------   -------     ----    ----
     Total.........    3,423      288     8.4     4.4       2,967      151    5.1      2.6       3,891     1,160     29.8    26.3
                    ========  =======                   =========  =======                   =========   =======
Lease contracts
  Ch$..............    9,827      553     5.6     1.1      12,573       96    0.8     (1.8)     22,183        84      0.4    (2.4)
  UF...............   39,314    6,618    16.8    11.8      46,463    6,719   14.5     11.6      41,662     6,388     15.3    12.2
  Foreign currency.    4,138      730    17.7    22.2       3,317      827   24.9     39.5       4,237       (18)    (0.4)    5.2
                    --------  -------    ----    ----   ---------  -------   ----     ----   ---------   -------     ----    ----
     Total.........   53,279    7,901    14.8    10.6      62,353    7,642   12.3     10.4      68,082     6,454      9.5     7.0
                    ========  =======                   =========  =======                   =========   =======
Other
  outstanding
  loans
  Ch$..............   45,793    9,440    20.6    15.4      51,841    1,870    3.6      1.0      54,408     6,699     12.3     9.3
  UF...............  173,021   18,742    10.8     6.1     234,020   20,721    8.9      6.1     263,263    14,877      5.7     2.8
  Foreign currency.       15        3    20.0    24.6          28        0    0.0     11.7          30         0      0.0     5.6
                    --------  -------    ----    ----   ---------  -------   ----     ----   ---------   -------     ----    ----
     Total.........  218,829   28,185    12.9     8.1     285,889   22,591    7.9      5.2     317,701    21,576      6.8     3.9
                    ========  =======                   =========  =======                   =========   =======
Past due loans
  Ch$..............    9,895    3,015    30.5    24.9      10,052    2,977   29.6     26.3      10,545       712      6.8     3.8
  UF...............   18,234      372     2.0    (2.4)     28,959      400    1.4     (1.2)     28,483        62      0.2    (2.5)
  Foreign currency.    2,425       39     1.6     5.5       1,599        0    0.0     11.7       1,260         0      0.0     5.6
                    --------  -------    ----    ----   ---------  -------   ----     ----   ---------   -------     ----    ----
     Total.........   30,554    3,426    11.2     7.1      40,610    3,377    8.3      6.1      40,288       774      1.9    (0.6)
                    ========  =======                   =========  =======                   =========   =======
Contingent loans
  Ch$..............    8,867      201     2.4    (2.0)      6,238      185    3.0      0.4       6,138       199      3.2     0.4
  UF...............   19,100      356     1.9    (2.5)     19,029      382    2.0     (0.6)     22,158       331      1.5    (1.3)
  Foreign currency.   33,729      209     0.6     4.5      44,368      242    0.5     12.3      44,965       236      0.5     6.2
                    --------  -------    ----    ----   ---------  -------   ----     ----   ---------   -------     ----    ----
     Total.........   61,696      766     1.3     1.4      69,635      809    1.2      7.7      73,261       766      1.0     3.4
                    ========  =======                   =========  =======                   =========   =======
Total interest
  earning assets
  Ch$..............  394,000   65,018    16.5    11.5     558,756   69,150   12.4      9.6     684,874    65,050      9.5     6.5
  UF...............1,182,646  138,840    11.7     6.9   1,265,981  133,292   10.5      7.7   1,132,123   108,413      9.6     6.6
  Foreign currency.  283,884   22,132     7.8    12.0     386,236   15,752    4.1     16.3     626,475    43,001      6.9    12.9
                   ---------  -------    ----    ----   ---------  -------   ----     ----   ---------   -------     ----    ----
     Total.........1,860,530  225,990    12.1%    8.7%  2,210,973  218,194    9.9%     9.7%  2,443,472   216,464      8.9     8.2
                   =========  =======                   =========  =======                   =========   =======

NON-INTEREST
  EARNING ASSETS
Cash and due
  from banks
  Ch$..............   221,869                              216,237                              234,886
  UF...............         0                                    0                                    0
  Foreign currency.    12,376                               15,479                               11,732
     Total.........   234,245                              231,716                              246,618
Allowance for
  loan losses
  Ch$..............   (37,393)                             (38,795)                             (42,991)
  UF...............         0                                    0                                    0
  Foreign currency.         0                                    0                                    0
     Total.........   (37,393)                             (38,795)                             (42,991)
Bank premises
  and equipment
  Ch$..............    55,518                               57,656                               56,502
  UF...............         0                                    0                                    0
  Foreign currency.         0                                    0                                    0
     Total.........    55,518                               57,656                               56,502
Other assets
  Ch$..............    49,719                              119,353                               80,691
  UF...............       629                                  717                                  641
  Foreign currency.    20,075                               33,432                               62,145
     Total.........    70,423                              153,502                              143,477
Total non-
  interest
  earning assets
  Ch$..............   289,712                              354,451                              329,088
  UF...............       629                                  717                                  641
  Foreign currency.    32,451                               48,911                               73,877
                      -------                              -------                              -------
     Total.........   322,792                              404,079                              403,606
                      =======                              =======                              =======
TOTAL ASSETS
  Ch$..............   683,712   65,018                     913,207   69,150                   1,013,962    65,050
  UF............... 1,183,275  138,840                   1,266,698  133,292                   1,132,764   108,413
</TABLE>

                                       40
<PAGE>


<TABLE>
                                                                     Year ended December 31,
                      --------------------------------------------------------------------------------------------------------------
                                       2000                                  2001                                2002
                      ------------------------------------- ---------------------------------- -------------------------------------
                                          Average   Average                   Average  Average                     Average  Average
                       Average  Interest  nominal    real   Average  Interest nominal   real    Average  Interest  nominal   real
                       balance   earned    rate      rate   balance   earned   rate     rate    balance   earned    rate     rate
                       -------  --------  -------   ------- -------  -------- -------  -------  -------  --------  -------  -------

<S>                  <C>        <C>        <C>      <C>   <C>        <C>       <C>      <C>   <C>          <C>       <C>     <C>
  Foreign currency.   316,335   22,132                     435,147   15,752                     700,352    43,001
                    ---------  -------                   ---------  -------                   ---------   -------
     Total......... 2,183,322  225,990                   2,615,052  218,194                   2,847,078   216,464
                    =========  =======                   =========  =======                   =========   =======

LIABILITIES AND
SHAREHOLDERS'
EQUITY INTEREST
BEARING LIABILITIES

Savings accounts
   Ch$.............         0        0     0.0%    0.0%          0        0    0.0%     0.0%          0         0      0.0     0.0
   UF..............    54,310    4,417     8.1     3.5      57,379    3,099    5.4      2.7      57,438     2,179      3.8     1.0
   Foreign
   currency........         0        0     0.0     0.0           0        0    0.0      0.0           0         0      0.0     0.0
                    ---------  -------     ---     ---   ---------  -------    ---      ---   ---------   -------      ---     ---
     Total.........    54,310    4,417     8.1     3.5      57,379    3,099    5.4      2.7      57,438     2,179      3.8     1.0
                    =========  =======                   =========  =======                   =========   =======
Time deposits
   Ch$.............   206,619   18,286     8.8     4.2     246,576   15,507    6.3      3.6     531,132    21,861      4.1     1.3
   UF..............   492,814   50,160    10.2     5.4     562,326   41,097    7.3      4.6     480,761    30,930      6.4     3.5
   Foreign
   currency........    64,428    3,506     5.4     9.5     134,797    5,229    3.9     16.0     141,857     2,736      1.9     7.6
                    ---------  -------     ---     ---   ---------  -------    ---      ---   ---------   -------      ---     ---
     Total.........   763,861   71,952     9.4     5.4     943,699   61,833    6.6      6.0   1,153,750    55,527      4.8     3.0
                    =========  =======                   =========  =======                   =========   =======
Central Bank
     borrowings
   Ch$.............     1,106      111    10.1     5.3      13,086      879    6.7      4.0       7,024       295      4.2     1.4
   UF..............    15,084    1,383     9.2     4.5      12,928    1,004    7.8      5.0       9,844       722      7.3     4.4
   Foreign
   currency........         4        1     0.0     0.0           0        0    0.0      0.0           0         0      0.0     0.0
                    ---------  -------     ---     ---   ---------  -------    ---      ---   ---------   -------      ---     ---
     Total.........    16,194    1,495     9.2     4.5      26,014    1,883    7.2      4.5      16,868     1,017      6.0     3.1
                    =========  =======                   =========  =======                   =========   =======
Securities sold
   under
   agreements to
   repurchase
   Ch$.............   162,099   16,407    10.1     5.4     192,647   14,276    7.4      4.7      72,999     4,781      6.5     3.6
   UF..............    12,177    1,176     9.7     4.9      17,623    1,165    6.6      3.9         371        23      6.2     3.3
   Foreign
   currency........         0        0     0.0     0.0         351        6    0.0      0.0     150,855     1,444      1.0    (1.8)
                    ---------  -------     ---     ---   ---------  -------    ---      ---   ---------   -------      ---     ---
     Total.........   174,276   17,583    10.1     5.3     210,621   15,447    7.3      4.6     224,225     6,248      2.8     0.0
                    =========  =======                   =========  =======                   =========   =======
Mortgage finance
     bonds
   Ch$.............         0        0     0.0     0.0           0        0    0.0      0.0           0         0      0.0     0.0
   UF..............   259,999   28,982    11.1     6.4     251,483   24,343    9.7      6.9     247,046    23,328      9.4     6.5
   Foreign
   currency........         0        0     0.0     0.0           0        0    0.0      0.0           0         0      0.0     0.0
                    ---------  -------     ---     ---   ---------  -------    ---      ---   ---------   -------      ---     ---
     Total.........   259,999   28,982    11.1     6.4     251,483   24,343    9.7      6.9     247,046    23,328      9.4     6.5
                    =========  =======                   =========  =======                   =========   =======
Other interest
   bearing
   liabilities
   Ch$.............    78,038    4,136     5.3     0.8      83,752    4,165    5.0      2.3      38,203     5,290     13.8    10.7
   UF..............   103,819   13,076    12.6     7.7      94,213    9,825   10.4      7.6     150,421    10,629      7.1     4.1
   Foreign
   currency........    90,510    4,269     4.7     8.7     113,098    4,257    3.8     15.9     127,978     3,232      2.5     8.3
                    ---------  -------     ---     ---   ---------  -------    ---      ---   ---------   -------      ---     ---
     Total..........  272,367   21,481     7.9     6.1     291,063   18,247    6.3      9.3     316,602    19,151      6.0     6.6
                    =========  =======                   =========  =======                   =========   =======
Total interest
bearing liabilities
   Ch$.............   447,862   38,940     8.7     4.0     536,061   34,827    6.5      3.8     649,358    32,227      5.0     2.1
   UF..............   938,203   99,194    10.6     5.8     995,952   80,533    8.1      5.4     945,881    67,811      7.2     4.3
   Foreign
   currency........   154,942    7,776     5.0     9.0     248,246    9,492    3.8     15.9     420,690     7,412      1.8     7.5
                    ---------  -------     ---     ---   ---------  -------    ---      ---   ---------   -------      ---     ---
     Total......... 1,541,007  145,910     9.5%    5.6%  1,780,259  124,852    7.0%     6.4%  2,015,929   107,450      5.3     4.3
                    =========  =======                   =========  =======                   =========   =======

</TABLE>


                                       41
<PAGE>


<TABLE>
                                                                     Year ended December 31,
                      --------------------------------------------------------------------------------------------------------------
                                       2000                                  2001                                2002
                      ------------------------------------- ---------------------------------- -------------------------------------
                                          Average   Average                   Average  Average                     Average  Average
                       Average  Interest  nominal    real   Average  Interest nominal   real    Average  Interest  nominal   real
                       balance   earned    rate      rate   balance   earned   rate     rate    balance   earned    rate     rate
                      ---------  -------  -------   ------- -------  -------- -------  ------- --------- --------  --------  -------
                                         (in millions of constant Ch$ of December 31, 2002, except for rate data)

NON-INTEREST BEARING
   LIABILITIES
<S>                     <C>        <C>     <C>     <C>       <C>        <C>    <C>      <C>       <C>         <C>     <C>     <C>
Non-interest
  bearing demand
   deposits
  Ch$..............   314,444                              354,823                              406,692
  UF...............    16,456                               11,454                               12,097
  Foreign
  currency.........     7,679                               11,770                                  550
                    ---------                            ---------                            ---------
   Total...........   338,579                              378,047                              419,339
                    =========                            =========                            =========
Contingent
 liabilities
  Ch$..............     8,847                                6,221                               30,547
  UF...............    19,057                               18,988                                3,162
  Foreign
  currency.........    33,818                               44,520                               39,942
                    ---------                            ---------                            ---------
   Total...........    61,722                               69,729                               73,651
                    =========                            =========                            =========
Other non-interest
   bearing
   liabilities
  Ch$..............    24,834                              106,226                               42,500
  UF...............         0                                    0                                   50
  Foreign currency.    21,799                               36,593                               48,906
                    ---------                            ---------                            ---------
   Total...........    46,633                              142,819                               91,456
                    =========                            =========                            =========
Shareholders'
  equity
  Ch$..............   195,377                              244,199                              246,702
  UF...............         0                                    0                                    0
  Foreign currency.         0                                    0                                    0
                    ---------                            ---------                            ---------
   Total...........   195,377                              244,199                              246,702
                    =========                            =========                            =========
Total non-interest
  bearing
  liabilities and
  shareholders'
  equity
  Ch$..............   543,502                              711,469                              726,441
  UF...............    35,513                               30,442                               15,309
  Foreign currency.    63,296                               92,883                               89,398
                    ---------                            ---------                            ---------
   Total...........   642,311                              834,794                              831,148
                    =========                            =========                            =========
TOTAL LIABLITIES
  AND SHAREHOLDERS'
  EQUITY
  Ch$..............   991,364   38,940                   1,247,530   34,827                   1,375,799    32,227
  UF...............   973,716   99,194                   1,026,394   80,533                     961,190    67,811
  Foreign currency.   218,238    7,776                     341,129    9,492                     510,088     7,412
                    ---------  -------                   ---------  -------                   ---------   -------
   Total........... 2,183,318  145,910                   2,615,053  124,852                   2,847,077   107,450
                    =========  =======                   =========  =======                   =========   =======


</TABLE>

Changes in Net Interest Revenue and Interest Expense-Volume and Rate Analysis

The following tables allocate, by currency of denomination, changes in our net
interest revenue and interest expense between changes in the average volume of
interest earning assets and interest bearing liabilities and changes in their
respective nominal interest rates for 2002 compared to 2001 and for 2001
compared to 2000. Volume and rate variances have been calculated based on
movements in average balances over the period and changes in nominal interest
rates on average interest earning assets and average interest bearing
liabilities. The net change attributable to changes in both volume and rate has
been allocated to the change due to rate.


<TABLE>
                                       Increase (decrease) from    Net change    Increase (decrease) from    Net change
                                       2000 to 2001 due to            from          2001 to 2002 due to         from
                                            changes in            2000 to 2001          changes in          2001 to 2002
                                       ------------------------   ------------   ------------------------   ------------
                                        Volume       Rate                           Volume        Rate
                                        ------       ----                           ------        ----
                                                    (in millions of constant Ch$ of December 2002)

INTEREST EARNING ASSETS
Interbank deposits
<S>  <C>                                 <C>         <C>               <C>            <C>         <C>           <C>
   Ch$.............................      183         (168)             15             23          (73)          (50)
   UF..............................        0            0               0              0            0             0
</TABLE>

                                       42
<PAGE>


<TABLE>

                                       Increase (decrease) from   Net change    Increase (decrease) from    Net change
                                       2000 to 2001 due to            from          2001 to 2002 due to         from
                                            changes in            2000 to 2001          changes in          2001 to 2002
                                       ------------------------   ------------  ------------------------    ------------
                                        Volume       Rate                           Volume        Rate
                                        ------       ----                           ------        ----
                                                    (in millions of constant Ch$ of December 2002)

<S>                                     <C>           <C>              <C>            <C>         <C>            <C>
   Foreign currency................     (138)         177              39             59          (44)           15
                                      ------      -------           -----         ------       -------        ------
     Total.........................       45            9              54             82         (117)          (35)
                                      ======      =======           =====         ======       =======        ======
Investments
   Ch$.............................    9,525       (1,971)          7,554           (667)     (10,690)      (11,357)
   UF..............................       18       (2,265)         (2,247)        (4,806)      (5,769)      (10,575)
   Foreign currency................      206       (5,107)         (4,901)        19,572        5,622        25,194
                                      ------      -------           -----         ------       -------        ------
     Total.........................    9,749       (9,343)            406         14,099      (10,837)        3,262
                                      ======      =======           =====         ======       =======        ======
Commercial loans
   Ch$.............................    3,283       (2,580)            703          6,456       (4,736)        1,720
   UF..............................    1,510       (9,033)         (7,523)        (9,357)      12,892         3,535
   Foreign currency................    1,363       (3,147)         (1,784)         2,897        2,881         5,778
                                      ------      -------           -----         ------       -------       -------
     Total.........................    6,156      (14,760)         (8,604)            (4)      11,037        11,033
                                      ======      =======           =====         ======       =======       =======
Consumer loans
   Ch$.............................    4,993         (904)          4,089          4,193       (2,238)        1,955
   UF..............................      (90)        (440)           (530)            80         (291)         (211)
   Foreign currency................        0            0               0              0            3             3
                                      ------      -------           -----         ------       -------        ------
     Total.........................    4,903       (1,344)          3,559          4,273       (2,526)        1,747
                                      ======      =======           =====         ======       =======        ======
Mortgage loans
   Ch$.............................        0            0               0              0            0             0
   UF..............................   (1,500)       4,107           2,607           (144)     (11,370)      (11,514)
   Foreign currency................        0            0               0              0            0             0
                                      ------      -------           -----         ------       -------        ------
     Total.........................   (1,500)       4,107           2,607           (144)     (11,370)      (11,514)
                                      ======      =======           =====         ======       =======       =======
Foreign trade loans
   Ch$.............................        0            0               0            507            0           507
   UF..............................        0            0               0              0            0             0
   Foreign currency................    2,192       (2,014)            178            235       (3,125)       (2,890)
                                      ------      -------           -----         ------       -------        ------
     Total.........................    2,192       (2,014)            178            742       (3,125)       (2,383)
                                      ======      =======           =====         ======       =======        ======
Interbank loans
   Ch$.............................      (14)        (134)           (148)            58          501           559
   UF..............................        0            0               0            461            0           461
   Foreign currency................        0            1               1              0            0             0
                                      ------      -------           -----         ------       -------        ------
     Total.........................      (14)        (133)           (147)           519          501          1020
                                      ======      =======           =====         ======       =======        ======
Lease contracts
   Ch$.............................       21         (478)           (457)            36          (48)          (12)
   UF..............................    1,034         (933)            101           (736)         405          (331)
   Foreign currency................     (206)         302              96             (4)        (841)         (845)
                                      ------      -------           -----         ------       -------        ------
     Total.........................      849       (1,109)           (260)          (704)        (484)       (1,188)
                                      ======      =======           =====         ======       =======        ======
Other outstanding loans
   Ch$.............................      219       (7,789)         (7,570)           317        4,512         4,829
   UF..............................    5,401       (3,422)          1,979          1,653       (7,497)       (5,844)
   Foreign currency................        0           (3)             (3)             0            0             0
                                      ------      -------           -----         ------       -------        ------
     Total.........................    5,620      (11,214)         (5,594)         1,970       (2,985)       (1,015)
                                      ======      =======           =====         ======       =======        ======
Past due loans
   Ch$.............................       46          (84)            (38)            33       (2,298)       (2,265)
   UF..............................      148         (120)             28             (1)        (337)         (338)
   Foreign currency................        0          (39)            (39)             0            0             0
                                      ------      -------           -----         ------       -------        ------
    Total..........................      194         (243)            (49)            32       (2,635)       (2,603)
                                      ======      =======           =====         ======       =======        ======
Contingent loans
   Ch$.............................      (78)          62             (16)            (3)          17            14
   UF..............................       (1)          27              26             47          (98)          (51)
   Foreign currency................       59          (26)             33              4          (10)           (6)
                                      ------      -------           -----         ------       -------        ------
    Total..........................      (20)          63              43             48          (91)          (43)
                                      ======      =======           =====         ======       =======        ======
Total interest earning assets
   Ch$.............................   18,178      (14,046)          4,132         10,953      (15,053)       (4,100)
   UF..............................    6,520      (12,079)         (5,559)       (12,803)     (12,065)      (24,868)
   Foreign currency................    3,476       (9,856)         (6,380)        22,763        4,486        27,249
                                      ------      -------           -----         ------      --------       -------
    Total..........................   28,174      (35,981)         (7,807)        20,913      (22,632)       (1,719)
                                      ======      =======           =====         ======      ========       =======

INTEREST BEARING LIABILITIES
Saving accounts
   Ch$.............................        0            0               0              0             0             0
   UF..............................      166       (1,484)         (1,318)             2          (922)         (920)
   Foreign currency................        0            0               0              0             0             0
                                      ------      -------           -----         ------       -------        ------
</TABLE>


                                       43
<PAGE>
<TABLE>

<S>                                   <C>         <C>             <C>              <C>         <C>            <C>
    Total..........................      166       (1,484)         (1,318)             2          (922)         (920)
                                      ======      =======           =====         ======       =======        ======
Time deposits
   Ch$.............................    2,513       (5,292)         (2,779)        11,712        (5,358)        6,354
   UF..............................    5,080      (14,143)         (9,063)        (5,248)       (4,919)      (10,167)
   Foreign currency................    2,730       (1,007)          1,723            136        (2,629)       (2,493)
                                      ------      -------           -----         ------       -------        ------
    Total..........................   10,323      (20,442)        (10,119)         6,600       (12,906)       (6,306)
                                      ======      =======           =====         ======       =======        ======
Central Bank borrowings
   Ch$.............................      805          (37)            768           (255)         (329)         (584)
   UF..............................     (167)        (212)           (379)          (226)          (56)         (282)
   Foreign currency................        0            0               0              0             0             0
                                      ------      -------           -----         ------       -------        ------
    Total..........................      638         (249)            389           (481)         (385)         (866)
                                      ======      =======           =====         ======       =======        ======
Securities  sold  under  agreements
   to repurchase
   Ch$.............................    2,264       (4,395)         (2,131)        (7,836)       (1,659)       (9,495)
   UF..............................      360         (371)            (11)        (1,070)          (72)       (1,142)
   Foreign currency................        0            0               0          1,441             3         1,444
                                      ------      -------           -----         ------       -------        ------
    Total..........................    2,624       (4,766)         (2,142)        (7,465)       (1,728)       (9,193)
                                      ======      =======           =====         ======       =======        ======
Mortgage finance bonds
   Ch$.............................        0            0               0              0             0             0
   UF..............................     (824)      (3,815)         (4,639)          (419)         (596)       (1,015)
   Foreign currency................        0            0               0              0             0             0
                                      ------      -------           -----         ------       -------        ------
    Total..........................     (824)      (3,815)         (4,639)          (419)         (596)       (1,015)
                                      ======      =======           =====         ======       =======        ======
Other interest bearing liabilities
   Ch$.............................      284         (255)             29         (6,307)        7,432         1,125
   UF..............................   (1,002)      (2,249)         (3,251)         3,972        (3,168)          804
   Foreign currency................      850         (862)            (12)           376        (1,401)       (1,025)
                                      ------      -------           -----         ------       -------        ------
    Total..........................      132       (3,366)         (3,234)        (1,959)        2,863           904
                                      ======      =======           =====         ======       =======        ======
Total interest bearing liabilities
   Ch$.............................    5,866       (9,979)         (4,113)        (2,686)           86        (2,600)
   UF..............................    3,613      (22,274)        (18,661)        (2,989)       (9,733)      (12,722)
   Foreign currency................    3,580       (1,869)          1,711          1,953        (4,027)       (2,074)
                                      ------      -------           -----         ------       -------        ------
    Total..........................   13,059      (34,122)        (21,063)        (3,722)      (13,674)      (17,396)
                                      ======      =======           =====         ======       =======        ======
</TABLE>


                                       44
<PAGE>


Interest Earning Assets--Net Interest Margin

     The following table analyzes, by currency of denomination, our levels of
average interest earning assets and net interest, and illustrates the
comparative margins realized, for each of the periods indicated:

<TABLE>
                                                                            Year ended December 31,
                                                              --------------------------------------------------
                                                                  2000               2001               2002
                                                              -------------        -----------      ------------
                                                              (in millions of constant Ch$ of December 31, 2002,
                                                                            except for percentages)

Total average interest earnings assets
<S>  <C>                                                            <C>                <C>             <C>
   Ch$..................................................            394,000            558,756         684,874
   UF...................................................          1,182,646          1,265,981       1,132,123
   Foreign currency.....................................            283,884            386,236         626,475
                                                                  ---------          ---------       ---------
     Total..............................................          1,860,530          2,210,973       2,443,472
                                                                  =========          =========       =========
Net interest earned(1)
   Ch$..................................................             26,078             34,323          32,823
   UF...................................................             39,646             52,759          40,602
   Foreign currency.....................................             14,356              6,260          35,589
                                                                  ---------          ---------       ---------
     Total..............................................             80,080             93,342         109,014
                                                                  =========          =========       =========
Net interest margin(2)
   Ch$..................................................               6.62%              6.14%           4.79%
   UF...................................................               3.35               4.17            3.59
   Foreign currency.....................................               5.06               1.62            5.68
                                                                  ---------          ---------       ---------
     Total..............................................               4.30%              4.22%           4.46%
                                                                  =========          =========       =========
</TABLE>

----------------------
(1) Net interest earned is defined as interest revenue earned less interest
expense incurred.

(2) Net interest margin is defined as net interest earned divided by average
interest earning assets

Return on Equity and Assets

     The following table presents certain of our selected financial ratios for
the periods indicated:

<TABLE>
                                                                            Year ended December 31,
                                                              --------------------------------------------------
                                                                  2000            2001                  2002
                                                              -------------     -----------         ------------
                                                              (in millions of constant Ch$ of December 31, 2002,
                                                                            except for percentages)

<S>                                                              <C>                <C>                 <C>
Net income..............................................         14,904             15,335              20,255
Average total assets....................................      2,183,322          2,615,052           2,847,078
Average shareholders' equity............................        195,377            244,199             246,702
Net income as a percentage of:
Average total assets....................................          0.68%               0.59%              0.71%
Average shareholders' equity............................          7.63                6.28               8.21
Average shareholders' equity as a percentage of
    average total assets................................          8.95                9.34               8.67
Dividend paid ratio (percentage)(1).....................         99.98               99.98              99.99
</TABLE>

----------------------
(1) Calculated by dividing dividends declared per share by net income per share,
for each year.


                                       45
<PAGE>


Investment Portfolio

     The following table sets forth our investments in Chilean government and
corporate securities and certain other investments as of December 31, 2000, 2001
and 2002. Investments which have a secondary market and a remaining maturity of
more than one year are carried at market value. All other investments are
carried at acquisition cost, plus accrued interest and UF indexation
adjustments, as applicable.

<TABLE>
                                                                                                             December 31,
                                                                                                             2002 Weighted
                                                                      Year ended December 31,                   Average
                                                           -----------------------------------------------   -------------
                                                               2000             2001               2002       Nominal Rate
                                                           ----------         ---------          ---------   -------------
                                                         (in millions of constant Ch$ of December 31, 2002)

<S>                                                        <C>                <C>             <C>                <C>
Government securities:
   Central Bank securities...............................     149,570          187,653           287,787            4.11
     Subtotal............................................     149,570          187,653           287,787            4.11
Investments purchased under agreements to resell.........       7,817            9,579            56,055            5.22
Investment collateral under agreements to repurchase:
   Central Bank securities...............................     223,647          147,813           203,577            4.79
   Negotiable time deposits in Chilean financial
     institutions........................................      22,621           21,286            16,704            4.50
      Subtotal...........................................     246,268          169,100           220,281            4.77
Other investments:
   Negotiable time deposits in domestic financial
     institutions........................................       2,808           15,589            43,353            4.40
   Mortgage Finance Bonds issued by the Bank(1)..........      15,091               --                --              --
   Other marketable securities...........................      73,509            8,345            38,404            2.89
      Subtotal...........................................      91,408           23,934            81,757            3.69
                                                              -------          -------           -------            ----
      Total investments..................................     495,063          390,266           645,880            2.88
                                                              =======          =======           =======            ====

</TABLE>
------------------
     (1) Under US GAAP, mortgage finance bonds issued by us are not classified
as an asset but rather are offset against outstanding debt. The same applies
under Chilean GAAP since year 2002. Accordingly, outstanding mortgage finance
bonds issued as of December 31, 2002 and those issues as of December 31, 2001,
have been presented net of its corresponding liability. Outstanding mortgage
finance bonds issued prior to year 2001 have not been presented net of its
corresponding liability, the same presentation as in previous reports.

     The above table includes Central Bank securities available for sale which
have the following maturity dates:

                                                       At December 31, 2002
                                                     ------------------------
                                                     (in millions of constant
                                                     Ch$ of December 31, 2002)

Due in one year or less.........................             110,507
Due from one year to five years.................              99,813
                                                             -------
      Total.....................................             210,320
                                                             =======


                                     46
<PAGE>


Loan Portfolio

     The following table analyzes our loans by type of loan. Except where
otherwise specified, all loan amounts stated below are before deduction of
allowance for loan losses. Total loans reflect our loan portfolio, including
past due amounts.

<TABLE>
                                               1998            1999            2000            2001           2002
                                            ---------       ---------       ---------       ---------     ---------
<S>                                           <C>             <C>             <C>             <C>           <C>
Commercial loans...................           620,073         621,307         685,665         819,362       828,522
Mortgage loans:
    Residential loans..............           187,921         176,850         159,140         146,864       146,153
    Other..........................            86,004          87,026          88,153          94,592       107,336
                                            ---------       ---------       ---------       ---------     ---------
       Subtotal....................           273,925         263,876         247,293         241,456       253,489
Consumer loans.....................            95,963         127,971         154,772         176,114       204,589
Foreign trade loans................           117,539         141,370         153,633         148,856       233,522
Interbank loans....................            31,057          10,612          15,950           1,033           --
Lease contracts....................            57,304          58,606          57,519          66,013        83,731
Other outstanding loans:
    Lines of credit--individuals....           29,891          18,359          19,306          17,309        17,759
    Lines of credit--companies......           18,649          22,906          49,002          16,201        36,235
    Mortgages financed by Central
       Bank lines of credit........            12,450           9,279           6,954           6,420         3,646
    Mortgages financed by the
       Bank's general borrowings...            35,972         117,010         212,789         236,947       310,143
    Other..........................               793             926           1,404           5,611           907
                                            ---------       ---------       ---------       ---------     ---------
    Subtotal.......................            97,755         168,480         289,455         282,488       368,690
Past due loans.....................            24,903          25,475          30,375          38,653        41,330
                                            ---------       ---------       ---------       ---------     ---------
    Subtotal.......................         1,318,519       1,417,697       1,634,662       1,773,975     2,013,873
Contingent loans...................            58,850          63,608          69,824          67,184        84,691
                                            ---------       ---------       ---------       ---------     ---------
       Total loans.................         1,377,369       1,481,305       1,704,486       1,841,159     2,098,564
                                            =========       =========       =========       =========     =========
</TABLE>

     The loan categories are as follows:

     Commercial loans are long-term and short-term loans made in Chilean pesos,
on an adjustable or fixed rate basis, primarily to finance working capital or
capital expenditures. Loans to individuals and businesses with terms that do not
meet the definitions of any of the other loan categories below are also included
in commercial loans. See "--Lines of Business".

     Mortgage loans are principally inflation-indexed, fixed-rate, long-term
loans financed specifically by mortgage finance bonds, with monthly payments of
principal and interest collateralized by real property mortgages. At the time of
approval, the amount of a mortgage loan may not be more than 75% of the lower of
the purchase price or appraised value of the mortgaged property. Under Mortgage
loans, unless specified separately, we also include other mortgages ("Mutuos"),
which are inflation-indexed, fixed or variable-rate, long-term loans financed by
the Bank's general borrowing, with monthly payments of principal and interest
collateralized by real property mortgages. At the time of approval, the amount
of such mortgage loan usually does not exceed 80% of the lower of the purchase
price or appraised value of the mortgaged property. Residential mortgage loans
relate to loans to individuals for housing, and other mortgage loans are made to
finance the purchase of undeveloped land, office buildings and other real
estate. See "--Lines of Business". We recently launched a new product in which a
mortgage loan is complemented by a commercial loan that covers the remaining 20%
of the price of the property, thus allowing qualified clients to acquire the
property without any down payment. The product has received favorable reviews in
the market and was immediately copied by some competitors, but its effect in
business can not be established as yet.

     Consumer loans are loans to individuals, made in Chilean pesos, generally
on a fixed rate basis, to finance the purchase of consumer goods or to pay for
services. They also include credit card balances financed by customers and thus
subject to interest charges. See "--Lines of Business--Retail Banking".


                                      47
<PAGE>

     Foreign trade loans are fixed or variable rate, short-term loans made in
foreign currencies (principally US$) to finance imports and exports. See
"--Lines of Business--Corporate Banking".

     Interbank loans are fixed-rate, short-term loans to financial institutions
that operate in Chile.

     Lease contracts are agreements for direct financing leases relating to
capital equipment and other property.

     Other outstanding loans include checking account lines of credit, bills of
exchange and mortgage loans which are financed by our general borrowings (as
opposed to mortgage finance bonds).

     Past due loans include, with respect to any loan, the amount of principal
or interest that is 90 or more days overdue, and the entire outstanding balance
of any loan is recorded under past due loans once legal collection proceedings
have been commenced.

     Contingent loans consist of guarantees granted by a bank's in Ch$, UF and
foreign currencies (principally US$), as well as outstanding and undrawn letters
of credit. Unlike US GAAP, Chilean GAAP requires such loans to be included on a
bank's balance sheet.

     Any collateral provided generally consists of a mortgage on real estate or
a pledge of marketable securities, third party letters of credit, equipment or
inventory. The existence and amount of collateral generally vary from loan to
loan.

Risks of the Loan Portfolio

     Our management believes that certain of our principal loan products have
the following risk characteristics:

     Commercial Loans. Our loans for working capital, capital expenditures and
similar purposes have experienced a decrease in the risk index from 2.05% at
December 31, 2001 to 1.79% at December 31, 2002.

     The variation in the risk index of our commercial loan portfolio is
attributable mainly to a decrease in the volume of B- category loans as a
percentage of total loans, from 4.1% in 2001 to 3.6% in 2002 and to a decrease
in the volume of C category loans as a percentage of total loans, from 1.2% in
2001 to 0.9% in 2002 . We experienced such decreases despite our policy, applied
since the third quarter of 1998, of acknowledging all real and potential risk in
loans and of assigning loan classifications according to the most unfavorable
projections. See "--Competition--Risk Index". The quality of our commercial loan
portfolio was adversely affected by a decrease in the rate of growth of the
Chilean economy during the years 1998 and 1999, a sharp increase in interest
rates between late 1997 and September 1998, and an increase in the general level
of indebtedness of our customers due to the economic crisis of 1998-1999, from
which there has been no clear recovery yet. Nevertheless, the stabilization of
the economic conditions has resulted in a slow improvement on the quality of our
loan portfolio. The quality of our commercial loan portfolio is likely to be
adversely affected in the future by a decrease in the rate of growth of the
Chilean economy, an increase in interest rates, or an increase in the general
level of indebtedness of our customers and regulatory changes (such as tax rules
and labor regulations) that could impose additional operating costs on Chilean
companies or on companies operating in certain sectors of the Chilean economy.

     Mortgage Loans. Our mortgage loans have shown a level of risk which has
ameliorated from 0.85% at December 31, 2001 to 0.72% at December 31, 2002.

     The quality of our mortgage loan portfolio has been adversely affected by
the unfavorable conditions of the Chilean economy, favorably affected by a
decrease in interest rates, and adversely affected by an increase in the general
level of indebtedness of our customers due to the economic conditions prevailing
over the year. As economic conditions became stable, even though the level of
economic activity is still depressed, the quality of our mortgage loan portfolio
has begun a slow recovery.

     Chilean banking regulations currently limit the amount of a residential
mortgage loan financed by a Mortgage Finance Bond to 75% of the value of the
property. If the loan is not financed by a Mortgage Finance Bond it can


                                       48
<PAGE>

finance up to 80% of the value of the property. Such value is established by the
regulations as the lesser of (i) the purchase price of the property securing the
loan, and (ii) the appraised value of such property. In addition, our policy is
not to make a residential mortgage loan if the monthly payments on such loan
exceed 25% of the household's monthly after-tax income.

     Consumer Loans. The level of risk in our consumer loans has increased from
approximately 2.47% at December 31, 2001 to approximately 2.85% at December 31,
2002. Such increase in the risk level of our consumer loans is a consequence of
a year where the unemployment rate increased and the level of economic activity
in the Chilean economy remained depressed, and is due, among other factors, to
the unfavorable economic conditions.

     The risks associated with both residential mortgage and consumer loans are
affected by, among other things, the following variables: the unemployment rate,
changes in real salaries, the level of economic activity and the overall level
of credit in the Chilean economy. These indices affect both high income and
lower and middle-income individuals but have an earlier impact on the latter
sector. Consumer credit risk also depends on the quality of financial
information obtained about the individual debtor. We receive relevant credit
information from DICOM with respect to existing and potential customers.

     Foreign Trade Loans. Our loans for foreign trade are made to finance
working capital requirements of exporters and importers and, accordingly, risk
factors are similar to commercial loans for working capital. Additional
variables which specifically affect risk for our foreign trade loans include
fluctuations in real exchange rates and international commodity prices as well
as international foreign trade policies (including tariffs and other barriers).

     Leasing. The risk index from our leasing operations has not exceeded 4.14%
at the end of each of the previous five years and at December 31, 2002 was
approximately 2.08%

Maturity and Interest Rate Sensitivity of Loans

     The following table sets forth an analysis by type and time remaining to
maturity of our loans at December 31, 2002:

<TABLE>

                                                         Due after    Due after    Due after    Due after
                            Balance at                    1 month      6 months      1 year      3 years
                            December 31,    Due within   but within   but within   but within   but within   Due after
                              2002           1 month      6 months    12 months     3 years      5 years      5 years
                            ------------    ----------   ----------   ----------   ----------   ----------   ---------
                                                 (in millions of constant Ch$ of December 31, 2002)

<S>                            <C>              <C>          <C>          <C>          <C>          <C>           <C>
Commercial loans........       828,522          189,071      207,108      114,256      112,045      148,175       57,867
Mortgage loans:
   Residential .........       146,154            1,478        5,752        7,168       25,406       21,481       84,869
   Other................       107,336            1,107        3,841        4,693       17,557       17,569       62,569
                             ---------          -------      -------      -------      -------      -------      -------
     Subtotal...........       253,489            2,584        9,593       11,861       42,963       39,050      147,438
Consumer loans..........       204,589           14,960       21,045       24,143       80,698       46,846       16,897
Foreign trade loans.....       233,522           55,403      102,744       24,368        5,910       24,371       20,724
Interbank loans.........            --               --           --           --           --           --           --
Lease contracts.........        83,731            1,354        8,222        8,898       26,725       21,975       16,557
Other outstanding loans.       368,690            4,368       41,129       11,607       29,536       20,327      261,723
Past due loans..........        41,330           41,330           --           --           --           --           --
                             ---------          -------      -------      -------      -------      -------      -------
     Subtotal...........     2,013,873          309,072      389,841      195,133      297,877      300,744      521,206
Contingent loans........        84,691           12,932       41,771       16,632       12,245        1,101           10
                             ---------          -------      -------      -------      -------      -------      -------
     Total loans........     2,098,564          322,003      431,612      211,765      310,122      301,845      521,216
                             =========          =======      =======      =======      =======      =======      =======
</TABLE>


                                       49
<PAGE>


     The following table presents the interest rate sensitivity of our
outstanding loans due after one year as of December 31, 2002 (not including
contingent loans). See also "Operating and Financial Review and Prospects--Asset
and Liability Management--Interest Rate Sensitivity."

                                                         At December 31, 2002
                                                       -------------------------
                                                       (in millions of constant
                                                       Ch$ of December 31, 2002)

Variable rate
   Ch$ ..............................................             5,315
   UF ...............................................           244,805
   Foreign currency..................................            35,946
                                                              ---------
     Total...........................................           286,066
Fixed rate
   Ch$ ..............................................           168,201
   UF ...............................................           526,979
   Foreign currency..................................           138,581
     Total...........................................           833,761
                                                              ---------
        Total........................................         1,119,827
                                                              =========


Loans by Economic Activity

     The following table sets forth at the dates indicated an analysis of our
loan portfolio based on the borrower's principal economic activity. Loans to
individuals for business purposes are allocated to their economic activity. The
table includes outstanding contingent loans amounting to Ch$63,608 million in
1999, Ch$69,824 million in 2000, Ch$67,184 million in 2001 and Ch$84,691 million
in 2002.

<TABLE>

                                                                              At December 31, 2002
                                               ---------------------------------------------------------------------------------
                                                            2000                        2001                      2002
                                               -------------------------     -------------------------   -----------------------
                                                              Percentage                    Percentage                Percentage
                                                  Loan         of loan           Loan        of loan        Loan       of loan
                                               portfolio      portfolio      portfolio      portfolio    portfolio    portfolio
                                               ---------      ----------     ---------      ----------   ---------    ----------
                                               (in millions of constant Ch$ of December 31, 2000 except for percentages)
AGRICULTURE, LIVESTOCK, FORESTRY, FISHING
<S>                                              <C>           <C>              <C>          <C>           <C>         <C>
   Agriculture..............................     34,485        2.02%            35,727       1.94%         40,856      1.95%
   Livestock................................     11,702        0.69%            11,130       0.60%         18,768      0.89%
   Forestry.................................      2,711        0.16%             2,300       0.12%          2,186      0.10%
   Fishing..................................     17,931        1.05%            34,038       1.85%         38,189      1.82%
                                                 ------      ------             ------     ------          ------    ------
     Subtotal...............................     66,829        3.92%            83,195       4.52%         99,999      4.77%
MINING
   Coal, stone and clay extraction..........      2,232        0.13%               215       0.01%           9745      0.46%
   Metallic mineral extraction..............      3,934        0.23%            16,335       0.89%         56,296      2.68%
   Extraction of other minerals.............        391        0.02%             10545       0.57%          10598      0.51%
                                                 ------      ------             ------     ------          ------    ------
     Subtotal...............................      6,557        0.38%            27,095       1.47%         76,639      3.65%
MANUFACTURING
   Automobile industry......................      2,105        0.12%             1,523       0.08%            505      0.02%
   Food, beverages and tobacco..............     45,052        2.64%            40,892       2.22%         67,076      3.20%
   Textiles, clothing and leather goods.....     17,534        1.03%            14,750       0.80%          6,432      0.31%
   Wood and wood products, including
     furniture..............................      9,443        0.55%             8,192       0.44%         35,535      1.69%
   Paper, paper products, printing and
     publishing.............................     10,730        0.63%            11,225       0.61%         30,589      1.46%
   Chemical products derived from oil,
     coal, rubber and plastic...............      9,171        0.54%            13,608       0.74%         14,463      0.69%
   Production of non-mineral products.......      2,707        0.16%             6,956       0.38%          4,056      0.19%
   Basic metal industries...................     15,126        0.89%            12,543       0.68%         11,653      0.56%
   Production of machines, equipment and
     other metal goods......................     13,429        0.79%             9,576       0.52%         16,674      0.79%
   Other manufacturing industries...........     14,000        0.82%             2,419       0.13%            642      0.03%
                                                 ------      ------             ------     ------          ------    ------
</TABLE>


                                       50
<PAGE>

<TABLE>
                                                                               At December 31, 2002
                                               ---------------------------------------------------------------------------------
                                                            2000                        2001                      2002
                                               -------------------------     -------------------------   -----------------------
                                                              Percentage                    Percentage                Percentage
                                                  Loan         of loan           Loan        of loan        Loan       of loan
                                               portfolio      portfolio      portfolio      portfolio    portfolio    portfolio
                                               ---------      ----------     ---------      ----------   ---------    ----------
                                               (in millions of constant Ch$ of December 31, 2000 except for percentages)

<S>                                             <C>            <C>             <C>          <C>          <C>          <C>
     Subtotal...............................    139,297        8.17%           121,684       6.61%        187,625      8.94%
ELECTRICITY, GAS AND WATER
   Electricity, gas and steam...............     29,287        1.72%            41,892       2.28%         64,669      3.08%
   Collection and distribution of water.....     27,894        1.64%            29,568       1.61%         29,376      1.40%
                                              ---------      ------          ---------     ------       ---------    ------
   Subtotal.................................     57,181        3.35%            71,460       3.88%         94,045      4.48%

CONSTRUCTION
   Residential buildings....................    146,291        8.58%           113,943       6.19%        114,984      5.48%
   Non-residential buildings................     55,099        3.23%            77,714       4.22%         20,381      0.97%
   Other constructions......................     20,980        1.23%            13,570       0.74%         35,536      1.69%
                                              ---------      ------          ---------     ------       ---------    ------
     Subtotal...............................    222,370       13.05%           205,227      11.15%        170,901      8.14%
TRADE
   Wholesale................................     16,564        0.97%            25,230       1.37%         32,038      1.53%
   Retail...................................     64,918        3.81%           112,898       6.13%        123,503      5.89%
   Restaurants and hotels...................      6,187        0.36%             6,273       0.34%          9,534      0.45%
   Imports..................................     53,800        3.16%            51,291       2.79%         27,339      1.30%
   Exports..................................     37,899        2.22%            32,696       1.78%         25,225      1.20%
                                              ---------      ------          ---------     ------       ---------    ------
     Subtotal...............................    179,368       10.52%           228,388      12.40%        217,639     10.37%
TRANSPORT, STORAGE AND COMMUNICATIONS
   Transport and storage..............           18,047        1.06%            23,363       1.27%         59,787      2.85%
   Communications.....................           40,341        2.37%            28,739       1.56%          5,300      0.25%
                                              ---------      ------          ---------     ------       ---------    ------
     Subtotal.........................           58,388        3.43%            52,102       2.83%         65,087      3.10%
FINANCIAL SERVICES
   Financial companies................          145,202        8.52%           129,661       7.04%        107,883      5.14%
   Insurance..........................            1,416        0.08%            14,001       0.76%            725      0.03%
   Real estate........................           79,249        4.65%            84,742       4.60%         79,902      3.81%
                                              ---------      ------          ---------     ------       ---------    ------
     Subtotal.........................          225,867       13.25%           228,404      12.41%        188,510      8.98%
SERVICES
   Public administration and defense..            8,203        0.48%             7,126       0.39%          5,627      0.27%
   Health services....................            3,268        0.19%             3,487       0.19%          3,661      0.17%
   Social services....................           36,875        2.16%            38,036       2.07%        101,212      4.82%
   Leisure services...................            2,215        0.13%             2,230       0.12%          1,608      0.08%
   Personal and home services.........           15,335        0.90%             7,905       0.43%          4,533      0.22%
   International organizations........                4        0.00%                 2       0.00%              3      0.00%
   Enterprise services................          131,667        7.72%           125,949       6.84%         81,693      3.89%
   Other services.....................           14,000        0.82%            67,794       3.68%        139,998      6.67%
                                              ---------      ------          ---------     ------       ---------    ------
     Subtotal.........................          211,567       12.40%           252,529      13.72%        338,335     16.12%
INDIVIDUALS
   Consumer loans.....................          155,422        9.12%           178,306       9.68%        205,029      9.77%
   Residential mortgage loans.........          381,640       22.39%           392,769      21.33%        454,755     21.67%
                                              ---------      ------          ---------     ------       ---------    ------
     Subtotal.........................          537,062       31.51%           571,075      31.02%        659,784     31.44%
TOTAL.................................        1,704,486      100.00%         1,841,159     100.00%      2,098,564    100.00%
                                              =========      ======          =========     ======       =========    ======
</TABLE>


Foreign Country Loans Outstanding

     Our cross-border loans are principally trade-related. These include loans
to foreign financial institutions, principally under the ALADI payments system.
ALADI is a series of arrangements among Latin American countries designed to
facilitate trade financing by providing to a cross-border lender in a
participating country the guarantee of its own central bank of amounts due in
connection with a qualifying transaction. At December 31, 2002, no outstanding
loans to Brazilian borrowers and approximately 0.03% of our outstanding loans to
foreign borrowers were under the ALADI programs and, accordingly, were
guaranteed by the Central Bank. These percentages are similar to those observed
in 2001 due to an overall decrease in foreign country loans. The Bank has a
policy of decreasing its exposure to Brazil and Argentina.


                                       51
<PAGE>

<TABLE>
                                                    2000            2001            2002
                                                    ----            ----            ----
                                                (in millions of constant Ch$ of December 31, 2002)
<S>                                                  <C>          <C>              <C>
Argentina....................................        4,396        22,091           9,782
Brazil.......................................       33,572        30,358          26,749
Cayman Island................................            -        16,970          18,760
Peru.........................................           92           139             166
Venezuela....................................        5,673        12,432          12,108
Mexico.......................................          246           233             350
Costa Rica...................................        4,975         4,973           4,320
Italia                                                  45           188              31
Colombia.....................................           29            25              97
South Korea .................................        4,020             -           3,174
Aruba........................................            -         7,442               -
China........................................            -         3,174               -
United States of America.....................          728             -           3,776
Uruguay......................................            -        11,510           8,549
Other........................................        1,071         1,557             130
                                                    ------       -------          ------
     Total...................................       54,847       111,092          87,992
                                                    ======       =======          ======
</TABLE>


     The following table shows the changes in aggregate outstanding loans to
borrowers in Brazil during the year ended December 31, 2002:

                                                     (in millions of constant
                                                     Ch$ of December 31, 2002)
                                                     -------------------------
Aggregate outstanding loans at January 1, 2002.....           30,358
Net change in short-term loans.....................            (181)
Changes in other loans:
      Additional outstanding.......................           26,930
      Interest income accrued......................                -
      Collections of:
        Principal..................................          (30,377)
        Accrued interest...........................               19
      Other changes................................                -
                                                            --------
Aggregate outstanding loans at December 31, 2002...           26,749
                                                            ========

     We also maintain deposits abroad (primarily demand deposits) as needed to
conduct our foreign trade transactions. The table below lists the largest
amounts of foreign deposits by country for the years ended December 31, 2000,
2001 and 2002:

                                       Year ended December 31, 2002
                               --------------------------------------------
                                   2000           2001          2002
                                   ----           ----          ----
                               (in millions of constant Ch$ of December 31,
                                                  2002)
United States..............         4,396       36,042           731
Germany....................            22           81            97
Spain......................         1,552          485           338
United Kingdom.............            55           32            82
Canada.....................             2            1             1
France.....................             6            2             -
Japan......................             -            -         1,732
Other......................            41          104            74
                                    -----       ------         -----


                                       52
<PAGE>

                                       Year ended December 31, 2002
                               --------------------------------------------
                                   2000           2001          2002
                                   ----           ----          ----
                               (in millions of constant Ch$ of December 31,

Total......................         6,074       36,747         3,055
                                    =====       ======         =====


Credit Approval Process

     We manage our credit risks in accordance with policies and rules developed
by the Credit Division and approved by the General Manager and the Board of
Directors. The policies and rules, which are set forth in our credit manual,
define, among other factors, (i) the responsibilities of the various units
participating in the credit approval process, (ii) the business segments and
markets which constitute our strategic targets, (iii) quantitative and
qualitative standard by business area (e.g., corporate banking, retail banking,
international operations), and (iv) the composition of the committee responsible
for the approval of each transaction.

     Until September 1998 the policies and rules in effect were the following:

     In the case of credit applications by companies, the evaluation was
conducted by the Credit Analysis division and the relevant commercial division
taking into account quantitative and qualitative factors. Credit analysis and
evaluation of a customer's risk continued during the term of the loan.

     In the case of retail banking transactions, the most relevant parameters
used to evaluate an applicant's credit risk were (i) income and net worth, (ii)
seniority at employment, (iii) professional and academic qualifications, (iv)
indebtedness and credit reports, and (v) liquidity, measured in terms of
percentage of monthly income required to service indebtedness.

     Once the evaluation of an application had been completed, the decision was
adopted by different committees, depending upon our total risk exposure to the
borrower and related parties, the amount of credit requested and the quality and
value of the collateral provided.

     Any transaction as a result of which a customer's total risk exposure would
exceed Ch$400 million, as well as transactions involving amounts between Ch$300
million and Ch$400 million requested by an applicant that was not one of our
customers, had to be reviewed by the Credit Committee, which consisted of the
General Manager and at least three members of the Board of Directors.

     The following table lists our committees from which credit approval was
required depending upon total risk exposure:

<TABLE>
                                                                       Limit in Millions of Ch$(1)
                                                      -------------------------------------------------------------
 Level                  Approved by:                  Without Collateral    "A" Collateral(2)     "B" Collateral(2)
 -----                  ------------                  ------------------    -----------------     -----------------
<S>                                                   <C>                   <C>                   <C>
   1.    Credit Committee(3)......................    Above 300 or 400      Above 300 or 400      Above 300 or 400
   2.    General Manager's Committee(3)...........    Up to 300 or 400      Up to 300 or 400      Up to 300 or 400
   3.    Manager's Committee......................          200                   200                   200
   4.    Area Executive Committee.................          120                   120                   120
   5.    Area Committee...........................           90                    90                    90
   6.    Branches Executive Committee.............           60                    60                    60
   7.    Branches Credit Committee................           30                    40                    50
   8.    Branches Internal Committee..............           10                    20                    30
   9.    Deputy Branch Manager....................           15                    25                    50
  10.    Level 1--Local Branch Committee..........           10                    20                    50
  11.    Level 2--Local Branch Committee..........           8                     16                    40
  12.    Level 3--Local Branch Committee..........           6                     12                    30
  13.    Level 4--Local Branch Committee..........           4                     8                     20
  14.    Level 5--Local Branch Committee..........           3                     6                     15
</TABLE>


                                       53
<PAGE>

----------------------
(1)  Amount limits were determined on the basis of total risk: direct debt,
     indirect debt and affiliated party debt.

(2)  "A" Collateral: mortgages on real estate, or pledges of term deposits or
     similar instruments. "B" Collateral all pledges on properties other than
     real estate and liquid securities.

(3)  In Levels 1 and 2, the limit depended upon whether a series of conditions
     had been previously met.

     The composition of each of the above approving committees was as follows :

<TABLE>
<S>                                       <C>
Credit Committee                          Board Directors/General Manager
General Manager's Committee               Commercial Area Manager/General Manager or Branches Area Manager/Credit
                                          Risk Manager
Managers Committee                        Commercial Area Manager/Branches Area Manager/Credit Risk Manager
Area Executive Committee                  Commercial Area Manager or Branches Area Manager/Credit Risk Manager
Area Committee                            Branches Assistant Manager/Credit Risk Assistant Manager
Branches Executive Committee              Branches Assistant Manager/Credit Analysis Director
Branches Credit Committee                 Agent/Credit Analysis Director
Branches Internal Committee               Agent/Credit Analysis Coordinator
Level 1-5--Local Branch Committee         Account Manager/Agent
</TABLE>


     After all conditions had been met and credit had been extended, we
maintained a surveillance of the loan portfolio to determine the level of risk
of its loans. This review was conducted by account managers, analysts and
control committees on the basis of information available in our database as well
as external information such as that provided by DICOM. The purpose of this
review was to evaluate, during the term of a loan, our overall credit risk, the
financial condition of the borrowers and the risk classification in accordance
with the regulations of the Superintendency of Banks. After a payment in an
amount equal to or greater than Ch$2 million became overdue, the loan became
subject to continuous review by a control committee comprised of officers of the
Commercial Area and the Credit Risk Division.

     The acquisition by BBV in September 1998 of a controlling shareholding
interest in BBVA Chile., formerly known as Banco BHIF (see "The Acquisition"),
implied a change in our credit risk policies and rules. Our credit risk policies
and rules in effect after that date are as follows:

     In the case of credit applications by companies, the evaluation is
conducted by the credit admission committee taking into account quantitative and
qualitative factors. See "--Lines of Business--Corporate Banking". Credit
analysis and evaluation of a customer's risk continue during the term of the
loan.

     In the case of retail banking transactions, the most relevant parameters
used to evaluate an applicant's credit risk are (i) income and net worth, (ii)
seniority at employment, (iii) professional and academic qualifications, (iv)
indebtedness and credit reports, and (v) liquidity, measured in terms of
percentage of monthly income required to service indebtedness.

     Once the evaluation of an application has been completed, the decision is
adopted by different committees, depending upon our total risk exposure to the
borrower and related parties, the amount of credit requested and the quality and
value of the collateral provided.

     The following table lists our committees from which credit approval is
required depending upon total risk exposure:

<TABLE>
                                                                       Limit in Millions of Ch$(1)
                                                      -------------------------------------------------------------
 Level(3)               Approved by:                  Without Collateral    "B" Collateral(2)     "A" Collateral(2)
 --------               ------------                  ------------------    -----------------     -----------------
<S>                                                        <C>                  <C>                  <C>
    1.     Sectorial Analysis & Risk Management
              Committee (A.S.G.R.C) (Spain)............    Above 2,500          Above 2,500          Above 2,500
    2.     General Manager's Committee( CTO)...........    Up to 7,000          Up to 7,000          Up to 7,000
    3.     Risk Division's Committee (CRD).............    Up to 5,000          Up to 5,000          Up to 5,000
</TABLE>


                                       54
<PAGE>

<TABLE>
                                                                       Limit in Millions of Ch$(1)
                                                      -------------------------------------------------------------
 Level(3)               Approved by:                  Without Collateral    "B" Collateral(2)     "A" Collateral(2)
 --------               ------------                  ------------------    -----------------     -----------------
<S>                                                        <C>                  <C>                  <C>
    4.     Treasury and Fund Adm. Manager..............    Up to 1,500          Up to 1,500          Up to 1,500
    4.     Corporate Banking Manager...................      Up to 250            Up to 250            Up to 250
    4.     Commercial and Personal Banking
              Division Manager.........................      Up to 250            Up to 250            Up to 250
    4.     Commercial Banking Area Manager.............             25                   50                  100
    4.     Branches (Commercial Banking)...............          10/20                25/40                50/75
    4.     Branches (Personal Banking).................            2/8                 5/20                15/40
</TABLE>

----------------------
(1)  Amount limits are determined on the basis of total risk: direct debt,
     indirect debt and affiliated party debt.

(2)  "A" Collateral: mortgages on real estate, or pledges of term deposits or
     similar instruments. "B" Collateral: all pledges on properties other than
     real estate and liquid securities.

(3)  In Level 1, the limit depends upon whether a series of conditions have been
     previously met. In Level 4 the limit depends upon whether the client is a
     firm or an individual, upon the specific area involved and upon the branch
     category. There are 3 categories for Commercial Banking Branches and 5
     categories for Personal Banking Branches.

     The composition of each of the above approving committees is as follows :

<TABLE>
<S>                                                                     <C>
    Sectorial Analysis & Risk Management Committee       BBVA Group's Risk Assessment Division
       (A.S.G.R.C) (Spain)
    General Manager's Committee:                         CEO/Commercial Manager/Corporate Manager Treasury & Fund
                                                         Manager/Credit Risk Manager
    Risk Division's Committee:                           Credit Risk Manager/Commercial Admission Manager/
                                                         Corporate Admission Manager /Personal Banking Admission
                                                         Manager/Risk Monitoring Manager
    Branch, Area or Division Committee:                  Branch, Area or Division Manager /Account Executive
</TABLE>

     After all conditions have been met and credit has been extended, we
maintain a surveillance of the loan portfolio to determine the level of risk of
its loans. This review is conducted by specialized analysts on the basis of
information available in our database as well as external information such as
that provided by DICOM. The purpose of this review is to evaluate, during the
term of a loan, our overall credit risk, the financial condition of the
borrowers and the risk classification in accordance with the regulations of the
Superintendency of Banks. After a payment in an amount equal or greater than
Ch$2 million becomes overdue, the loan becomes subject to continuous review by a
control committee comprised of officers of our Credit Risk Division.

Classification of Loan Portfolio

     Chilean banks are required to classify their outstanding exposures on an
ongoing basis for the purpose of determining the amount of allowance for loan
losses. The guidelines used by Chilean banks for such classifications are
established by the Superintendency of Banks, although banks are given some
latitude in devising more stringent classification systems within such
guidelines. For purposes of classification, loans are divided into consumer
loans, residential mortgage loans and commercial loans. The Superintendency of
Banks regularly examines and evaluates each financial institution's credit
management process, including its compliance with the loan classification
guidelines, and on that basis classifies banks and other financial institutions
into one of three categories, I, II or III. Category I is reserved for
institutions that fully comply with the loan classification guidelines.
Institutions are rated in Category II if their loan classification system
reveals deficiencies that must be corrected by the bank's management. Lastly,
Category III indicates significant deviations from the Superintendency of Banks'
guidelines that clearly reflect inadequacies in the evaluation of the risk and
estimated losses associated with loans. We have been classified in Category I
since 1992.

     Consumer Loans: Include financing arising from the use of credit cards and
loans granted to individuals. Their purpose is to finance the acquisition of
consumer goods and payment of services in an amount that does not exceed


                                       55
<PAGE>


UF 550.  Their  repayment  is  generally  made in  equal  monthly  installments.
Consumer loans also include loans related to the use of credit cards.

     Residential Mortgage Loans: Include loans for residential purposes that are
currently funded through the issuance by BBVA Chile of Mortgage Finance Bonds.
Generally, the purpose of these loans is to finance the acquisition,
improvement, restoration or construction of a residential home. They are granted
to the final user of the property and the collateral covers the entire credit.
All the remaining mortgage loans, in particular those granted for general
purposes, are considered as commercial loans.

     Commercial Loans: Include all loans other than consumer loans and
residential mortgage loans.

     In the case of consumer loans and residential mortgage loans, the
classification is determined by the extent to which payments are overdue. In the
case of commercial loans, the classification is based on the estimated losses on
all of the loans outstanding to the borrower, as determined by us. Residential
mortgage loans are classified A, B or B- (except for loans purchased from the
Asociacion de Ahorro y Prestamos ("ANAP"), the former Chilean savings and loans
association, which may be rated as C or D). Consumer and commercial loans are
classified in five categories as follows:

<TABLE>
                                                                                                                   Required
Classification    Commercial Loans (1)             Residential Mortgage Loans      Consumer Loans                  Provisions(2)
--------------    --------------------             --------------------------      --------------                  -------------
<S>               <C>                              <C>                             <C>                               <C>
      "A"        Loans which are not expected to    Interest and principal          Interest and principal             0%
                 default                            payments are current            payments are current
      "B"        Loans with probability of          Payments are up to 6            Payments are up to 1               1%
                 default of less than 5%            months overdue                  month overdue
      "B-"       Loans with probability of          Payments are over 6             Payments are overdue by           20%
                 default between 5% and 39%         months overdue                  1 to 2 months
      "C"        Loans with probability of          Not applicable(3)               Payments are overdue by           60%
                 default between 40% and 79%                                        2 to 4 months
      "D"        Loans with probability of          Not applicable(3)               Payments are overdue by           90%
                 default between 80% and 100%                                       over 4 months
</TABLE>

----------------------
(1)  We determine the "potential loss" of commercial loans based on (i) the
     financial condition of the customer; (ii) the past payment behavior of the
     customer; (iii) the collateral or guarantee, if any, provided to us in
     connection with the loan and the market or liquidation value of such
     collateral or guarantee; and (iv) the outlook for the economic sector or
     industry in which the customer is engaged in its business activities.
(2)  Certain commercial loans in excess of UF 25,000 classified as "A" or "B"
     are deemed to present an additional level of risk and thus require an
     additional allowance of 5% of the aggregate amount of such loans, even if
     there is no evident loss. The additional level of risk is deemed to exist
     when such loans cover over 50% of the total financing of a project or when
     the loan term exceeds three years and no guarantees exist in addition to
     those related directly to the project.
(3)  These categories are not applicable to residential mortgage loans, except
     in the case of loans acquired from the Asociacion Nacional de Ahorro
     (National Association of Savings and Loans or "ANAP"). ANAP loans may have
     additional levels of risk and thus require an allowance of between 40% and
     79% in category "C" and greater than 79% in category "D".

     The loan classification guidelines of the Superintendency of Banks
applicable to commercial loans require that we classify the greater of (i) the
commercial loans outstanding to our 400 largest debtors or (ii) the commercial
loans outstanding to the number of our largest debtors whose commercial loans
aggregate at least 75% of the total amount of loans included in our commercial
loan portfolio. Such guidelines also require that our classify 100% of our
residential mortgage loans and 100% of our consumer loans. For these purposes,
the loan amount includes outstanding principal (whether or not past due) and
accrued and unpaid interest.


                                       56
<PAGE>


Analysis of our Loan Classifications

     The following tables provide statistical data regarding the classification
of our loans at the end of each of the last five years. As previously indicated,
the Superintendency of Banks requires that we prepare a risk analysis that
evaluates, for classification purposes only, a portion (but in no event less
than 75%) of our total commercial loan portfolio, including past due and
contingent loans.

<TABLE>

                                                                At December 31, 1998
                                   ---------------------------------------------------------------------------------------
                                                                    Residential                             Percentage of
                                   Commercial        Consumer         mortgage                                 evaluated
           Category                   loans            loans           loans            Total loans              loans
------------------------------     ----------        --------  ---------------------    -----------         --------------
                                     (in millions of constant Ch$ of December 31, 2002, except for percentages)

<S>                                     <C>              <C>             <C>              <C>                    <C>
A.............................          674,801          78,418          205,999          959,218                75.41%
B.............................          223,702          10,650           27,257          261,609                20.57
B-............................           23,783           3,112            5,899           32,793                 2.58
C.............................           11,936           2,718              516           15,170                 1.19
D.............................            1,352           1,916                0            3,268                 0.25
                                      ---------          ------          -------        ---------               ------
Total of evaluated loans......          935,574          96,814          239,671        1,272,058               100.00%
                                      =========          ======          =======        =========               ======
Total loans...................        1,040,883          96,814          239,671        1,377,366
                                      =========          ======          =======        =========

   Percentage evaluated.......           89.88%         100.00%          100.00%          92.35%



                                                                At December 31, 1999
                                   ---------------------------------------------------------------------------------------
                                                                    Residential                             Percentage of
                                   Commercial        Consumer         mortgage                                 evaluated
           Category                   loans            loans           loans            Total loans              loans
------------------------------     ----------        --------  ---------------------    -----------         --------------
                                     (in millions of constant Ch$ of December 31, 2002, except for percentages)

A.............................          636,808         111,145         273,246        1,021,199                 74.21%
B.............................          242,649          10,467          27,528          280,644                 20.39
B-............................           36,186           2,529           9,481           48,196                  3.50
C.............................           18,836           2,262             464           21,561                  1.57
D.............................            2,158           2,349               0            4,507                  0.33
                                      ---------         -------         --------       ----------               ------
   Total of evaluated loans...          936,637         128,752         310,718        1,376,107                100.00%
                                      =========         =======         ========       ==========               ======
   Total loans................        1,041,837         128,752         310,718        1,481,304
                                      =========         =======         ========       ==========

   Percentage evaluated.......         89.90%           100.00%          100.00%          92.90%


                                                                At December 31, 2000
                                   ---------------------------------------------------------------------------------------
                                                                    Residential                             Percentage of
                                   Commercial        Consumer         mortgage                                 evaluated
           Category                   loans            loans           loans            Total loans              loans
------------------------------     ----------        --------  ---------------------    -----------         --------------
                                     (in millions of constant Ch$ of December 31, 2002, except for percentages)

A.............................          758,654          138,781          337,206         1,234,793               77.54%
B(1)..........................          227,181           10,131           33,242           270,554               16.99
B-............................           48,737            2,632           10,941            62,309                3.91
C.............................           13,290            2,128              402            15,820                0.99
D.............................            7,273            1,750                0             9,023                0.57
                                      ---------          -------          -------         ---------              ------
   Total of evaluated loans...        1,055,134          155,422          381,790         1,592,499              100.00%
                                      =========          =======         ========        ==========              ======
   Total loans................        1,167,121          155,422          381,790         1,704,486
                                      =========          =======         ========        ==========

   Percentage evaluated.......         90.40%           100.00%          100.00%           93.43%

</TABLE>


                                       57
<PAGE>


<TABLE>
                                                                At December 31, 2001
                                   ---------------------------------------------------------------------------------------
                                                                    Residential                             Percentage of
                                   Commercial        Consumer         mortgage                                 evaluated
           Category                   loans            loans           loans            Total loans              loans
------------------------------     ----------        --------  ---------------------    -----------         --------------
                                     (in millions of constant Ch$ of December 31, 2002, except for percentages)
<S>                                     <C>              <C>               <C>             <C>                    <C>
A.............................          822,422          152,633           336,719         1,311,774              76.25%
B.............................          261,817           15,139            42,103           319,059              18.55
B-............................           49,640            4,230            13,581            67,451               3.92
C.............................           13,933            2,726               365            17,024               0.99
D.............................            3,047            1,913                 0             4,959               0.29
                                      ---------          -------           -------         ---------             ------
   Total of evaluated loans...        1,150,858          176,641           392,768         1,720,267             100.00%
                                      ---------          -------           -------         ---------             ======
   Total loans................        1,271,751          176,641           392,768         1,841,160
                                      =========          =======           =======         =========

   Percentage evaluated.......           90.49%          100.00%           100.00%            93.43%



                                                                At December 31, 2002
                                   ---------------------------------------------------------------------------------------
                                                                    Residential                             Percentage of
                                   Commercial        Consumer         mortgage                                 evaluated
           Category                   loans            loans           loans            Total loans              loans
------------------------------     ----------        --------  ---------------------    -----------         --------------
                                     (in millions of constant Ch$ of December 31, 2002, except for percentages)
A.............................          935,376          171,631           394,997         1,502,379              76.34%
B.............................          307,814           22,362            46,341           376,517              19.14%
B-............................           48,373            4,750            13,109            66,232               3.37%
C.............................           11,444            3,762               308            15,514               0.79%
D.............................            4,518            2,673                 0             7,191               0.37%
                                      ---------          -------           -------         ---------              ------
   Total of evaluated loans...        1,307,525          205,178           454,755         1,967,833             100.00%
                                      =========          =======           =======         =========              ======
   Total loans................        1,438,256          205,178           454,755         2,098,564
                                      ---------          -------           -------         ---------
   Percentage evaluated.......           90.91%          100.00%           100.00%            93.77%
</TABLE>

----------------------
(1)  Includes category B loans which are subject to an allowance equivalent to
     5% of the balance due in accordance with regulations of the Superintendency
     of Banks. Such loans are none as of December 31, 2002 See "--Classification
     of Loan Portfolio".

Classification of Loan Portfolio Based on the Borrower's Payment Performance

     Accrued interest and UF indexation readjustments from overdue loans are
only recognized when and to the extent effectively received. Overdue loans are
classified as such when the loan is 1-89 days overdue. Past due loans include,
with respect to any loan, the portion of principal or interest that is 90 or
more days overdue; the entire outstanding balance of any loan is included in
past due loans only after legal collection proceedings have been commenced. Once
a loan becomes more than 90 days overdue, a specific loan loss allowance is made
in an amount equal to 100% of the unsecured portion of the loan. Individual loan
loss allowances must be determined separately for the classified and
non-classified loan portfolios, but are required only to the extent that, in the
aggregate, they exceed the global allowance for each portfolio. See "--Allowance
for Loan Losses--Individual Allowances for Loan Losses".

     The following table sets forth as of December 31 of each of the last five
years, the outstanding principal amount of loans that are current, overdue (1-89
days) and past due (90 or more days) as to payment of principal and interest.


                                       58
<PAGE>


<TABLE>
                                                                   At December 31,
                                        ----------------------------------------------------------------------
                                        1998            1999             2000             2001            2002
                                        ----            ----             ----             ----            ----
                                      (in millions of constant Ch$ of December 31, 2002, except for percentages)
<S>                                    <C>             <C>              <C>             <C>             <C>
Current(1).......................     1,328,178      1,440,236       1,655,005        1,789,444       2,043,206
Overdue 1-29 days................        12,477         10,107           7,967            3,575           3,818
Overdue 30-89 days...............        11,808          5,487          11,137            9,489          10,210
Overdue 90 days or more ("past
   due").........................        24,903         25,475          30,375           38,653          41,330
Total loans......................     1,377,366      1,481,304       1,704,333        1,841,160       2,098,564
Overdue loans (1-89 days)
   expressed as a percentage of
   total loans                             1.76           1.05            1.12             0.71            0.67
Past due loans as a percentage
   of total loans                          1.81           1.72            1.78             2.10            1.97
</TABLE>

----------------------
(1)  Includes Ch$9,346 in 1998, Ch$8,434 million in 1999, Ch$5,109million in
     2000, Ch$9,941million in 2001, and Ch$ 5,160 million in 2002 of category C
     and D loans.

     The following table shows the principal balances included in current and
overdue (up to 90 days) categories in the table above of loans that have any
amount of principal or interest included in the category "past due" in such
table, in accordance with the rules of the Superintendency of Banks.

<TABLE>

                                                                   At December 31,
                                        ------------------------------------------------------------------------
                                        1998             1999            2000            2001            2002
                                        ----             ----            ----            ----            ----
                                                  (in millions of constant Ch$ of December 31, 2002)
<S>                                    <C>             <C>              <C>             <C>             <C>
Mortgage loans...................      10,666          10,038           15,004          15,828          18,973
Commercial loans.................      20,999          20,277           16,368          16,170          23,907
Consumer loans...................       2,365           1,939            1,641           1,815           2,957
                                       ------          ------           ------          ------          ------
   Total.........................      34,030          32,254           33,013          33,813          45,838
                                       ======          ======           ======          ======          ======

</TABLE>

     The following table sets forth, at December 31 of each of the last five
years, the amount of our past due loans per category of loan.

<TABLE>
                                                                      At December 31,
                                        ------------------------------------------------------------------------
                                        1998             1999            2000            2001            2002
                                        ----             ----            ----            ----            ----
                                                     (in millions of constant Ch$ of December 31, 2002)
<S>                                     <C>             <C>             <C>             <C>             <C>
Mortgage loans....................      2,074           3,245           4,061           3,837           4,271
Commercial loans..................     22,019          20,587          24,826          34,008          36,432
Consumer loans....................        571             572             459             420             440
Lease contracts...................        240           1,071           1,028             388             187
                                       ------          ------          ------          ------          ------
Total.............................     24,903          25,475          30,375          38,653          41,330
                                       ======          ======          ======          ======          ======

</TABLE>


     We suspend all accrual of interest and UF indexation readjustment of
principal on all loans classified in category C in excess of one year, all loans
classified in category D, all loans reclassified from category D to C and all
overdue loans, and on amounts not yet due for loans on which payments of
principal or interest are 90 days overdue. The amount of interest that would
have been recorded on such loans for the year ended December 31, 2002 had these
loans continued to accrue interest was approximately Ch$104 million.

     The following table shows loans (included in the second table above) that
have been restructured. Restructured loans consist of loans which bear interest
at a rate two or more percentage points below our average rate for similar type
performing loans at the date of the restructuring.


                                       59
<PAGE>

<TABLE>
                                                                       At December 31,
                                                -------------------------------------------------------------
                                                1998           1999          2000          2001          2002
                                                ----           ----          ----          ----          ----
                                                     (in millions of constant Ch$ of December 31, 2002)
<S>                                                                                          <C>           <C>
 Ch$.........................................       --            --            --           315           330
 UF                                              1,141           933           743           857         1,402
 Foreign.....................................      511           332           127            31             0
 Total loans.................................    1,652         1,265           870         1,203         1,732

</TABLE>

     The amount of interest that would have been recorded on these loans for the
year ended December 31, 2002 if these loans had been earning a market interest
rate was Ch$107 million.

Allowance for Loan Losses

     Chilean banks are required to maintain allowances for loan losses in
amounts determined in accordance with regulations issued by the Superintendency
of Banks. A bank may also maintain voluntary allowances in excess of the minimum
required amount so as to provide additional coverage for potential loan losses.
Under these regulations, the minimum amount of required loan loss allowances is
the greater of (i) the bank's global loan loss allowances, and (ii) the
aggregate amount of its individual allowances for loan losses.

Global Allowance for Loan Losses

     The amount of the global allowance for loan losses required to be
maintained by a bank is equal to the aggregate amount of its outstanding loans
multiplied by the greater of (i) the bank's "risk index" (as defined herein), or
(ii) 0.75%.

     A bank's risk index is based on its classified loans, determined as
previously described. See "--Classification of Loan Portfolio". More
specifically, the index is computed as follows. First, the aggregate amount of
evaluated loans in each category from A through D is multiplied by the
corresponding required provision percentage. Such percentages are as follows:

              Category                 Provision %
              --------                 -----------
                 A ...................       0
                 B ...................       1
                 B- ..................      20
                 C ...................      60
                 D ...................      90


     The risk index itself is then computed by dividing (i) the aggregate amount
so computed by (ii) the aggregate amount (i.e., the outstanding principal
(whether or not past due) and accrued and unpaid interest) of all evaluated
loans. Also, in accordance with regulations established by the Superintendency
of Banks, the risk index calculated for the classified loans must also be
applied to the non-classified commercial loan portfolio. The chart below
illustrates the evolution of our consolidated risk index at December 31 of each
of the last five calendar years:

                                   Consolidated
      Year                         Risk Index %
      ----                         ------------
      1998 .......................     1.66
      1999 .......................     2.11
      2000 .......................     2.03
      2001 .......................     1.83
      2002 .......................     1.67


     Over a 5 year period, our consolidated risk index has increased from 1.66%
at December 31, 1998 to a peak of 2.11% at December 31, 1999 and then decreased
back to 1.67% at December 31, 2002. The variation in the


                                       60
<PAGE>

consolidated risk index is due principally to (a) an increase of loans
classified in category B- (for which 20% provisions are required) from 2.58% of
the evaluated loans in 1998 to 3.92% of the evaluated loans in 2001 and to 3.37%
of the evaluated loans in 2002, (b) an increase in loans classified in category
C (for which 60% provisions are required) from 1.19% of the evaluated loans in
1998 to 1.57% of the evaluated loans in 1999 and to 0.79% of the evaluated loans
in 2002; and (c) an increase in loans classified in category D (for which 90%
provisions are required) from 0.25% of the evaluated loans in 1998 to a peak of
0.57% of the evaluated loans in 2000 and to 0.37 % of the evaluated loans in
2002. Such evolution illustrates the fact that credit quality became polarized
during the crisis, with low quality credits deteriorating while good quality
loans remained good or even improved. In fact, the proportion of loans
classified in category A (for which no provisions are required) also increased
from 75.41% of the evaluated loans in 1998 to a peak of 77.54% of the evaluated
loans in 2000 and to 76.34% of the evaluated loans in 2002. In the fourth
quarter of 1998, soon after the BBVA Group took control of Banco BHIF, we
conducted an extensive revision of our loan portfolio, which resulted in the
downgrading of a part of our portfolio and a significant increase in the level
of provisions and in our risk level. Furthermore, the economic recession that
affected the country over the 1998-1999 period caused a significant loan quality
deterioration across the Chilean banking industry. The slow recovery that took
place in 2000 enabled us to slightly improve our portfolio quality over the year
but since the recovery has stalled over the year 2001 and the first half of
2002, our portfolio quality has remained stable and improved very slowly over
the year 2002. Since economic conditions have not yet recovered, we can not
foresee any significant improvement in our portfolio quality over the year 2003.
See "--Competition - Risk Index".

     In 2002, we reviewed 93.77% of our loan portfolio. See "--Classification of
Loan Portfolio". We estimate that had we reviewed 100% of our loan portfolio,
the credit risk evaluation of all commercial loans (including commercial loans
having a principal amount outstanding smaller than Ch$30 million) would increase
the Consolidated Risk Index to approximately 1.77% at December 31, 2002. See
"--Analysis of our Loan Classifications".

   Individual Allowances for Loan Losses

     Banks in Chile are also required to establish individual allowances for
loan losses for loans that are more than 90 days past due in an amount equal to
100% of each overdue loan or the part thereof that is unsecured. This individual
loan loss allowance must be determined separately for the classified and
non-classified loan portfolios, but is required only to the extent it exceeds in
the aggregate the global allowance for loan losses for each portfolio. At
December 31, 2002, the aggregate amount of our potential individual allowances
for loan losses was 4.22% of our global allowance for loan losses.

   Voluntary Allowance for Loan Losses

     We have maintained a voluntary allowance for loan losses from time to time
in addition to the allowance for loan losses required by the regulations of the
Superintendency of Banks. Our policy in this regard has been to maintain a
voluntary allowance for loan losses that, together with the required allowance
for loan losses, aggregates approximately 100% of our past due loans. We have
adopted this policy in an effort to provide for any losses that could affect our
loan portfolio and that might arise from unforeseen circumstances beyond known
potential losses and losses inherent in a portfolio of a size and nature as
ours. At December 31, 2002, the aggregate amount of our allowances for loan
losses was 109% of our past due loans; with some voluntary allowance maintained
by us.

   Analysis of Substandard Loans and Amounts Past Due

     The following table analyzes our substandard loans (i.e., all of the loans
included in categories B-, C and D) and past due loans and the allowances for
loan losses existing at the dates indicated.

<TABLE>
                                                                      At December 31,
                                           ------------------------------------------------------------------------
                                             1998           1999           2000           2001           2002
                                             ----           ----           ----           ----           ----
                                          (in millions of constant Ch$ of December 31, 2002, except for percentages)
<S>                                           <C>            <C>             <C>             <C>             <C>
Total loans..........................      1,377,366      1,481,304       1,704,333       1,841,160       2,098,564
Substandard loans....................         51,233         74,262          87,151          89,434          88,937
</TABLE>


                                       61
<PAGE>

<TABLE>

                                                                      At December 31,
                                           ------------------------------------------------------------------------
                                             1998           1999           2000           2001           2002
                                             ----           ----           ----           ----           ----
                                          (in millions of constant Ch$ of December 31, 2002, except for percentages)
<S>                                           <C>            <C>             <C>             <C>             <C>
Amounts past due(1)..................         24,903         25,475          30,375          38,653          41,330
   To the extent secured(2)..........         12,117         19,083          17,741          17,714          31,834
   To the extent unsecured...........         12,786          6,392          12,634          20,939           9,496
   Allowance for loan losses.........         26,495         38,746          38,273          43,264          45,045
   Substandard loans as a percentage
     of total loans..................           3.72           5.01            5.11            4.86            4.24
Amounts past due as a percentage
     of total loans..................           1.81           1.72            1.78            2.10            1.97
   To the extent secured(2)..........           0.88           1.29            1.04            0.96            1.52
   To the extent unsecured...........           0.93           0.43            0.74            1.14            0.45
Allowance for loan losses as a percentage of:
   Total loans.......................           1.92           2.62            2.25            2.35            2.15
   Total loans, excluding
     contingent loans................           1.97           2.73            2.33            2.44            2.24
   Substandard loans.................          51.72          52.20           43.92           48.37           50.65
   Total amounts past due............         106.39         152.09          126.00          111.93          108.99
                                              ======         ======          ======          ======          ======
   Total amounts past due unsecured..         207.22         606.16          302.94          206.62          474.36
                                              ======         ======          ======          ======          ======

</TABLE>

----------------------
(1)  See "--Classification of Loan Portfolio Based on the Borrower's Payment
     Performance" for the definition of past due loans.

(2)  Collateral generally consists of a mortgage on real estate or a pledge of
     marketable securities, equipment or inventory or a third party letter of
     credit.



   Analysis of Allowance for Loan Losses

     The following table analyzes our allowance for loan losses, and changes in
the allowance attributable to charge-offs, new provisions, provisions released
and the effect of price-level restatement on the allowance for loan losses.

<TABLE>
                                                                    At December 31,
                                          ------------------------------------------------------------------------
                                          1998            1999             2000            2001            2002
                                          ----            ----             ----            ----            ----
                                         (in millions of constant Ch$ of December 31, 2002, except for percentages)

<S>                                        <C>             <C>              <C>             <C>             <C>
Allowance for loan losses at
   beginning of period.............        15,155          26,495           38,746          38,273          43,264
Charge-offs........................       (17,393)        (22,552)         (23,759)        (23,950)        (28,274)
Provisions established.............        29,567          35,220           24,459          31,556          31,316
Price-level restatement(2).........          (835)           (417)          (1,173)         (2,615)         (1,261)
Allowance for loans acquired
   from Banesto Chile Bank.........            --              --               --              --            --
Allowance for loan losses at
   end of the period...............        26,495          38,746           38,273          43,264          45,045
Ratio of charge-offs to average
   loans(1)........................          1.31%           1.61%            1.59%           1.38%           1.49%
Allowance for loan losses at
   end of period as a
   percentage of total loans.......          1.92%           2.62%            2.25%           2.35%           2.15%
</TABLE>

----------------------
(1)  Represents the aggregate amount of the allowance for loan losses released
     during each year or period as a result of charge-offs, recoveries or a
     determination by management that the level of risk existing in the loan
     portfolio had been reduced.

(2)  Reflects the effect of inflation on the allowances for loan losses at the
     beginning of each year, adjusted to constant Chilean pesos of December 31,
     2002.


                                       62
<PAGE>


     Our policy with respect to charge-offs follows, and in the case of
installment loans, is stricter than, the regulations established by the
Superintendency of Banks. Under these regulations, (i) an unsecured loan (or
part thereof) must be charged off not more than 24 months after being classified
as past due and secured loans must be charged off within 36 months after being
classified as past due, (ii) a loan must be charged off when we do not have any
right to commence an action for collection in the courts, and (iii) in the case
of loans payable in installments, the aggregate amount of the loan must be
charged off when one installment is past due six months.

     Based on information available to us regarding our debtors, we believe that
our aggregate allowance for loan losses is sufficient to cover known potential
losses and losses inherent in a loan portfolio of a size and nature as ours.

   Allocation of Allowance for Loan Losses

     The following tables set forth, at December 31 of each of the last five
calendar years, the proportions in which our required minimum allowance was
attributable to commercial, consumer and residential mortgage loans, and the
amount of allowance which is allocated to any particular category at each such
date.

<TABLE>

                                                                      At December 31,
                                       ---------------------------------------------------------------------------
                                                                           1998
                                       ---------------------------------------------------------------------------
                                        (in millions of constant Ch$ of December 31, 2002, except for percentages)

                                                            Allowance
                                                            amount as a          Allowance           Loans in a
                                                           percentage of        amount as a        category as a
                                          Allowance          loans in          percentage of       percentage of
                                           amount            category           total loans         total loans
                                          ---------        -------------       -------------       -------------
<S>                                         <C>                 <C>                  <C>                <C>
Commercial loans.....................       19,868              1.91%                1.44%              75.57%
Consumer loans.......................        4,621              4.77                 0.34                7.03
Residential mortgage loans...........        1,780              0.74                 0.13               17.40
Total allocated allowance............       26,269              1.90                 1.91              100.00
Voluntary allowance..................          226              --                   0.02                --
                                            ------              ----                 ----              ------
Total allowance......................       26,495              1.92%                1.92%             100.00%
                                            ======              ====                 ====              ======

</TABLE>


<TABLE>
                                                                        At December 31,
                           --------------------------------------------------------------------------------------------------------
                                                  1999                                                  2000
                           ----------------------------------------------------- --------------------------------------------------
                                          (in millions of constant Ch$ of December 31, 2002, except for percentages)

                                         Allowance    Allowance    Loans in a                 Allowance     Allowance    Loans in a
                                        amount as a  amount as a   category as               amount as a   amount as a   category as
                                         percentage   percentage  a percentage                percentage   percentage   a percentage
                            Allowance   of loans in    of total     of total     Allowance   of loans in    of total      of total
                             amount       category      loans         loans        amount      category       loans         loans
                             ------       --------      -----         -----        ------      --------       -----         -----

<S>                             <C>        <C>             <C>       <C>             <C>          <C>          <C>           <C>
Commercial loans..........      25,420     2.44%           1.71%     70.33%          30.591       2.62%        1.79%         68.48%
Consumer loans............       5,152     4.00            0.35       8.69            4.920       3.17         0.29           9.12
Residential mortgage
   loans..................       2,455     0.79            0.17      20.98            2.762       0.72         0.16          22.40
Total allocated
   allowance..............      33,027     2.23            2.23     100.00%          38.273       2.24%        2.24         100.00%
                                                                                     ------       ----         ----         ------
                                ------     ----            ----                      ------        --                         --
Voluntary allowance.......       5,719       --            0.39        --
                                ------     ----            ----                      ------
Total allowance...........      38,746     2.62%           2.62%                     38.273
                                ======     ====            ====                      ======

</TABLE>


                                       63
<PAGE>

<TABLE>
                                                                        At December 31,
                           --------------------------------------------------------------------------------------------------------
                                                  2001                                                  2002
                           ----------------------------------------------------- --------------------------------------------------
                                         Allowance    Allowance    Loans in a                 Allowance     Allowance    Loans in a
                                        amount as a  amount as a   category as               amount as a   amount as a   category as
                                         percentage   percentage  a percentage                percentage   percentage   a percentage
                            Allowance   of loans in    of total     of total     Allowance   of loans in    of total      of total
                             amount       category      loans         loans        amount      category       loans         loans
                             ------       --------      -----         -----        ------      --------       -----         -----
<S>                             <C>        <C>             <C>       <C>             <C>          <C>          <C>           <C>
                                (in millions of constant Ch$ of December 31, 2002, except for percentages)
Commercial loans............  30,298        2.50%       1.72%        69.04%        29,063       2.04%          1.40%        68.55%
Consumer loans..............   5,929        3.36        0.32          9.60         10,035       5.28%          0.52%         9.78%
Residential
   mortgage loans...........   3,356        0.85        0.18         21.35          3,034       0.72%          0.16%        21.67%
                              ------        ----        ----        ------         ------       ----           ----        ------
Total allocated allowance...  39,583        2.15        2.15        100.00         42,132       2.07%          2.07%       100.00%
Voluntary allowance.........   3,681          --        0.20           --           2,913                      0.14%
                              ------        ----        ----                       ------       ----           ----        ------
Total allowance.............  43,264          --         --                        45,045
                              ======                                               ======

</TABLE>

The allowance for commercial loans includes Ch$1,416 million due to country
risk.

     As of December 31, 2002, we had no loans subject to the 5% additional
allowance requirement for certain commercial loans, and therefore made no
allowances to comply with the additional allowance requirement for restructured
consumer loans.

     We do not collect comprehensive data regarding the allocation of
charge-offs or the allowance for loan losses among the various types of economic
activity set forth in the table under "Loans by Economic Activity". During the
years 1999, 2000, 2001 and 2002 all of our ten largest (per year) loan
charge-offs related to our commercial loans. Such loans were outstanding to
borrowers engaged in a wide variety of activities, and our management is not
otherwise aware of any concentration of loan charge-offs or allowance for loan
losses in any particular area of economic activity.

Composition of Deposits and Other Commitments

     The following table sets forth the average balances of our deposits and
other commitments for the years 2000, 2001 and 2002.

<TABLE>
                                                                      For the years,
                                    -----------------------------------------------------------------------------------
                                             2000                         2001                          2002
                                    -------------------------    -------------------------     ------------------------
                                    Average       Average        Average         Average       Average        Average
                                    Balance     nominal rate     balance      nominal rate     Balance     nominal rate
                                    -------     ------------     -------      ------------     -------     ------------
                                        (in millions of constant Ch$ of December 31, 2002, except for percentages)
<S>                                   <C>                       <C>                             <C>
Checking accounts................     163,709      --           179,067           --            192,398          --
Other demand liabilities.........     174,869      --           198,980           --            226,941          --
Savings accounts.................      54,310     8.1            57,379          5.4             57,438         3.8
Time deposits....................     763,860     9.4           943,699          6.6          1,153,750         4.8
Other commitments                           0      --                 0           --                  0          --
                                    ---------                 ---------                       ---------
   Total                            1,156,748                 1,379,125                       1,630,527
                                    =========                 =========                       =========
</TABLE>


                                       64
<PAGE>


     C.     Organizational Structure

   See "History and Development of the Company".

     Below is a simplified organizational chart of our significant subsidiaries
as of March 2003.

<TABLE>
                                                                                                    Total Assets
                                                                                    BBVA Chile     (in millions of
                                                                     BBVA Chile.     Ownership     Ch$ of December
             Subsidiary                 Country       Activity      Voting Power        (%)            30, 2002)
             ----------                 -------       --------      ------------    ----------     ---------------

<S>                                      <C>         <C>                 <C>            <C>            <C>
                                                    Stock
BBVA BHIF Brokerage                    Chile        Brokerage            100.00         100.00         108,958.0
                                                    Financial
BHIF Advisory                          Chile        Advisory              98.60          98.60           1,124.2
                                                    Closed-end
BHIF Closed-end Fund Manager           Chile        Fund Manager         100.00         100.00           1,480.2
                                                    Residential
                                                    Housing
BHIF Residential Housing Fund                       Fund
   Management                          Chile        Management           100.00         100.00             315.1

                                                    Residential
BBVA BHIF Residential Leasing          Chile        Leasing               97.48          97.48           6,620.4
                                                    Mutual
                                                    Fund
BBVA BHIF Mutual Fund                  Chile        Management           100.00         100.00           5,880.8
                                                    Insurance
BBVA BHIF Insurance Brokerage          Chile        Brokerage            100.00         100.00           3,177.1

</TABLE>


     D.       Property, Plants and Equipment

Description Of Property

     We are domiciled in Chile and own our principal executive offices at
Huerfanos 1234, Santiago, Chile. At December 31, 2002, we owned the properties
where 45 of our 80 branches are located, and the remaining 35 branch locations
were leased. All of these facilities are adequate for our present needs and
suitable for their intended purposes. Our branches are located in 12 of Chile's
thirteen regions. We maintained the number of branches at 80 during 2002 and
plan to continue increasing the number of full-service branches as the economic
conditions recover. We also plan to extend our network of automated and
home-banking facilities.


Item 5.       Operating and Financial Review and Prospects

     A.       Operating Results

Introduction

     The following discussion should be read in conjunction with our
Consolidated Financial Statements, including the Notes thereto. Certain amounts
(including percentage amounts) that appear herein have been rounded. Certain
tabular information and percentage amounts may not add due to rounding.

     Our Consolidated Financial Statements included elsewhere in this Annual
Report have been prepared in accordance with Chilean GAAP (including the rules
of the Superintendency of Banks relating thereto), which differ in certain
significant respects from US GAAP. Note 28 to the Consolidated Financial
Statements describes the principal differences between Chilean GAAP and US GAAP
as they relate to us and includes a reconciliation to US GAAP of our net income
and shareholders' equity for and at the end of the covered periods.

     Unless otherwise indicated, the financial data presented herein for all
full-year periods is restated in constant Chilean pesos of December 31, 2002.
See Note 1.c) to the Consolidated Financial Statements.


                                       65
<PAGE>


Critical accounting policies

     As a Chilean bank, we prepare our consolidated financial statements in
conformity with accounting principles generally accepted in Chile and the rules
of the Superintendency of Banks relating thereto, which, together, differ in
certain significant aspects from US GAAP. See Note 28 to our audited
consolidated financial statements contained at the end of this Annual Report for
a description of the principal differences between Chilean GAAP and US GAAP as
they relate to us.

     Notes 1 and 2 to our audited consolidated financial statements contain a
summary of our significant accounting policies. Some of these policies demand
management to make difficult, complex or subjective judgements. As dictated by
our accounting procedures, these judgements are then submitted to our Audit
Committee and/or to our regulatory authorities and are always disclosed in the
notes to our financial statements.

     Management's ability to make subjective decisions is more restricted by
Chilean GAAP than by US GAAP. For example, Chilean GAAP requires the level of
the allowances for loan losses to be determined on the basis of specific rules
rather than on the subjective judgement involved under the US GAAP impairment
process. Management can add voluntary allowances, which have a different
accounting treatment, but can not modify the allowances so determined.

     We believe that of our critical accounting policies, the following may
involve higher degrees of judgement and complexity:

o    Investments. Investments which have a secondary market are carried at
     market value, except for investments held by the brokerage and other
     subsidiaries which are carried at the lower of cost or market value.
     Instructions issued by the Superintendency of Banks require market value
     adjustments to be made against income, except in the case of securities
     available for sale, in which case the adjustments are made directly against
     the equity account "Market value adjustments of available for sale
     securities", included in Reserves. All other investments are carried at
     cost plus accrued interest and UF indexation adjustment, as applicable.

     We enter into repurchase agreements as a form of borrowing. In this regard,
     our investments which are sold subject to a repurchase obligation and which
     serve as collateral for the borrowing are reclassified as "Investment
     collateral under agreements to repurchase". The liability to repurchase the
     investments is classified as "Securities sold under agreements to
     repurchase".

     We also enter into resale agreements as a form of investment. Under these
     agreements, we purchase securities which are included as an asset under the
     caption "Investments purchased under agreements to resell".

o    Derivatives. The Bank engages in derivative transactions for its own
     account and on behalf of its customers, mainly corporate clients of the
     import sector. These transactions arise from forward exchange contracts
     which are of two types: (i) transactions covering two foreign currencies
     and (ii) transactions covering Chilean pesos against the U.S. dollar.
     Foreign exchange contracts involve an agreement to exchange the currency of
     one country for the currency of another country or an agreed-upon price and
     settlement date. These contracts are generally standardized contracts,
     normally for periods between 30 and 90 days and are not traded in a
     secondary market, however, in the normal course of business and with the
     agreement of the original counterparty, they may be terminated or assigned
     to another counterparty. When the Bank enters into a forward exchange
     contract, it analyzes and approves the creditor's risk (the risk that the
     counterparty might default on is obligation). Subsequently, on an ongoing
     basis, it monitors the possible losses involved in each contract. To manage
     the level of credit risk the Bank deals with counterparties of good credit
     standing, enters into master netting agreements whenever possible and when
     appropriate, obtains collateral.

     The Central Bank requires that foreign exchange forward contracts be made
     only in US dollars and other major foreign currencies. In the case of the
     Bank, most forward contracts are made in US dollars against the Chilean
     peso or the UF. From time to time, forward contracts are also made in other
     currencies, but only when the Bank acts as an intermediary.


                                       66
<PAGE>

     The Bank's counterparties in derivative transaction are mainly
     international investment bank and domestic corporate and financial
     institution clients.

     Under Chilean GAAP, forward contracts between foreign currencies and U.S.
     dollars are reported at fair value with realized and unrealized gains and
     losses on these instruments recognized in other income. Forward contracts
     between the U.S. dollar and the Chilean peso are valued at the closing spot
     exchange rate of each balance sheet date with the initial discount or
     premium being amortized over the life of the contract in accordance with
     Chilean hedge accounting criteria.

     Under Chilean GAAP interest rate swap agreements that hedge part of the
     Bank's investment portfolio are recorded on balance sheet at their
     estimated fair market values. Unrealized gains or losses are credited or
     charged to income for those agreements that are designated by the Bank's
     management as hedges of part of the investment portfolio classified as
     trading. In the case of the interest rate swap agreements designated by the
     Bank's management as hedges of part of the investment portfolio as
     permanent investments, unrealized gains and losses are credited or charged
     to shareholders' equity.

o    Allowance for loan losses. The allowance for loan losses is established
     through a charge to the provision for loan losses. We have established
     allowances to cover possible loan losses in accordance with regulations
     issued by the Superintendency of Banks. The allowance for loan losses is a
     significant estimate and is regularly evaluated by us for adequacy by
     taking into consideration factors such as changes in the nature and volume
     of the loan portfolio, trends in actual and forecasted portfolio credit
     quality and current economic conditions that may affect the borrower's
     ability to pay. See "Selected Statistical Information-- Risks of the Loan
     Portfolio". This allowance is always estimated according to specific rules
     set by the Superintendency, who rates banks according, among other factors,
     by the way they conduct this process.

o    Transfers of Financial Assets. We are engaged in securitization activities
     in connection with some of our businesses. Gains and losses from
     securitization are recognized in our consolidated financial statements of
     income when we relinquish control of the transferred financial assets. The
     gain or loss on the sale of financial assets depends in part on the
     previous carrying amount of the assets involved in the transfer. The
     securitization gain or loss is partly dependant on our best estimates of
     key assumptions, including forecasted credit losses, payment rates, forward
     yield curves and appropriate discount rates. The use of different estimates
     or assumptions could produce different financial results.

Overview

     As described below, our financial performance is substantially influenced
by factors such as changes in interest rates and inflation rates and economic
conditions prevailing in Chile, and by our policy with respect to charging off
loans and our recoveries on such loans.

   Chilean Economy

     All of our operations and substantially all of our customers are located in
Chile. Accordingly, our results of operations and financial condition are
substantially dependent upon economic conditions prevailing in Chile. The
Chilean economy has experienced continued growth during the last decade as
evidenced by a 5.5% annual compound average increase in GDP from 1992 to 2002,
which has resulted in increased demand for loans and credit facilities,
particularly from middle-market businesses and individuals. In addition, the
inflation rate has been declining from 15% in 1992 to 2.6% in 2001, and to 2.8%
in 2002, even though the rise in the international price of oil pushed the
inflation rate upwards. The slow growth in Chilean gross domestic product has
also led to less significant wage growth in real terms, which has led to smaller
increases in both the number and aggregate amount of savings and demand
deposits.

     In 1998, as an effect of the Asian crisis, there was a sharp slowdown in
the Chilean economy, as well as a steep decline in both copper prices and in
Chilean exports generally. In 1999, Chile's GDP decreased 0.8% in real terms.
This situation improved during 2000, when Chile's GDP increased 4.2% in real
terms. The reduction in the price of Chile's commodity exports and the continued
gap between aggregate expenditures and gross domestic product have


                                       67
<PAGE>


decreased Chile's current account deficit to almost 0.1% of GDP in 1999. In 2000
this situation changed and the Chile's current account deficit was 1.4% of GDP.
At the same time, the financial turmoil in other emerging markets has placed
pressure on the Chilean peso. In order to support the Chilean peso and to reduce
the current account deficit, the Central Bank increased the overnight interbank
rate to 8.5% in February 1998 and to 14.0% in September 1998. Monetary policy
has been relaxed since then. The level of the Central Bank's overnight interbank
rate as of December 31, 2002 was 3.0%, and continued decreasing during the first
half of 2003.

     Within this context, the Central Bank changed its reference interest rate
from a real interest rate definition to a nominal definition. Thus, on July 26,
2001, this rate was changed from a 3.5% real interest rate to a 6.5% nominal
interest rate, assuming a 3% inflation for the year. From then on, the reference
rate has been expressed in nominal terms.

     The reduced level of inflation (by local standards) is explained by a low
level of consumer expenditures as well as by the decreasing dollar prices of
imported consumer goods. This moderate inflationary trend allowed the Central
Bank to reduce the reference interest rate eight times during the year 2002,
bringing it from 6.5% in January to 3.0% at the end of the year. The downward
trend was immediately followed (and at times anticipated) by the interest rate
on long term instruments from the Central Bank.

     Notwithstanding the actions taken by the Central Bank, there exists a
potential for a reduction in economic activity in Chile. Any such decline may
have a material adverse effect on our business, financial condition or results
of operations, including a decline in our net interest margin, a reduced rate of
growth in our loan portfolio, increased loan charge-offs, higher provisions for
loan losses and lower fee and trading income. In particular, we expect such
developments would reduce our net interest margin and result in higher loan loss
provisions and charge-offs and, although our management does not anticipate that
economic activity will materially decline or that we will be materially
adversely affected as a result of the current economic situation, there can be
no assurance that such a material adverse effect on us will not occur or that
the current economic situation in Chile will not materially worsen.

   Inflation

     Chile has experienced high levels of inflation in the past, which have
significantly affected our financial condition and results of operations.
However, the rate of inflation in Chile has had a downward trend for the last
seven years and was 4.7% in 1998, 2.3% in 1999, 4.5% in 2000, 2.6% in 2001 and
2.8% in 2002.

     In accordance with Chilean GAAP, we reflect the effect of inflation on its
financial statements considering whether an asset or liability is of a monetary
nature or not. These adjustments measure the monetary gain or loss in purchasing
power from holding monetary assets and liabilities exposed to the effects of
inflation, other than those denominated in UF or foreign currencies.

     Substantially all of our assets and liabilities are monetary. Substantially
all monetary assets and liabilities in Chile are denominated in (i) UF, a unit
of account developed during the 1960s whose value in Chilean pesos is indexed to
Chilean inflation, (ii) nominal Chilean pesos or (iii) dollars. The UF is
revalued once a month for each day in the period beginning on the tenth day of
such month through the ninth day of the succeeding month in order to reflect the
prior month's change in the CPI as determined by the INE. At December 31, 2002,
one UF was equal to Ch$16,744.12 (US$23.5 at the Observed Exchange Rate in
effect at such date). A significant portion of the loans made by us with a
maturity greater than 90 days is denominated in UF, as are savings deposits and
certain time deposits (generally those having maturities in excess of 90 days).
The nominal Chilean peso value of UF-denominated loans and deposits will
increase or decrease with changes in the CPI. The effect of any changes in the
nominal Chilean peso value of the UF on UF-denominated assets or liabilities is
reflected in our statement of income as an increase or decrease in interest
revenue or expense.

     Our earnings will be positively affected by inflation to the extent that
our average UF-denominated assets exceed our average UF-denominated liabilities.
This positive effect will decrease as the rate of inflation decreases. See
"--Net Interest Revenue--Interest Revenue". Our earnings will be negatively
affected by inflation in any period in which our average UF-denominated
liabilities exceed our average UF-denominated assets. Net interest revenue


                                       68
<PAGE>


on Chilean peso-denominated consumer loans is more negatively affected by
decreasing inflation than net interest revenue on UF-denominated commercial
loans because consumer loans are unindexed short-term loans and the nominal
interest rates earned on consumer loans decrease with decreasing inflation.
Commercial loans are typically longer term loans and are denominated in UF. In
addition, we have Chilean peso-denominated, non-interest earning assets and
non-interest bearing liabilities whose value is particularly susceptible to
inflation, which causes them to decrease in real terms. Our earnings will be
positively affected by inflation in any period in which our Chilean
peso-denominated, non-interest bearing liabilities are greater than our Chilean
peso-denominated, non-interest earning assets and negatively affected by
inflation in any period in which our Chilean peso-denominated, non-interest
earning assets are greater than our Chilean peso-denominated, non-interest
bearing liabilities. Chilean GAAP requires that adjustments be made to
non-monetary assets and liabilities, primarily to our fixed assets and to our
shareholders' equity, to reflect the effects of inflation. The net effect of
this inflation adjustment is shown as "price-level restatement" in our income
statement. The inflation rate used for purposes of such adjustments is the
change in the CPI, with a lag of one month, which was 2.6%, 4.7%, 3.1% and 3.0%
in the years ended December 31, 1999, 2000, 2001 and 2002 respectively.

   Interest Rates

     In Chile, the current account was adversely affected by the Asian crisis,
which resulted in lower volumes of exports to the affected countries, as well as
lower prices of commodities, such as copper, wood pulp, fish meal and fruits,
exported by Chile. See "--Chilean Economy". Apart from the effects of the Asian
crisis on the current account deficit, Chile's economy in the second half of
1997 and the first quarter of 1998 was showing signs of overheating since
aggregate demand (consumption plus investment) was expanding at a faster rate
than GDP. This gap, together with the current account deficit, prompted the
Central Bank to adopt a very tight monetary policy. The Central Bank increased
the overnight interbank rate to 8.5% in early January and to 14.5% in
mid-September of 1998. As a result of these policies, economic growth
decelerated sharply in 1998. During this period, GDP grew 3.9% and the current
account reached 5.7% of GDP. The growth rate of aggregate demand also slowed to
3.9% in 1998 compared to 9.1% in 1997.

     As a result of the sharp deceleration of GDP and aggregate demand in the
last quarter of 1998, the Central Bank began to relax its monetary policy and
continued to do so during the second half of 2000. The Central Bank's overnight
interbank rate was 5.0% as of December 31, 2000. Despite these lower rates, GDP
growth did not recover until the second quarter of 2000. GDP grew 2.8% in 2001,
below expectations, inflation rose 2.6% during the same period and domestic
spending estimated growth was approximately 2.8%. A decreasing interest rate
since early 2000 and the higher expected growth in GDP are expected to
positively affect the growth and quality of our investment portfolio.

     After the contractionary monetary policy adopted to deal with the Asian
crisis, in 1999 the Central Bank reassumed a normal monetary stance. As of
December 31, 2002, with overnight interest rates at 3.0% nominal, the Central
Bank has more freedom to confront higher international interest rates:

     o    On the inflationary side, the Central Bank has announced that in the
          0-12 months horizon, the relevant inflationary target is core
          inflation. From 12-24 months it is the total CPI inflation that guides
          monetary policy. In that context, there are no relevant threats to
          achieve inflation targets.

     o    The exchange rate was changed from a band to a float system. This
          gives the Central Bank the ability to allow wider variations in the
          exchange rate without being forced to act, thus discouraging
          speculation on the appreciation or depreciation of the Chilean peso.

     o    Until August 9, 2001, the Central Bank expressed its reference
          interest rate in real terms. Effective that date, the Central Bank
          begun expressing it in nominal terms, assuming an annual inflation of
          3.5% for 2001. The rate changed from 3.0% in real terms to 6.5% in
          nominal terms, without further changes until year end. In 2002, the
          Central Bank has reduced the rate on eight occasions, ending the year
          with a reference rate of 3.0%. In 2003, the Central Bank further
          reduced its reference interest rate on one occasion, to 2.75%, where
          it stood as of May 31, 2003.


                                       69
<PAGE>


     Interest rates earned and paid on our assets and liabilities reflect to a
certain degree inflation and expectations regarding inflation as well as shifts
in short-term rates related to the Central Bank's monetary policies. The Central
Bank manages short-term interest rates based on its objectives of balancing low
inflation and economic growth. Because our liabilities generally reprise faster
than its assets, changes in the rate of inflation or short-term rates in the
economy are reflected in the rates of interest paid by us on our liabilities
before such changes are reflected in the rates of interest earned by us on our
assets. Accordingly, our net interest margin on assets and liabilities tends to
be adversely affected in the short term by increases in inflation or short-term
rates and to benefit in the short term from decreases in inflation or short-term
rates, although the existence of non-interest bearing Chilean peso-denominated
demand deposits tends to mitigate both effects. See "--Inflation". In addition,
because our Chilean peso-denominated liabilities have relatively short repricing
periods, they are generally more responsive to changes in inflation or
short-term rates than our UF-denominated liabilities. As a result, during
periods when current inflation or expected inflation exceeds the previous
month's inflation, customers often switch funds from UF-denominated deposits to
more expensive Chilean peso-denominated deposits, thereby adversely affecting
our net interest margin.

Business strategy

     The growth of the economy has generated a demand for financial services
from an increasing number of individuals in all income segments of the
population and from an increasing number of companies, although at a slow pace
due to the current economic environment. Our business strategy has shifted to
target the growing demand for banking products and services from upper to
lower-middle income individuals and from large corporations to small-size
companies. Our strategy aims to increase lending and to provide services through
cross-selling to all customer segments. Our historical strength in residential
mortgages and with medium and small-size companies serves as a natural and
strong base for expansion in those markets. While we believe that this strategy
has the potential to provide higher net interest margins, it also has the
potential to expose us to a higher degree of credit risk. We continuously seek
to improve the quality of our loan portfolio and our risk index through the
adherence to our new loan origination procedures and credit management policies.
See "Information on the Company -- Business Overview" and "Selected Statistical
Information-- Loans by economic activity".

Mortgage Finance Bonds Issued and Held by Us

     From time to time, we use other sources of financing to fund our
residential mortgage loans; however, we generally fund our residential mortgage
loans through the issuance of mortgage finance bonds which are our recourse
obligations with payment terms matched to the related mortgage loans, bearing
interest at a spread below the interest rate applicable to such mortgage loans.
However, if we were ever to be liquidated, the mortgage finance bond holders
would be secured by a pool of mortgages.

     Mortgage finance bonds are traditionally placed with institutions, such as
pension funds, mutual funds and insurance companies, seeking long-term
fixed-income investments. However, we also purchase mortgage finance bonds we
have issued for our own account and hold them as financial investments. Unlike
US GAAP, under which mortgage finance bonds issued by us and held for future
sale would be offset against the related liability, under Chilean GAAP such
mortgage finance bonds and the related liability appeared on our balance sheet
until 2001 as "financial investment" and "mortgage finance bonds", respectively.
Since 2002, under Chilean GAAP mortgage finance bonds issued by us and held for
future sale have been offset by the related liability, as in US GAAP. See Note
2. to the Consolidated Financial Statements. At December 31, 2002, we had issued
and outstanding Ch$257,134.5 million of mortgage finance bonds, net.

     According to the General Banking Law, if a bank faces solvency problems and
a reorganization plan has been proposed, its board of directors shall put up at
separate auctions its residential mortgage loans and its commercial real estate
loans funded through mortgage finance bonds. The board will transfer the loans
to the best offer as long as such offer is equal to or higher than the amount
that shall be paid to the other creditors of the bank pursuant to the
reorganization plan. If that is not the case, a new auction shall be carried out
and the same rules shall apply. If there is a successful bidder, it shall pay
the mortgage finance bonds, but the aggregate principal amount of such bonds
shall be reduced to the amount paid by the successful bidder. If the auction
does not succeed, the holders of the mortgage finance bonds shall be subject to
the provisions of the reorganization plan. In the event of mandatory


                                       70
<PAGE>

liquidation of a bank, the same rules apply; provided that in order for an offer
to be accepted, it shall be equal to or higher than 90% of the face value of the
mortgage finance bonds, unless the holders of a majority of the issued and
outstanding mortgage finance bonds approve the offer in a meeting specially
called for this purpose by the liquidator.

     Pursuant to the regulations of the Superintendency of Banks, as of April 1,
1996, mortgage finance bonds issued by us and held in our own investment
portfolio, which had previously been carried at cost, were required to be marked
to market on an ongoing basis (mortgage finance bonds issued by other banks and
held by us in our investment portfolio were already, as of April 1, 1996,
required to be marked to market). The gains and losses resulting from the
holding of mortgage finance bonds issued by us (or issued by other banks) appear
as "other operating income (gains and losses from trading and brokerage
activities)" in our consolidated statements of income.

     However, in September 1998, the Superintendency of Banks modified the
regulations regarding the valuation of financial investments. Due to this
modification, all mortgage finance bonds issued by us and held in our own
investment portfolio that were acquired prior to January 1, 1998 are recorded at
their December 31, 1997 carrying values until they reach maturity or are sold.
See "Description of Business--Chilean Regulation and Supervision--Recently
Enacted Banking Legislation--Mark to Market Requirements for Financial
Investments".

Contingent Loans

     Contingent loans consist of unfunded letters of credit, guarantees,
performance bonds and other unfunded commitments. Chilean banks charge their
customers a fee on contingent loans as well as interest for the periods of the
contingent debt. Accordingly, contingent loans are treated by us as interest
earning assets. As a result of this treatment, the comparatively low rates of
interest earned on these assets have a distorting effect on the average interest
rate earned on total interest earning assets. See "Description of
Business--Selected Statistical Information--Average Balance Sheets and Interest
Rate Data".

     In addition, under Chilean GAAP, rights and obligations with respect to
contingent loans are treated as contingent assets and liabilities on our
consolidated balance sheets. This practice differs from US GAAP, under which
such contingent amounts are not recognized on the consolidated balance sheets
but are disclosed off-balance sheet in memorandum accounts. Accordingly, to the
extent we maintain contingent loans and contingent liabilities, our consolidated
balance sheets will appear different than if they had been prepared under US
GAAP. See Note 28.f) to the Consolidated Financial Statements.

     At December 31, 2002, we had Ch$84,691.5 million contingent loans and
Ch$85,457.4 million contingent liabilities outstanding.

Accounting Treatment for Financial Investments

     In 1998, we opted to apply a new rule of the Superintendency of Banks,
which changed the accounting treatment for financial investments considered
available for sale. This criteria allows us to charge to an equity account, and
not income, the market value adjustments of such investments. The effect of this
change resulted in a charge to equity of Ch$1,729 million in 1998. As from June
1998, and with the consent of the Superintendency of Banks, we began to record
commissions earned and paid relating to retail banking products on an accrual
basis. Until then, these commissions were recorded at the time of collection or
payment.

Deferred income taxes

     As of January 1, 1999, we and our subsidiaries have recorded the effects of
deferred income taxes for temporary differences in accordance with Circular 2984
of the Chilean Superintendency of Banks and Financial Institutions and Technical
Bulletin No. 60 of the Chilean Institute of Accountants. This generated a credit
of Ch$5,389 million to income for the year.

     As of January 1, 2002, the effects of deferred income taxes for temporary
differences generated a credit of Ch$3,743 million to income for the year. See
Note 23 to the Consolidated Financial Statements.


                                       71
<PAGE>

Net Income (2002)

     Consolidated net income for the year ended December 31, 2002 increased to
Ch$20,255 million in 2002 from Ch$15,335 million in 2001 due principally to a
Ch$15,672 million increase in net interest revenue, to a Ch$4,534 million
increase in income from services, net and to a Ch$2,196 million increase in the
recoveries of loans previously charged off; partially offset by a Ch$12,586
million decrease in other operating income, a Ch$3,864 million increase in
operating expenses and a Ch$1,638 million increase in income taxes. All other
items on the income statement had variations of under Ch$500 million from 2001.

Charge-offs and Recoveries

     At December 31, 2002, we had Ch$115,312 million in memorandum accounts
related to loans previously charged off, comprised of Ch$53,818 million of loans
reacquired from the Central Bank in connection with the Central Bank
Subordinated Debt (the "Reacquired Loans Previously Charged Off") and Ch$61,327
million of loans charged off by us as part of our operating policies (the
"Operational Loans Previously Charged Off"). See "Business Overview--Chilean
Regulation and Supervision--The Central Bank", "--Other Income--Recoveries of
Loans Previously Charged Off" and "Selected Statistical Information--Analysis of
our Loan Classifications". The following table provides information regarding
our loans previously charged off at the end of each of the last five years.


<TABLE>
                                                                      At December 31,
                                            ------------------------------------------------------------------------
                                            1998              1999             2000           2001           2002
                                            ----              ----             ----           ----           ----
                                                    (in millions of constant Ch$ of December 31, 2002)

<S>                                          <C>               <C>             <C>            <C>           <C>
Reacquired Loans Previously
   Charged Off.....................        51,009             49,935          43,330         47,537        49,388
Operational Loans Previously
   Charged Off.....................       114,062            115,417          80,362         67,607        65,924
                                          -------            -------         -------        -------       -------
   Total...........................       165,071            165,352         123,692        115,144       115,312
                                          =======            =======         =======        =======       =======
</TABLE>


Results of Operations for the Years Ended December 31, 2000, 2001 and 2002

     The following table sets forth the principal components of our net income
for the years ended December 31, 2000, 2001 and 2002.


<TABLE>
                                                     Year ended December 31,                     % Change
                                             ---------------------------------------    ---------------------------
                                                 2000           2001          2002        2000/2001      2002/2001
                                                 ----           ----          ----        ---------      ---------
                                             (in millions of constant Ch$ of December 31, 2002, except percentages)
Principal components of net income:
<S>                                             <C>           <C>           <C>           <C>           <C>
   Net interest revenue...................      80,079        93,342        109,014       16.60%        16.8%
   Provision for loan losses..............    (24,459)      (31,556)       (31,316)       29.00         (0.8)
   Income from services, net..............      11,795        17,228         21,762       46.10         26.3
   Other operating income, net............       5,328         4,392        (8,195)      (17.60)      (286.6)
   Other income and expenses, net:

   Recovery of loans previously charged
   off....................................       7,674         7,500          9,696       (2.30)        29.3
   Other income and expenses..............        (15)         1,093          1,169   (7,671.40)         7.0
   Operating expenses.....................    (62,074)      (71,295)       (75,159)       14.90          5.4
   Loss from price-level restatement......     (5,388)       (4,464)        (4,164)      (17.10)        (6.7)
</TABLE>


                                       72
<PAGE>
<TABLE>
                                                      Year ended December 31,                     % Change
                                             -----------------------------------------   --------------------------
                                                 2000           2001          2002        2000/2001      2002/2001
                                                 ----           ----          ----        ---------      ---------
                                             (in millions of constant Ch$ of December 31, 2002, except percentages)

<S>                                               <C>           <C>            <C>        <C>           <C>
   Minority interest in consolidated
     subsidiaries.........................        (20)          (24)           (34)       21.10         41.7
   Income taxes...........................       1,984         (881)        (2,518)     (144.40)       185.8
                                                 -----         ----         ------      -------        -----
   Net income.............................      14,904        15,335         20,255        2.90%        32.1%
                                                 =====         ====         ======      =======        =====
</TABLE>


     Our net income for 2002 reached Ch$20,255 million, an increase of 32.1%
from Ch$15,334 million in 2001, which in turn had increased by 2.9% from
Ch$14,905 million in 2000. The increase in 2002 was attributable principally to
(i) a 16.8% increase in net interest revenue due to an increase in volume of
interest bearing assets and liabilities, (ii) a 26.3% increase in income from
services, net, due mainly to a 41.2% increase in commissions on pension
payments, and to a 30.4% reduction in the commissions paid on placement and
servicing of loans, and (iii) to a 29.3% increase in the recovery of loans
previously charged off.

     Return on total average assets for each of 2000, 2001 and 2002 was 0.68%,
0.59% and 0.71%, respectively. Return on average shareholders' equity was 8.21%
for 2002 compared to 6.28% for 2001 and 7.63% for 2000. The increase in return
on total average assets in 2002 is attributable mostly to the improvements in
portfolio quality and to the increase in recoveries of loans previously charged
off. Net interest revenue has continued to grow slower than loans due to the
prevailing low levels of both interest rates and inflation, dampening the growth
of our return on average shareholders' equity. The decreasing level of
provisions is mostly due to an industry wide trend, caused by the stable
economic conditions prevailing during most of the year 2002 in Chile.

   Net Interest Revenue

     Our net interest revenue increased by 16.8% in 2002 compared to 2001. This
increase comes on top of the 16.6% increase registered in 2001 and is completely
attributable to the increase in the average volume of interest earning assets,
which more than compensated for the reduction caused by the declining levels of
the reference interest rate.

     The following table sets forth the elements of our net interest revenue for
the years ended December 31, 2000, 2001 and 2002:


<TABLE>
                                             Year ended December 31,                         % Change
                                    -----------------------------------------        --------------------------
                                               (in millions of constant Ch$ of December 31, 2002)

                                      2000              2001           2002          2001/2000        2002/2001
                                      ----              ----           ----          ---------        ---------
<S>                                  <C>              <C>            <C>               <C>               <C>
Interest revenue..............       225,990          218,194        216,464           (3.4)%            (0.8)%
Interest expense..............      (145,911)        (124,852)      (107,450)         (14.4)%           (13.9)%
                                    --------         --------       --------          -----             -----
   Net interest revenue.......        80,079           93,342        109,014           16.6%             16.8%
                                    ========         ========       ========          =====             =====
</TABLE>


     The following table sets forth the effect on our net interest revenue of
changes in (i) the average volume of interest earning assets and interest
bearing liabilities, and (ii) their respective average nominal interest rates
during the relevant periods:


                                       73
<PAGE>

<TABLE>
                                                                         2001/2000               2002/2001
                                                                    Increase (decrease)     Increase (decrease)
                                                                    -------------------     -------------------
                                                               (in millions of constant Ch$ of December 31, 2002)

<S>                                                                        <C>                      <C>
Due to changes in average volume of interest earning assets
   and interest bearing liabilities............................         15,115                   24,635
Due to changes in average nominal interest rates...............         (1,859)                  (8,958)
                                                                        ------                   ------
Net change.....................................................         13,256                   15,677
                                                                        ======                   ======
</TABLE>


     Net interest revenue in 2002 increased 16.8% from 2001, a Ch$15,676 million
increase. Such increase is a net result of a 10.5% increase in the volume of
interest earning assets and of a 13.2% increase in the volume of interest
bearing liabilities. The lower increase in interest bearing liabilities allowed
the effect of the increase in asset volume to prevail, with a net effect of
Ch$24,635 million due to volume. The significant reductions in the average
nominal interest rate had a marked effect on both interest revenue and on
interest expense, and the net effect of such changes was a decrease of Ch$8,959
million in 2002.

     Net interest revenue in 2001 increased 16.6% from 2000, a Ch$13,256 million
increase. Such increase was a net result of a 18.8% increase in the volume of
interest earning assets and of a 15.5% increase in the volume of interest
earning liabilities. The lower increase in interest bearing liabilities allowed
the effect of the increase in asset volume to prevail, with a net effect of
Ch$15,117 million due to volume. The variations in the average nominal interest
rate had a marked effect on both interest revenue and on interest expense, but
since both effects offset each other, the net effect of the variations in the
average nominal interest rate was a decrease of Ch$1,862 million in 2001.

     Our net interest margin (net interest revenue over average interest earning
assets) decreased from 4.22% in 2001 to 3.28% in 2002, primarily due to the
decrease in the average interest rate earned, mainly as a result of a decrease
in the market rates in a context of stable inflation rate which was not offset
by the changes in the loan portfolio composition. Our net interest margin
decreased from 4.30% in 2000 to 4.22% in 2001, primarily due to a 16.6% increase
in net interest revenue that was more than offset by the 18.8% growth in average
interest earning assets due to the decreasing interest rates.

   Interest Revenue

     The following table sets forth information as to our interest revenue and
average interest earning assets for the years ended December 31, 2000, 2001 and
2002:

<TABLE>

                                                 Year ended December 31,                         % Change
                                                 -----------------------                         --------
                                             2000             2001           2002          2001/2000       2002/2001
                                             ----             ----           ----          ---------       ---------
                                                    (in millions of constant Ch$ of December 31, 2002)
<S>                                        <C>             <C>             <C>               <C>              <C>
Interest revenue.................          225,990         218,194         216,464           (3.4)%           (0.8)%
Average interest earning assets:
Loans............................        1,498,449       1,739,619       1,897,359           16.1              9.1
Investments......................          336,614         444,385         511,591           32.0             15.1
Interbank deposits                          25,467          26,969          34,522            5.9             28.0
                                         ---------       ---------       ---------      ---------        ---------
Total                                    1,860,530       2,210,973       2,443,472           18.8%            10.5%
                                         =========       =========       =========      =========        =========
Average nominal interest rates               12.1%            9.9%           8.90%            --               --
</TABLE>

     The following table sets forth the effect on our interest revenue of
changes in (i) the average volume of interest earning assets, and (ii) average
nominal interest rates during the relevant periods:

<TABLE>
                                                                          2001/2000              2002/2001
                                                                     Increase (decrease)    Increase (decrease)
                                                                     -------------------    -------------------
                                                                      (in millions of constant Ch$ of December
                                                                                     31, 2002)
                                                                      ----------------------------------------
<S>                                                                            <C>                    <C>
Due to changes in average volume of interest earning assets.......               28,174                 20,913
Due to changes in average nominal interest rates..................             (35,981)               (22,632)
</TABLE>


                                       74
<PAGE>

<TABLE>
                                                                          2001/2000              2002/2001
                                                                     Increase (decrease)    Increase (decrease)
                                                                     -------------------    -------------------
                                                                      (in millions of constant Ch$ of December
                                                                                     31, 2002)
                                                                      ----------------------------------------
<S>                                                                            <C>                    <C>
Net change........................................................              (7,807)                (1,719)
</TABLE>

     Interest revenue in 2002 decreased 0.8% from 2001. The decrease in interest
revenue is primarily the result of an increase in average interest earning
assets that was offset by a 100 bp decrease in average nominal interest rates,
which was due to a stabilization in the annual rate of inflation, a decrease in
the Central Bank reference interest rate and a low activity environment. In
accordance with the strategy established by us, the higher growth operations
within the loan portfolio continued to be the Crediton and the Hipotecon. See
"Business Overview-Retail Market: Middle and Lower-Middle Income Individuals".
See "Selected Statistical Information--Loan Portfolio". The positive impact on
interest revenue resulting from the increase in average interest earning assets
went together with a negative impact of changes in average nominal interest
rates.

     Interest revenue in 2001 decreased 3.4% from 2000. The decrease in interest
revenue was primarily the result of a 220 bp decrease in average nominal
interest rates, which was due to a reduction in the annual rate of inflation,
and a decrease in the Central Bank reference interest rate. In accordance with
the strategy established by us, the higher growth operations within the loan
portfolio were the Crediton and the Hipotecon. See "Business Overview --Retail
Market: Middle and Lower-Middle Income Individuals". In fact, the average
balance of consumer loans grew 19.5% and the average balance of mortgage loans
diminished 3.9%. See "Selected Statistical Information--Loan Portfolio". The
positive impact on interest revenue resulting from the increase in average
interest earning assets was more than offset by a decrease in average nominal
interest rates, which was attributable to a reduction in the rate of inflation
from 2000 to 2001 and to the reduction of the overnight interest rate.

   Interest Expense

     The following table sets forth our interest expense, average interest
bearing liabilities and average non-interest bearing demand deposits for the
years ended December 31, 2000, 2001 and 2002:

<TABLE>
                                                         Year ended December 31,                      % Change
                                                    ------------------------------------      ------------------------
                                                    2000           2001          2002         2001/2000      2002/2001
                                                    ----           ----          ----         ---------      ---------
                                                           (in millions of constant Ch$ of December 31, 2002)
<S>                                                 <C>           <C>            <C>             <C>            <C>
Interest expense............................        145,911       124,852        107,450         (14.4)%        (13.9)%
Average interest bearing liabilities:
Deposits(1).................................        818,171     1,001,078      1,211,188          22.4           21.0
Mortgage finance bonds(2)...................        259,999       251,483        247,046          (3.3)          (1.8)
Other interest bearing liabilities(3).......        462,837       527,698        557,695          14.0            5.7
                                  --                -------       -------        -------          ----            ---
Total.......................................      1,541,007     1,780,259      2,015,929          15.5           13.2
                                                  =========     =========      =========
Average nominal interest rates..............           9.05          7.00           5.30
Average non-interest bearing demand
   deposits.................................        338,579       378,046        419,339          11.7%          10.9%
</TABLE>

----------------------
(1)  Combines "Savings accounts" and "Time deposits" shown in the tables set
     forth under "Selected Statistical Information--Average Balance Sheets and
     Interest Rate Data".

(2)  Unsecured bonds with maturities ranging from five to 30 years, the proceeds
     of which are used to fund mortgage lending.

(3)  Combines "Central Bank borrowings", "Securities sold under agreements to
     repurchase" and "Other interest bearing liabilities" shown in the tables
     set forth under "Selected Statistical Information--Average Balance Sheets
     and Interest Rate Data".

     The following table sets forth the effect on our interest expense of
changes in (i) average volume of interest bearing liabilities, and (ii) average
nominal interest rates during the relevant periods:


                                       75
<PAGE>

<TABLE>

                                                                                    2001/2000                2002/2001
                                                                               Increase (decrease)      Increase (decrease)
                                                                               -------------------      -------------------
                                                                                     (in millions of constant Ch$
                                                                                        of December 31, 2002)
<S>                                                                                      <C>                 <C>
Due to changes in average volume of interest bearing liabilities........                 13,057              (3,722)
Due to changes in average nominal interest rates........................               (34,122)             (13,674)
Net change..............................................................               (21,065)             (17,396)
</TABLE>

     Interest expense in 2002 decreased 13.9% from 2001, despite the 21%
increase in average interest bearing deposits, mainly concentrated in time
deposits, and primarily as a result of a 191 bp decrease in the average nominal
interest rate paid by us on such liabilities. Such effects are accompanied by a
10.9% increase in non-interest bearing demand deposits, mainly concentrated in
checking accounts, and by further reductions on the Central Bank reference
interest rates. The effect of the decrease in the average nominal interest rate
paid by us amounted to Ch$(13,674) million, more than offsetting the Ch$(3,722)
million effect of the increase in the average volume of interest bearing
liabilities. Within deposits, time deposits, which represent close to 73% of
total deposits, increase 22.3% whereas savings accounts increase 0.1%. See
"--Overview".

     Interest expense in 2001 decreased 14.4% from 2000, primarily as a result
of an 11.7% increase in non-interest bearing demand deposits, mainly
concentrated in checking accounts, by a 195bp decrease in the average nominal
interest rate paid by us on such liabilities and by further reductions on the
Central Bank reference interest rates. Such effects are partially offset by the
22.4% increase in average interest bearing demand deposits, mainly concentrated
in time deposits. The effect of the decrease in the average nominal interest
rate paid by us amounted to Ch$(34,122) million, more than compensating for the
Ch$13,057 million effect of the increase in the average volume of interest
bearing liabilities Within deposits, time deposits, which represent close to 60%
of total deposits, increased 23.5% whereas savings accounts increased 5.7%. See
"Operating Results--Overview".

   Provision for Loan Losses

     Chilean banks are required to maintain reserves to cover possible credit
losses that at least equal their loans to customers multiplied by the greater of
(i) their risk index or (ii) 0.75%. The risk index is derived from management's
classification of our portfolio according to objective criteria relating to the
performance of the loans or, in the case of commercial loans, management's
estimate of the likelihood of default. Banks in Chile are also required to
establish individual loan loss reserves for loans that are more than 90 days
past due. The amount of the individual loan loss reserves is equal to 100% of
the unsecured past due portion of the loan if such amounts in the aggregate
exceed the global loan loss reserve. See "Business Overview--Selected
Statistical Information--Classification of Loan Portfolio" and "--Selected
Statistical Information--Loan Loss Reserves". Banks in Chile are also required
to maintain additional consumer loan loss reserves as a result of the new
provisioning requirements for consumer loans set by the Superintendency of
Banks. See "Business Overview --Chilean Regulation And Supervision--Recently
Enacted Banking Legislation--Allowance Requirements for Consumer Lending". A
bank may also maintain voluntary additional loan loss reserves in excess of the
minimum amounts required as global and individual loan loss reserves. Provisions
to such voluntary reserves are not deducted from income for tax purposes.

     The following table sets forth information about us with respect to the
allowance for loan losses and its principal components, provision for loan
losses and charge-offs, at and for each of the years ended December 31, 2000,
2001 and 2002, respectively:

<TABLE>

                                                       December 31,                               % Change
                                        ----------------------------------------         -------------------------
                                           2000             2001            2002         2001/2000       2002/2001
                                           ----             ----            ----         ---------       ---------
                                        (in millions of constant Ch$ of December 31, 2002, except for percentages)
<S>                                         <C>             <C>             <C>           <C>             <C>
Provisions for loan losses.......           24,459          31,556          31,316        29.0%           (0.8)%
Charge-offs......................          (23,759)        (23,950)        (28,274)        0.8            18.0
</TABLE>


                                       76
<PAGE>

<TABLE>

                                                       December 31,                               % Change
                                        ----------------------------------------         -------------------------
                                           2000             2001            2002         2001/2000       2002/2001
                                           ----             ----            ----         ---------       ---------
                                        (in millions of constant Ch$ of December 31, 2002, except for percentages)
<S>                                         <C>             <C>             <C>           <C>             <C>
Total loans...........................   1,704,486       1,841,159       2,098,564         8.0            14.0
   Risk index.........................        2.03            1.82            1.67       (10.3)
   Required allowance for loan
     losses based on risk index ......      34,601          33,509          35,046        (3.2)            4.0
   Allowance for loan losses .........      38,273          43,264          45,045        13.0%            4.1%
   Allowance for loan losses as
     a percentage of total loans .....        2.25            2.35            2.15
</TABLE>

     The amount charged to income as provision for loan losses decreased 0.8% to
Ch$31,316 million in 2002 from Ch$31,556 million in 2001. This decrease was
primarily explained by an improvement in portfolio quality due to three years of
applying more demanding criteria in loan origination and in the implementation
of credit scoring, offset by the falling into past due of a specific set of
loans (already classified as low quality loans).

     As a result of this improvement in portfolio quality, our risk index
decreased from 1.82% at December 31, 2001 to 1.67% at December 31, 2002. In
addition, 95.4% of our loans were category A and category B loans in 2002,
compared to 94.8% in 2001. See "Selected Statistical Information--Analysis of
Our Loan Classifications".

     The amount charged to income as provisions for loan losses was offset in
part by the increase in the required allowance for loan losses based on risk
index, due to the increase in loan volume. The net effect on our coverage level
decreased the level of allowances for loan losses over the loan portfolio from
2.35% in 2001 to 2.15% in 2002. When compared with past due loans, allowances
for loan losses represented 126.0% of past due loans in 2000 and 111.9% in 2001.
Our policy of over 100% coverage was exceeded as we achieved 109.0% coverage at
year end 2002.

     Mainly as a result of the changes in our loan classification, BBVA Chile's
risk index was 1.67% at December 31, 2002, down from 1.82% at December 31, 2001
and from 2.03% at December 31, 2000, compared to an average risk index for the
Chilean financial system of 2.0% at October 31, 2002 (the most recent available
information for the industry), 1.90% at October 31, 2001 and 2.08% at October
31, 2000. For a discussion of our policies and practices regarding loan loss
provisions and allowances, see "Business Overview--Selected Statistical
Information--Allowance for Loan Losses".

     The amount charged to income as provisions for loan losses increased 13.0%
to Ch$43,263 million in 2001 from Ch$38,273 million in 2000. This increase was
primarily the result of the use of voluntary allowances and of an improvement in
portfolio quality due to the application of the new criteria and procedures. See
"Selected Statistical Information--Analysis of Our Loan Classifications".

     In the fourth quarter of 1998, soon after the BBVA Group took control of
us, we conducted an extensive revision of our loan portfolio, which resulted in
an extensive cleanup and downgrading of a part of our portfolio and in an 86.9%
increase in charge-offs in 1998. The economic recession that affected the
country over the 1998-1999 period caused a significant loan quality
deterioration across the Chilean banking industry and is mostly responsible for
the 29.7% increase of charge-offs in 1999. In light of these events, with the
aim of reaching a level of allowances for loan losses that would be adequate
even if conditions worsened, we established in 1999 additional (voluntary)
allowances for an amount of Ch$5,180 million.

   Other Income

     Income from Services, Net. The following table sets forth the components of
our income from services, net for the years ended December 31, 2000, 2001 and
2002:


                                       77
<PAGE>

<TABLE>

                                                    Year ended December 31,                         % Change
                                           ---------------------------------------         -------------------------
                                             2000            2001             2002         2001/2000       2002/2001
                                             ----            ----             ----         ---------       ---------
                                           (in millions of constant Ch$ of December 31, 2002, except for percentages)
<S>                                          <C>              <C>             <C>             <C>             <C>
Fees from services:
Commissions on insurance brokerage .......  1,588             1,951           2,170           22.9%           11.2%
Credit cards .............................  1,144             1,299           1,275           13.5%          (1.8)%
Current accounts .........................  2,898             4,839           4,459           67.0%          (7.9)%
Pension payments .........................  1,043             2,719           3,840          160.7%           41.2%
Contingent loans and letters of credit ...    623             1,001             762           60.7%         (23.9)%
Automatic teller machines ................  1,059               541           1,596         (48.9)%          195.0%
Collections ..............................    798               389             354         (51.3)%          (9.0)%
Purchases and sales of foreign
exchange .................................    142               214             272           50.7%           27.1%
Lines of credit and overdrafts ...........    919               484             675         (47.3)%           39.5%
On-line accounts .........................    312               210             169         (32.7)%         (19.5)%
Custody and Trust services ...............     57                59             130            3.5%          120.3%
Service charges on deposit accounts ......    226               206             204          (8.8)%          (1.0)%
Service charges on loans .................    536               380             534         (29.1)%           40.5%
Fees from collections of insurance
premiums .................................  1,199             1,260           1,507            5.1%           19.6%
Loan and securities collections ..........    153                 -               -        (100.0)%               -
Brokerage fees ...........................    553               610             737           10.3%           20.8%
Commissions on mutual and investment
  Funds administration ...................  2,176             2,301           2,578            5.7%           12.0%
Lease contracts fees .....................      -               474             483               -            1.9%
Financial advisory services ..............    306               432               -           41.2%        (100.0)%
Fees charged on prepaid loans ............      1               573           1,645        57200.0%          187.1%
Other ....................................    902             2,340           2,944          159.4%           25.8%
                                           ------            ------          ------           ----            ----
      Total income from services ......... 16,635            22,282          26,334           33.9%           18.2%
                                           ======            ======          ======           ====            ====
Services expenses
Brokerage expenses .......................    (64)             (74)            (39)          15.60%        (47.30)%
Brokerage fees ...........................   (360)            (331)           (305)         (8.10)%         (7.90)%
Credit card operators ....................   (613)            (778)         (1,017)          26.90%          30.70%
Automatic teller machines ................   (791)            (873)         (1,031)          10.40%          18.10%
Collection expenses ......................    (19)             (12)            (20)        (36.80)%          66.70%
Commissions on placement and                                                                               (30.40)%
servicing of loans ....................... (2,833)          (2,553)         (1,777)         (9.90)%
Other ....................................   (160)            (433)           (383)         170.60%        (11.50)%
      Total services expenses ............ (4,840)          (5,054)         (4,572)           4.40%         (9.50)%
             Income from services, net ... 11,795           17,228          21,762            46.1%          26.3%
</TABLE>

     Our net income from services increased 26.3% to Ch$21,762 million in 2002
from Ch$17,228 million in 2001. This increase was primarily the result of (i) a
41.2% increase in commission on pension payments to Ch$3,840 million in 2002
from Ch$2,719 million in 2001; (ii) a 187.1% increase in fees charged on prepaid
loans to Ch$1,645 million on 2002 from Ch$573 million on 2001; and (iii) a 195%
increase in commissions from Automatic Teller Machines to Ch$1,596 million in
2002 from Ch$541 million in 2001. These increases were partially offset by (i) a
Ch$432 million decrease in fees form financial advisory services and (ii) a 7.9%
decrease in fees and commissions on current accounts to Ch$4,459 million in 2002
from Ch$4,839 million in 2001. See "Business Overview--Lines of Business--Retail
Banking".

     Our net income from services increased 46.1% to Ch$17,228 million in 2001
from Ch$11,795 million in 2000. This increase was primarily the result of (i) an
67% increase in commission on current accounts to Ch$4,839 million in 2001 from
Ch$2,898 million in 2000 and (ii) a Ch$1,676 million increase in commissions on
pension payments to


                                       78
<PAGE>

Ch$2,719 million in 2001 from Ch$1,043 million in 2000. These increases were
partially offset by: (i) a Ch$518 million decrease in commissions from Automatic
Teller Machines and (ii) a 47.3% decrease in fees from lines of credit and
overdrafts.

     The commission on pension payments stems from a clause in the pension
payment contract that states that a commission is due if the balances held at
the bank fall below a previously established level. This condition was met for
the first time in 1999.

     For information related to our lines of businesses, see Note 28.2.e)
("Segment Information") to the Consolidated Financial Statements.

     Other Operating Income, Net. The following table sets forth the components
of our other operating income, net for the years ended December 31, 2000, 2001
and 2002:

<TABLE>
                                             Year ended December 31,                      % Change
                                       -----------------------------------        ------------------------
                                       2000           2001            2002        2001/2000      2002/2001
                                       ----           ----            ----        ---------      ---------
                                               (in millions of constant Ch$ of December 31, 2002)
<S>                                      <C>            <C>             <C>           <C>           <C>
Gains (losses) on financial
   instruments, net...................   3,951          8,554           6,140          116.5%        (28.2)%
Foreign exchange
   transactions, net..................   1,377         (4,162)        (14,335)        (402.2)        244.4
                                         -----          -----          ------         ------        ------
Other operating income, net...........   5,328          4,392          (8,195)         (17.6)%      (286.6)%
                                         =====          =====          ======         ======        ======

</TABLE>

     In 2002, we recorded a loss of Ch$225 million in our other operating
income, net, primarily due to gains on financial instruments due to the
declining interest rates and to losses in foreign exchange transactions. The
latter losses were a result of the high volatility exhibited by the exchange
rate, particularly over specific periods of the year.

     In 2001, we recorded a gain of Ch$4,392 million in other operating income,
net, due to the losses obtained from foreign exchange transactions and gains on
financial instruments. This gain was also in a period of high volatility
exhibited by the exchange rate, particularly in the first quarter of the year.

     Other Income and Expenses. The following table sets forth the principal
components of our other income and expenses for the years ended December 31,
2000, 2001 and 2002:

<TABLE>
                                                    Year ended December 31,                    % Change
                                               ---------------------------------        ----------------------
                                               2000           2001          2002        2001/2000    2002/2001
                                               ----           ----          ----        ---------    ---------
                                                    (in millions of constant Ch$ as of December 31, 2002)
<S>                                          <C>           <C>            <C>               <C>           <C>
Recoveries of loans previously charged        7,573
   off.......................................               7,420          9,679            (2.0)%        30.4
Recoveries of loans reacquired from the         101
   Central Bank..............................                  80             17           (20.8)        (78.8)
Subtotal..................................... 7,674         7,500          9,696            (2.3)         29.3
Non-operating income......................... 2,866         3,948          4,776            37.7          31.0
Non-operating expenses.......................(2,845)       (2,821)        (3,723)           (0.8)         32.0
Subtotal.....................................    21         1,127          1,053         5,266.7          (6.6)
Participation in earnings of equity
   investments...............................   (36)          (34)           116            (5.6)          -
                                              -----         -----         ------            ----          ----
Total........................................ 7,659         8,593         10,865            12.2%         26.4%
                                              =====         =====         ======            ====          ====

</TABLE>

     Recoveries of Loans Previously Charged Off. Recoveries of loans previously
charged off amounted to Ch$10,865 million in 2002, up from Ch$8,592 million in
2001. Recoveries of loans reacquired from the Central Bank previously charged
off, which will tend to decrease as the total amount of such loans decreases,
accounted for


                                       79
<PAGE>

approximately 0.2% of total recoveries in 2002. The increase in
recoveries of loans previously charged off during 2002 comes from of a continued
effort by us, and is a result of the economic conditions prevailing over the
year and of the increase in the number of operational loans charged off in
recent years.

     Other. In 2002 non-operating income increased by 21% while non-operating
expenses increased by 32% from 2001 levels. Such decrease in net non-operating
income is mostly explained by the higher level of non-operating income attained
in 2002, through an increase in the sale of assets received in lieu of payment,
offset by the higher level of non-operating expenses. In 2001, non-operating
income increased by 37.8% while non-operating expenses decreased by 0.8% from
2000 levels. The increase in net non-operating income in 2001 was attributable
principally to a decrease in losses on the sale of assets received in lieu of
payment and other assets.

   Operating Expenses

     The following table sets forth the principal components of our operating
expenses for the years ended December 31, 2000, 2001 and 2002:

<TABLE>
                                                   Year ended December 31,                     % Change
                                               ------------------------------------         ----------------------
                                               2000           2001             2002         2001/2000    2002/2001
                                               ----           ----             ----         ---------    ---------
                                                     (in millions of constant Ch$ as of December 31, 2002)
<S>                                             <C>             <C>             <C>          <C>           <C>
Personnel salaries and expenses..........     28,555          33,099           33,118       15.9%          0.1%
Administrative and other expenses........     26,676          28,143           29,049        5.5           3.2
Depreciation and amortization............      6,843          10,053           12,992       46.9          29.2
                                              ------          ------           ------       ----          ----
   Total.................................     62,074          71,295           75,159       14.9%          5.4%
                                              ======          ======           ======       ====          ====

</TABLE>

     The 5.4% increase in operating expenses to Ch$75,159 million in 2002 from
Ch$71,295 million in 2001 was primarily the result of a 29.2% increase in
depreciation and amortization and of a 3.2% increase in administrative and other
expenses. Such increase in operating expenses is mostly due to the significant
investments made in technology with the implementation of the new "Altamira"
systems platform.

     The 14.9% increase in operating expenses to Ch$71,295 million in 2001 from
Ch$62,074 million in 2000 was primarily the result of a 15.9% increase in
personnel expenses directly related to extraordinary disbursements related to a
two week strike in March and to the investment in technology with the
implementation of the new "Altamira" systems platform.

   Loss from Price-level Restatement

     The net effect of the restatement of price-levels gave rise to a charge to
net income of Ch$5,387 million, Ch$4,464 million and Ch$4,164 million in 2000,
2001 and 2002, respectively. See Note 22 to the Consolidated Financial
Statements.

<TABLE>
                                                                                Year ended December 31,
                                                                                -----------------------
                                                                         2000            2001             2002
                                                                         ----            ----             ----
                                                                    (in millions of constant Ch$ as of December 31,
                                                                                         2002)
<S>                                                                     <C>             <C>              <C>
Restatement of non-monetary accounts based on CPI:
   Bank premises and equipment....................................      2,533           1,850            1,806
   Other non-monetary assets and liabilities, net.................        876             808              930
   Shareholders' equity...........................................     (8,797)         (7,122)          (6,900)
                                                                       ------          ------           ------
   Net price-level restatement (loss).............................     (5,388)         (4,464)          (4,164)
                                                                       ======          ======           ======

</TABLE>

   Income Tax

     Our effective tax rate was (15.4)% in 2000, (5.4)% in 2001 and (11.1)% in
2002 compared to an average rate which we estimate to be (7.0)% in 2000, (6.6)%
in 2001 and 14.0% in 2002 for Chilean financial institutions as a whole for such
periods. Excluding the effect of the deferred income taxes recorded against
income in 2002 (See


                                       80
<PAGE>

Note 1.l) to the Consolidated Financial Statements), our effective tax rate
would have been 16% in 2002. The statutory rate on most of our income during
these three years was 15%, 15% and 16% respectively. Our effective tax rate was
different from the statutory rate primarily because of the amortization of the
effects of adopting deferred income tax accounting in 2001. See Note 23 to the
Consolidated Financial Statements.

   US GAAP Reconciliation

     We prepare our financial statements in accordance with Chilean GAAP, which
differs in certain significant respects from US GAAP. The following table sets
forth net income for the years ended December 31, 2000, 2001 and 2002 under
Chilean GAAP and US GAAP and shareholders' equity (including net income for the
year) at December 31, 2000, 2001 and 2002 under Chilean GAAP and US GAAP.

<TABLE>
                                                                           At or for the year ended December 31
                                                                           ------------------------------------
                                                                           2000            2001           2002
                                                                           ----            ----           ----
                                                                             (in millions of constant Ch$ of
                                                                                    December 31, 2002)

<S>                                                                         <C>             <C>            <C>
Net income (Chilean GAAP)...........................................        14,456          15,335         20,255
Net income  (US GAAP)...............................................         9,227          15,619         16,917
Shareholders' equity (Chilean GAAP).................................       242,860         250,120        257,022
Shareholders' equity (US GAAP)......................................       244,874         252,353        255,345

</TABLE>


     The principal differences which affect net income under Chilean GAAP and US
GAAP relate to deferred income taxes and amortization of goodwill. The principal
differences in accounting for shareholders' equity relate to loan origination
fees and costs, amortization of goodwill on acquisition of Banesto Chile Bank,
deferred income taxes and the accrual for mandatory dividends. Note 28 to the
Consolidated Financial Statements provides a description of the principal
differences between Chilean GAAP and US GAAP and a reconciliation to US GAAP of
net income for the years ended December 31, 2000, 2001 and 2002 and of
shareholders' equity at December 31, 2001 and 2002.

Asset and Liability Management

     We follow conservative policies and procedures for the management of our
assets and liabilities, both in terms of their maturities and currencies. These
policies have resulted in the formation of an adequate financing structure to
meet our increasing needs during our current expansion. In addition to the
guidelines established by the Superintendency of Banks and the Central Bank to
manage asset/liability mismatches, the Board of Directors together with the
General Manager (our chief executive officer) have implemented additional
procedures, such as limits for gaps in different currencies, trading stop
losses, investments and approval authorities, to control our asset/liability
position. Generally, the Finance and International Division Manager is in charge
of the implementation of our policies in this respect. Further, we distribute
three reports prepared by the Planning and Development Division to our senior
management on a daily basis: (i) Foreign Exchange Position, which reflects
potential gaps, (ii) Limits and Margins in Local Currency, which controls the
margins established by the external/internal authorities, and (iii) Assets and
Liabilities Management Report, which summarizes our position in terms of
maturities and currencies.

     The composition of our assets and liabilities by currency and term and our
shareholders' equity at December 31, 2002 was as follows:

<TABLE>
                                                                              Foreign
                                                  Ch$           UF(1)       Currency(2)      Total       Percentage
                                                  ---           -----       -----------      -----       ----------
                                                  (in millions of constant Ch$ of December 31, 2002, except for
                                                                           percentages)
<S>                                                <C>            <C>            <C>         <C>             <C>
  Assets
   Cash and due from banks ..............          285,561              -         25,462       311,023        9.73
Other assets:
   Less than one year ...................          588,411        297,914        658,999     1,545,324       48.35
   From one to three years...............            4,131         31,737         18,884        54,752        1.71
</TABLE>


                                       81
<PAGE>

<TABLE>
                                                                              Foreign
                                                  Ch$           UF(1)       Currency(2)      Total       Percentage
                                                  ---           -----       -----------      -----       ----------
                                                  (in millions of constant Ch$ of December 31, 2002, except for
                                                                           percentages)
<S>                                                <C>            <C>            <C>         <C>             <C>
   More than three years.................          223,468        848,665        202,349     1,274,482       39.87
   Bank premises and equipment and other.                          55,668                       55,668        1.74
   Allowance for loan losses.............         (45,045)                                    (45,045)       (1.40)
                                                 ---------      ---------        -------     ---------      ------
       Total.............................        1,056,526      1,233,984        905,694     3,196,204      100.00
                                                 =========      =========        =======     =========      ======
   Percentage of total assets............            33.06          38.61          28.33        100.00
Liabilities and Shareholders' Equity
   Non-interest bearing deposits.........          422,872         18,915         16,014       457,801       14.32
Other liabilities:
   Less than one year....................          589,620         61,211        771,890     1,422,721       44.51
   From one to three years...............          140,507        369,030        111,597       621,134       19.43
   More than three years.................           11,075        424,489          1,962       437,526       13.69
   Shareholders' equity..................                -        236,767              -       236,767        7.41
   Net income............................                -         20,255              -        20,255        0.64
                                                 ---------      ---------        -------     ---------      ------
       Total.............................        1,164,074      1,130,667        901,463     3,196,204      100.00
                                                 =========      =========        =======     =========      ======
   Percentage of total  liabilities  and
     shareholders' equity................            36.42          35.38          28.20        100.00
</TABLE>

----------------------
(1)  Includes monetary assets and liabilities denominated in UF and nonmonetary
     assets, liabilities and shareholders' equity restated for inflation for
     accounting purposes.

(2)  Includes assets and liabilities denominated in foreign currency, Foreign
     currency assets consist of U.S. dollars (53.1%), Japanese yen (0.5%), Euros
     (0.4%), and other currency (0.0%). Foreign currency liabilities consist of
     U.S. dollars (99.1%), Japanese yen (0.5%), Euros (0.3%), and other currency
     (0.0%).

     We typically have more Chilean peso-denominated liabilities than Chilean
peso-denominated assets because our deposits, one of our principal sources of
funding, are denominated in Chilean pesos. See "Operating Results--Overview".

   Exchange Rate Risk

     At December 31, 2002, our net foreign currency exposure was Ch$4,231
million (US$5.9 million), equal to 1.65% of our capital and reserves. See Note
24 to the Consolidated Financial Statements, "--Asset and Liability Management"
and "Business Overview--Chilean Regulation and Supervision--Foreign Exchange".

     In recent years, our results of operations have not been significantly
affected by fluctuations in the exchange rate between the Chilean peso and the
U.S. dollar in part due to our policy and Central Bank regulations relating to
the control of material exchange rate mismatches. However, the rate of
depreciation or appreciation of the Chilean peso against the U.S. dollar could
be expected to have the following principal effects:

         (i) If we maintain a net asset position in U.S. dollars and a
     depreciation of the Chilean peso against the dollar occurs, we would record
     a related gain, and if an appreciation of the Chilean peso occurs, we would
     record a related loss;

        (ii) If we maintain a net liability position in U.S. dollars and a
     depreciation of the Chilean peso against the dollar occurs, we would record
     a related loss, and if an appreciation of the Chilean peso occurs, we would
     record a related gain;

       (iii) If the inflation rate for a period exceeded the depreciation of the
     Chilean peso against the U.S. dollar during the same period, we would
     record a related gain if we had a net asset position in UF which exceeded a
     net liability position in U.S. dollars, and we would record a related loss
     if we had a net liability position in U.S. dollars which exceeded a net
     asset position in UF. The same effect would occur if there were an
     appreciation of the Chilean peso against the U.S. dollar; and


                                       82
<PAGE>

        (iv) If the inflation rate for a period were lower than the rate of
     depreciation of the Chilean peso against the U.S. dollar during the same
     period, we would record a related gain if we maintained a net asset
     position in U.S. dollars and a net liability position in UF and would
     record a related loss if we had a net liability position in U.S. dollars
     and a net asset position in UF. The same effect would occur if there were
     an appreciation of the Chilean peso against the U.S. dollar.

     The following table sets forth our foreign currency position.

                                               Assets         Liabilities
                                           --------------     -----------
                                           (in millions of constant Ch$ of
                                                  December 31, 2002)
Currency
US Dollars.............................        480,715           893,408
Ch$ readjusted by US$..................        417,333               760
Japanese Yen...........................          4,204             4,157
Euro...................................          3,183             3,110
Other Currency.........................            259                28
                                               -------           -------
Total..................................        905,694           901,463
                                               =======           =======


     We have exchange rate exposure with respect to t
lesser extent, other currencies. The potential immediate loss that would result
from a hypothetical 10% change in foreign currency exchange rates based on this
position would be Ch$423 million. This sensitivity analysis assumes an
unfavorable 10% fluctuation in all of the exchange rates affecting all the
foreign currencies in which the assets and liabilities presented in the table
above are denominated.

     We enter into forward exchange contracts which are fundamentally of two
types: (i) transactions between two foreign currencies, and (ii) transactions
among Chilean pesos, UF and U.S. dollars. The first type are done for hedging
purposes, such as when we take a liability position in foreign currency other
than the U.S. dollar; the second type, which are carried out only in the Chilean
local market, are utilized to take selling positions (liabilities) in foreign
currency, subject to the regulatory requirement that the forward foreign
currency exposure must be included in the maximum net foreign currency position
permitted by applicable regulations. See "Business Overview--Chilean Regulation
and Supervision--Foreign Exchange" and "Description of Business--Selected
Statistical Information--Average Balance Sheets and Interest Rate Data".

B.   Liquidity and Capital Resources

Securitization

     On July 4, 2002, our subsidiary BBVA BHIF Residential Leasing securitized
381 leasing contracts, amounting to Ch$5,219 million (US$7.3 million) in assets.
The instruments were sold for Ch$7,015 million (US$9.8 million), and the effect
on BBVA BHIF Residential Leasing's net income was Ch$1,318 million (US$1.8
million).

Maturity of Deposits at December 31, 2002

     The following table sets forth information regarding the currency and
maturity of our deposits at December 31, 2002, expressed in percentages.
UF-denominated deposits are similar to Chilean-peso denominated deposits in all
respects, except that the principal is readjusted periodically based on
variations in the Chilean CPI.

<TABLE>
                                                                                          Foreign
                                                          Ch$              UF            currency          Total
                                                          ---              --            --------          -----
<S>                                                        <C>              <C>             <C>              <C>
Demand deposits....................................        33.0             3.2             40.0             23.9
Saving accounts....................................                         9.7                               3.0
Time deposits:
Maturity within 3 months...........................        45.7            21.8             54.2             38.5
Maturity after 3 but within 6 months...............        13.1            15.6              2.4             13.6
</TABLE>


                                       83
<PAGE>

<TABLE>
<S>                                                         <C>            <C>               <C>             <C>
Maturity after 6 but within 12 months..............         3.6            46.0              3.4             16.7
Maturity after 12 months...........................         4.6             3.7              -                4.3
               --                                          ----            ----             ----             ----
Total time deposits................................        67.0            87.1             60.0             73.1
                                                           ====            ====             ====             ====
Total deposits.....................................         100%            100%             100%             100%
                                                           ====            ====             ====             ====

</TABLE>

     The following table sets forth information regarding the maturity of
outstanding time deposits in excess of US$100,000 issued by us at December 31,
2002

<TABLE>
                                                      Ch$               UF         Foreign currency       Total
                                                      ---               --         ----------------       -----
Time deposits:
<S>                                                  <C>                <C>               <C>            <C>
Maturity within 3 months......................       Ch$413,296         Ch$90,145         Ch$84,111        Ch$587,552
Maturity after 3 but within 6 months..........          152,894            98,389               853           252,136
Maturity after 6 but within 12 months.........           43,931           261,512             1,240           306,683
Maturity after 12 months......................           47,562            18,373                --            65,935
                                                     ----------        ----------         ---------      ------------
Total deposits in excess of US$100,000........       Ch$657,683        Ch$468,419         Ch$86,204      Ch$1,212,306
                                                     ==========        ==========         =========      ============
</TABLE>

Minimum Capital Requirements

     According to the current General Banking Law, banks must have a minimum
ratio of Total Capital to Risk Adjusted Assets of 8%, net of required allowances
for loans losses, and a minimum ratio of Basic Capital to Total Assets of 3%,
net of required allowances for loan losses. For these purposes, Total Capital
means the aggregate of: (a) a bank's paid-in capital and reserves, excluding
capital attributed to subsidiaries and foreign branches, (b) its subordinated
bonds, calculated at the issue price but not exceeding 50% of its Basic Capital,
and (c) its voluntary allowances for loan losses, up to 1.25% of the Risk
Adjusted Assets. Basic Capital includes paid-in capital and reserves, but
excludes the net income for the period. Risk Adjusted Assets are based on total
assets on an unconsolidated basis, which are then classified into five
categories, each of which has a different weight.

     At December 31, 2002, in accordance with the requirements of the General
Banking Law, our ratio of Total Capital to Risk Adjusted Assets was 12.31% or
Ch$89,408 million higher than the 8% minimum required by the first test under
the Banking Law. Our ratio of Basic Capital to Total Assets was 7.38% or
Ch$140,564 million higher than the 3% minimum Basic Capital required by the
second test under the General Banking Law.

     Our mutual fund and securities brokerage subsidiaries are also subject to
minimum capital requirements as defined under Chilean regulations. All such
minimum regulatory capital requirements were being complied with at December 31,
2000, 2001 and 2002.

Short-Term Borrowings

     Our short-term borrowings (excluding other obligations) totaled Ch$388,063
million as of December 31, 2000, Ch$288,128 million as of December 31, 2001 and
Ch$385,460 million as of December 31, 2002.

     The principal categories of our short-term borrowings are amounts borrowed
under repurchase agreements, , domestic interbank loans and foreign trade lines
of credit. The following table presents the amounts outstanding and the weighted
average nominal interest rate at the end of each year for each type of
short-term borrowing:


                                       84
<PAGE>

<TABLE>
                                                                 At December 31,
                                   ---------------------------------------------------------------------------
                                            2000                       2001                       2002
                                   ----------------------     ----------------------     ---------------------
                                                 Weighted                   Weighted                  Weighted
                                                 average                    average                    average
                                                 nominal                    nominal                    nominal
                                   Year end      interest     Year end      interest     Year end     interest
                                    Balance        rate        Balance        rate        Balance       rate
                                    -------        ----        -------        ----        -------       ----
                                    (in millions of constant Ch$ of December 31, 2002, except for percentages)

<S>                                    <C>           <C>          <C>          <C>           <C>          <C>
Securities sold under
   agreements to repurchase......    254,294        5.30%       172,624       6.48%        255,565        2.09%
Central Bank borrowings..........      3,186        8.40           --           --            --           --
Domestic interbank loans.........    106,676        8.37         63,996       5.84          63,616        1.72
Borrowings under foreign
   trade credit lines                 23,907        6.35         51,508       2.05          66,279        1.73
                                     -------                    -------                    -------
Total short-term borrowings          388,063        6.23%       288,128       5.55%        385,460        1.97%
                                     =======                    =======                    =======
</TABLE>

     The following table shows the average balance and the average nominal rate
for each short-term borrowing category during the periods indicated.

<TABLE>

                                                        For the year ended December 31,
                                   --------------------------------------------------------------------------
                                           2000                       2001                      2002
                                   ---------------------      --------------------      ---------------------
                                                Average                    Average                    Average
                                                nominal                    nominal                    nominal
                                   Average      interest      Average     interest      Average      interest
                                   balance        rate        balance       rate        balance        rate
                                   -------        ----        -------       ----        -------        ----
                                   (in millions of constant Ch$ of December 31, 2002, except for percentages)
<S>                                 <C>          <C>           <C>           <C>          <C>               <C>
Securities sold under
  agreements to repurchase.......   174,276      10.10%        210,622       8.34%        224,225         2.80%
Central Bank borrowings..........     1,077      10.10          13,086       6.72          16,868         6.00
Domestic interbank loans.........    91,703       5.90          90,464       4.65          90,436         7.50
Subtotal.........................   267,056       --            314,172       --          331,529
Borrowings under foreign
   trade credit lines                12,630       1.50          13,587       1.61          35,346         2.20
                                    -------                    -------                    -------
Total short-term borrowings         279,686       8.30%        327,759       6.98%        366,875         6.98%
                                    =======                    =======                    =======

</TABLE>

     The following table presents the maximum month-end balances of our
principal sources of short-term borrowings during the periods indicated.

<TABLE>
                                                                  Maximum 2000      Maximum 2001      Maximum 2002
                                                                   month-end         month-end         month-end
                                                                    balance           balance           balance
                                                                  ------------      ------------      ------------
                                                                 (in millions of constant Ch$ of December 31, 2002)
<S>                                                                    <C>               <C>               <C>
Securities sold under agreements to repurchase.............            161,106           221,523           123,944
Domestic interbank loans...................................             96,954            73,109            99,800
Borrowings under foreign trade credit lines................             49,960            59,442           131,606
Central Bank borrowings....................................              7,954             7,076            27,472
</TABLE>


   Liquidity and Funding

     The following table sets forth our average daily balance of liabilities for
the years ended December 31, 2001 and 2002, in each case together with the
related average nominal interest rates paid thereon:


                                       85
<PAGE>

<TABLE>

                                                                   Year ended December 31,
                                          --------------------------------------------------------------------------
                                                         2001                                   2002
                                          -------------------------------------   ----------------------------------
                                                                     Average                                 Average
                                          Average     % of Total     Nominal      Average     % of Total     Nominal
                                          Balance     Liabilities     Rate        Balance     Liabilities     Rate
                                          -------     -----------     ----        -------     -----------     ----
                                          (in millions of constant Ch$ of December 31, 2002, except for percentages)
<S>                                         <C>           <C>            <C>    <C>              <C>            <C>
Checking accounts....................       179,066        7.6%           --      192,398         7.4%
Time deposits........................       943,699       39.8           6.6    1,153,750        44.4%          4.8
Savings accounts.....................        57,379        2.4           5.4       57,438         2.2%          3.8
Mortgage finance bonds...............       251,483       10.6           9.7      247,046         9.5%          9.4
Foreign borrowings...................        70,443        3.0           2.3      111,038         4.3%          2.4
Bankers drafts and other demand
   deposits..........................       198,981        8.4                    226,941         8.7%
Central Bank Borrowings..............        26,014        1.1           7.2       16,868         0.6%          6.0
Securities subject to agreements to
   repurchase........................       210,621        8.9           7.3      224,225         8.6%          2.8
Subordinated bonds...................        31,160        1.3           7.2       30,935         1.2%          7.2
Other bonds..........................        46,441        2.0           5.8       42,146         1.6%          5.9
Borrowings from domestic financial
   institutions,.....................       143,021        6.0           6.5      132,483         5.1%          6.5
Contingent liabilities...............        69,729        2.9            --       73,651         2.8%           --
Other................................       142,819        6.0            --       91,456         3.6%           --
                                            -------        ---                     ------         ---
     Total liabilities...............     2,370,856      100.00%          --    2,600,375      100.00%           --
                                          =========      ======                 =========      ======

</TABLE>

     We, through our liquidity management, seek to ensure our ability to honor
withdrawals of deposits, make repayments at maturity of other liabilities,
extend loans and meet our own working capital needs. Our most important source
of funding is our customer deposits (which consist primarily of Chilean
peso-denominated non-interest bearing checking accounts and Chilean peso- and
UF-denominated interest bearing time and savings deposits). Checking account
deposits are the least expensive source of funding and represented approximately
7.4% of our total average liabilities for the year ended December 31, 2002. Time
deposits represented 44.4% of our total average liabilities for year ended
December 31, 2002.

     As part of our overall business strategy, we seek to minimize our cost of
funding by broadening our deposit base, particularly checking account balances,
by cross-selling to existing customers and by broadening our customer base. See
"Business Overview--Business Strategy".

     Mortgage Finance Bonds are issued to fund residential mortgage loans and
certain of our commercial mortgage loans. Mortgage Finance Bonds have payment
terms matched to the related loans and bear interest at a fixed rate. See
"Business Overview--Lines of Business--Retail Banking--Residential Mortgage
Lending". Foreign borrowings, which are used primarily in connection with our
foreign trade operations, are mainly dollar-denominated short-term loans. See
Note 12 to the Consolidated Financial Statements.

     Central Bank borrowings constitute our fourth source of liquidity. The
Central Bank provides credit to Chilean banks on a long-term basis to permit
dollar- and UF-denominated financing of industrial and agricultural projects.
The Central Bank also makes short-term credit lines, that generally mature
within five days, available to banks to assist in liquidity management.

     Generally, we rely upon all sources of funding, choosing funding sources at
any given time on the basis of cost and availability, in the light of our
general asset and liability management strategy. The minimum amount of liquidity
required by us is determined by the reserve requirements of the Central Bank.
See "Business Overview--Chilean Regulation and Supervision--Reserve
Requirements". These reserves are currently 3.6% of time deposits and 9% of
demand deposits. In addition, we are subject to a technical reserve requirements
(the reserva tecnica) pursuant to which a certain amount must be held in cash or
in highly liquid instruments. This amount is equal to the amount by which the
amounts on deposit in checking accounts and in instruments that mature in less
than 10 days exceed by 2.5 times our capital and reserves. The Central Bank
imposes a uniform reserve requirement of 13.6% with respect to foreign
currency-denominated liabilities. In June 1998, the Central Bank announced a
reduction in


                                       86
<PAGE>


this reserve requirement from 30% to 10% and in September 1998 announced a
further reduction from 10% to 0%. We are able to recover the costs of
maintaining these reserves on foreign currency-denominated liabilities by
charging higher rates on foreign currency-denominated loans. Liquidity is also
derived from our capital, reserves, subordinated bonds and investments,
including government securities.

   Interest Rate Sensitivity

     A key component of our asset and liability policy is the management of
interest rate sensitivity. Interest rate sensitivity is the relationship between
market interest rates and net interest revenue due to the maturity or repricing
characteristics of interest earning assets and interest bearing liabilities. For
any given period, the pricing structure is matched when equal amounts of such
assets and liabilities mature or reprice in that period. Any mismatch of
interest earning assets and interest bearing liabilities is known as a gap
position. A positive gap denotes asset sensitivity and normally means that an
increase in interest rates would have a positive effect on net interest revenue
while a decrease in interest rates would have a negative effect on net interest
revenue.

     Our interest rate sensitivity strategy takes into account not only the
rates of return and the underlying degree of risk, but also liquidity
requirements, including minimum regulatory cash reserves, mandatory liquidity
ratios, withdrawal and maturity of deposits, capital costs and additional demand
for funds. Our maturity mismatches and positions are monitored by us and are
managed within established limits.

     The following table sets forth the repricing of our interest earning assets
and our interest bearing liabilities at December 31, 2002 and may not be
indicative of interest rate gap positions at other times.


<TABLE>
                                                            Interest Rate Sensitivity
                                                            -------------------------
                                Up to        31-90        91-180      181-365                   Over 3
                               30 days        days         days         days      1-3 years     years       Total
                               --------     --------     --------     -------     ---------    -------    ---------
                                   (in millions of constant Ch$ of December 31, 2002, except for percentages)
<S>                             <C>          <C>           <C>         <C>         <C>         <C>          <C>
Interest earning assets(1)
   Ch$.....................     167,900      152,327       64,406      81,729      118,964     103,702      689,028
   UF......................     124,467      139,365      132,810     182,397      143,429     428,681    1,151,149
   Foreign Currency........      87,531       71,806       88,426     139,089      224,983     207,740      819,575
                               --------     --------     --------     -------      -------     -------    ---------
     Total.................     379,898      363,498      285,642     403,215      487,376     740,123    2,659,752
                               ========     ========     ========     =======      =======     =======    =========
Interest bearing
   liabilities(2)
   Ch$.....................     329,020      254,765      167,295      45,475       52,830       6,800      856,185
   UF......................     130,452       89,488      124,919     295,404       75,780     238,001      954,044
   Foreign Currency........     291,213       52,920       79,891      83,850        5,185          92      513,151
                               --------     --------     --------     -------      -------     -------    ---------
     Total.................     750,685      397,173      372,105     424,729      133,795     244,893    2,323,380
                               ========     ========     ========     =======      =======     =======    =========
Asset/liability Gap
   Ch$.....................    (161,120)    (102,438)    (102,889)     36,254       66,134      96,902     (167,157)
   UF......................      (5,985)      49,877        7,891    (113,007)      67,649     190,680      197,105
   Foreign Currency........    (203,682)      18,886        8,535      55,239      219,798     207,648      306,424
                               --------     --------     --------     -------      -------     -------     --------
     Total.................    (370,787)     (33,675)     (86,463)    (21,514)     353,581     495,230      336,372
                               ========     ========     ========     =======      =======     =======     ========
Cumulative Gap
   Ch$.....................    (161,120)    (263,558)    (366,447)   (330,193)    (264,059)   (167,157)
   UF......................      (5,985)      43,892       51,783     (61,224)       6,425     197,105
   Foreign Currency........    (203,682)    (184,796)    (176,261)   (121,022)      98,776     306,424
                               --------     --------     --------     -------     --------    --------
     Total.................    (370,787)    (404,462)    (490,925)   (512,439)    (158,858)    336,372
                               ========     ========     ========    ========     ========    ========
Ratio of cumulative gap to
   cumulative total interest
   earning assets
   Ch$.....................     (95.96%)     (82.30%)     (95.27%)    (70.80%)     (45.11%)    (24.26%)
   UF......................      (4.81%)      16.64%       13.06%     (10.57%)       0.89%      17.12%
</TABLE>


                                       87
<PAGE>


<TABLE>
                                                            Interest Rate Sensitivity
                                                            -------------------------
                                Up to        31-90        91-180      181-365                  Over 3
                               30 days        days         days         days      1-3 years    years        Total
                               --------     --------     --------     -------     ---------    -------     --------
                                   (in millions of constant Ch$ of December 31, 2002, except for percentages)
<S>                             <C>          <C>           <C>         <C>         <C>         <C>          <C>
   Foreign Currency........    (232.70%)    (115.98%)     (71.14%)    (31.28%)      16.14%      37.39%
                               --------     --------     --------      ------       ------      ------
     Total.................     (97.60%)     (54.41%)     (47.71%)    (35.78%)      (8.28%)     12.65%
                               ========     ========     ========      ======       ======      ======
</TABLE>

----------------------
(1)  Includes loans (other than contingent loans) and investments.

(2)  Includes deposits, Central Bank borrowings, repurchase agreements, mortgage
     finance bonds and other interest bearing deposits (other than contingent
     liabilities).

     Variations in interest rate sensitivity may exist within the repricing
periods presented due to differing repricing dates within the period. Variations
may also arise among the different currencies in which interest rate positions
are held. As the above table reflects, our exposure to potential changes in
Chilean peso interest rates is increased by the fact that at December 31, 2002,
approximately 32% of our Chilean peso-denominated interest bearing liabilities
and 14% of our Chilean peso-denominated interest earning assets have a repricing
period of less than one month. Approximately 23% of our UF-denominated interest
bearing liabilities and 23% of our UF-denominated interest earning assets have a
repricing period of less than three months, which is also the most common
repricing period for UF-denominated time deposits. In the case of interest
earning assets and interest bearing liabilities denominated in UF, our exposure
to changes in interest rates is reduced by the fact that a significant portion
of the interest rate earned or paid on such assets or liabilities is currently
indexed to reflect the daily effect of inflation, and as a result, our exposure
is limited to variations in the real interest rate among such assets and
liabilities. Further, a substantial part of our foreign currency-denominated
loans are funded by foreign currency borrowings and time deposits with
comparable maturity or repricing dates. Moreover, mortgage loans which have five
to 30 year terms, are financed through Mortgage Finance Bonds issued for the
same terms and in the same currency.

     The table below provides information on principal cash flows, based on the
maturity or repricing period, the earlier and fair values as of December 31,
2002.


                                       87
<PAGE>

<TABLE>
                                 Weighted                Weighted               Weighted             Weighted
                        2003     Interest     2004       Interest      2005     Interest     2006    Interest
                       Amount      Rate      Amount        Rate       Amount      Rate      Amount     Rate
                       ------    --------    ------      --------     ------    --------    ------   --------
                                      (in millions of constant Ch$ of December 31, 2000)
Assets
<S>                     <C>         <C>       <C>           <C>       <C>         <C>       <C>          <C>
Commercial loans
  $...............      217,147     6.04      11,925       12.75       3,214     20.32       4,641      10.72
  UF..............      240,125     3.37      34,971        5.93      34,068      6.79      29,660       5.09
  Foreign Currency       53,163     2.78       8,001        3.42      19,866      2.74      34,851       3.01
Consumer loans
  $...............       55,967    21.22      40,432       18.95      33,687     18.87      25,412      19.37
  UF..............        3,997     8.25       3,464        7.38       3,115      7.91       2,723       8.26
  Foreign Currency          184     0.00           0           0           0         0           0          0
Mortgage loans
  $...............            0        0           0           0           0         0           0          0
  UF..............       24,038     9.08      21,899        9.14      21,064      9.09      19,995       9.10
  Foreign Currency            0        0           0           0           0         0           0          0
Foreign Trade
  loans
  $...............       11,941     4.11           0           0           0         0           0          0
  UF..............        3,523     1.13           0        0.00         149      5.43           0       0.00
  Foreign Currency      167,052     2.61       3,636        6.93       2,125      3.94       4,577       3.38
Interbank loans
  $...............
  UF..............
  Foreign Currency
Lease contracts
  $...............           39    16.61          31       12.54          33      9.51          15       9.51
  UF..............       16,302     9.84      13,215        9.45      10,139      8.95       9,866       8.32
  Foreign Currency        2,133     6.40       1,716        5.07       1,591      4.74       2,037       4.74
Other outstanding
  loans
  $...............       45,542     1.04       2,651        1.05       6,115      1.05           2       0.00
  UF..............       11,531     6.01      10,418        6.30      10,352      6.29       9,969       6.31
  Foreign Currency           31     0.00           0        0.00           0      0.00           0       0.00
Total interest
  earning assets
  $...............      330,636     7.85      55,039       16.74      43,049     16.44      30,070      18.03
  UF..............      299,516     4.32      83,967        7.43      78,887      7.66      72,213       6.93
  Foreign Currency      222,563     2.68      13,353        4.59      23,582      2.99      41,465       3.14
Liabilities
Time Deposits
  $...............      692,917     3.26      51,535        4.74       1,296      5.63       1,022       7.20
  UF..............      500,199     1.75      12,707        2.70       3,520      4.74       1,010       5.04
  Foreign Currency      121,715     1.61           0        0.00           0      0.00           0       0.00
Savings accounts
  $...............
  UF..............       57,648     0.60
  Foreign Currency
Central Bank
  Borrowings
  $...............            0                    0                       0                     0
  UF..............        3,560     3.00           0                       0                 5,281       6.00
  Foreign Currency            0                    0                       0                     0
Securities
  subject to
  agreements to
  repurchase
  $...............       82,851     2.96           0                       0                     0
  UF..............
  Foreign Currency      172,714     1.34           0                       0                     0
Mortgage finance
  bonds
  $...............
  UF..............       28,504     6.55      23,646        6.57      22,555      6.46      21,412       6.40
  Foreign Currency
Subordinated bonds
  $...............
  UF..............        9,119     8.06         688        6.50         733      6.50         780       6.50
  Foreign Currency
Other bonds
  $...............
  UF..............        5,059     5.65       3,226        5.99       2,032      6.00       2,574       6.00
  Foreign Currency
Borrowings from
  domestic
  financials
  $...............       19,214     4.32
  UF..............       35,680     1.80          66        7.00          60      4.00           0
  Foreign Currency       13,914     1.90           0                       0                     0
Foreign borrowings
  $...............
  UF..............
  Foreign Currency      170,471     1.94       4,275        1.85         299      7.21           0
Other obligations
  $...............        1,573
  UF..............          494     5.12         126        4.55         130      4.58          65       4.66
  Foreign Currency       29,060     0.01         351        7.22         260      7.10          66       7.20
Total interest
  earning
  Liabilities
  $...............      796,555     3.25      51,535        4.74       1,296      5.63       1,022       7.20
  UF..............      640,263     1.99      40,459        5.30      29,030      6.20      31,122       6.25
  Foreign Currency      507,874     1.55       4,626        2.26         559      7.16          66       7.20
</TABLE>


                                       89
<PAGE>
<TABLE>


                                       Weighted               Weighted
                             2007      Interest    2008       Interest
                            Amount       Rate     Amount        Rate     TOTAL    Fair Value
                            ------     --------   ------      --------   -----    ----------
                                   (in millions of constant Ch$ of December 31, 2000)


Assets
<S>                          <C>         <C>      <C>          <C>     <C>         <C>
Commercial loans
  $...............            5,798      7.20     10,818       6.75    253,543     248,296
  UF..............           25,194      6.08     45,346       6.82    409,364     419,042
  Foreign Currency           48,031      3.06      1,703       4.86    165,615     163,854
Consumer loans
  $...............           16,350     19.56     12,293      19.94    184,141     183,497
  UF..............            2,361      8.14      4,604       8.41     20,264      22,056
  Foreign Currency                0         0          0          0        184         184
Mortgage loans
  $...............                0         0          0          0          0           0
  UF..............           19,055      9.13    147,438       9.16    253,489     293,843
  Foreign Currency                0         0          0          0          0           0
Foreign Trade
  loans
  $...............                0         0          0          0     11,941      24,777
  UF..............                0      0.00          0       0.00      3,672       3,672
  Foreign Currency           19,794      3.54     20,724       2.85    217,908     205,072
Interbank loans
  $...............
  UF..............
  Foreign Currency
Lease contracts
  $...............                0      0.00          0       0.00        118         117
  UF..............            8,638      7.20     12,101       9.05     70,261      70,551
  Foreign Currency            1,419      3.04      4,456       3.04     13,352      13,353
Other outstanding
  loans
  $...............                2      0.00         97       0.00     54,409      54,409
  UF..............           10,354      6.37    261,626       6.34    314,250     331,889
  Foreign Currency                0      0.00          0       0.00         31          31
Total interest
  earning assets
  $...............           22,150     16.32     23,208      13.71    504,152     511,097
  UF..............           65,602      7.23    471,115       7.36  1,071,300   1,141,053
  Foreign Currency           69,244      3.20     26,883       3.01    397,090     382,494
Liabilities
Time Deposits
  $...............            5,777      8.68          0       0.00    752,547     749,206
  UF..............            4,580      7.02        758       6.70    522,774     522,975
  Foreign Currency                0      0.00          0       0.00    121,715     121,715
Savings accounts
  $...............
  UF..............                                                      57,648      57,648
  Foreign Currency
Central Bank
  Borrowings
  $...............                0                    0                                 0
  UF..............                0                    0                 8,841       9,042
  Foreign Currency                0                    0                                 0
Securities
  subject to
  agreements to
  repurchase
  $...............                0                    0                82,851      82,851
  UF..............
  Foreign Currency                0                    0               172,714     172,714
Mortgage finance
  bonds
  $...............                                                                       0
  UF..............           20,320      6.40    134,562       8.37    250,999     285,930
  Foreign Currency                                                                       0
Subordinated bonds
  $...............                                                                       0
  UF..............              831      6.50     19,456       6.88     31,607      41,627
  Foreign Currency                                                                       0
Other bonds
  $...............                                                                       0
  UF..............            2,728      6.00     24,106       6.00     39,725      49,422
  Foreign Currency                                                                       0
Borrowings from
  domestic
  financials
  $...............                                                      19,214      19,214
  UF..............                0                    0                35,806      35,806
  Foreign Currency                0                    0                13,914      13,914
Foreign borrowings
  $...............                                                                       0
  UF..............                                                                       0
  Foreign Currency                0                    0               175,045     175,045
Other obligations
  $...............                                                       1,573       1,573
  UF..............              886      5.54      4,943       5.49      6,644       6,640
  Foreign Currency               26      7.40          0       0.00     29,763      29,763
Total interest
  earning
  Liabilities
  $...............            5,777      8.68          0       0.00    856,185     852,844
  UF..............           29,345      6.44    183,825       7.82    954,044   1,009,090
  Foreign Currency               26      7.40          0       0.00    513,151     513,151

</TABLE>


                                       90
<PAGE>


Market Price Risk on Bonds Portfolio

     Our investment policy is oriented principally to low risk instruments with
high liquidity. Over 81% of our portfolio consists of instruments from the
Central Bank and mortgage finance bonds issued by us. See "--Mortgage Finance
Bonds Issued and Held by Us". All investments are made in accordance with the
limits for both the instruments and for the specific issuer set by our Board of
Directors. The investment portfolio is valued on a daily basis to keep price
risk under control, and on a monthly basis to comply with the Superintendence's
requirements and to keep the instruments marked-to-market. See "Business
Overview--Chilean Regulation and Supervision". The potential loss to us over one
year that would have resulted from a hypothetical, instantaneous and unfavorable
change of 100 basis points in the interest rate applicable to our bonds
portfolio on December 31, 2002 would be approximately Ch$9,267 million. See
"--Asset and Liability Management" and "Business Overview--Chilean Regulation
and Supervision--Foreign Exchange".

Capital Expenditures

     Capital expenditures in each of the years ended December 31, 2000, 2001 and
2002 totaled Ch$9,075 million, Ch$10,198 million and Ch$9,361 million,
respectively. Capital expenditures consist mainly of investments to upgrade our
communications and computer systems, improve existing branches and open new
branches. Such capital expenditures were funded with resources generated through
our operations. Our capital expenditures during 2003 will be used to further
improve our communications and computer systems and to develop additional
infrastructure.

Capital

     According to the current General Banking Law, banks should have a minimum
ratio of Total Capital to Risk Adjusted Assets of 8%, net of required allowances
for loans losses, and a minimum ratio of Basic Capital to Total Assets of 3%,
net of required allowances for loan losses. For these purposes, Total Capital
means the aggregate of: (a) a bank's paid-in capital and reserves, excluding
capital attributed to subsidiaries and foreign branches, (b) its subordinated
bonds, calculated at the issue price but not exceeding 50% of its Basic Capital,
and (c) its voluntary allowances for loan losses, up to 1.25% of the Risk
Adjusted Assets. Basic Capital includes paid-in capital and reserves, but
excludes the net income for the period. Risk Adjusted Assets are based on total
assets on an unconsolidated basis, which are then classified into five
categories, each of which has a different weight.

     At December 31, 2002, in accordance with the requirements of the General
Banking Law, our ratio of Total Capital to Risk Adjusted Assets was 12.31% or
Ch$89,408 million higher than the 8% minimum required by the first test under
the Banking Law. Our ratio of Basic Capital to Total Assets was 7.38% or
Ch$140,564 million higher than the 3% minimum Basic Capital required by the
second test under the General Banking Law.

     Our mutual fund and securities brokerage subsidiaries are also subject to
minimum capital requirements as defined under Chilean regulations. All such
minimum regulatory capital requirements were being complied with at December 31,
2000, 2001 and 2002.

     C.   Research and Development, Patent and License

     We do not currently conduct any significant research and development
activities.

     D.   Trend Information

Competition

     The Chilean financial system is comprised of 26 private-sector banks (of
which 16 are banks established in Chile and 9 are subsidiaries of banks
established abroad), and one public-sector bank (BancoEstado). At December 31,
2002, the Chilean financial system had a total of Ch$31,644,779 million
(US$44,463 million) of loans outstanding. In the last five years, the average
annual rate of increase in outstanding loans for the Chilean financial


                                       91
<PAGE>

system was 3.6% (compared with an average annual rate of increase in GDP of 2.1%
during the same period) and the average annual return on average shareholders'
equity was 13.1%.

     Foreign-owned banks have been operating in Chile since the 1930s. More than
half of all Chilean banks are foreign-owned (considering those established in
Chile and those classified as subsidiaries of foreign banks), including us. Such
banks accounted for 42.5% of total loans made by the Chilean financial system at
December 31, 2002.

     The Chilean market for financial services is highly competitive. We compete
with other Chilean private banks, and with Banco del Estado de Chile
("BancoEstado") that makes consumer credit available to an important portion of
the Chilean population. The middle and lower-middle income segments of the
Chilean population and the small and medium-size companies have become the
target of several banks and competition in those segments is likely to increase.

     Because Chilean regulations do not impose barriers to entry into the
Chilean market and do not restrict capital movements, we face significant
competition from both domestic and foreign commercial and investment banks. See
"Chilean Regulation and Supervision". The regulatory framework in the Chilean
financial system has led to increased consolidation both in the universal bank
sector and in the sectors of financial institutions specializing in specific
products or markets. Concentration, as measured by the participation of the 10
major banks in total deposits, increased from 72.4% at December 31, 1998 to
76.0% at December 31, 2002.

     Consolidation in the Chilean market has given the opportunity to other
competitors to increase their branch network and gain proximity to compete for
banking penetration. Traditional competitors with international name recognition
and easy access to financial and technical resources made the market more
competitive, thereby constraining our growth strategy.

     Limited barriers to entry and continued consolidation of the Chilean
banking industry have intensified price competition. We expect the trends of
increased competition and consolidation to continue, and result in the formation
of new large financial groups.

Regulations

     As a result of the amended General Banking Law, Chilean banks are now
allowed to establish, in addition to branches and representative offices outside
Chile, foreign subsidiaries (or have minority interests in foreign entities)
engaged in banking activities or in any of the types of non-banking activities
in which Chilean banks can engage through domestic subsidiaries. It also permits
Chilean-based banking offices, under certain conditions, to make loans to many
types of entities located in other countries. Following such amendment, in
September 1998 we acquired a controlling stake at an insurance brokerage firm
and in 1999 we integrated our leasing subsidiary into the Bank.

     Besides the activities linked to the subsidiaries, our operations profile
was expanded by permitting the execution of underwriting agreements for public
placement of stocks and the possibility of development for financial services
for third parties.

     Regulators have stated that the above actions are part of a trend of
modernization that leads to an increasing internationalization of the
regulations. We expect such trends to continue, opening new windows of activity
for our business and increasing supervision. We believe such trend and the
globalization of the banking business will result in strategic alliances with
non-banking businesses and the formation of new and larger financial groups.

     E.   Off-Balance Sheet Arrangement

     We do not have any off-balance sheet financings. We have no majority-owned
subsidiaries that are not included in our consolidated financial statements, nor
do we have any interests in or relationships with any special purpose entities
that are not reflected in our consolidated financial statements.


                                       92
<PAGE>


     F.   Tabular Disclosure of Contractual Obligations

     The following table represents our contractual obligations and commercial
commitments as of December 31, 2002:

xxxxx
<TABLE>

                                                                      Payments due by Period
                                                                        in millions of Ch$
                                                              Less than       1-3           4-5         After 5
                                                    Total       1 year       years         years         years
<S>                                               <C>         <C>            <C>          <C>           <C>
 Contractual obligations
 Long-term debt.............................          --          --          --            --             --
 Capital lease obligations..................          --          --          --            --             --
 Operating leases...........................          --          --          --            --             --
 Unconditional purchase obligations.........          --          --          --            --             --
 Other long-term obligations................     1,335.7     1,335.7          --            --             --
                                                 -------     -------        ------        -----         -----
 Total contractual cash obligations.........     1,335.7     1,335.7           --           --             --
                                                 =======     =======        ======        =====         =====

 Commercial Commitments
 Lines of credit............................      42,838      28,474         4,435        2,149         7,780
 Standby letters of credit..................     196,669     192,095         4,574          --             --
 Guarantees (contingent liabilities)........      85,457      72,101        12,245        1,101            10
 Standby repurchase obligations.............     255,565     255,565
 Total commercial commitments...............     580,529     548,235        21,254        3,250         7,790
                                                 =======     =======        ======        =====         =====

</TABLE>

     Our only contractual obligation of any relevance stems from a contract
signed with the BBVA Group by which we received technical advice from 1998 to
2002. The contract expired on December 31, 2002, and the only annual payment
remains is the Ch$1,337.5 million set forth above on the table. See Note 16 to
the Consolidated Financial Statements for information on previous payments.
Other contingencies and commitments with no specific maturity, as well as
commitments or responsibilities arising in the ordinary course of business are
discussed in Note 15 to the Consolidated Financial Statements.

      See Note 12 to the Consolidated Financial Statements for more information
on our most relevant commercial commitments.


Item 6.  Directors, Senior Management and Employees

     A.  Directors and Senior Management

     Our administration is conducted by a Board of Directors which, in
accordance with our By-laws, consists of nine directors who are elected at
annual ordinary shareholders' meetings. The entire Board is elected every three
years; the current Board was elected at an Ordinary Shareholder's Meeting on
March 17, 2003. Cumulative voting is permitted for the election of directors.
The Board may appoint replacements to fill any vacancies that occur during
periods between elections. Our executive officers are appointed by the Board of
Directors and hold office at its discretion. Scheduled meetings of the Board of
Directors are held once a month. Extraordinary Board meetings are called when
summoned by the Chairman or when requested by at least five directors.


                                       93
<PAGE>

     Our current directors and executive officers are as follows:

                      Directors                         Position
                      ---------                         --------
Jose Said Saffie (1) ............................   Director and Chairman
Vitalino Nafria Aznar ...........................   Director and Vice Chairman
Gustavo Alcalde Lemarie .........................   Director
Ernesto Bertelsen Repetto .......................   Director
Manuel Gonzalez Cid .............................   Director
Ricardo Massu Massu .............................   Director
Antonio Martinez Jorquera .......................   Director
Jaime Said Handal (1) ...........................   Director
Jose Fonollosa Garcia ...........................   Director


                 Alternate Directors                    Position
                 -------------------                    --------
Carlos Area Usatorre ............................   Alternate Director
Jose Domingo Eluchans U. ........................   Alternate Director


----------------------
(1) Mr. Jose Said S. is the uncle of Mr. Jaime Said H.


<TABLE>
                  Executive Officers                        Position
                  ------------------                        --------
<S>                                                        <C>
Ramon Monell Valls...................................   General Manager
Maria Elisa Abovic W. ...............................   Manager-Legal Division
Enrique Hosiasson....................................   Manager-Business Banking Division (1)
Juan Escudero .......................................   Manager-Commercial and Personal Banking Division
Manuel Olivares......................................   Manager-Corporate Banking Division (2)
Jaime Uribe .........................................   Manager-Treasury and Fund Management Division
Jose Joaquin Murguialday.............................   Manager-Credit Risk Division
Jose Maria Jimenez...................................   Manager-Organization and Systems Division (3)
Marcos Balmaceda.....................................   Manager-Human Resources Division
Salvador Milan.......................................   Manager- Planning and Financial Control Division (4)
Jorge Cruz D. .......................................   Manager-Comptrolling Division
</TABLE>

----------------------
(1) The Business Banking Division was created in 2002.

(2) The Corporate Banking Division was restructured and re-launched as a
separate division during 2000.

(3) The Administration Division was absorbed by the Organization and Systems
Division, effective May 2003.

(4) The EFYCO Division was merged into the Planning and Financial Control
Division, effective December 2001.



<TABLE>
Subsidiaries
------------
<S>                                                     <C>
Frank Leighton C. ..................................General Manager-BHIF Brokerage
Alejandro Bertrand..................................General Manager-BHIF Advisory
Roberto Molina......................................General Manager-BHIF Residential Housing Fund Manager
Eduardo Boizard ....................................General Manager-BHIF Residential Leasing
Fernando Santana....................................General Manager-BHIF Closed-End Fund Manager
Ian Couso...........................................General Manager-BHIF Mutual Fund Manager
Raul Ossandon G. ...................................General Manager-BHIF Insurance Brokerage

</TABLE>

     Set forth below are brief biographical descriptions of the directors and
executive officers of BBVA Banco BHIF, all of whom reside in Chile.


                                      94
<PAGE>

Directors

     Jose Said S. has served as Chairman of our Board of Directors since 1994.
He also currently serves as Chairman of Parque Arauco and Envases Multipack and
as Vice-Chairman of Vital S.A. In addition, he serves as Director of
Embotelladora Andina and Envases del Pacifico. Mr. Said studied law at the
Universidad de Chile.

     Vitalino Nafria A. currently serves as our Vice-Chairman. Mr. Nafria has
been a Director of BBVA Chile since 2002. He currently holds the position of
Director General for America at the BBVA Group. Prior to that, he was CEO at
BBVA Bancomer, a leading mexican bank belonging to the BBVA Group. Mr. Nafria
joined the BBVA Group in 1966.

     Ernesto Bertelsen R. has been a Director of BBVA Chile since 1987. He also
serves as Chairman of the Boards of Directors of BHIF Asesorias y Servicios
Financieros S.A. and BHIF Leasing. Mr. Bertelsen holds a degree in Finance and
Administration from the Universidad Adolfo Ibanez, Valparaiso, Chile.

     Jose Fonollosa G. has been a Director of BBVA Chile since 2001. He
currently holds the position of Director General of Retail Banking for America
at the BBVA Group. Prior to that, he was Director for Europe and International
Operations and before that he was the CFO for the BBVA Group. Mr. Fonollosa
joined the BBVA Group in 1976.

     Antonio Martinez-Jorquera L. has been a Director of BBVA Chile since 2001.
He currently holds the position of Director General of Corporate Banking for
America at the BBVA Group. Prior to that, he was the CEO at BBVA Banco Frances,
a leading bank in Argentina. Mr. Martinez-Jorquera joined the BBVA Group in
1969.

     Ricardo A. Massu M. has been a Director of BBVA Chile since 1987, prior to
which time he lived in England and held positions at Bank of America
Corporation, Bank of America International Ltd. and Banco de Chile. Mr. Massu
received a Bachelors of Science and a Master in Business Administration from
Babson College in Wellesley, Massachusetts.

     Manuel Gonzalez C. has been a Director of BBVA Chile since 2001. He is
Director General Adjunto for the BBVA Group. Mr. Gonzalez holds a degree from
the Universidad Complutense de Madrid and a M.Sc. in Finance from the University
of Chicago.

     Gustavo Alcalde L. has been a Director of BBVA Chile since 2002. Since 2001
he is a member of the Senior Management Committee at the BBVA Group, and a board
member at BBVA Insurance. He is the CEO at AFP Provida since 1996. Mr. Alcalde
holds a degree in Finance and Administration from the Universidad de Chile.

     Jaime Said H. has been a Director of BBVA Chile since 1987. Previously, he
served as the Vice-President and Chilean representative of the Republic Bank of
Dallas, USA. He received a degree from the Universidad Adolfo Ibanez,
Valparaiso, Chile and received a degree in Business Administration from Southern
Methodist University in Dallas, Texas.

Alternate Directors

     Carlos Area has been an Alternate Director of BBVA Chile since 1998, prior
to which time he was the representative for the BBVA Group in Chile.

     Jose Domingo Eluchans U. served as Director of BBVA Chile since 1987 to
1998, and from that date as Alternate Director. Since 1976, he has practiced law
at the offices of Edmundo Eluchans y Cia. He received his law degree from the
Escuela de Derecho de la Universidad Catolica de Chile in 1976.

Executive Officers

     Ramon Monell V. became the General Manager of BBVA Chile on January 25,
2002. Prior to his appointment, Ramon Monell was an Assistant Director General
for BBVA, responsible for the Marketing and Development of Wholesale Business
and has a distinguished track record within the BBVA Group.


                                       95
<PAGE>

     Maria Elisa Abovic W. has been the Manager of our Legal Division since
March 1997. Ms. Abovic has been employed by us since 1977 and held the position
of Assistant General Counsel from 1992 until she accepted her current position
as Manager. She previously held the position of attorney to the Regional
Planning Secretariat of the Fifth Region and was a member of the Private Law
Faculty of the Universidad Catolica de Valparaiso. Ms. Abovic received her law
degree from the Universidad Catolica de Valparaiso.

     Juan Escudero G. holds the position of Commercial and Personal Banking
Manager at BBVA Chile since April 2000. Prior to joining us, he was in charge of
Business Development at the Chile - Brazil region for BBVA. Mr. Escudero holds a
degree in Law.

     Enrique Hosiasson S.. holds the position of Business Banking Manager at
BBVA Chile since April 2002. Previously he held the position of Regional Branch
Manager. Mr. Hosiasson holds a degree in Commercial Engineering from Universidad
Catolica de Chile.

     Manuel Olivares R. holds the position of Corporate Banking Manager at BBVA
Chile since May, 2000. Previously he held senior credit officer positions at
Citibank (Chile). He holds a degree in Economics and Business Administration
from the Universidad de Chile.

     Jaime Uribe currently holds the position of Division Manager for Treasury
and Fund Management at BBVA Chile since December 2001. He was previously
Treasury Manager at Banco Santander-Chile. Mr. Uribe holds a degree in
Engineering from the Universidad de Chile. He has a vast experience in the
finance areas of banks and subsidiaries in Chile.

     Jose Joaquin Murguialday M. has been Credit Risk Manager of BBVA Chile
since October. Previously he held the positions of Corporate Banking Manager and
of Deputy Credit Risk Manager at the central offices of BBVA at Bilbao. Mr.
Murguialday holds a degree in Economics.

     Jose Maria Jimenez T. has been Operations and Technology Manager of BBVA
Chile since August 2002. Prior to his current position, he was Director of the
America Organization at the BBVA Group, and before that he held senior
managerial positions at Argentaria. Mr. Jimenez obtained a degree in Economic
and managerial Sciences at the Universidad de Sevilla. He holds a master degree
from CEREM and an MBA from IESE.

     Marcos Balmaceda M. has been Manager of Human Resources of BBVA Chile since
July, 2001. He received a degree in Agroindustrial Engineering and has also an
MBA from Universidad Adolfo Ibanez. Mr. Balmaceda has a vast experience at
multinational corporations.

     Salvador Milan A. has been the Planning and Development Manager since
August 2002. Previously he held a similar position at AFP Provida, and a
position as Executive Vice-President and Finance and Logistics Director at BBV
Puerto Rico. Mr. Milan holds a degree in Economics and Managerial Sciences from
Universidad Central de Barcelona and followed graduate studies at CEPADE -
Universidad Politecnica de Madrid.

     Jorge Cruz D. joined BBVA Chile in 1977. He serves as BBVA Chile's
Controller since April 23 2003. He previously held the position of Manager of
Administration since 1994 and, before that, the positions of Assistant Manager
of the Mortgage Loans Division, Assistant Manager of Operations and General
Accounting Manager, among others. Mr. Cruz was previously employed by the
Contraloria General of the Republic of Chile and Abaco S.A. He holds a degree in
Accounting.

Subsidiaries

     Frank Leighton C. has been the General Manager of BBVA BHIF Corredores de
Bolsa S.A. since February 1998. Previously, he was the General Manager of
Bancredito S.A. Corredor de Bolsa. He received a degree in Business
Administration from the Universidad Diego Portales.


                                       96
<PAGE>

     Alejandro Bertrand has been the General Manager of BHIF Asesorias y
Servicios Financieros S.A. (our investment banking team) since February 2001.
Mr. Bertrand holds an MBA from the Wharton School of the University of
Pennsylvania and an Engineering degree from Pontificia Universidad Catolica de
Chile.

     Roberto Molina has been the General Manager of BHIF Residential Housing
Fund since January, 2001. Previously, he was the Finance Manager at Banco
Exterior - Chile. He holds a degree in Finance from Pontificia Universidad
Catolica de Chile and is presently at a graduate program in Finance at ESANE
Santiago, Chile.

     Eduardo Boizard P. has been the General Manager of BBVA BHIF Residential
Leasing since its 2001. Previously, he was Branch Manager of our Corporate
Office. He holds a degree in Civil Engineering from the Universidad Catolica de
Chile.

     Fernando Santana has been the General Manager of BHIF Closed-end Fund
Manager since 1999. Previously, he was in charge of Investment Analysis at BHIF
Closed-end Fund Manager. He holds an Industrial Engineering degree from the
Universidad Catolica de Chile.

     Ian Couso W. has been the General Manager of BBVA BHIF Mutual Fund since
March 2002. Previously, he was the Commercial Manager at Larrain Vial, a well
known brokerage house. He is an Industrial Civil Engineer from Universidad de
Chile. He also holds an MBA from Universidad Adolfo Ibanez.

     Raul Ossandon G. has been the General Manager of BBVA BHIF Corredora
Tecnica de Seguros (BHIF CTS) since 1993. Previously, he was Development Manager
at BHIF CTS. He received a degree in Business Administration in the Valparaiso
Business School, belonging to Universidad Federico Santa Maria, (presently
Universidad Adolfo Ibanez) in 1982.

     B.  Compensation

Compensation of Directors and Officers

     For the year ended December 31, 2002, the aggregate amount of compensation
paid by us and our subsidiaries to all directors and executive officers was
Ch$1,496 million (US$2.1 million). Our policy is not to disclose to our
shareholders or otherwise make publicly available information relating to the
compensation of our individual directors and officers. Such disclosure is not
required under Chilean regulations.

     No money was set aside or accrued by us to provide pension, retirement or
similar benefits for any of our directors or executive officers.

     C.  Board Practices

     Our administration is conducted by our Board of Directors which, in
accordance with our By-laws, consists of nine directors who are elected at
annual ordinary shareholders' meetings. The entire Board is elected every three
years; the current Board was elected at an Ordinary Shareholder's Meeting on
March 17, 2003. Cumulative voting is permitted for the election of directors.
The Board may appoint replacements to fill any vacancies that occur during
periods between elections. Our executive officers are appointed by the Board of
Directors and hold office at its discretion. Scheduled meetings of the Board of
Directors are held once a month. Extraordinary Board meetings are called when
summoned by the Chairman or when requested by at least five directors.

     Directors Committee

     Law 19,705, published on December 20, 2000, established, among other
changes to corporate regulations, the need to create a Directors Committee in
order to reinforce self regulation strengthening the controls on the management
activities. This Committee has three members which are appointed by the Board of
Directors and holds office on January and July. It can also convene
extraordinary meetings any time as they see fit. On the March 17,


                                       97
<PAGE>

2003 Board meeting the Board appointed Mr. Manuel Gonzalez Cid, Mr. Vitalino
Nafria Aznar and Mr. Jose Said Saffie.

     The Directors Committee has the following duties:

     i)   To examine the reports form the external auditors and, as required,
          balances and statements of income presented by the management to the
          shareholders, and to issue a verdict about them before they are
          brought to the shareholders for their approval.

     ii)  To present to the Board a proposal on the external auditors and the
          rating firms to be retained for the annual period, before the Board
          makes the forma proposal to the Annual Shareholders' Meeting

     iii) To review the salaries and compensation plans for the senior
          management.

     iv)  To examine all operations described in articles 44 and 89 of the
          Corporate Law, and to issue a verdict about them. A copy of such
          verdict shall be sent to the President of the Board, who will read it
          at the Board meeting in which the operation is to be approved.

   Audit Committee

     Our Audit Committee was established on October 23, 1995, as described in
the Minutes of the board of directors dated October 23, 1995, on a
recommendation issued by the Superintendent of Banks on a note dated October 11,
1995. This committee meets quarterly in March, June, September and December of
each year. As of this date, the committee is composed of one director, Mr.
Ernesto Bertelsen R.; the CEO, Mr. Ramon Monell Valls; the Controller, Mr. Jorge
Cruz D.; and the General Counsel, Ms. Maria Elisa Abovic Wiegand. If needed, the
Committe can request the additional participation of the external auditors. As
of December 31, 2002 , the Audit Committee members were Mr Bertelsen, Mr.
Monell, Ms. Abovic and Mr. Daniel Planas Jane. Mr. Planas was promoted to a
position in another bank of the Group, and was replaced by Mr. Cruz on April 23,
2003.

     The Audit Committee presently has specific functions, approved by the Board
of Directors, as well as procedures that enable it to comply with its mission.
Its functions currently are:

     o    To supervise the sufficiency, adequacy and efficient functioning of
          internal control systems in such a manner that ensures the
          correctness, reliability, sufficiency and clarity of (i) our financial
          statements as contained in the annual and quarterly reports, and (ii)
          the accounting or financial information which may be required by the
          Superintendency or other regulatory bodies, including those pertaining
          to countries where we carry out activities;

     o    To monitor our compliance with applicable domestic or international
          regulations in matters relating to money laundering, conduct in the
          securities markets, data protection, and competition, as well as to
          ensure that requests for information or action made by official bodies
          holding competency in these areas are fulfilled in time and form;

     The board member that integrates the Committee reports each month to the
Board.

     On May 6, 2003, the Superintendency issued new regulations that make the
Audit Committee an obligatory and essential part of the internal control systems
in all Chilean financial institutions. Under the new regulations, this committee
will be vested with the powers and resources necessary for the exercise of its
fundamental function within the corporation. In accordance with the regulations
and with our principles of corporate governance, it will be formed exclusively
by independent directors, with the dedication, capacity and experience necessary
for carrying out this duty. This committee shall have specific rules, approved
by the Board of Directors, which determine its functions, and establish the
procedures to enable it to comply with its mission. Among its functions will be:

     o    To supervise the sufficiency, adequacy and efficient functioning of
          internal control systems in such a manner that ensures the
          correctness, reliability, sufficiency and clarity of (i) our financial
          statements as


                                       98
<PAGE>

          contained in the annual and quarterly reports, and (ii) the accounting
          or financial information which may be required by the Superintendency
          or other regulatory bodies, including those pertaining to countries
          where we carry out activities;

     o    To monitor our compliance with applicable domestic or international
          regulations relating to money laundering, conduct in the securities
          markets, data protection, and competition, as well as to ensure that
          requests for information or action made by official bodies holding
          competency in these areas are fulfilled in time and form;

     o    To ensure that the code of ethics and code of conduct applicable to
          our personnel meet regulatory requirements and are adequate; and

     o    To monitor compliance of directors with the provisions contained in
          the Directors' Code, as well as with regulations applicable to conduct
          in the securities markets.

     The committee shall be able to outsource the contracting of advisory
services in material matters when it is considered that, due to reasons of
specialization or independence, these cannot be rendered by our experts or
technical staff. This new regulation will be effective no later than the year
2004, and is presently in the process of being implemented at our bank.

   Compensation Committee

     Currently we do not have a compensation committee.

     D.  Employees

     At December 31, 2002, we had 1,770 employees, approximately 42% of whom
belonged to one union, the Sindicato Unificado de Trabajadores Banco BHIF. All
management positions are held by non-union employees. We are party to one
collective bargaining agreement which covers all of our unionized employees and
which was renewed in April 2001 for 36 additional months, commencing in May
2001. We have only experienced a one-week strike since the union's formation in
1983 and consider relations with our employees to be good. Of our 1,770
employees, 65 were employed by our subsidiaries at December 31, 2002.

     E.  Share Ownership

     As of May 31, 2003 the members of our Board of Directors owned an aggregate
of 335,630,414 shares of BBVA Chile as shown in the table below.

<TABLE>
                                          Directly                                         % of
                                           Owned           Indirectly                     Capital
                    Name                   Shares       Owned Shares    Total Shares       Stock
                    ----                   ------       ------------    ------------       -----
<S>                                          <C>         <C>             <C>               <C>
     Chairman
        Jose Said ......................     971         56,223,313      56,224,284        15.57%
     Vice Chairman:
        Vitalino Nafria (1) ............       0        237,067,355     237,067,355        65.63%
     Directors:
        Gustavo Alcalde (1) ............       0                  0               0         0.00%
        Manuel Gonzalez (1) ............       0                  0               0         0.00%
        Jose Fonollosa (1) .............       0                  0               0         0.00%
        Antonio Martinez (1) ...........       0                  0               0         0.00%
        Ernesto Bertelsen (2) ..........       0                  0               0         0.00%
        Jaime Said (2) .................       0         23,834,108      23,834,108         6.60%
        Ricardo Massu (2) ..............       0         18,504,667      18,504,667         5.12%
     --------------------------------        ---        -----------     -----------        -----
     Total .............................     971        335,629,443     335,630,414        92.92%
                                             ===        ===========     ===========        =====
</TABLE>

----------------------
(1) These Directors have been designed by and act in representation of BBVA
(2) These Directors have been designed by and act in representation of the local
    shareholders who signed the Shareholders Agreement with BBVA.


                                       99
<PAGE>

     As of May 31, 2003, the executive officers and their families owned less
than 1,000,000 shares. None of our senior executives holds 1% or more of our
shares.

     See Item 7 for other share ownership information.


Item 7.  Major Shareholders and Related Party Transactions

     A.  Major Shareholders

Principal Shareholders

     We are controlled by BBVA. As of December 31, 2002, BBVA controlled 65.63%
of our outstanding shares ("the Shares"). Our former principal shareholders, the
Said Group, the Massu Group, the Sumar Group and Fundacion (the "Former
Principal Shareholders"), held 27.29% of our outstanding shares as of December
31, 2002 with the balance of the outstanding shares being held by the public.
Our principal shareholders do not have different voting rights from the public.

     BBVA, a banking corporation organized in Spain, of which no natural or
legal person owns more than 2%, obtained control of BBVA Chile through: (i) the
acquisition of 40,637,415 shares of Banco BHIF for an aggregate price of
Ch$20,821,157,368 and (ii) the subscription, on September 24, 1998, of
158,034,393 newly-issued shares of Banco BHIF that were issued in accordance
with the shareholders' resolution passed at the Extraordinary Shareholders'
Meeting held on August 21, 1998. Ch$69,301,321,035 of the total purchase price
of Ch$126,002,401,882 was paid by BBVA in cash, and the balance of
Ch$56,701,080,847 was paid within two years from the date of the subscription.

     BBVA undertook the above-referenced transactions in accordance with a
subscription and share purchase agreement which had been entered into by BBVA
and the Former Principal Shareholders on June 18, 1998. In addition, pursuant to
such agreement, BBVA and the Former Principal Shareholders entered into a
separate agreement which governs our future administration. The Former Principal
Shareholders also entered into an agreement among themselves with respect to our
future administration.

     In late 1999, BBVA acquired from the Massu Group a Chilean investment firm,
Aragon Holdings, which owns 6.92% of our outstanding shares. With this
acquisition, BBVA gained control of 62.4% of our outstanding shares.

     Since 1996, we have only Common Shares, all of which have equal voting
rights. Each of the ADS represent 10 Common Shares and each has the voting power
of the corresponding 10 shares.

   The Said Group

     The Said Group controlled 22.16% of our outstanding Shares as of December
31, 2002. The Said Group plays a major role in certain industrial and commercial
sectors in Chile, controlling Embotelladora Andina (Coca-Cola bottling company
in Santiago) and Parque Arauco (one of Chile's largest shopping centers), among
other entities. In addition, the Said Group is a controlling shareholder in Rio
de Janeiro Refrescos (Coca-Cola bottler in Brazil). The Said Group is jointly
controlled by Mr. Jose Said S., who is the Chairman of our Board of Directors,
and Mr. Jaime Said D, who is also a member of our Board of Directors.

   The Massu Group

     The Massu Group controlled 5.12% of our outstanding Shares as of December
31, 2002. In addition to BBVA Chile, the Massu Group holds significant interests
in Banco Boliviano Americano, Bifactoring, BHIF America Life


                                      100
<PAGE>


Insurance Co. and certain real estate businesses. Mr. Ricardo Massu, the
head of the Group, is a member of our Board of Directors.

   The Sumar Group

     The Sumar Group controlled 3.00% of our outstanding Shares as of December
31, 2002. In addition to its significant minority interest in BBVA Chile, the
Sumar Group is primarily engaged in the textile industry through Manufacturas
Sumar, one of the largest textile companies in Chile.

     The following table shows the percentage of shares owned by the Principal
Shareholders, as of May 31, 2003.

<TABLE>
                                                                             Common Shares
                               Owner(1)                                       (Thousands)           Voting Power
------------------------------------------------------------------------      -----------           ------------
<S>                                                                             <C>                     <C>
BBVA..................................................................          237,067                 65.63%
Said Group............................................................           80,058                 22.16%
Massu Group...........................................................           18,505                  5.12%
Sumar Group...........................................................           10,841                  3.00%
Other.................................................................           14,751                  4.09%
                                                                                -------                ------
     Total............................................................          361,222                100.00%
                                                                                =======                ======
</TABLE>

----------------------
(1)  Certain shares owned by the Principal Shareholders have been pledged to
     secure obligations the aggregate amount of which is not material compared
     to the value of the shares pledged.

     At December 31, 2002, there were 1,235 holders of record of Common Shares
in the form of ADS. It is not practicable for us to determine the number of ADS
or Common Shares beneficially owned in the United States. Approximately 1.3% of
the shares were property of non-Chilean stockholders.

     B.  Related Party Transactions

Interest Of Management In Certain Transactions

     In accordance with the General Banking Law, related parties are defined as
individuals and companies who are directors, officers or shareholders who own
more than 1% of our shares. Companies in which a director, officer or
shareholder holds more than a 5% interest are also considered to be related
parties, as well as companies that have common directors with us. In addition,
the Superintendency can classify any individual or company as "related party"
based on its own judgement. Article 89 of the Chilean Companies Law requires
that a Chilean company's transactions with related parties be on a market basis
or on terms similar to those customarily prevailing in the market.

     Under the General Banking Law, a bank may not grant loans to related
parties (including holders of 1% or more of its shares) on more favorable terms
than those generally offered to non-related parties. Loan s to directors,
management and companies in which such individuals have a participation of 5% or
more of equity or net earnings are not permitted under the General Banking Law.
The aggregate amount of loans to related parties may not exceed a bank's Total
Capital. Under the General Banking Law, transactions between a bank and its
affiliates are subject to certain additional restrictions. See "Regulation and
Supervision--Lending Limits".

     At December 31, 2002, loans to directors and officers amounted to Ch$32,372
million (US$45.4 million), or 12.6% of our regulatory capital at such date. The
total amount of these loans was distributed among 185 borrowers, with the
average loan being Ch$72 million. All of such loans are current and were made in
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons. See Note
16 to the Consolidated Financial Statements. Expenses incurred in connection
with services rendered by related parties were Ch$3,249 million (US$4.6
million), Ch$3,109 million (US$4.4 million) and Ch$2,775 million (US$3.9
million) for 2000, 2001 and 2002.


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<PAGE>

     C.  Interests of Experts and Counsel

     Not applicable.


Item 8.  Financial Information

     A.  Consolidated Statements and other Financial Information

     See Item 18 for the Company's Financial Statement.

     See Item 10 for the BBVA Chile's dividend distribution policy.

     Legal or Arbitration Proceedings

     Until July 23, 1999, Banco BHIF, currently BBVA Chile, had an obligation to
administer the "Adjustment Account" arising from the purchase agreement for the
shares of the former Banco Nacional, dated as of July 23, 1989.

     Our management and legal counsel believe that we will not suffer material
losses due to any claims brought by the selling party in connection with the
administration of the "Adjustment Account". Our reasons are as follows.

     In the purchase agreement, certain principal shareholders of ours acquired
97% of the shares of Banco Nacional from a group of companies and individuals
related to the selling party. The acquisition was undertaken with a view to the
merger of the former Banco Nacional with Banco BHIF, which was completed on
November 15, 1989.

     In connection with the acquisition of the shares of former Banco Nacional
and its subsequent merger with Banco BHIF, we agreed that certain loans due from
the sellers to Banco Nacional would be consolidated into UF-denominated loans,
scheduled to be repaid over a period of 12 years. The purchase agreement
provided that (i) the amount of recoveries on certain of Banco Nacional's loans,
selected by the sellers under the terms of the purchase agreement (Adjustment
Account), exceeding the net book value of the loans, and (ii) an amount equal to
the amount of allowance for loan losses released as a result of improvements in
the classification of the loans included in the Adjustment Account, would be
credited on a quarterly basis to the Adjustment Account and treated as the
payment of interest and principal due from the sellers.

     The purchase agreement also provided that any dispute relating to the
interpretation of the agreement or the fulfillment of the parties' respective
obligations thereunder would be submitted to arbitration.

     On July 23, 1989, the Adjustment Account was divided in two parts with
terms of five and ten years, respectively. The latter, together with the
sellers' right to the Adjustment Account, expired on July 23, 1999, as mentioned
above.

     Due to several disagreements between the sellers, us, our former management
and the buyers, the parties signed an agreement on November 27, 1996 in which
they agreed to submit all present and future disputes relating to the purchase
agreement to arbitration, including those relating to the Adjustment Account,
but excluding any possible future legal actions relating to the collection of
loans which would be submitted to the ordinary courts.

     The arbitrators accepted their appointment on February 3, 1997 and the
arbitration court was constituted on April 8 of that year. On June 9, 1997, the
parties agreed on the procedures to be followed in the arbitration process.

     To date, the sellers and we have submitted various claims to the
arbitration court, giving rise to several trial procedures that have been
labeled as "Claims" and assigned a correlative number.

     During 2001, judgments were rendered on two of the Claims. With respect to
Claims 1 we were sentenced to pay U.F. 19,062 plus interest, totaling
U.F.38,003.20. We complied and credited the equivalent amount in Chilean pesos
to the liabilities due to us by Cidef S.A., the lowest rated company of the
Errazuriz Group. With respect to Claims 2 we were required to pay UF 8,292.12
plus interest, totaling UF 11,216.55. The payment was remitted to the court in
the equivalent amount of Chilean pesos. A significant portion of the latter
amount was retained in favor of BBVA Chile in relation to the proceedings
brought against the Errazuriz Group of companies, that were submitted to the
ordinary courts.


                                      102
<PAGE>

     In 2002, judgments were rendered on seven of the Claims, and four judgments
were against us. With respect to Claim 3, we were sentenced to pay a total of UF
10,206.67, and we complied by crediting the equivalent amount in Chilean pesos
to the liabilities due to us by Cidef S.A. With respect to Claim 12, we were
required to pay UF 6,053.33 plus interest , and we complied partially by
crediting the equivalent of the principal amount in Chilean pesos to the
liabilities due to us by Cidef S.A., while waiting for the interest to be
established. With respect to Claim 5, we were sentenced to pay UF 27,431.02 plus
interest. We have not been able to comply because the Errazuriz Group improperly
transferred its right to collect from us in connection with Claim 5 and it has
not been possible to determine who the present creditor is. With respect to
Claim 6, we were sentenced to pay UF 42,715.55 plus interest. This payment is on
hold pending the outcome of an appeal we have filed with respect this judgment.

     Judgments for three of the seven Claims were in our favor. With respect to
Claim 17, the arbitration panel accepted arguments and determined that Comercial
Las Dalias S.A. was not our creditor. With respect to Claim 9, the arbitration
panel disallowed an allegation asking us to pay UF 4,071.44 plus interest as
indemnification. With respect to Claim 4, the arbitration panel rejected both
our claim and the Errazuriz Group`s counterclaim.

     In 2003, judgment was rendered on Claim 10, requiring us to pay a total of
UF 1,743 UF. The credit is still in the process of being liquidated. Judgment
was also rendered on Claim 7, and we complied by crediting the equivalent of UF
9,261.29 in Chilean pesos to the liabilities due to us by companies of the
Errazuriz Group who are beneficiaries of the Adjustment Account.

     We also submitted claim against the Errazuriz Group asking for an
indemnification, which was registered as Claim 28.

     The following is the status of the remaining Claims: One will begin the
discussion period and nine have already concluded their discussion period; five
are in the process of evidence production and two have concluded such period and
are ready for judgment.

     Considering the procedural stage of some of the pending proceedings and the
complexity of the matters dealt with in others, it is difficult to determine the
likely outcome of the actions brought against us, and no assurance can be given
that the final outcome will not be adverse to us.

     In late 2000 we were notified of seven consignment and compensation
payments made by debtors of the Errazuriz Group beneficiaries of the Adjustment
Account in relation to the loans payable to us with a view to extinguish total
obligations. However, as a result of our opposition the resolutions have been
appealed.

     In light of the above, we filed claims in Court for the collection of the
total amount due from each of the beneficiaries of the Errazuriz Group, on the
grounds that the debtor waived the period granted to each of them. To date, six
of our claims have been ruled and one is ready for judgment. Of the rulings
already delivered, three were in our favor and the other three were against us
on formal grounds. These rulings basically stated that the offer of total and
subsequent consignment payments did not imply a waiver of the period granted to
each debtor, therefore the loans would not have been required to be paid upon
filing the claim. Although these rulings were against us, in principle they were
not because the existence of these loans had been recognized by the debtors.
Both the Bank and the defendants filed an appeal on the issue, which is pending
hearing.

     In addition, in 2000 we were notified of three additional consignment and
compensation payments made by debtors of the Errazuriz Group who were not
beneficiaries of the Adjustment Account, with a view to extinguish total
obligations. We responded by asking for the judicial collection of these
obligations, and to date we have been able to collect on two of them, for a
total of UF 188,120.35, and the third is pending judgment.

     The Errazuriz Group filed in Court three allegations against us based on
the rulings of the arbitration court on Claims 1,3,5, and 6. In all cases the
Bank has filed defense on the grounds that (a) the allegations ask for the
payment of obligations that have already been paid for with respect to Claims 1
and 3; (b) the allegation ask for the payment of credits improperly transferred
with respect to Claim 5; and (c) the allegations ask for payment of obligations
which are not yet due with respect to Claim 6. Of these claims, one has
concluded the process of delete the process of evidence production, another will
begin evidence production and the remaining one will begin its discussion
period.


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<PAGE>

  All payments made on these allegations have been charged against the allowance
previously made for the corresponding loans. Such allowance is included in the
general allowance for loan losses.

     B.   Significant Changes

     No significant change has occurred since the date of the annual financial
statements.


Item 9.   The Offer and Listing

     A.   Offer and Listing Details

     Nature Of Trading Market

     On June 24, 1996, we completed the public offering in Chile and
internationally (the "Combined Offering") of our Series G common shares ("Series
G Shares") and American Depositary Shares each representing ten Series G Shares.
Prior to the Combined Offering, we had six series of shares (A through F)
outstanding. Upon discharge in full of the Central Bank Subordinated Debt, each
outstanding share of Series A through F was converted into a Series G Share.
Following the Combined Offering, the public market for the ADS and for Series G
Shares in the United States, Chile or elsewhere improved significantly. At an
Extraordinary Shareholders' Meeting held on April 1, 1997, the name of the
Series G Shares was changed to Common Shares. As of December 31, 2002, 65.6% of
the outstanding Shares of our capital stock was held by BBVA, 30.3% was held by
the Former Principal Shareholders (and entities controlled by or affiliated with
them), 1.3% was held by investors abroad in the form of ADS and 2.8% was held by
Chilean institutional investors and by the public.

     Market Volume and Price Information

     During 2002, Common Shares were traded daily on the Santiago Stock Exchange
at a rate of 0.04% of the average number of Common Shares outstanding during
2002, accounting for approximately 1.2% of the trading volume on the Santiago
Stock Exchange over the same period. During 2002, the ADS were also traded daily
on the NYSE, at a rate of 0.03% of the average number of Common Shares
outstanding during 2002.

     The table below sets forth, for the periods indicated, the reported low and
high closing prices and daily average trading volumes for Common Shares, where
indicated, on the Santiago Stock Exchange and on the New York Stock Exchange.
See "Exchange Rates" for the exchange rates applicable during the periods set
forth below. The information set forth in the table below reflects actual
historical amounts at the trade dates and has not been restated in constant
Chilean pesos.


                                      104
<PAGE>

<TABLE>
                                     ----------------------------------------------------------------------------
                                         Daily Average
                                            Shares         Ch$ per Share      Daily Average        US$ per ADR
                                            ------         --------------          ADR            --------------
Year ended December 31,                 Trading Volume     Low       High     Trading Volume      Low       High
-----------------------                 --------------     ---       ----     --------------      ---       ----
<S>                                           <C>           <C>        <C>            <C>            <C>       <C>
   1998.............................          144,912       400        716            23,824         8         16
   1999.............................           27,836       343        875            14,035         7         17
   2000.............................           12,259       740        950             2,836        14         19
2001
   First Quarter ...................           13,569       830        950            20,634        15         16
   Second Quarter ..................          106,061       930      1,080            26,728        16         18
   Third Quarter ...................           19,081       879      1,060               984        13         17
   Fourth Quarter ..................           21,538       850        950             3,277        12         14
2002
   First Quarter ...................           60,506       770        920             5,259        12         14
   Second Quarter ..................          127,719       760        840             5,025        11         13
   Third Quarter ...................          128,837       700        850            14,332        10         12
   Fourth Quarter ..................          270,148       800        950            14,482        11         14
   December.........................          353,521       810        950             4,273        12         14
2003
   January..........................           37,323       935      1,000             1,195        13         13
   February.........................           41,797       989        995             3,155        13         14
   March............................           66,726       955      1,010             8,720        13         14
   April............................            6,871     1,000      1,070             3,669        13         15
   May..............................           22,063     1,020      1,080             1,084        15         15
</TABLE>

----------------------
Source:  Santiago Stock Exchange, New York Stock Exchange.

     On December 31, 1998, the closing sale price per Common Share on the
Santiago Stock Exchange was Ch$450 (equivalent to US$0.95 at Ch$473.77 per
US$1.00, the Observed Exchange Rate on such date). On December 31, 1998, the
closing sale price per ADS on the New York Stock Exchange was US$7.750. On
December 31, 1999, the closing sale price per Common Share on the Santiago Stock
Exchange was Ch$815 (equivalent to US$1.54 at Ch$527.70 per US$1.00, the
Observed Exchange Rate on such date). On December 31, 1999, the closing sale
price per ADS on the New York Stock Exchange was US$14.88. On December 31, 2000,
the closing sale price per Common Share on the Santiago Stock Exchange was
US$1.47 On December 31, 2000, the closing sale price per ADS on the New York
Stock Exchange was US$14.8.  On December 31, 2001, the closing sale price per
Common Share on the Santiago Stock Exchange was Ch$920 (equivalent to US$1.4 at
Ch$656.20 per US$1.00, the Observed Exchange Rate on such date). On December 31,
2001, the closing sale price per ADS on the New York Stock Exchange was
US$13.40. On December 31, 2002, the closing sale price per Common Share on the
Santiago Stock Exchange was Ch$940 (equivalent to US$1.32 at Ch$712.38 per
US$1.00, the Observed Exchange Rate on such date). On December 31, 2002, the
closing sale price per ADS on the New York Stock Exchange was US$13.17. On April
30, 2003 the closing sale price per Common Share on the Santiago Stock Exchange
was Ch$1060 (equivalent to US$1.50 at Ch$705.32 per US$1.00, the Observed
Exchange Rate on such date). On April 30, 2003, the closing sale price per ADS
on the New York Stock Exchange was US$14.83.

     At December 31, 2002, there were 1,235 holders of record of Common Shares.
It is not practicable for us to determine the number of ADS or Common Shares
beneficially owned in the United States. Approximately 1.3% of the shares were
property of non-Chilean stockholders.

     The ADS and the Common Shares have been listed on the New York Stock
Exchange and on the Santiago Stock Exchange since June 18, 1996, respectively.

   Dividends

     The terms of the Central Bank Subordinated Debt imposed a limit on the
amount of dividends we could pay on its Shares. See "Central Bank Subordinated
Debt". After repayment in full of the Central Bank Subordinated Debt, there are
no legal restrictions on the payment of dividends from our net income. The
shareholders may determine


                                      105
<PAGE>

upon recommendation of the Board of Directors to distribute a percentage of net
income in any given year in order to maintain our ability to meet the targets of
the annual Investment and Financing Policy approved by the shareholders'
meeting.

     Dividends payable to holders of ADS will be paid net of foreign currency
conversion fees and expenses of the Depositary and will be subject to Chilean
withholding tax currently imposed at a rate of 35% (subject to credits in
certain cases as described under "Taxation"). Owners of the ADS will not be
charged any dividend remittance fees by the Depositary with respect to cash
dividends. See "Taxation".

     Chilean law requires that holders of shares of Chilean companies that are
not residents of Chile register as foreign investors under one of the foreign
investment regimes established by Chilean law in order to have dividends, sale
proceeds or other amounts with respect to their shares remitted outside Chile
through the Formal Exchange Market. Under the Foreign Investment Contract, the
Depositary, on behalf of ADS holders, will be granted access to the Formal
Exchange Market to convert cash dividends from Chilean pesos to U.S. dollars and
to pay such U.S. dollars to ADS holders outside Chile. See "Exchange Controls
and Other Limitations Affecting Security Holders".

     Under the current Ley General de Bancos (the "General Banking Law"), a
Chilean bank may only pay a single dividend per year (i.e., interim dividends
are not permitted). Pursuant to our By-laws, the annual dividend is proposed by
the Board of Directors and approved by the shareholders at the annual ordinary
shareholders' meeting held in the first four months of the year following the
year with respect to which the dividend is proposed. Following shareholder
approval, the dividend is declared and paid to shareholders of record on the
fifth business day preceding the date set for payment of the dividend. The
applicable record dates for the payment of dividends to holders of ADS will, to
the extent practicable, be the same. Under the Chilean Companies Law, Chilean
public corporations are generally required to distribute at least 30% of their
earnings (calculated in accordance with Chilean GAAP) as dividends, but a bank
is permitted to distribute less than such minimum amount in any given year if
the holders of at least two-thirds of the bank's outstanding stock so determine.

     B.   Plan of Distribution

     Not applicable.

     C.   Markets

     The ADS and the Common Shares have been listed on the New York Stock
Exchange and on the Santiago Stock Exchange since June 18, 1996, respectively.

     D.   Selling Shareholders

     Not appplicable.

     E.   Dilution

     Not appplicable.

     F.   Expenses of the Issue

     Not appplicable.


Item 10. Additional Information

     A.   Share capital

     Not appplicable.


                                      106
<PAGE>

     B.   Memorandum and Articles of Association

     Set forth below is certain information concerning our share capital and a
brief summary of certain significant provisions of our By-laws and Chilean law.
All rights and obligations of BBVA Chile's shareholders are contained in our
by-laws (a copy of which has been filed as an exhibit to this 20-F), the General
Banking Law, the Chilean Companies Law and the Ley de Mercado de Valores No.
18,045 (the "Securities Market Law"), each referred to below.

   General

     Shareholders' rights in a Chilean bank that is also an open-stock (public)
corporation are governed by the corporation's estatutos (which effectively serve
the purpose of both the articles or certificate of incorporation and the by-laws
of a company incorporated in the United States), by the General Banking Law and
by the provisions of the Chilean Companies Law applicable to open stock
corporations, to the extent applicable and not inconsistent with the General
Banking Law. Additionally, Article 137 of the Chilean Companies Law provides
that all provisions of the Chilean Companies Law take precedence over any
contrary provision in a corporation's estatutos. Both the Chilean Companies Law
and our By-laws provide that legal actions by shareholders against us (or our
officers or directors) to enforce their rights as shareholders or by one
shareholder against another in their capacity as such are to be brought in Chile
in arbitration proceedings or, at the option of the plaintiff, in the ordinary
courts in Santiago, Chile.

     The Chilean securities markets are principally regulated by the SVS under
the Securities Market Law and the Chilean Companies Law. In the case of banks,
compliance with these laws is supervised by the Superintendency of Banks. These
two laws provide for disclosure requirements, restrictions on insider trading
and price manipulation, and protection of minority investors. The Securities
Market Law sets forth requirements relating to public offerings, stock
exchanges, brokers and dealers, and outlines disclosure requirements for
companies that issue publicly offered securities. The Chilean Companies Law sets
forth rules and requirements for establishing open stock corporations while
eliminating government supervision of closed (closely-held) corporations. Open
stock (public) corporations are those with 500 or more shareholders, or
companies in which 100 or more shareholders own at least 10% of the subscribed
capital, excluding those shareholders who individually, or through other
individuals or companies, exceed such percentage, and all other companies that
publicly offer their stock.

   Ownership Restrictions

     Under Article 12 of the Securities Market Law and the regulations of the
Superintendency of Banks, certain information regarding transactions in shares
of banks must be reported to the SVS and the Chilean stock exchanges.
Shareholders of a bank who are holder of 10% or more of such bank's capital or
directors, general managers or managers of such bank are required to report to
the SVS and the Chilean stock exchanges any direct or indirect acquisition or
sale of shares or options to buy or sell shares, in any amount.

     Additionally, there are also reporting requirements for any shareholder who
controls 10% or more of a bank, to identify in each purchase of shares, whatever
its number may be, if his final intent is to control the company or to make an
investment.

     A beneficial owner of ADS representing 10% or more of our share capital
will be subject to these reporting requirements under Chilean law.

     Under Article 54 of the Securities Market Law and the regulations of the
Superintendency of Banks, any person who directly or indirectly, pretends to
take over the control of a bank that makes a public offer of its shares,
regardless of the form of acquisition of the shares, including that which could
be made by direct subscriptions or private transactions, shall previously report
such fact to the public in general.

     For the purposes indicated in the preceding paragraph, written notice will
be sent to such effect to the stock corporation that it is intended to control,
to the companies that are the controllers and are controlled by the company
whose control it is intended to obtain, to the SVS and to the Stock Exchanges
where such securities are traded. With


                                      107
<PAGE>

the same purpose, a prominent notice will be published in two newspapers of
national circulation. The communication and the publication just mentioned shall
be made, at least, ten business days in advance from the date on which it is
pretended to implement the act that will permit obtaining the control of the
respective stock corporation and, in any event, as soon as negotiations have
commenced tending to achieve its control, through the delivery of information
and documents of that company. Violation of this article will not invalidate the
operation, but shall give the shareholders or third parties who are interested
the right to demand indemnification for damages caused, apart from the pertinent
administrative penalties.

     Should it be intended to obtain control through an offer regulated in Title
XXV of the Securities Market Law the provisions of such Title shall be applied
exclusively. On December 20, 2000, it was enacted the new tender offer law
(known as "OPA Law") which in general terms, regulates transactions through
which control of a corporation that makes public offer of its shares changes, as
well as transactions in which a controlling shareholder or group increases
control to over 66 2/3%. For this purpose, "control" means de facto control,
being the acquisition of a sufficient shareholding to permit the acquirer to
exercise the majority of the votes in shareholders' meetings, thus allowing for
the election of a majority of the board of directors of the target company, or
to allow the acquirer to have decisive power in the administration of the target
company. The first requirement of the new OPA Law is enhanced disclosure of the
intention to accumulate shares or acquire control. The OPA Law has further
elaborated on the amount of information to be provided by the intended purchaser
to the market, through a publication to be made in the newspapers providing a
full disclosure on the terms of the proposed transaction to be carried out to
obtain control. If a transaction which will result in the acquisition of control
of a Chilean open stock corporation is to occur, the OPA Law requires the
acquirer to launch a tender offer subject to the rules established in Title XXV
of the Securities Market Law, including the obligation to carry out the tender
offer on a pro-rata and a non discriminatory basis, and the obligation of making
available for the shareholders a prospectus which discloses the terms and
conditions of the offer.

     The OPA Law also contemplates anti-avoidance rules aimed at the acquisition
of control of a company that controls an open stock corporation where the shares
of the open stock company constitute more than 75% of the book value of the
consolidated assets of the controlling company. In such circumstances, the
purchaser will be required to make an offer for the remaining shares of the open
stock company at the same pro rated price as is paid for the controlling
company. While the legislation could be more specific, the end result is that if
the acquirer ends up with control of the company in a transaction fairly close
to other small transactions, he may be liable for a breach of these rules and
fined for up to 30% of the value of the transaction and criminal sanctions. In
addition, the OPA Law contains a number of limited exemptions from the
obligations to make a bid in accordance with article 54 of the Securities Market
Law as set forth above.

     Finally, the OPA Law also contemplates transitional rules which would
exclude the operation of the OPA Law in the following cases: (i) When a present
controlling shareholder sells to an unrelated new controlling shareholder within
a three year period after the OPA Law comes into effect. To be entitled to this
right a special shareholders meeting must agree, within 6 months following to
the enactment of the law, that the corporation is going to be subject to the
transitional rule; (ii) The sales and purchases that are performed in fulfilment
of the rights granted by a shareholders agreement executed prior to the
enactment of the law.

     The shareholders of BBVA Chile have not passed any decision regarding such
transitory rule therefore making it non applicable.

     Article 36 of the General Banking Law states that as a matter of public
policy, no person or company may acquire, directly or indirectly, more than 10%
of the shares of a bank without the prior authorization of the Superintendency
of Banks, which may not be unreasonably withheld. The prohibition would also
apply to beneficial owners of ADS. In the absence of such authorization, any
person or group of persons acting in concert would not be permitted to exercise
voting rights with respect to the shares or ADS acquired. In determining whether
or not to issue such an authorization, the Superintendency of Banks considers a
number of factors enumerated in the General Banking Law, including the financial
stability and probity of the purchasing party.


                                      108
<PAGE>

     Article 84 No. 2 of the General Banking Law creates the presumption that
natural persons who are holders of Shares and who beneficially own more than 1%
of the Shares are related to us and imposes certain restrictions on the amounts
and terms of loans made by banks to related parties. This presumption would also
apply to beneficial owners of ADS representing more than 1% of the Shares.
Finally, according to the regulations of the Superintendency of Banks, Chilean
banks that issue ADS are required to inform the Superintendency of Banks if any
person, directly or indirectly, acquires ADSs representing 5% or more of the
total amount of shares of capital stock issued by such bank.

     Neither Chilean law nor the By-laws impose specifically on nonresident or
foreign owners any limitations on the rights of such owners to hold or vote the
Shares.

   Capitalization

     Under Chilean law, the shareholders of a company, acting at an
extraordinary shareholders' meeting, have the power to authorize an increase in
such company's capital. This shareholders' meeting resolution that increases the
bank's capital must be approved or rejected by the Superintendency of Banks
within a term of 30 days. The Superintendency of Banks may extend this term up
to 30 days more. When an investor subscribes for issued shares, the shares are
issued and registered in such investor's name, even if not paid for, and the
investor is treated as a shareholder for all purposes except with respect to
receipt of dividends and the return of capital. The investor becomes eligible to
receive dividends once it has paid for the shares (if it has paid for only a
portion of such shares, it is entitled to receive a corresponding pro rata
portion of the dividends declared with respect to such shares unless the
company's by-laws provide otherwise). If an investor does not pay for shares for
which it has subscribed on or prior to the date agreed upon for payment, the
company is entitled under Chilean law to auction the shares on the stock
exchange where such shares are traded, and it has a cause of action against the
investor for the difference, if any, between the subscription price and the
auction proceeds. However, until such shares are sold at auction, the subscriber
continues to exercise all the rights of a shareholder (except the right to
receive dividends and return of capital). In the case of banks, authorized
shares and issued shares which have not been paid for within the period fixed
for their payment by the Superintendency of Banks are cancelled and are no
longer available for issuance by the company.

     Article 22 of the Chilean Companies Law states that the purchaser of shares
of a company implicitly accepts its by-laws and any agreements adopted at
shareholders' meeting.

   Preemptive Rights and Increases of Share Capital

     The Chilean Companies Law provides that whenever a Chilean company issues
new shares for cash, it must offer its existing shareholders the right to
purchase a sufficient number of shares to maintain their existing ownership
percentages in the company. The OPA Law now requires that ADS holders be given
the same rights as local shareholders. Pursuant to this requirement, preemptive
rights in connection with any future issue of shares will be offered by us to
the Depositary as the registered owner of the Shares underlying the ADS. See
"Cash Dividends and Other Distributions".

     Under Chilean law, preemptive rights are exercisable or freely transferable
by shareholders during a period which cannot be less than 30 days following the
granting of such rights. During such period (for shares as to which preemptive
rights have been waived), and for an ensuing period (up to the term fixed by the
shareholders' meeting to pay the increase in capital, which cannot exceed three
years), a Chilean open stock corporation is permitted to offer any unsubscribed
shares for sale to third parties on terms which are equal to or less favorable
to such purchasers than those offered to its shareholders. At the end of a
30-day period following the preemptive rights period, a Chilean open stock
corporation is authorized to sell non-subscribed shares to third parties on more
favorable terms to such purchasers, provided they are sold on a stock exchange.

   Shareholders' Meetings and Voting Rights

     An ordinary annual meeting of shareholders is held within the first four
months of each year, but in any case following the preparation of our financial
statements for the previous year. The ordinary annual meeting of


                                      109
<PAGE>

shareholders is the corporate body that approves the annual financial
statements, approves all dividends in accordance with the dividend policy
determined by the Board of Directors, elects the Board of Directors and approves
any other matter which does not require an extraordinary shareholders' meeting.
The last ordinary annual meeting of our shareholders was held on March 17th,
2003. Extraordinary meetings may be called by the Board of Directors when deemed
appropriate, and ordinary or extraordinary meetings must be called by the Board
of Directors when requested by shareholders representing at least 10% of the
issued voting shares or when requested by the Superintendency of Banks. Notice
to convene the ordinary annual meeting or an extraordinary meeting is given by
means of three notices which must be published in a newspaper published in our
corporate domicile (currently Santiago) in a prescribed manner, and the first
notice must be published not fewer than 15 days nor more than 20 days in advance
of the scheduled meeting. Notice must also be mailed no fewer than 15 days in
advance to each shareholder and given to the Superintendency of Banks and the
Chilean Stock Exchanges. Currently, we publish our official notice in La Nacion.

     The quorum for a shareholders' meeting is established by the presence, in
person or by proxy, of shareholders representing at least an absolute majority
of the issued Shares; if a quorum is not present at the first meeting, the
meeting can be reconvened within 45 days (in accordance with the procedures
described in the previous paragraph) and, upon the meeting being reconvened,
shareholders present or represented at the reconvened meeting are deemed to
constitute a quorum regardless of the percentage of Shares represented. The
shareholders' meetings pass resolutions by the affirmative vote of an absolute
majority of those Shares with voting rights present or represented at the
meeting. The vote required at any shareholders' meeting to approve any of the
following actions, however, is a two-thirds majority of issued Shares: (i) a
change of organization, merger or spin-off, (ii) an amendment to our term of
existence or early dissolution, (iii) a change in corporate domicile, (iv) a
decrease of corporate capital, (v) the approval of capital contributions in kind
and a valuation of the assets contributed, (vi) a modification of the powers of
shareholders or limitations on the powers of the Board of Directors, (vii) a
reduction in the number of members of the Board of Directors, (viii) the
transfer of 50.0% or more of the corporate assets, regardless of whether it
includes liabilities, or the formation or amendment of any business plan that
contemplates the transfer of more than 50.0% of the corporate assets, (ix) any
non-cash distribution in respect of the Shares, (x) the emission of convertible
bonds or debentures, or (xi) the approval of material related-party transactions
when requested by shareholders representing at least 5.0% of the issued and
outstanding shares with right to vote. Shareholders may accumulate their votes
for the election of directors and cast the same in favor of one person. The vote
required to change the number of members who make up the Board of Directors is
91% of voting shares present or represented, and the same majority is needed to
change this requirement.

     In general, Chilean law does not require a Chilean open stock corporation
to provide the level and type of information that United States securities laws
require a reporting company to provided to its shareholders in connection with a
solicitation of proxies. However, shareholders are entitled to examine the books
of the company within the 15-day period before the scheduled meeting. Under
Chilean law, a notice of a shareholders' meeting listing matters to be addressed
at the meeting must be mailed not less than 15 days prior to the date of such
meeting, and, in the cases of an ordinary annual meeting, shareholders holding a
prescribed minimum investment must be sent an annual report of the company's
activities which includes audited financial statements. Shareholders who do not
fall into this category but who request it must also be sent a copy of the
company's annual report. In addition to these requirements, we regularly
provide, and our management currently intends to continue to provide, together
with the notice of shareholders' meeting, a proposal for the final annual
dividend.

     The Chilean Companies Law provides that wherever shareholders representing
10% or more of the issued voting shares so request, a Chilean company's annual
report must include, in addition to the materials provided by the Board of
Directors to shareholders, such shareholders' comments and proposals in relation
to the company's affairs. Similarly, the Chilean Companies Law provides that
whenever the Board of Directors of an open stock corporation convenes an
ordinary meeting of the shareholders and solicits proxies for that meeting, or
distributes information supporting its decisions, or other similar material, it
is obligated to include as an annex to its annual report any pertinent comments
and proposals that may have been made by shareholders owning 10% or more of the
company's voting shares who have requested that such comments and proposals be
so included.


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     Only shareholders registered as such with us on the fifth business day
prior to the date of a meeting are entitled to attend and vote their shares. A
shareholder may appoint another individual (who need not be a shareholder) as
his proxy to attend and vote on its behalf. Every shareholder entitled to attend
and vote at a shareholders' meeting has one vote for every share subscribed.

   Approval of Financial Statements

     The Board of Directors is required to submit our audited financial
statements to the shareholders annually for their approval. The approval or
rejection of such financial statements is entirely within the shareholders'
discretion. If the shareholders reject the financial statements, the Board of
Directors must submit new financial statements not later than 60 days from the
date of such rejection. If the shareholders reject the new financial statements,
the entire Board of Directors is deemed removed from office and a new Board is
elected at the same meeting. Directors who individually approved such financial
statements are disqualified for re-election for the ensuing period.

   Registration and Transfers

     We act as our own registrar and transfer agent, as is customary among
Chilean companies. In the case of jointly owned Common Shares, a single person
must be appointed to represent the joint owners in dealings with us. This person
may be either one of the joint owners or their legal representative.

     C.   Material Contracts

     On September 24, 1998, Banco Bilbao Vizcaya, S.A. (now BBVA) entered into
an agreement (the "Agreement") with Inversiones Caburga S.A., Inversiones del
Pacifico S.A., Compania de Leasing y Arriendo S.A., Inversiones Santa Virginia
Limitada, Panamerican Holdings Limited Agency in Chile, Inversiones Valparaiso
S.A., Inversiones Corinto Limitada and Fundacion Educacional de Beneficencia
Maria Teresa Brown de Ariztia; and Jose Domingo Eluchans Asesorias Limitada,
(collectively, "the former controllers"). We refer to all the parties to the
agreement as "the "Shareholders".

     In their capacities as our controlling Shareholders, the parties agreed to
coordinate their actions in order to jointly manage and develop our business. To
this end, they agreed upon operating standards for us and our subsidiaries,
which complement those required by law, regulations and our By-laws. The
principal standards refer to:

          Board of Directors. According to the Agreement, the Board shall be
     composed of nine office holders and two alternates and, in the event of a
     merger or acquisition, the number of members may be increased to 11. Given
     the composition of the Shareholders, the parties to the Agreement may
     appoint all of the directors, with BBVA presently entitled to appoint a
     majority of the Board. In addition the parties agreed upon rules to be
     applied to the appointment of the Chairman, to the replacement of
     directors, for setting dates for Board meetings, for passing resolutions
     and to the appointment of the General Manager and the exercise of some of
     his most important faculties.

          Shareholders' meeting. Resolutions will be passed pursuant to
     requirements prescribed by law and the By-laws, with the requirement that
     at least one of the former controllers must form part of the majority vote
     for the following matters: mergers, early dissolution, a combined sale of
     the assets and the liabilities or all of the assets, or a substantial
     portion thereof, modification of the dividend distribution policy or the
     By-laws, or any matters that, pursuant to the Agreement, require the
     approval of at least one director appointed by each party of the agreement.

         Transfer of shares. The parties recognize a preemptive right in the
     event that any of them intend to sell their Shares.

          Purchase of shares on the market by the parties. This standard
     regulates the purchase and sale of Shares on the Stock Exchange.
     Third-party purchases, are freely authorized provided the purchases are on
     the Stock Exchange and the purchaser fulfills the obligation of offering
     the other Shareholder a percentage of the Shares purchased at unit
     acquisition cost, which percentage must be equal to the relative holdings
     of the Shareholders at the time.


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     The sale of shares on the Stock Exchange is only permitted if, having
     fulfilled the obligation of offering its acquisition to the other party,
     that party is not interested.

         New business. The parties declare their intention to look into new
     business in Chile in the future, in the form of holdings substantially
     similar to what they had at that time.

         Dividend policy. Dividend policy will be to make annual distributions
     of at least 50% of the income that pursuant to applicable regulations would
     be subject to distribution.

         Starting date, duration and term. The Agreement took effect on
     September 24, 1998 for an indefinite duration unless an event that enables
     any party to terminate the agreement occurs.

         Irreconcilable differences, mediation. In cases in which the Board or
     Shareholders are not able to pass resolutions in fulfillment of this
     Agreement, differences shall be submitted to a neutral mediator. If no
     agreement can be reached, the parties have the right to terminate the
     Agreement.

     D.   Exchange Controls

   Exchange Controls

     The Central Bank is responsible for, among other things, monetary policy
and exchange controls in Chile. Foreign investments in Chile (including
investments in shares or Common Stock) can be made under the following
regulations: (i) registration with the "Foreign Investment Committee" under
Decree Law No. 600 of 1974 as amended ("Decree Law No, 600") or (ii) according
to Chapter XIV of the Compendium.

     Foreign investment made under Decree Law No. 600 gives foreign investors
access to the Formal Exchange Market once the foreign currency is converted into
Chilean pesos. Under Decree Law No. 600 foreign investors may transfer abroad
their capital and the net profits from their investments in Chile. Capital may
be remitted after one year has elapsed counted from the date on which the
foreign currency it was brought in. Profits can be remitted with no time limit.
Decree Law No. 600 gives the foreign investors access to the Formal Exchange
Market in order to remit capital and net profits abroad.

     Since April 19, 2001 foreign investments made under Chapter XIV are not
subject to restrictions other than the requirement that all foreign currency
brought into the country or remitted abroad by the foreign investor should be
made through the Formal Exchange Market and to provide certain information to
the Central Bank. Under Chapter XIV, foreign investors do not have granted
access to the Formal Exchange Market as is the case under Decree Law No. 600,
however, for the purpose of remitting capital and net profit abroad, foreign
investors are entitled to purchase foreign currency either in the Formal
Exchange Market or in the informal exchange market. Foreign investments made
prior to April 19, 2001 are subject to the regulations of Chapter XIV that were
in place at the time such foreign investment was made, unless the foreign
investor, voluntarily, decides to be subject to the current regulations of
Chapter XIV.

     Pursuant to Article 47 of the Central Bank Act, the Central Bank may enter
into agreements with investors or creditors, both foreign or local, and other
parties in a foreign exchange transaction, to regulate the terms and conditions
under which the capital, interest, profits and benefits generated by such
foreign exchange transaction may be utilized, remitted abroad or reimbursed to
the local investor or creditor and to assure them free access to the Formal
Exchange Market. According to Article 47 of the Central Bank Act, agreements
entered into by the Central Bank pursuant to Article 47 may only be modified by
mutual agreement of all parties to the contract.

     Until April 19, 2001, Chapter XXVI, Title I of the Compendium ("Chapter
XXVI") regulated the issuance of ADS by a Chilean company and the access to the
Formal Exchange Market for the purpose of converting Chilean pesos to U.S.
dollars and repatriating from Chile amounts received in respect of shares
deposited or shares withdrawn from deposit or surrender of ADSs (including
amounts received as cash dividends and proceeds from the sale in Chile of the
underlying shares and any rights with respect thereto).


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     On April 19, 2001, Chapter XXVI was derogated by the Central Bank and it
established under Chapter XIV that will be considered "investments", for the
purpose of Chapter XIV, the acquisition of shares of Chilean open stock
corporations to be withdrawn in exchange for a certificate representing such
shares, as is the case of ADSs, that are traded in foreign markets.
Additionally, the Central Bank sets forth on Chapter XIV that the withdrawn of
shares in exchange for a certificate representing such shares or reverse will be
subject to the rules applicable under Chilean law.

     Even though the Central Bank eliminated Chapter XXVI, all ADSs that have
been issued according to Article 47 of the Central Bank Act and Chapter XXVI
will be subject to such regulations and to their own Foreign Investment
Contract, without regard of the derogation of Chapter XXVI.

     The ADS representing Common Shares are the subject of a contract dated June
19, 1996 (the "Foreign Investment Contract") between the Central Bank, us and
the Bank of New York as Depositary, pursuant to Article 47 of the Central Bank
Act and Chapter XXVI.

     The following is a summary of material provisions in the Foreign Investment
Contract. This summary does not purport to be complete and is qualified in its
entirety by reference to the Foreign Investment Contract.

     Under Chapter XXVI and the Foreign Investment Contract, the Central Bank
agrees to grant to the Depositary, on behalf of ADS holders, and to any investor
not residing or domiciled in Chile who withdraws Common Shares upon delivery of
ADSs (such Common Shares being referred to herein as "Withdrawn Shares"), access
to the Formal Exchange Market to convert Chilean pesos to dollars (and remit
such dollars outside of Chile) in respect of Common Shares represented by ADS or
Withdrawn Shares, including amounts received as (a) cash dividends, (b) proceeds
from the sale in Chile of Withdrawn Shares (subject to receipt by the Central
Bank of a certificate from the holder of the Withdrawn Shares (or from an
institution authorized by the Central Bank) that such holder's residence and
domicile are outside Chile and a certificate from a Chilean stock exchange (or
from a brokerage or securities firm established in Chile that such Withdrawn
Shares were sold on a Chilean Exchange) or from shares distributed because of
the liquidation merger or consolidation of the Bank, (c) proceeds from the sale
in Chile of rights to subscribe for additional Common Shares, (d) proceeds from
the liquidation, merger or consolidation of BBVA Banco BHIF, and (e) other
distributions, including without limitation those resulting from any
recapitalization, as a result of holding Common Shares represented by ADS or
Withdrawn Shares. Transferees of Withdrawn Shares will not be entitled to any of
the foregoing rights under Chapter XXVI unless the Withdrawn Shares are
redeposited with the custodian. Investors receiving Withdrawn Shares in exchange
for ADSs will have the right to redeposit such Common Shares in exchange for
ADSs, provided that the conditions to redeposit are satisfied. For a description
of the Formal Exchange Market, see "Exchange Rates". Chapter XXVI provides that
access to the Formal Exchange Market in connection with dividend payments is
conditioned upon certification by BBVA Banco BHIF to the Central Bank that a
dividend payment has been made and any applicable tax has been withheld, which
certification BBVA Banco BHIF has agreed to provide at the appropriate time.

     Chapter XXVI also provides that access to the Formal Exchange Market in
connection with the sale of Withdrawn Shares or distributions thereon is
conditioned upon receipt by the Central Bank of certification by the custodian
that such Common Shares have been withdrawn in exchange for ADSs and receipt of
a waiver of the benefit of the Foreign Investment Contract with respect thereto
(except in connection with the proposed sale of the Common Shares) until such
Withdrawn Shares are redeposited.

     Chapter XXVI and the Foreign Investment Contract provide that a person who
brings foreign currency into Chile to purchase Common Shares with the benefit of
the Foreign Investment Contract must convert it into Chilean pesos on the same
date and has five banking business days within which to invest in Common Shares
in order to receive the benefits of the Foreign Investment Contract. If such
person decides within such period not to acquire Common Shares, he can access
the Formal Exchange Market to reacquire dollars, provided that the applicable
request is presented to the Central Bank within seven banking business days of
the initial conversion into Chilean pesos. Common Shares acquired as described
above may be deposited for ADS and receive the benefits of the Foreign
Investment Contract, subject to receipt by the Central Bank of a certificate
from the Depositary that such deposit has been effected and that the related
ADSs have been issued and receipt by the Custodian of a declaration


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from the person making such deposit waiving the benefits of the Foreign
Investment Contract with respect to the deposited Common Shares.

     Access to the Formal Exchange Market under any of the circumstances
described above is not automatic. Pursuant to Chapter XXVI, such access requires
approval of the Central Bank based on a request therefore presented through a
banking institution established in Chile. The Foreign Investment Contract
provides that if the Central Bank has not acted on such request within seven
banking days, the request will be deemed approved.

     Until June 26, 1998, foreign investors acquiring shares or securities in
the Chilean secondary market should maintain a mandatory reserve ("Reserve")
with the Central Bank in an amount equal to 30% of the amount of the investment
or alternatively foreign investors might choose to satisfy such reserve
requirements by making a payment to the Central Bank of a non-refundable amount
calculated in regard to the amount that must have been deposited. The deposit
had to be done for one year in the form of a non-interest bearing U.S. dollars
deposit.

     On June 26, 1998, the Reserve was reduced to 10% and on September 17, 1998
to 0% of the investment. Notwithstanding the mentioned reserve reduction, the
Central Bank can increase the Reserve at any moment until 40% of the amount of
the investment. No assurance can be given that the Central bank would not
increase the amount of the Reserve. However, under Chilean law such increase
would only be imposed upon investments brought into Chile after the increase of
the Reserve becomes effective.

     Under current Chilean law, the Foreign Investment Contract cannot be
changed unilaterally by the Central Bank. No assurance can be given, however,
that additional Chilean restrictions applicable to the holders of ADSs, the
disposition of underlying Common Shares or the repatriation of the proceeds from
such disposition could not be imposed in the future, nor can there be any
assessment of the duration or impact of such restrictions if imposed. See also
"Description of By-laws--Ownership restrictions"

     E.   Taxation

Chilean Tax Considerations

     The following discussion summarizes the principal Chilean income tax
consequences of the purchase, ownership and disposition of ADS or Common Shares
by an individual who is not domiciled or resident in Chile or by a legal entity
that is not organized under the laws of Chile and does not have a permanent
establishment located in Chile (any such individual or entity, a "Foreign
Holder"). For purposes of Chilean tax law, an individual holder is a resident of
Chile if he has resided in Chile for more than six consecutive months in one
calendar year or for a total of more than six months, whether consecutive or
not, in two consecutive tax years. The discussion is not intended as tax advice
to any particular investor, which can be rendered only in light of that
investor's particular tax situation.

     This summary is based upon the tax laws of Chile and relevant
interpretations thereof (including Ruling No. 324 of January 29, 1990 of the
Chilean Internal Revenue Service and other applicable regulations and rulings)
in effect on the date of this Annual Report, all of which are subject to change.
There is no income tax treaty in force between Chile and the United States.

     HOLDERS OF ADS OR COMMON SHARES SHOULD CONSULT THEIR OWN TAX ADVISERS AS TO
THE CHILEAN, U.S. OR OTHER TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF ADS OR COMMON SHARES, INCLUDING, IN PARTICULAR, THE EFFECT OF ANY
FOREIGN, STATE OR LOCAL TAX LAWS.

   Cash Dividends and Other Distributions

     Cash dividends paid by us with respect to the ADS or Common Shares held by
a Foreign Holder will be subject to a 35% Chilean withholding tax, which is
withheld and paid over to the Chilean tax authorities by us (the "Withholding
Tax"). If we have paid corporate income tax (the "First Category Tax") on the
income from which the dividend is paid, a credit for the First Category Tax
effectively reduces the rate of Withholding Tax, though not on a one-for-one
basis because it also increases the base on which the Withholding Tax is
imposed. In addition, if we


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distribute less than all of our distributable income, the credit for First
Category Tax paid by us is proportionately reduced. It must be considered that
the First Category Tax rate for earnings from commercial year 1991 until 2001
was 15%, for the year 2002 was 16%, currently this year is 16.5% and for years
2004 and thereafter a rate of 17% will be applicable. Therefore, it is possible
that different rates of credits may be available for a single dividend.

     When a credit is available, the Withholding Tax is computed by applying the
35% rate to the pre-tax amount needed to fund the dividend and then subtracting
from the tentative withholding tax so determined the amount of First Category
Tax actually paid on that pre-tax income. For purposes of determining the rate
at which First Category Tax was paid, dividends are treated as paid from our
oldest retained earnings.

     The example below illustrates the effective Chilean Withholding Tax rate
burden on a cash dividend received by a Foreign Holder assuming a Withholding
Tax rate of 35%, an effective First-Category Tax rate of 16.5% and a
distribution of 30% of the consolidated net income of BBVA Banco BHIF
distributable after payment of the First Category Tax:

BBVA Chile......................................................     100.0
First Category Tax (16.5% of CH$100)............................     (16.5)
Net distributable income........................................      83.5
Dividend distributed (30% of net distributable income)..........      25.05
Withholding Tax (35% of the sum of CH$ 25.05 dividend
     Plus CH4.95 First Category Tax paid).......................     (10.5)
Credit for 16.5% of First-Category Tax..........................       4.95
Net additional tax withheld.....................................       5.55
Net dividend received...........................................      19.5
Effective dividend withholding rate.............................       22%

     The effective Withholding Tax Rate, after giving effect to the credit for
the First Category Tax, can be calculated using the following formula:

          (Withholding Tax rate) - (First Category Tax effective rate)
          ------------------------------------------------------------
                     1 - (First Category Tax effective rate)

     The effective rate of Withholding Tax to be imposed on dividends paid by us
will vary depending upon the amount of First Category Tax paid by us on the
earnings to which the dividends are attributed.

     The overall tax rate for the foreign (non-domiciled and non-resident)
investor is 35%.

     As a result of the repayment of the Central Bank Subordinated Debt, we
realized a tax loss which was applied first against net income in 1996 and
second against certain retained earnings from prior years. The balance has been
carried forward to off-set 1998, 1999 and 2000 taxable income and the balance
thereof can be carried forward indefinitely. The consequence of application of
the tax loss against net income in 1998, 1999 and 2000 was that we did not pay
any First Category Tax in 1998, 1999 and 2000 and does not expect to pay such
Tax in future years until any remaining tax loss carry forward is fully
utilized. Thus, for 1998, 1999 and 2000 there was no First Category Tax credit
available to reduce the 35% Withholding Tax, and for such future years (or
portions thereof until any remaining tax loss carry forward is fully utilized)
there will be no First Category Tax credit available to reduce the 35%
Withholding Tax. See "Operating and Financial Review and Prospects--Results of
Operations for the Years Ended December 31, 1998, 1999 and 2000--Income Tax".
However, regardless of whether we pay any First-Category Tax, the total overall
Chilean tax burden imposed on our distributed profits will be 35%.

     Any dividend distributions made in property (other than Common Shares) will
be subject to the same Chilean tax rules as cash dividends. Stock dividends are
not subject to Chilean taxation. The distribution and exercise of preemptive
rights relating to Common Shares will not be subject to Chilean taxation.

     As is stipulated in number 8 of the Shareholders Agreement signed on
September 24, 1998 by BBVA Chile, (then BBV), Inversiones Caburga S.A. and other
shareholders, our policy on dividend distribution is defined as "to


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distribute every year at least 50% of the distributable net income from the
corresponding fiscal year". The distributable net income is the net income that
can be distributed according to law and regulations.

   Capital Gains

     Disposition of ADS

     Gain realized on a sale or other disposition by a Foreign Holder of the ADS
will not be subject to Chilean taxation, provided that such sale or other
disposition occurs outside Chile and that such ADS are also located outside
Chile. The deposit and withdrawal of Common Shares in exchange for ADS will not
be subject to any Chilean taxes.

     Disposition of Common Shares

     Gain recognized on a sale or exchange of Common Shares (as distinguished
from sales or exchanges of ADS representing such Common Shares) will be subject
to Chilean income taxes at an effective rate of 35% if (i) the Foreign Holder
has held the Common Shares for less than one year since exchanging ADS for the
Common Shares, (ii) the Foreign Holder acquired and disposed of the Common
Shares in the ordinary course of its business or as a regular trader of shares
(i.e., the holder is "habitual in the purchase and sale of shares"), or (iii)
the Foreign Holder and the purchaser of the Common Shares are "related parties."
For this purpose, a "related party" is any entity in which the foreign holder is
(a) a partner, (b) a shareholder if such entity is a closed stock corporation,
or (c) a shareholder with more than 10% of the shares if such entity is an open
stock corporation. In all other cases (i.e., if the foreign holder is not
habitual and has held the shares for at least one year prior to their sale and
such sale was not made to a related party), gain on the disposition of Common
Shares will be subject only to a capital gains tax which is assessed at the same
rate as the First Category Tax (currently imposed at a rate of 16.0%) as a sole
tax.

     For purposes of determining gain upon their sale, the tax basis of Common
Shares received in exchange for ADS will be the acquisition value of the Common
Shares on the date of the exchange, adjusted for the Chilean Consumer Price
Index (domestic inflation) variation between the month preceding the exchange
and the month preceding the sale. The valuation procedure set forth in the
Deposit Agreement, which values Common Shares which are being exchanged at the
highest reported sales price at which they trade on the Santiago Stock Exchange
on the date on which the exchange is recorded, will determine the acquisition
value for this purpose.

     In case of conversion of ADS into Common Shares and the immediate sale of
such Common Shares, because of the mechanisms under which the Santiago Stock
Exchange operates, the sales price of the Common Shares is determined two days
prior to the date on which the exchange is recorded and the ownership transfer
of the Common Shares resulting from the exchange actually takes place.
Therefore, if the price of the Common Shares does not fluctuate within those two
days or goes up, no capital gain shall be generated. However, if the value of
the Common Shares on the Santiago Stock Exchange goes down within those two
days, a capital gain subject to taxation in Chile should be generated equal to
the difference between (i) the sales price determined two days prior to the date
the conversion of ADS into Common Shares is recorded, and (ii) the highest
reported sales price of the Common Shares on the Santiago Stock Exchange on such
recording date.

     The above has been clarified by the Internal Revenue Service of Chile by
Ruling N(degree) 3708 of October 1, 1999 upon consultation by the Santiago Stock
Exchange. Such ruling also accepts (for the purposes of determining if capital
gains are generated) the amendment of the Deposit Agreement by the parties
thereto setting forth that the acquisition value of the Common Shares resulting
from an exchange of ADS should be the price registered in the relevant invoice
issued by the stock broker through whom the sale of such Common Shares took
place, provided, however, that such sales price is determined within no more
than two Santiago business days prior to the date on which the conversion of ADS
into Common Shares and the subsequent transfer of such Common Shares are
recorded.

     Any gains on the sale or transfer of common shares will not be subject to
any Chilean tax, regardless of whether the seller performs such operations in a
regular basis or not. The gains obtained on the sale or transfer of common
shares which had presence at the stock exchange no more than 90 days prior to
the date of the operation, given that


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the operation is carried at a Chilean stock exchange, at a foreign stock
exchange authorized by the regulating body of the country, or in a public
offering ruled by Title XXV of the Securities Market Law.

     Disposition of preemptive rights

     Amounts received in exchange for the sale or assignment of preemptive
rights relating to Common Shares will be subject to both the First Category Tax
and the Withholding Tax (the former being creditable against the latter to the
extent described above) as it is considered "normal" income and is taxed
accordingly.

   Other Chilean Taxes

     There are no Chilean inheritance, gift or succession taxes applicable to
the ownership, transfer or disposition of the ADS by a Foreign Holder, but such
taxes generally will apply to the transfer at death or by gift of Common Shares
by a Foreign Holder. There are no Chilean stamp, issue, registration or similar
taxes or duties payable by Foreign Holders of ADS or Common Shares.

   Withholding Tax Certificates

     Upon request, we will provide to Foreign Holders appropriate documentation
evidencing the payment of the Chilean Withholding Tax (net of applicable First
Category Tax).

   U.S. Federal Income Tax Considerations

     The following is a discussion of material U.S. federal income tax
consequences of purchasing, owning and disposing of Common Shares or ADSs, but
it does not purport to be a comprehensive description of all of the tax
considerations that may be relevant to a particular person's decision to acquire
such securities. The discussion applies only if you hold Common Shares or ADSs
as capital assets for tax purposes and it does not address special classes of
holders, such as:

     o    certain financial institutions;

     o    insurance companies;

     o    dealers and traders in securities or foreign currencies;

     o    persons holding Common Shares or ADSs as part of a hedge, straddle or
          conversion transaction;

     o    persons whose functional currency for U.S. federal income tax purposes
          is not the U.S. dollar;

     o    partnerships or other entities classified as partnerships for U.S.
          federal income tax purposes;

     o    persons liable for the alternative minimum tax;

     o    tax-exempt organizations;

     o    persons holding Common Shares or ADSs that own or are deemed to own
          more than ten percent of any class of our stock; or

     o    persons who acquired our ADSs or Common Shares pursuant to the
          exercise of any employee stock option or otherwise as compensation.

     This discussion is based on the Internal Revenue Code of 1986, as amended,
administrative pronouncements, judicial decision and final, temporary and
proposed Treasury regulations, all as currently in effect. These laws are
subject to change, possibly on a retroactive basis. It is also based in part on
representations by the Depositary and assumes that each obligation under the
Deposit Agreement and any related agreement will be performed in accordance with
its terms. Please consult your own tax advisers concerning the U.S. federal,
state, local and foreign


                                      117
<PAGE>

tax consequences of purchasing, owning and disposing of Common Shares or ADSs in
your particular circumstances.

     The discussion below applies to you only if you are a beneficial owner of
Common Shares or ADSs and are, for U.S. federal tax purposes:

     o    a citizen or resident of the United States;

     o    a corporation, or other entity taxable as a corporation, created or
          organized in or under the laws of the United States or any political
          subdivision thereof; or

     o    an estate or trust the income of which is subject to U.S. federal
          income taxation regardless of its source.

     In general, if you hold ADSs, you will be treated as the holder of the
underlying shares represented by those ADSs for U.S. federal income tax
purposes. Accordingly, no gain or loss will be recognized if you exchange ADSs
for the underlying shares represented by those ADSs.

     The U.S. Treasury has expressed concerns that parties to whom ADSs are
released may be taking actions that are inconsistent with the claiming of
foreign tax credits for United States holders of ADSs. Accordingly, the analysis
of the creditability of Chilean taxes described below could be affected by
future actions that may be taken by the U.S. Treasury.

   Taxation of Distributions

     Distributions paid on ADSs or Common Shares, other than certain pro rata
distributions of common shares, will be treated as a dividend to the extent paid
out of current or accumulated earnings and profits (as determined under United
States federal income tax principles). Under recently enacted legislation,
dividends received by noncorporate U.S. Holders on ADSs or Common Shares may be
subject to U.S. federal income tax at lower rates than other types of ordinary
income if certain conditions are met. You should consult your own tax advisers
regarding the implications of this new legislation in your particular
circumstances. The amount of the dividend will include any amounts withheld by
us or our paying agent in respect of Chilean taxes. The amount of the dividend
will be treated as foreign source dividend income to you and will not be
eligible for the dividends received deduction generally allowed to U.S.
corporations under the Code. Such dividends will constitute passive income for
foreign tax credit purposes.

     Dividends paid in Chilean pesos will be included in your income in a U.S.
dollar amount calculated by reference to the exchange rate in effect on the date
of your (or in the case of ADSs, the depositary's) receipt of the dividend,
regardless of whether the payment is in fact converted into U.S. dollars. If the
dividend is converted into U.S. dollars on the date of receipt, you generally
should not be required to recognize foreign currency gain or loss in respect of
the dividend income. You may have foreign currency gain or loss if you do not
convert the amount of such dividend into U.S. dollars on the date of its
receipt.

     Chilean taxes withheld from dividends on Common Shares or ADSs will be
creditable against your U.S. federal income tax liability, subject to applicable
limitations that may vary depending upon your circumstances. Instead of claiming
a credit, you may, at your election, deduct such Chilean taxes in computing your
taxable income, subject to generally applicable limitations under U.S. law. You
should consult your own tax advisers to determine whether you are subject to any
special rules that limit your ability to make effective use of foreign tax
credits.

   Sale and Other Disposition of Common Shares or ADSs

     For U.S. federal income tax purposes, gain or loss you realize on the sale
or other disposition of Common Shares or ADSs will be capital gain or loss, and
will be long-term capital gain or loss if you held the Common Shares or ADSs for
more than one year. The amount of your gain or loss will be equal to the
difference between your tax basis in the Common Shares or ADSs disposed of and
the amount realized on the disposition. Such gain or loss will generally be U.S.
source gain or loss for foreign tax credit purposes. Consequently, any Chilean
taxes


                                      118
<PAGE>

imposed on gain from Common Shares or ADSs (except for ADSs that are disposed of
outside of Chile) may not be creditable against your U.S. federal income tax
liability.

   Passive Foreign Investment Company Rules

     Based on proposed Treasury regulations, which are proposed to be effective
for taxable years after December 31, 1994, we believe that we will not be
considered a "passive foreign investment company" ("PFIC") for United States
federal income tax purposes for 2002. However, since PFIC status depends upon
the composition of a company's income and assets and the market value of its
assets (including, among others, less than 25 percent owned equity investments)
from time to time, there can be no assurance that we will not be considered a
PFIC for any taxable year. If we were treated as a PFIC for any taxable year
during which you held an ADS or a Common Share, certain adverse consequences
could apply to you.

     If we are treated as a PFIC for any taxable year, gain recognized by you on
a sale or other disposition of an ADS or Common Share would be allocated ratably
over your holding period for the ADS or Common Share. The amounts allocated to
the taxable year of the sale or other exchange and to any year before the
Company became a PFIC would be taxed as ordinary income. The amount allocated to
each other taxable year would be subject to tax at the highest rate in effect
for individuals or corporations, as appropriate, and an interest charge would be
imposed on the amount allocated to such taxable year. Further, any distribution
in respect of ADSs or Common Shares in excess of 125 percent of the average of
the annual distributions on ADSs or Common Shares received by you during the
preceding three years or your holding period, whichever if shorter, would be
subject to taxation as described above. Certain elections (including a mark to
market election) may be available to you that may mitigate the adverse
consequences of PFIC status.

   Information Reporting and Backup Withholding

     Payment of dividends and sales proceeds that are made within the United
States or through certain U.S.-related financial intermediaries generally are
subject to information reporting and to backup withholding unless (i) you are a
corporation or other exempt recipient, or (ii) you provide a correct taxpayer
identification number and certify that you are not subject to backup
withholding.

     The amount of any backup withholding from a payment to you will be allowed
as a credit against your United States federal income tax liability and may
entitle you to a refund, provided that the required information is furnished to
the Internal Revenue Service.

     F.   Dividends and Paying Agents

     Not applicable.

     G.   Statement by Expert

     Not applicable.

     H.   Documents on Display

     We file annual and special reports and other information with the SEC. You
may read and copy any document we file at the Public Reference Room o the SEC at
450 Fifth Street, N.W., Washington, DC 20549. You may obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. You
may also inspect our filings at the regional offices of the SEC located at
Citicorp, 500 West Madison, Suite 1400, Chicago, Illinois 60661. You may request
a copy of these filings by writing or telephoning the offices of BBVA in New
York, 1345 Avenue of the Americas, 45th Floor, New York, NY 10105. BBVA's
telephone number is (212) 728-1660.


                                      119
<PAGE>

Item 11.  Quantitative and Qualitative Disclosures About Market Risk

General

     Through our normal operations, we are exposed to a number of risks, the
most significant of which are market risk, liquidity risk, credit risk and
operational risk. Management of these risks is a process which involves
different levels of our organization and covers a wide range of policies. The
extent to which we properly and effectively identify and manage our risk is
critical to our profitability. Risk management seeks to optimize the
relationship between risk and reward and to limit the possible maximum absolute
loss. For a discussion of our risk management policies and Chilean regulation on
managing market risk in the banking sector, see "Business Overview-Chilean
Regulation and Supervision", "Business Overview-Selected Statistical
Information" and "Operating and Financial Review and Prospects-Asset and
Liability Management".

Market Risk

     Market risk is the risk that changes in interest rates, currency exchange
or bond prices will have an adverse impact on our earnings, cash flows or the
fair values of our assets, liabilities or off-balance sheet positions. We are
exposed to market risk in both our trading and non-trading activities.

     Trading Risk

     The estimation of potential losses that could arise from reasonably likely
adverse changes in market conditions is the key element of managing market risk.
As of 2002 we have installed institutional tools that enable us to use the value
at risk methodology ("VAR"). VAR is an estimate (made with a given confidence
interval) of the maximum potential loss in the fair or market value of a certain
instrument or portfolio likely to occur over a specified time period, or "time
horizon," if that portfolio were held unchanged for that time period. This
methodology is based on statistical methods that take into account numerous
variables that may cause a change in the value of BBVA Chile's portfolios,
including interest rates, foreign exchange rates, securities prices and
volatility and any correlations among the foregoing.

     Additionally, we are involved in a continuous process of improvement of our
systems, in order to adapt them to the latest methodological advances in market
risks measurement and control.

     Our VAR estimates provide us with a consistent and uniform measure of
market risk in our trading portfolios. VAR uses historical movements in these
variables to estimate reasonably likely potential losses in trading activities
assuming normal market conditions and market liquidity. The historical
observation involves constructing a distribution of hypothetical daily changes
in trading portfolio value. These hypothetical changes are based on daily
observed percentage changes in key market indices or other market factors to
which the portfolio may be sensitive. Our VAR analysis is updated regularly by
recalculating the historic volatilities and correlations that serve as the basis
for this analysis. In the case of our VAR analysis, the period for estimating
risk factors is approximately two years and we assume a one-day holding period
and adverse market movements of 2.33 standard deviations as the standard for
risk measurement and comparison. This range approximates a 99% one-tailed
confidence interval. For a given portfolio, this implies that changes in market
value are statistically likely to deviate adversely from VAR estimates
approximately 1% of the time or one day out of 100 days. The volatility and
correlation used in the calculation process are obtained by the technique known
as "exponential smooth," which confers a higher relative weight to the last
historical data considered within the one-year series.

     We use VAR as a tool to estimate and limit market risks related to all of
our trading activities. Two types of limits will be used to seek to control
market risk arising from our trading activities: limits based on VAR and
stop-loss. Currently the limit based on VAR is at $1,800 million (US$2.5
million). Limits on particular portfolios, products and individual traders are
established within each business. The VAR model incorporates numerous variables
that could impact the fair value of our trading portfolio, as well as
correlations that exist among these variables. It takes into account linear and
non-linear exposures to price and interest rate risk and linear exposure to
implied volatility risks.


                                      120
<PAGE>

     Non-Trading Risk

     Our principal non-trading market risks are interest rate, foreign exchange
and equity price risk.

     Interest Rate Risk. Interest rate risk arises as a result of timing
differences on the re-pricing of the assets and liabilities, unexpected changes
in the slope and shape of yield curves and changes in correlation of interest
rates between different financial instruments. Exposure to interest rate
movements arises when there is a mismatch between interest rate sensitive assets
and liabilities.

     Currency Risk. Currency risk arises as a result of our having assets,
liabilities and off-balance sheet items that are denominated in currencies other
than Chilean pesos and Unidades de Fomento, either as a result of trading or in
the normal course of banking activities including investments. The most
significant currency in which we have transactions is the U.S. dollar. Exposure
to exchange rate movements is controlled by ensuring that mismatches are managed
and monitored by individual business divisions.

     For a discussion of our trading and non-trading interest rate risk, foreign
currency risk and market price risk of our bonds portfolio, see "Operating and
Financial Review and Prospects-Asset and Liability Management" and "Business
Overview-Selected Statistical Information".

Liquidity Risk

     Liquidity risk is the risk that we might be unable to meet payment
obligations and potential payment obligations when they fall due without
incurring unacceptable losses and that asset commitments cannot be funded on an
economic basis over their life. Liquidity management seeks to ensure that we
have access to funds necessary to cover client needs, maturing liabilities and
capital requirements, even under adverse market conditions. See "Operating and
Financial Review and Prospects-Asset and Liability Management-Liquidity and
Funding".

Credit Risk

     We have drawn up a system to measure credit risk both at the level of
operation as well as the level of the whole loan portfolio. For a discussion of
our credit risk, see "Business Overview--Selected Statistical Information".

Operational Risk

     Operational risk can result from any of the following: failures to obtain
proper internal authorizations, failure to properly document transactions,
equipment failures, fraud, inadequate training or errors by employees. Losses
that are characterized as operational include, but are not limited to the
following examples: losses due to a failure of internal controls, personnel
unavailability or injury and external events including natural disasters or the
failure of external systems. We manage these risks with internal rules based on
tolerance limits for operational failures set by management. Legal risk includes
the possibility that transactions may not be enforceable under applicable law or
regulation and also the possibility that changes in law or regulation could
adversely affect our position. The risk is greater with respect to derivative
financial instruments, as applicable law and regulation is relatively recent and
in some cases incomplete. We manage legal risk by seeking to ensure that
transactions are properly authorized and by submitting new or unusual
transactions to our legal advisors for review.


Item 12.   Description of Securities Other than Equity Securities

     Not applicable.


                                     PART II


Item 13.   Defaults, Dividend Arrearages and Delinquencies

     None.


                                      121
<PAGE>


Item 14.   Material Modifications to the Rights of Security Holders and Use of
Proceeds

     None.


Item 15.   Controls and Procedures

     Within the 90 day period prior to the filing of this report, we have
carried out an evaluation of the effectiveness of the design and operation of
the Bank's disclosure controls and procedures, which are defined as those
controls and procedures designed to ensure that information required to be
disclosed in reports filed under the Exchange Act is correctly recorded,
summarized and reported. As of the date of the evaluation, we have concluded
that the design and operation of these disclosure controls and procedures were
effective. No significant changes were made in our internal controls or in other
factors that could significantly affect these controls subsequent to the
evaluation.


Item 16A.  Audit Committee Financial Expert

     Not yet applicable.


Item 16B.  Code of Ethics

     Not yet applicable.


                                    PART III


Item 17.   Financial Statements

     Our financial statements have been prepared in accordance with item 18
hereof.


Item 18.   Financial Statements

     Reference is made to item 19 for a list of all financial statements filed
as a part of this Form 20F.


Item 19.   Exhibits

(a)  Index to Financial Statements and Schedules

     Report of independent accountants Audited consolidated financial
     statements:
     Consolidated balance sheets at December 31, 2001 and 2002 Consolidated
     statements of income for each of the three years in the
          period ended December 31, 2002
     Consolidated statements of cash flows for each of the three years in the
          period ended December 31, 2002
     Consolidated statements of  shareholders' equity
          for each of the three years in the period ended December 31, 2002
     Notes to the consolidated financial statements

(b)  Index to Exhibits


                                      122
<PAGE>

1.1*       Estatutos of Registrant, which serve as the Registrant's articles of
           incorporation and by-laws, together with an English translation.

1.2**      English translation of amendments to Estatutos of Registrant.

4.1***     Shareholders Agreement dated September 24, 1998

8.1****    List of Subsidiaries of BBVA Chile

12.1*****  Section 906 certification














--------
*     Incorporated by reference to our Registration Statement No. 333-4918 on
      Form F-1 filed with the Commission on June 17, 1996.
**    Incorporated by reference to our annual report on Form 20-F filed with the
      Commission on May 31, 1999.
***   Incorporated by reference to our Annual Report on Form 20-F for the fiscal
      year ended December 31, 1999.
****  Incorporated by reference to our Annual Report on Form 20-F from the
      fiscal year ended December 31, 2002.
***** Filed herewith.


                                       123
<PAGE>


                                    SIGNATURE

     Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the Registrant certifies that it meets all of the requirements for
filing on Form 20-F and has duly caused this Annual Report on Form 20-F to be
signed on its behalf by the undersigned, thereunto duly authorized, in Santiago,
Chile on June 30, 2003.


                                    Banco Bilbao Vizcaya Argentaria, Chile S.A.


                                    By:   /s/ Ramon Monell Valls
                                       -------------------------------------
                                       Name:  Ramon Monell Valls
                                       Title: Gerente General (CEO)

Dated: June 30, 2003


                                      124
<PAGE>


                                 CERTIFICATIONS

I, Ramon Monell Valls, certify that:

1.     I have reviewed this annual report on Form 20-F of Banco Bilbao Vizcaya
       Argentaria, Chile S.A.;

2.     Based on my knowledge, this annual report does not contain any untrue
       statement of a material factor omit to state a material fact necessary to
       make the statements made, in light of the circumstances under which such
       statements were made, not misleading with respect to the period covered
       by this annual report;

3.     Based on my knowledge, the financial statements, and other financial
       information included in this annual report, fairly present in all
       material respects the financial condition, results of operations and cash
       flows of the registrant as of, and for, the periods presented in this
       annual report;

4.     The registrant's other certifying officers and I are responsible for
       establishing and maintaining disclosure controls and procedures (as
       defined in Exchange Act Rules 13a- 14 and 15d-14) for the registrant and
       have:

       a)     designed such disclosure controls and procedures to ensure that
              material information relating to the registrant, including its
              consolidated subsidiaries, is made known to us by others within
              those entities, particularly during the period in which this
              annual report is being prepared;

       b)     evaluated the effectiveness of the registrant's disclosure
              controls and procedures as of a date within 90 days prior to the
              filing date of this annual report (the "Evaluation Date"); and

       c)     presented in this annual report our conclusions about the
              effectiveness of the disclosure controls and procedures based on
              our evaluation as of the Evaluation Date;

5.     The registrant's other certifying officers and I have disclosed, based on
       our most recent evaluation, to the registrant's auditors and the audit
       committee of registrant's board of directors (or persons performing the
       equivalent function):

       a)     all significant deficiencies in the design or operation of
              internal controls which could adversely affect the registrant's
              ability to record, process, summarize and report financial data
              and have identified for the registrant's auditors any material
              weaknesses in internal controls; and

       b)     any fraud, whether or not material, that involves management or
              other employees who have a significant role in the registrant's
              internal controls; and

6.     The registrant's other certifying officers and I have indicated in this
       annual report whether or not there were significant changes in internal
       controls or in other factors that could significantly affect internal
       controls subsequent to the date of our most recent evaluation, including
       any corrective actions with regard to significant deficiencies and
       material weaknesses.

Date: June 26, 2003

/s/ Ramon Monell Valls
-------------------------

Gerente General (CEO)
---------------------


                                      125
<PAGE>


                                 CERTIFICATIONS

I, Salvador Milan Alcaraz, certify that:

1.     I have reviewed this annual report on Form 20-F of Banco Bilbao Vizcaya
       Argentaria, Chile S.A.;

2.     Based on my knowledge, this annual report does not contain any untrue
       statement of a material factor omit to state a material fact necessary to
       make the statements made, in light of the circumstances under which such
       statements were made, not misleading with respect to the period covered
       by this annual report;

3.     Based on my knowledge, the financial statements, and other financial
       information included in this annual report, fairly present in all
       material respects the financial condition, results of operations and cash
       flows of the registrant as of, and for, the periods presented in this
       annual report;

4.     The registrant's other certifying officers and I are responsible for
       establishing and maintaining disclosure controls and procedures (as
       defined in Exchange Act Rules 13a- 14 and 15d-14) for the registrant and
       have:

       a)     designed such disclosure controls and procedures to ensure that
              material information relating to the registrant, including its
              consolidated subsidiaries, is made known to us by others within
              those entities, particularly during the period in which this
              annual report is being prepared;

       b)     evaluated the effectiveness of the registrant's disclosure
              controls and procedures as of a date within 90 days prior to the
              filing date of this annual report (the "Evaluation Date"); and

       c)     presented in this annual report our conclusions about the
              effectiveness of the disclosure controls and procedures based on
              our evaluation as of the Evaluation Date;

5.     The registrant's other certifying officers and I have disclosed, based on
       our most recent evaluation, to the registrant's auditors and the audit
       committee of registrant's board of directors (or persons performing the
       equivalent function):

       a)     all significant deficiencies in the design or operation of
              internal controls which could adversely affect the registrant's
              ability to record, process, summarize and report financial data
              and have identified for the registrant's auditors any material
              weaknesses in internal controls; and

       b)     any fraud, whether or not material, that involves management or
              other employees who have a significant role in the registrant's
              internal controls; and

6.     The registrant's other certifying officers and I have indicated in this
       annual report whether or not there were significant changes in internal
       controls or in other factors that could significantly affect internal
       controls subsequent to the date of our most recent evaluation, including
       any corrective actions with regard to significant deficiencies and
       material weaknesses.

Date: June 26, 2003

/s/ Salvador Milan Alcaraz
---------------------------

Director Financiero (CFO)


                                      126
<PAGE>


                                BBVA BANCO BHIF

                       CONSOLIDATED FINANCIAL STATEMENTS

                                    CONTENTS


                                                                            Page
                                                                            ----

Report of independent accountants                                           F-2

Audited consolidated financial statements:

Consolidated balance sheets at December 31, 2001 and 2002                   F-4

Consolidated statements of income for each of the three years in the
  period ended December 31, 2002                                            F-6

Consolidated statements of cash flows for each of the three years
  in the period ended December 31, 2002                                     F-7

Consolidated statements of  shareholders' equity
  for each of the three years in the period ended December 31, 2002         F-8

Notes to the consolidated financial statements                              F-9


     Ch$  -  Chilean pesos
    MCh$  -  Millions of Chilean pesos
     US$  -  United States dollars
   ThUS$  -  Thousands of United States dollars
      UF  -  A UF is a daily-indexed, peso-denominated monetary unit. The UF
             rate is set daily in advance based on the previous month's
             inflation rate.

Applications of Constant Pesos

The above December 31, 2000, 2001 and 2002 consolidated financial statements
have been restated for general price-level changes and expressed in constant
Chilean pesos of December 31, 2002 purchasing power.


                                     F - 1
<PAGE>


REPORT OF INDEPENDENT ACCOUNTANTS


To the Board of Directors and Shareholders of
BBVA Banco BHIF


     We have audited the accompanying consolidated balance sheets of BBVA Banco
BHIF and its subsidiaries (the "Bank") as of December 31, 2001 and 2002 and the
related consolidated statements of income, of cash flows and of shareholders'
equity for each of the three years in the period ended December 31, 2002, all
expressed in millions of constant Chilean pesos. These financial statements are
the responsibility of the Bank's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

     We conducted our audits in accordance with auditing standards generally
accepted in both Chile and the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

     In our opinion, the consolidated financial statements present fairly, in
all material respects, the financial position of BBVA Banco BHIF and its
subsidiaries as of December 31, 2001 and 2002 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2002, in conformity with accounting principles generally accepted
in Chile and the rules of the regulatory agencies referred to in Note 1.



                                     F - 2
<PAGE>


To the Board of Directors and Shareholders of
BBVA Banco BHIF
2


     As described in Note 2, during the year ended December 31, 2002 the Bank
modified the accounting treatment of investments in mortgage finance bonds
issued by the Bank.

     Accounting principles generally accepted in Chile vary in certain
important respects from accounting principles generally accepted in the United
States of America and as allowed by Item 18 to Form 20 - F. The application of
the latter would have affected the determination of net income expressed in
Chilean pesos for each of the three years in the period ended December 31, 2002
and the determination of shareholders' equity and financial position also
expressed in Chilean pesos at December 31, 2001 and 2002 to the extent
summarized in Note 28 to the financial statements. The presentation of
financial statements for banks prepared in accordance with the requirements of
the Chilean regulatory authorities also differs significantly from the format
required by the United States Securities and Exchange Commission ("SEC").
Consolidated balance sheets at December 31, 2001 and 2002 and consolidated
statements of income for each of the three years in the period ended December
31, 2002, prepared in accordance with accounting principles generally accepted
in Chile, but using the format for bank financial statements specified by the
SEC, are shown in Note 27 to the financial statements.



/s/ PricewaterhouseCooper
Santiago, Chile
January 16, 2003


                                     F - 3
<PAGE>

                                BBVA BANCO BHIF

                          CONSOLIDATED BALANCE SHEETS

             Adjusted for general price-level changes and expressed
                in millions of constant Chilean pesos (MCh$) of
             December 31, 2002 and thousands of US dollars (ThUS$)

<TABLE>
                                                                                 At December 31,
                                                                     --------------------------------------
                ASSETS                                                  2001          2002          2002
                ------                                               ----------    ----------    ----------
                                                                        MCh$          MCh$          ThUS$
                                                                                                  Unaudited
                                                                                                  (Note 1 o)
<S>                                                                   <C>           <C>           <C>
CASH AND DUE FROM BANKS
      Non-interest bearing (Note 3) ..............................      145,973       284,463       399,314
      Interest bearing ...........................................       59,137        26,560        37,283
                                                                     ----------    ----------    ----------
            Total cash and due from banks ........................      205,110       311,023       436,597
                                                                     ----------    ----------    ----------

INVESTMENTS (Note 4)
      Government securities ......................................      187,653       287,787       403,980
      Investments purchased under agreements to resell ...........        9,579        56,055        78,687
      Investment collateral under agreements to repurchase .......      169,100       220,281       309,218
      Other investments ..........................................       23,934        81,757       114,766
                                                                     ----------    ----------    ----------
            Total investments ....................................      390,266       645,880       906,651
                                                                     ----------    ----------    ----------

LOANS, NET (Note 6)
      Commercial loans ...........................................      819,362       828,522     1,163,034
      Consumer loans .............................................      176,114       204,589       287,191
      Mortgage loans .............................................      241,456       253,489       355,834
      Foreign trade loans ........................................      148,856       233,522       327,805
      Interbank loans ............................................        1,033             -             -
      Lease contracts (Note 7) ...................................       66,013        83,731       117,537
      Other outstanding loans ....................................      282,488       368,690       517,547
      Past due loans .............................................       38,653        41,330        58,017
      Contingent loans ...........................................       67,184        84,691       118,885
      Allowance for loan losses (Note 8) .........................      (43,264)      (45,045)      (63,232)
                                                                     ----------    ----------    ----------
            Total loans, net .....................................    1,797,895     2,053,519     2,882,618
                                                                     ----------    ----------    ----------

OTHER ASSETS
      Assets received in lieu of payment .........................        8,918        15,446        21,682
      Bank premises and equipment (Note 9) .......................       57,566        55,668        78,144
      Investments in other companies (Note 10) ...................        1,083         1,159         1,627
      Other (Note 11a) ...........................................       83,023       113,509       159,338
                                                                     ----------    ----------    ----------
            Total other assets ...................................      150,590       185,782       260,791
                                                                     ----------    ----------    ----------
            Total assets .........................................    2,543,861     3,196,204     4,486,657
                                                                     ==========    ==========    ==========
</TABLE>

The accompanying Notes 1 to 28 form an integral part of these consolidated
financial statements.


                                     F - 4
<PAGE>


                                BBVA BANCO BHIF

                          CONSOLIDATED BALANCE SHEETS

             Adjusted for general price-level changes and expressed
                in millions of constant Chilean pesos (MCh$) of
             December 31, 2002 and thousands of US dollars (ThUS$)

<TABLE>
                                                                             At December 31,
                                                                 ---------------------------------------
      LIABILITIES AND SHAREHOLDERS' EQUITY                           2001          2002         2002
      ------------------------------------                       -----------   -----------   -----------
                                                                     MCh$          MCh$         ThUS$
                                                                                              Unaudited
                                                                                              (Note 1 o)
<S>                                                                <C>           <C>           <C>
DEPOSITS
     Non-interest bearing
        Current accounts .....................................       178,525       224,790       315,548
        Banker's drafts and other deposits ...................       143,986       233,011       327,088
                                                                 -----------   -----------   -----------
            Total non-interest bearing .......................       322,511       457,801       642,636
                                                                 -----------   -----------   -----------

     Interest bearing
        Saving accounts and time deposits ....................     1,102,821     1,454,684     2,042,005
                                                                 -----------   -----------   -----------
            Total deposits ...................................     1,425,332     1,912,485     2,684,641
                                                                 -----------   -----------   -----------

BORROWINGS (Note 12)
     Central Bank borrowings .................................        11,646         8,841        12,411
     Securities sold under agreements to repurchase ..........       172,624       255,565       358,748
     Mortgage finance bonds ..................................       239,816       250,999       352,339
     Other borrowings:
        Subordinated bonds ...................................        31,904        31,607        44,368
        Other bonds ..........................................        43,884        39,725        55,764
        Borrowings from domestic financial institutions ......        65,142        68,934        96,766
        Foreign borrowings ...................................       127,468       175,045       245,719
        Other obligations ....................................        40,472        37,980        53,314
                                                                 -----------   -----------   -----------
            Total borrowings .................................       732,956       868,696     1,219,429
                                                                 -----------   -----------   -----------

OTHER LIABILITIES
     Contingent liabilities (Note 11 c) ......................        67,117        85,457       119,960
     Other (Note 11 b) .......................................        68,248        72,431       101,674
                                                                 -----------   -----------   -----------
            Total other liabilities ..........................       135,365       157,888       221,634
                                                                 -----------   -----------   -----------

MINORITY INTEREST IN CONSOLIDATED
  SUBSIDIARIES ...............................................            88           113           159
                                                                 -----------   -----------   -----------

COMMITMENTS AND CONTINGENCIES (Note 15)
SHAREHOLDERS' EQUITY (Note 13)
     Capital .................................................       151,877       151,877       213,197
     Reserves ................................................        82,908        84,890       119,164
     Net income for the year .................................        15,335        20,255        28,433
                                                                 -----------   -----------   -----------
            Total shareholders' equity .......................       250,120       257,022       360,794
                                                                 -----------   -----------   -----------
            Total liabilities and shareholders' equity .......     2,543,861     3,196,204     4,486,657
                                                                 ===========   ===========   ===========
</TABLE>

The accompanying Notes 1 to 28 form an integral part of these consolidated
financial statements.


                                     F - 5
<PAGE>

                                BBVA BANCO BHIF

                       CONSOLIDATED STATEMENTS OF INCOME

           Expressed in millions of constant Chilean pesos (MCh$) of
             December 31, 2002 and thousands of US dollars (ThUS$)

<TABLE>
                                                                                    Year ended December 31,
                                                                      ----------------------------------------------------
                                                                         2000          2001          2002          2002
                                                                      ----------    ----------    ----------    ----------
                                                                         MCh$          MCh$          MCh$          ThUS$
                                                                                                                 Unaudited
                                                                                                                 (Note 1 o)
<S>                                                                      <C>           <C>           <C>          <C>
INTEREST REVENUE AND EXPENSE
      Interest revenue ............................................      225,990       218,194       216,464       303,860
      Interest expense ............................................     (145,911)     (124,852)     (107,450)     (150,832)
                                                                      ----------    ----------    ----------    ----------
            Net interest revenue ..................................       80,079        93,342       109,014       153,028
                                                                      ----------    ----------    ----------    ----------

PROVISION FOR LOAN LOSSES (Note 8) ................................      (24,459)      (31,556)      (31,316)      (43,960)
                                                                      ----------    ----------    ----------    ----------

INCOME FROM SERVICES, NET (Note 18)
      Income from services ........................................       16,635        22,282        26,334        36,966
      Services expenses ...........................................       (4,840)       (5,054)       (4,572)       (6,418)
                                                                      ----------    ----------    ----------    ----------
            Income from services, net .............................       11,795        17,228        21,762        30,548
                                                                      ----------    ----------    ----------    ----------

OTHER OPERATING INCOME, NET
      Gains on financial  instruments (Note 19) ...................        4,704        11,640        13,101        18,390
      Losses on financial instruments (Note 19) ...................         (753)       (3,086)       (6,961)       (9,771)
      Foreign exchange transactions, net ..........................        1,377        (4,162)      (14,335)      (20,123)
                                                                      ----------    ----------    ----------    ----------
            Total other operating income, net .....................        5,328         4,392        (8,195)      (11,504)
                                                                      ----------    ----------    ----------    ----------

OTHER INCOME AND EXPENSES
      Recovery of loans previously charged-off (Note 20) ..........        7,674         7,500         9,696        13,611
      Non operating income (Note 21) ..............................        2,866         3,948         4,776         6,704
      Non operating expenses (Note 21) ............................       (2,845)       (2,821)       (3,723)       (5,226)
      Participation in earnings (losses) of equity investments ....          (36)          (34)          116           163
                                                                      ----------    ----------    ----------    ----------
            Total other income and expenses .......................        7,659         8,593        10,865        15,252
                                                                      ----------    ----------    ----------    ----------

OPERATING EXPENSES
      Personnel salaries and expenses .............................      (28,555)      (33,099)      (33,118)      (46,489)
      Administrative and other expenses ...........................      (26,676)      (28,143)      (29,049)      (40,777)
      Depreciation and amortization ...............................       (6,843)      (10,053)      (12,992)      (18,237)
                                                                      ----------    ----------    ----------    ----------
            Total operating expenses ..............................      (62,074)      (71,295)      (75,159)     (105,503)
                                                                      ----------    ----------    ----------    ----------

LOSS FROM PRICE-LEVEL RESTATEMENT (Note 22) .......................       (5,388)       (4,464)       (4,164)       (5,845)
                                                                      ----------    ----------    ----------    ----------

MINORITY INTEREST IN CONSOLIDATED
   SUBSIDIARIES ...................................................          (20)          (24)          (34)          (48)
                                                                      ----------    ----------    ----------    ----------

INCOME BEFORE INCOME  TAXES .......................................       12,920        16,216        22,773        31,968
      Income taxes (Note 23) ......................................        1,984          (881)       (2,518)       (3,535)
                                                                      ----------    ----------    ----------    ----------
            Net income for the year ...............................       14,904        15,335        20,255        28,433
                                                                      ==========    ==========    ==========    ==========
</TABLE>

The accompanying Notes 1 to 28 form an integral part of these consolidated
financial statements.


                                     F - 6
<PAGE>


                                BBVA BANCO BHIF
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
           Expressed in millions of constant Chilean pesos (MCh$) of
             December 31, 2002 and thousands of US dollars (ThUS$)

<TABLE>
                                                                                                Year ended December 31,
                                                                                   ------------------------------------------------
                                                                                      2000         2001         2002         2002
                                                                                   ---------    ---------    ---------    ---------
                                                                                      MCh$         MCh$         MCh$         ThUS$
                                                                                                                           Unaudited
                                                                                                                          (Note 1 o)
<S>                                                                                  <C>          <C>          <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net income ..................................................................      14,904       15,335       20,255       28,433
   Adjustments to reconcile net income to net cash provided
     by operating activities:
      Depreciation and amortization ............................................       6,843       10,053       12,992       18,237
      Provision for loan losses ................................................      24,459       31,556       31,316       43,960
      Provision for assets received in lieu of payment .........................         746        1,027          678          952
      Net change in trading investments ........................................    (190,194)     150,079      (11,314)     (15,882)
      Minority interest in earnings of subsidiaries ............................          20           24           34           48
      Net gain (loss) on sales of bank premises and equipment ..................           2         (161)          (7)         (10)
      Net gain on sales of assets received in lieu of payment and leasing assets        (706)        (314)        (407)        (571)
      Recovery of assets received in lieu of payment previously charged - off ..        (685)        (775)        (806)      (1,131)
      Write-offs of assets received in lieu of payment .........................       1,048          540        1,405        1,972
      Price-level restatements .................................................       5,388        4,464        4,164        5,845
      Deferred income taxes ....................................................      (2,999)      (5,254)      (3,743)      (5,254)
      Other charges (credits) non representing cash flows ......................        (174)       1,872        2,138        3,001
      Net change in interest accruals ..........................................        (822)       3,410       (5,795)      (8,139)
      Net change in other assets and liabilities ...............................      12,194        5,629      (18,282)     (25,663)
                                                                                   ---------    ---------    ---------    ---------
            Net cash provided by (used in) operating activities ................    (129,976)     217,485       32,628       45,798
                                                                                   ---------    ---------    ---------    ---------

CASH FLOWS FROM INVESTING ACTIVITIES
   Net increase in loans .......................................................    (252,729)    (187,304)    (351,873)    (493,940)
   Purchases of investments ....................................................     (29,074)    (114,909)    (318,427)    (446,990)
   Proceeds from sales of investments ..........................................      49,110       49,196      140,224      196,839
   Dividends received from investments in  other companies .....................          91           89           50           70
   Additional investments in other companies ...................................         (55)        (362)         (15)         (22)
   Proceeds from sales of bank premises and equipment ..........................         103        1,849          108          152
   Purchases of bank premises and equipment ....................................     (11,590)      (8,368)      (4,920)      (6,907)
   Proceeds from sales of assets received in lieu of payment ...................       4,847        4,179        4,767        6,692
                                                                                   ---------    ---------    ---------    ---------
            Net cash used in investing activities ..............................    (239,297)    (255,630)    (530,086)    (744,106)
                                                                                   ---------    ---------    ---------    ---------

CASH FLOWS FROM FINANCING ACTIVITIES
   Net increase in current accounts ............................................       3,047       33,258       46,261       64,939
   Net increase in savings accounts and time deposits ..........................      61,608      166,954      347,765      488,173
   Net increase (decrease) in banker's drafts and other deposits ...............      33,958         (137)      90,610      127,194
   Net increase (decrease) in securities sold under agreements to repurchase ...     120,092      (85,270)      83,084      116,629
   Proceeds from issuance of mortgage finance bonds ............................      11,623       44,026       76,339      107,160
   Repayment of mortgage finance bonds .........................................     (28,526)     (40,536)     (58,046)     (81,481)
   Proceeds from Central Bank borrowings (long-term) ...........................       8,977            -            -            -
   Repayments of Central Bank borrowings (long-term) ...........................     (10,235)      (3,114)      (2,827)      (3,968)
   Net increase (decrease) in other short-term borrowings ......................     124,520      (17,432)      13,843       19,431
   Proceeds from bond issues ...................................................      22,550            -            -            -
   Repayment of bonds ..........................................................      (6,359)      (3,966)      (4,485)      (6,295)
   Proceeds from other long-term borrowings ....................................      13,900       22,362      134,779      189,196
   Repayment of other long-term borrowings .....................................     (18,222)     (14,332)    (100,819)    (141,524)
   Proceeds from issuance of shares ............................................      64,785            -            -            -
   Dividends paid ..............................................................      (9,519)     (15,636)     (14,930)     (20,958)
                                                                                   ---------    ---------    ---------    ---------
            Net cash provided by financing activities ..........................     392,199       86,177      611,574      858,496
                                                                                   ---------    ---------    ---------    ---------

NET INCREASE IN CASH AND DUE FROM BANKS ........................................      22,926       48,032      114,116      160,188
EFFECT OF INFLATION ON CASH AND CASH EQUIVALENTS ...............................     (10,308)      (7,421)      (8,203)     (11,513)
CASH AND DUE FROM BANKS, BEGINNING OF YEAR .....................................     151,881      164,499      205,110      287,921
                                                                                   ---------    ---------    ---------    ---------
CASH AND DUE FROM BANKS, END OF YEAR ...........................................     164,499      205,110      311,023      436,596
                                                                                   =========    =========    =========    =========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the year for:
      Interest .................................................................     129,032       58,303       30,706       43,104
      Income taxes paid ........................................................          83        4,808         (420)        (589)
</TABLE>

The accompanying Notes 1 to 28 form an integral part of these consolidated
financial statements.


                                     F - 7
<PAGE>


                                BBVA BANCO BHIF

                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

  Expressed in millions of constant Chilean pesos (MCh$) of December 31, 2002
                         (except for number of shares)

<TABLE>
                                                           Number
                                                         of shares                                 Net
                                                         issued and                             income for
                                                         fully paid     Capital     Reserves     the year      Total
                                                         -----------   ---------   ---------    ---------    ---------
                                                                          MCh$        MCh$         MCh$         MCh$
<S>                                                      <C>             <C>          <C>         <C>          <C>
Balances at January 1, 2000 (historical) .............   290,106,412     106,550      46,364        8,653      161,567
Dividend paid ........................................             -           -           -       (8,653)      (8,653)
Issuance of common shares ............................    71,115,615      30,967      29,830            -       60,797
Share issuance costs .................................             -           -        (751)           -         (751)
Market value adjustments of available
  for sale securities ................................             -           -         508            -          508
Price-level restatement ..............................             -       5,503       2,780            -        8,283
Net income for the year ..............................             -           -           -       14,035       14,035
                                                         -----------   ---------   ---------    ---------    ---------
Balances at December 31, 2000 ........................   361,222,027     143,020      78,731       14,035      235,786
                                                         ===========   =========   =========    =========    =========
Balance at December 31, 2000 restated in constant
 Chilean pesos of December 31, 2002 ..................                   151,877      83,608       14,904      250,389
                                                                       =========   =========    =========    =========

Balances at January 1, 2001 (historical) .............   361,222,027     143,020      78,731       14,035      235,786
Capitalization of undistributed earnings .............             -           -           2           (2)           -
Dividend paid ........................................             -           -           -      (14,033)     (14,033)
Market value adjustments of available for
  sale securities ....................................             -           -        (720)           -         (720)
Price-level restatement ..............................             -       4,434       2,480            -        6,914
Net income for the year ..............................             -           -           -       14,888       14,888
                                                         -----------   ---------   ---------    ---------    ---------
Balances at December 31, 2001 ........................   361,222,027     147,454      80,493       14,888      242,835
                                                         ===========   =========   =========    =========    =========
Balance at December 31, 2001 restated in constant
 Chilean pesos of December 31, 2002 ..................                   151,877      82,908       15,335      250,120
                                                                       =========   =========    =========    =========

Balances at January 1, 2002 (historical) .............   361,222,027     147,454      80,493       14,888      242,835
Capitalization of undistributed earnings .............             -           -           2           (2)           -
Dividend paid ........................................             -           -           -      (14,886)     (14,886)
Market value adjustments of available for
  sale securities ....................................             -           -       1,918            -        1,918
Price-level restatement ..............................             -       4,423       2,477            -        6,900
Net income for the year ..............................             -           -           -       20,255       20,255
                                                         -----------   ---------   ---------    ---------    ---------
Balances at December 31, 2002 ........................   361,222,027     151,877      84,890       20,255      257,022
                                                         ===========   =========   =========    =========    =========
</TABLE>

The accompanying Notes 1 to 28 form an integral part of these consolidated
financial statements.


                                     F - 8
<PAGE>

                                BBVA BANCO BHIF

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

             Expressed in millions of constant Chilean pesos (MCh$)
                   of December 31, 2002 (except as indicated)


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
---------------------------------------------------

a)  Basis of presentation

     BBVA Banco BHIF is a corporation organized under the laws of the Republic
of Chile whose stock is quoted on the Santiago Stock Exchange and the Chilean
Electronic Exchange and whose American Depositary Receipts ("ADR") are quoted
on the New York Stock Exchange (NYSE). It is regulated by the Chilean
Superintendencia de Bancos e Instituciones Financieras ("Superintendency of
Banks") and the United States Securities and Exchange Commission ("SEC").

     BBVA Banco BHIF provides a broad range of general banking services to
customers ranging from individuals to major corporations. BBVA Banco BHIF and
its subsidiaries (collectively the "Bank"), offer general commercial and
consumer banking services. The Bank's subsidiaries provide other services to
customers in Chile including securities and insurance brokerage, mutual fund
management, investment fund management, residential housing fund management and
financial advisory services.

     The consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in Chile and regulations of the
Superintendency of Banks (in the case of the bank and its residential housing
leasing and financial advisory services subsidiaries) and the Chilean
Superintendency of Securities and Insurance (in the case of the securities
brokerage and mutual fund, investment residential housing fund management and
insurance brokerage subsidiaries).

     The consolidated financial statements include BBVA Banco BHIF and its
majority-owned subsidiaries. The accounts of subsidiaries are included when the
Bank's ownership interest exceeds 50%. All significant intercompany
transactions and balances have been eliminated in consolidation. The
participation of minority shareholders in subsidiaries has been given effect in
the consolidated financial statements under Minority interest.

     The consolidated financial statements for the years 2000, 2001 and 2002
include the following subsidiaries:

<TABLE>
                                                               Percentage of ownership
                                                            ----------------------------
                                                             2000       2001       2002
                                                             ----       ----       ----
                                                              %           %          %
<S>                                                         <C>        <C>        <C>
BBVA  Corredores de Bolsa BHIF S.A. ...................     100.00      99.96     100.00
BHIF Administradora de Fondos de Inversion S.A. .......     100.00     100.00     100.00
BHIF Administradora de Fondos para la Vivienda S.A. ...     100.00     100.00     100.00
BBVA Sociedad de Leasing Inmobiliario BHIF S.A. .......      97.17      97.17      97.48
BHIF Asesorias y Servicios Financieros S.A. ...........      98.60      98.60      98.60
BBVA Administradora de Fondos Mutuos BHIF S.A. ........     100.00     100.00     100.00
BBVA Corredora Tecnica de Seguros BHIF Ltda ...........     100.00     100.00     100.00
</TABLE>


                                     F - 9
<PAGE>


                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

b)   Use of estimates in the preparation of financial statements

     The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

     In certain cases generally accepted accounting principles require that
assets or liabilities be recorded or disclosed at their fair values. The fair
value is the amount at which an asset could be bought or sold or in the case of
a liability could be incurred or settled in a current transaction between
willing parties, other than in a forced or liquidation sale. Where available
quoted market prices in active markets have been used as the basis for the
measurement, however, where quoted market prices in active markets are not
available the Bank has estimated such values based on the best information
available, including using modeling and other valuation techniques.

c)   Price-level restatements

     The consolidated financial statements are prepared on the basis of general
price-level accounting in order to reflect the effect of changes in the
purchasing power of the Chilean peso during each year. At the end of each
reporting period, the consolidated financial statements are restated in terms
of the general purchasing power of the Chilean peso using changes in the
Chilean consumer price index ("CPI") as follows:

-    Non monetary assets, liabilities and shareholders' equity accounts are
     restated in terms of year-end purchasing power.

-    Consistent with general banking practices in Chile, no specific purchasing
     power adjustments of income statement amounts are made.

-    Monetary items are not restated as such items are, by their nature, stated
     in terms of current purchasing power in the financial statements.

-    The price-level restatement credit or charge in the income statement
     represents the monetary gain or loss in purchasing power from holding
     monetary assets and liabilities exposed to the effects of inflation.

-    All the amounts contained in the accompanying consolidated financial
     statements have been restated in Chilean pesos of general purchasing power
     of December 31, 2002 ("constant pesos") applied under the "prior month
     rule", as described below, to reflect changes in the CPI from the
     financial statement dates to December 31, 2002. This updating does not
     change the prior years' statements or information in any way except to
     update the amounts to constant pesos of similar purchasing power.

     The general price-level restatements are calculated using the official CPI
of the Chilean National Institute of Statistics and are based on the "prior
month rule", in which the inflation adjustments at any balance sheet date are
based on the consumer price index at the close of the preceding month. The CPI
is considered by the business community, the accounting profession and the
Chilean government to be the index which most closely complies with the
technical requirement to reflect the variation in the general level of prices
in the country and, consequently, is widely used for financial reporting
purposes in Chile.


                                    F - 10
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The values of the CPI used for price-level restatement purposes are as follows:

                                                                Year-end
Year                               CPI*                       Change in CPI
----                               ----                       -------------
                                                                    %
2000 ........................     106.82 .................        4.7
2001 ........................     110.10 .................        3.1
2002 ........................     113.36 .................        3.0

* Index as of November 30 of each year, under the prior month rule described
above.

     The price-level adjusted consolidated financial statements do not purport
to represent appraised values, replacement cost, or any other current value of
assets at which transactions would take place currently and are only intended
to restate all non monetary financial statement components in terms of local
currency of a single purchasing power and to include in the net result for each
year the gain or loss in purchasing power arising from the holding of monetary
assets and liabilities exposed to the effects of inflation.

     For comparison purposes, the financial statements and their respective
notes are adjusted by the percentage changes in the CPI to December 31, 2002 as
follows:

Year                                                          Adjustment factor
----                                                          -----------------
2000..................................................               6.1   (1)
2001..................................................               3.0

(1)  Equivalent to the amounts for 2000, multiplied by the change in the CPI
     for 2001 and then by the change in the CPI for 2002.

d)   Index-linked assets and liabilities

     Certain of the Bank's interest-earning assets and interest-bearing
liabilities are expressed in index-linked units of account. The principal
index-linked unit used in Chile is the Unidad de Fomento (UF), a unit of
account which changes daily from the ninth day of the current month to the
tenth day of the next month, to reflect the changes in the Chilean CPI over the
previous month. The carrying amounts of such assets and liabilities change with
the changes in the UF and serve to offset the price-level restatement gains or
losses from holding such assets and liabilities. As the Bank's UF assets exceed
its UF liabilities, any increase in the index results in a net gain on
indexation. Values for the UF as of December 31 of each year are as follows in
historical Chilean pesos:

Year                                                                    Ch$
----                                                                    ---
2000.........................................................        15,769.92
2001.........................................................        16,262.66
2002.........................................................        16,744.12


                                    F - 11
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


e)   Interest revenue and expense recognition

     Interest revenue and expense are recognized on the accrual basis using the
effective interest method. The carrying amounts of loans, investments and
liabilities include accrued interest and the indexation adjustment applicable
to balances that are denominated in UFs or other indices. The effect of changes
in the UF index on interest-earning assets and interest-bearing liabilities is
reflected in the income statement as an increase or decrease in interest
revenue or expense.

     The Bank suspends the accrual of interest and indexation adjustment of
principal on loans beginning on the first day that such loans are overdue and
on amounts not yet due for loans on which any installments of principal or
interest are 90 days overdue. Interest accrued prior to the loan becoming
overdue remains on the Bank's books and is considered to be a part of the loan
balance when determining the allowance for loan losses. Payments received on
overdue loans are first applied to reduce the recorded balance of accrued
interest receivable, if any, and thereafter are recognized as income to the
extent of interest earned but not recorded.

f)   Assets and liabilities in foreign currency and foreign currency
     transactions

     The Bank makes loans and accepts deposits in amounts denominated in
foreign currencies, principally the US dollar. Such assets and liabilities are
translated at the applicable rate of exchange at each balance sheet date.

     Foreign exchange transactions, net, in the consolidated statements of
income include the recognition of the effects that variations in the exchange
rates have on assets and liabilities denominated in foreign currencies and the
gains or losses on foreign exchange spot and forward transactions (see Note 1
h) undertaken by the Bank.

g)   Investments

     Investments which have a secondary market are carried at market value,
except for investments held by the brokerage and other subsidiaries which are
carried at the lower of cost or market value. Instructions issued by the
Superintendency of Banks require market value adjustments to be made against
income, except in the case of securities available for sale, in which case the
adjustments are made directly against the equity account "Market value
adjustments of available for sale securities" included in Reserves. All other
investments are carried at cost plus accrued interest and UF indexation
adjustment, as applicable.

     The Bank enters into repurchase agreements as a form of borrowing. In this
regard, the Bank's investments which are sold subject to a repurchase
obligation and which serve as collateral for the borrowing are reclassified as
"Investment collateral under agreements to repurchase". The liability to
repurchase the investments is classified as "Securities sold under agreements
to repurchase".

     The Bank also enters into resale agreements as a form of investment. Under
these agreements, the Bank purchases securities which are included as an asset
under the caption "Investments purchased under agreements to resell".


                                    F - 12
<PAGE>


                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


h)   Derivatives

     The Bank enters into foreign exchange forward contracts for its own
account and the accounts of its customers. The Bank's forward contracts, held
for trading or hedging purposes, are valued at the spot rate of exchange at the
balance sheet date and the resulting gains or losses are recognized in income;
the discount or premium on a forward contract is included in net income over
the life of the forward contract.

     The Bank entered into interest rate swap agreements to hedge part of its
investment portfolio. These agreements are recorded on balance sheet at
estimated fair market values. Unrealized gains or losses are credited or
charged to income for those agreements that are designated by the Bank's
management as hedges of part of the investment portfolio classified as trading.
In the case of the interest rate swap agreements designated by the Banks'
management as hedges of part of the investment portfolio classified as
permanent investments, unrealized gains and losses are credited or charged to
shareholders' equity.

     The Bank's brokerage subsidiary enters into financial futures as part of
its portfolio management and trading activities. Financial futures contracts
are valued at their estimated market values. Gains on such contracts are
generally recognized when the transactions are closed and losses are recognized
immediately as incurred. However, gains are also recognized in income to the
extent of any previously recognized losses.

i)   Bank premises and equipment

     Bank premises and equipment are stated at acquisition cost net of
accumulated depreciation and have been restated for price-level changes.
Depreciation is calculated using the straight-line method over the estimated
useful lives of the underlying assets.

     The cost of maintenance and repairs is charged to income. The cost of
significant renovations and improvements is capitalized.

j)   Investments in other companies

     Investments in companies which are integral to the operations of the Bank
and where the Bank holds a less than majority interest are principally
accounted for under the equity method. Other minority investments are carried
at cost restated for price-level changes.


                                    F - 13
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


k)   Allowance for loan losses, charge-offs and recoveries

     The Bank has established allowances to cover possible loan losses in
accordance with regulations issued by the Superintendency of Banks. In general,
the Bank is required to maintain a minimum allowance for loan losses based on
the greater of the global loan loss allowance and the individual loan loss
allowance.

     Global loan loss allowance

     A global loan loss allowance is calculated by multiplying the Bank's
outstanding loans by the greater of its "risk index" and 0.75%. The Bank's risk
index is based upon a classification of a portion of its customers' outstanding
loans into five categories based upon risk of loss for commercial loans and
overdue status for consumer and residential mortgage loans. The loan
classification guidelines of the Superintendency of Banks require that the Bank
classify the greater of (i) the commercial loans outstanding to its 400 largest
debtors or (ii) the commercial loans outstanding to the number of its largest
debtors whose commercial loans aggregate at least 75% of the total amount of
loans included in the commercial loan portfolio. Such guidelines also require
that the Bank classify its entire portfolio of consumer and residential
mortgage loans.

     Once the customers' outstanding loans have been classified, specified
percentage allowances for each category are applied. The resulting weighted
average allowance rate is the risk index utilized in the calculation of the
global loan loss allowance.

     Also in accordance with regulations of the Superintendency of Banks, the
risk index calculated for the classified loans must also be applied to the
non-classified commercial loan portfolio.

     All consumer loans to an individual are classified in the same category as
the loan with the lowest classification (i.e., highest level of risk and
provision requirements).

     Individual loan loss allowance

     Once a loan becomes overdue for more than 90 days, a specific allowance is
calculated for 100% of the uncollateralized portion of the loan. Individual
loan loss allowances must be determined separately for the classified and
nonclassified loan portfolios, but are required only to the extent that, in the
aggregate, they exceed the global loan loss allowance for each portfolio.


                                    F - 14
<PAGE>


                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


     Voluntary loan loss allowance

     The Bank has recorded in 2001 and 2002 voluntary allowances in addition to
those required by the regulations of the Superintendency of Banks. The Bank has
adopted this policy in an effort to provide for any losses that could affect
its loan portfolio and that might arise from unforeseen circumstances beyond
known potential losses and losses inherent in a portfolio of the size and
nature of the Bank's portfolio. At December 31, 2001 and 2002 these voluntary
allowances amounted to MCh$ 3,681 and MCh$ 2,913, respectively. The effects of
this provision for loan losses in the consolidated statement of income are MCh$
5,463 MCh$ (3,681) and MCh$ 660 for the years ended December 31, 2000, 2001 and
2002, respectively.

     Charge-offs and recoveries

     In accordance with the regulations of the Superintendency of Banks,
commercial and mortgage loans must be charged-off no later than when they are
contractually past due 24 months (for loans without collateral) and 36 months
(for loans with collateral). The Bank will also charge-off commercial loans
prior to the meeting of this criteria when the Bank no longer considers such
loans to be collectible.

     Consumer loans must be charged off no later than when overdue for six
months.

     Charge-offs on loans are taken against the allowance for loan losses and
recoveries on charged-off loans are recorded directly to income.

     Assets received in lieu of payment of loans are carried at market value

l)   Income taxes

     Current income tax is recorded on an accrual basis in conformity with
current income tax legislation.

     Deferred taxes for temporary differences between the tax and financial
balance sheets are recorded on an accrual basis, in accordance with Technical
Bulletin No. 60 of Chilean Institute of Accountants, applied on a prospective
basis as from January 1, 1999. Calculation of deferred income taxes in 2001 and
2002 has been recorded against income during the year and includes the effect
of changes in the income tax rate, which increased from 15% in 2001 to 16% in
2002 and will increase progressively to 16.5% in 2003, and 17.0% in 2004, based
on the tax rate corresponding to the estimated period in which the timing
differences will reverse.

m)   Statement of cash flows

     For purposes of reporting cash flows, cash and cash equivalents include
cash and due from banks.

n)   Business combinations

     In accordance with Chilean GAAP for banks, assets acquired and liabilities
assumed in a business combination are included in the consolidated financial
statements of the acquirer at their net book value on the date of acquisition.
The difference between the purchase price and the net book value of the assets
and liabilities acquired is considered to be goodwill and is amortized on a
straight-line basis over a period not exceeding ten years.


                                    F - 15
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


o)   Convenience translation to US dollars (unaudited)

     The Bank maintains its accounting records and prepares its financial
statements in Chilean pesos. The US dollar amounts disclosed in the
accompanying consolidated financial statements are presented solely for the
convenience of the reader at the December 31, 2002 Observed Exchange Rate of
Ch$ 712.38 per US$ 1.00 which is the year end exchange rate used by financial
institutions in Chile. This translation should not be construed as a
representation that the Chilean peso amounts actually represent, or have been,
or could be converted into US dollars at that or any other exchange rate.

p)   Reclassifications

     Certain balances from prior years have been reclassified to conform with
the current year presentation.


NOTE 2 - ACCOUNTING CHANGES
---------------------------

     On October 7, 2002, the Superintendency of Banks issued Circular No. 3,196
which requires mortgage finance bonds issued by the Bank to be presented net of
its corresponding liability. Until December 31, 2001, mortgage finance bonds
issued by the Bank were considered permanent investment securities and
classified under the caption Other financial investments. To conform with
current year presentation, outstanding Mortgage finance bonds issued as of
December 31, 2001, have also been presented net of its corresponding liability.

NOTE 3 - CASH AND DUE FROM BANKS
--------------------------------

     In accordance with the rules of the Superintendency of Banks, the Bank
must maintain certain non-interest bearing balances on deposit with the Central
Bank. The required balances are based upon specified financial criteria,
including the amounts of foreign borrowings and average liabilities.


                                    F - 16
<PAGE>


                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


NOTE 4 - INVESTMENTS
--------------------

     Investments are summarized as follows:

<TABLE>
                                                                          December 31,
                                                                        2001       2002
                                                                      --------   --------
                                                                        MCh$       MCh$
<S>                                                                    <C>        <C>
Government securities
      Central Bank securities .....................................    187,653    287,787

Investments purchased under agreements to resell ..................      9,579     56,055

Investment collateral under agreements to repurchase
      Central Bank securities .....................................    147,814    203,577
      Time deposits in Chilean financial institutions .............     21,286     16,704
                                                                      --------   --------
                                                                       169,100    220,281
                                                                      --------   --------
Other investments
      Negotiable time deposits in Chilean financial institutions ..     15,589     43,353
      Other marketable securities .................................      8,345     38,404
                                                                      --------   --------
                                                                        23,934     81,757
                                                                      --------   --------
            Total investments .....................................    390,266    645,880
                                                                      ========   ========
</TABLE>

     For investments stated at market value, there were net unrealized holding
gains (losses) of MCh$ 351, MCh$ 441 and MCh$ (986) included in the statements
of income for the years ended December 31, 2000, 2001 and 2002, respectively.
The adjustment for the Bank's permanent investments resulted in a charge to
equity of MCh$ 742 and a credit to equity of MCh$ 1,918 at December 31, 2001
and 2002, respectively.

NOTE 5 - DERIVATIVE FINANCIAL INSTRUMENTS
-----------------------------------------

     The Bank and its brokerage subsidiary enter into derivative transactions
as part of their asset and liability management (which include contracts for
hedging purposes) and trading activities and in acting as dealers to satisfy
their clients' needs. The notional amounts of these contracts are carried
off-balance-sheet.

a)   Forward contract and futures

     Foreign exchange forward contracts involve an agreement to exchange the
currency of one country for the currency of another country at an agreed-upon
price and settlement date. These contracts are generally standardized
contracts, normally for periods between 1 and 180 days and are not traded in a
secondary market; however, in the normal course of business and with the
agreement of the original counterparty, they may be terminated or assigned to
another counterparty.

     When the Bank enters into a forward exchange contract it analyzes and
approves the credit risk (the risk that the counterparty might default on its
obligation). Subsequently, on an ongoing basis, it monitors the possible losses
involved in each contract. To manage the level of credit risk, the Bank deals
with counterparties of good credit standing, enters into master netting
agreements whenever possible and, when appropriate, obtains collateral.


                                    F - 17
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


     The Central Bank requires that foreign exchange forward contracts be made
only in US dollars and other major foreign currencies. In the case of the Bank,
most forward contracts are made in US dollars against the Chilean peso or the
UF. From time to time, forward contracts are also made in other currencies, but
only when the Bank acts as an intermediary.

The movement and balances of the notional amounts of foreign exchange forward
contracts during the years 2001 and 2002 are as shown below. The notional
amounts of these contracts, which are not included in the consolidated balance
sheet, significantly exceed the amount of potential credit risk.

<TABLE>
                                                      Year ended December 31,
                                       ----------------------------------------------------
                                                 2001                        2002
                                       ------------------------    ------------------------
                                          Asset      Liability        Asset      Liability
                                        position      position      position      position
                                        (forward      (forward      (forward      (forward
                                       purchased)      sales)      purchased)      sales)
                                       ----------    ----------    ----------    ----------
                                          MCh$          MCh$          MCh$          MCh$
<S>                                    <C>           <C>           <C>           <C>
Balance at January 1 ...............      209,819       297,882       303,271       390,057
New contracts ......................    1,816,669     1,781,868     1,842,678     2,312,105
Terminated and matured contracts ...   (1,746,589)   (1,722,873)   (1,855,735)   (2,108,856)
Foreign exchange adjustment ........       23,372        33,180        16,374        21,060
                                       ----------    ----------    ----------    ----------
Balance at December 31 .............      303,271       390,057       306,588       614,366
                                       ==========    ==========    ==========    ==========
</TABLE>

     Accounting polices followed for derivatives are shown in Note 1 h).
Unrealized gains, losses, premiums and discounts arising from foreign exchange
forward contracts are shown on a net basis under Other assets or Other
liabilities (see Note 12).


                                    F - 18
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


b)   Interest rate swaps

     The table below presents outstanding swaps at December 31, 2002 by
expected maturity of principal. Variable interest rates presented are based on
the London Interbank Offered Rate (LIBOR) in effect on the swaps at period-end.
The table was prepared under the assumption that these variable interest rates
remain constant. The variable rates to be received or paid will change to the
extent that rates fluctuate.

                                                             During de year
                                                        ending December 31,
                                                        -------------------
                                                                   MCh$

Pay fixed swaps
  Notional amounts:
    2003......................................................         -
    2004......................................................    58,415
    2005......................................................    11,398
    2006......................................................    24,933
    2007 and thereafter.......................................    75,579
                                                               ---------
    Total.....................................................   170,325
                                                               =========
  Weighted average:
    Received rate.............................................      1.66
    Paid rate.................................................      3.50

     The Bank considers the interest swap agreements set forth above to be
hedges of interest rate risk arising from a floating rate debt of MCh$ 170,325
(see Note 12).

     Accounting polices followed for derivatives are shown in Note 1 h). The
net interest accrual arising from the swap contracts is recorded in net income
in the period that it arises.

NOTE 6 - LOANS
--------------

     The loans on the accompanying balance sheets are classified into
subcategories as described below.

     Commercial loans are long-term and short-term loans made on a variable or
fixed-rate basis primarily to finance working capital or investments. Loans to
individuals or businesses which do not fit the definition of any of the other
loan categories below are classified as commercial loans.

     Consumer loans are long-term and short-term installment loans to
individuals generally on a fixed-rate basis. Credit card balances subject to
interest rates are also included in this category.


                                    F - 19
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


     Mortgage loans are inflation-indexed, fixed-rate, long-term loans with
monthly payments of principal and interest collateralized by mortgages on real
estate. These loans are specifically funded through the issuance of mortgage
finance bonds. In accordance with regulations of the Superintendency of Banks,
at the time of approval the amount of a mortgage loan cannot be more than 75%
of the lower of the purchase price or appraised value of the mortgaged
property.

     Foreign trade loans are fixed or variable-rate short-term loans made in
foreign currencies (principally US dollars) to finance imports and exports.

     Interbank loans are fixed-rate, short-term loans to financial institutions
that operate in Chile.

     Lease contracts are agreements for direct financing leases of capital
equipment and other property. Leasing contracts include the aggregate of lease
payments receivable, less the amount of unearned income and value added tax.
These contracts are denominated in either US dollars or UFs and are adjusted
based on the variation of the Chilean peso against the US dollar or the rate of
inflation based on the CPI.

Other outstanding loans include the following:

<TABLE>
                                                                      December 31,
                                                                  -------------------
                                                                    2001       2002
                                                                  --------   --------
                                                                    MCh$       MCh$
<S>                                                                <C>        <C>
Current account lines of credit - individuals and companies ...     33,508     53,994
Mortgage loans financed by Central Bank lines of credit .......      5,283      3,646
Mortgage loans financed by the Bank's general borrowings ......    242,560    310,143
Other .........................................................      1,137        907
                                                                  --------   --------
                                                                   282,488    368,690
                                                                  ========   ========
</TABLE>

     Past due loans include, with respect to any loan, the amount of principal
or interest that is 90 days or more overdue, and the entire outstanding balance
of any loan is recorded under past due loans once the legal collection
procedures have been commenced.

     Contingent loans consist of open and unused letters of credit together
with guarantees granted by the Bank in Chilean pesos, UFs and foreign
currencies (principally US dollars). Contingent loans (including accrued fees
receivable) are detailed as follow:

<TABLE>
                                                                      December 31,
                                                                  -------------------
                                                                    2001       2002
                                                                  --------   --------
                                                                    MCh$       MCh$
<S>                                                                <C>        <C>
Open and unused letters of credit .............................     29,381     41,293
Standby letters of credit and other guarantees ................     37,803     43,398
                                                                  --------   --------
                                                                    67,184     84,691
                                                                  ========   ========
</TABLE>

     The Bank's liabilities under these agreements are included in contingent
liabilities (see Note 11 c).


                                    F - 20
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


     The Bank has certain loans on which the accrual of interest income has
been discontinued. These loans amounted to MCh$ 92,563, MCh$ 121,732 and MCh$
126,821 at December 31, 2000, 2001 and 2002, respectively. If these loans had
been accruing interest, net income would have increased by MCh$ 2,494 in 2000,
MCh$ 2,247 in 2001 and MCh$ 9,148 in 2002.

     The following table summarizes the loan concentration by economic
activity, expressed as a percentage of total loans, excluding contingent loans
and before the allowance for loan losses:

                                                             December 31,
                                                            2001       2002
                                                          --------   --------
                                                              %          %
Agriculture, livestock, forestry and fishing ..........       4.52       4.77
Mining ................................................       1.47       3.65
Manufacturing .........................................       6.62       8.94
Electricity, gas and water ............................       3.89       4.48
Construction ..........................................      11.16       8.15
Trade .................................................      12.42      10.37
Transport, storage and communications .................       2.83       3.10
Financial services ....................................      12.42       8.98
Services ..............................................      13.73      16.11
Individuals:
     Consumer .........................................       9.60       9.77
     Residential mortgage loans .......................      21.34      21.68
                                                          --------   --------
            Total .....................................     100.00     100.00
                                                          ========   ========

     Substantially all of the Bank's loans are to borrowers doing business in
Chile. Thus, the recoverability of the Bank's loans could be affected by an
economic downturn in Chile.


     During 2001 and 2002, the Bank securitized certain leasing contracts as
follows:

                    Book value of                                Effect on
                  leasing contracts         Sale value           net income
                  -----------------         ----------           ----------
                        MCh$                   MCh$                 MCh$

2001                  39,004.7               42,587.2             3,582.5
2002                   5,219.6                6,470.9             1,251.3


                                    F - 21
<PAGE>


                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


NOTE 7 - LEASE CONTRACTS
------------------------

The amounts shown as lease contracts are receivables under direct financing
leases and have the following maturities as of December 31, 2002:

During the years                     Total     Unearned   Value-added  Net lease
ending December 31,                repayments   income       tax      receivable
-------------------                ----------   ------       ---      ----------
                                      MCh$       MCh$        MCh$        MCh$
2003 ...........................      7,711     (2,474)     (1,063)      4,174
2004 ...........................     20,657     (4,192)     (2,215)     14,250
2005 ...........................     20,657     (3,403)     (2,215)     15,039
2006 ...........................     16,040     (2,432)     (1,433)     12,175
2007 ...........................     11,069     (1,716)       (871)      8,482
2008 and thereafter ............     40,487     (8,970)     (1,906)     29,611
                                    -------    -------     -------     -------
         Total lease contracts      116,621    (23,187)     (9,703)     83,731
                                    =======    =======     =======     =======

NOTE 8 - ALLOWANCE FOR LOAN LOSSES
----------------------------------

The changes in the allowance for loan losses are as follows:

                                                 Year ended December 31,
                                             -----------------------------
                                               2000       2001       2002
                                             -------    -------    -------
                                               MCh$       MCh$       MCh$

Balances as of January 1 .................    38,746     38,273     43,264
Charge-offs ..............................   (23,759)   (23,950)   (28,274)
Provision charged to operations ..........    24,459     31,556     31,316
Price-level restatement (1) ..............    (1,173)    (2,615)    (1,261)
                                             -------    -------    -------
Balances as of December 31 ...............    38,273     43,264     45,045
                                             =======    =======    =======

(1)  Reflects the effect of inflation on the allowance for loan losses at the
     beginning of each period, adjusted to constant pesos of December 31, 2002.

     The provision charged to operations each year is included in the results
of operations under the caption "Provision for loan losses".


                                    F - 22
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


NOTE 9 - BANK PREMISES AND EQUIPMENT
------------------------------------

     The major categories of Bank premises and equipment, net of accumulated
depreciation, are as follows:

                                                 December 31,   Estimated useful
                                               2001      2002   lives (in years)
                                               ----      ----   ----------------

                                               MCh$      MCh$

Land ......................................   11,113    11,109
Buildings .................................   29,857    29,118     25 to 60
Furniture and fixtures ....................    1,971       155        10
Office equipment ..........................   12,894    14,349         5
Vehicles ..................................      106       144        10
Others ....................................    1,625       793        10
                                             -------   -------
  Total bank premises and equipment, net...   57,566    55,668
                                             =======   =======

     Certain Bank facilities and equipment are leased under various operating
leases. Rental expense was MCh$ 2,371 in 2000, MCh$ 2,260 in 2001 and MCh$
1,802 in 2002. Future minimum rental commitments under non-cancelable leases
are:

Payable during the years
   ending December 31,                                                 MCh$
   -------------------                                                 ----

2003 ..............................................................   1,664
2004 ..............................................................   1,155
2005 ..............................................................     951
2006 ..............................................................     548
2007 ..............................................................     402
2008 and thereafter ...............................................   1,510
                                                                      -----
        Total lease contracts                                         6,230
                                                                      =====


                                    F - 23
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


NOTE 10 - INVESTMENTS IN OTHER COMPANIES
----------------------------------------

Investments in other companies consist of the following:

<TABLE>
                                                                  At December 31,   Ownership
                                                                   2001     2002     interest
                                                                   ----     ----     --------
                                                                   MCh$     MCh$        %
<S>                                                               <C>       <C>        <C>
Investments in other companies accounted
   for under the equity method:
      Nexus S.A. ...........................................        310       328      9.70
      Transbank S.A. .......................................        254       299      6.25
      Santiago Stock Exchange ..............................        321       318      2.08
      Electronic Stock Exchange ............................         61        61      2.50
      Valparaiso Stock Exchange ............................         13        13      2.22
                                                                -------   -------
Investments carried at cost: ...............................        959     1,019
      Sociedad Interbancaria de Depositos de Valores S.A. ..         76        93
      Other ................................................         48        47
                                                                -------   -------
            Total investments in other companies ...........      1,083     1,159
                                                                =======   =======
</TABLE>

     The Bank is authorized to invest in other entities which support its
banking business and in consequence has ownership interests in Nexus S.A.
(credit card processing services), Transbank S.A. (credit card operator) and
Redbanc S.A. (a system of automatic teller machines). The securities brokerage
subsidiary also maintains investments in the Santiago, Valparaiso and
Electronic stock exchanges in connection with its primary business activities.

     Dividends received from investments accounted for under the equity method
aggregated MCh$ 74 in 2000, MCh$ 70 in 2001 and MCh$ 49 in 2002. Dividends
received from investments accounted for under the cost method aggregated MCh$
15 in 2000, MCh$ 19 in 2001 and MCh$ 1 in 2002.


                                    F - 24
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


NOTE 11 - OTHER ASSETS AND OTHER LIABILITIES
--------------------------------------------

a)   Other assets

                                                                2001      2002
                                                              --------  --------
                                                                MCh$      MCh$

Deferred income taxes (Note 23) ............................    19,931    26,124
Rentals guarantee deposit ..................................     1,077     3,289
Credit card charges in process .............................     1,330     1,808
Amounts receivable under spot foreign exchange transactions     16,032    15,316
Recoverable taxes ..........................................       656     3,269
Transactions in process (suspense accounts) ................     1,324     1,092
Accrued interest receivable ................................        11       109
Stationery .................................................       283       243
Brokerage receivables ......................................     6,558    26,352
Prepaid expenses ...........................................       519       521
Goodwill, net (1) ..........................................     2,574     2,182
Deferred expenses ..........................................    18,843    18,117
Deferred commissions .......................................     2,828     1,805
Accounts and notes receivable ..............................       905       526
Common stock purchased under agreements to resell by
  brokerage subsidiary .....................................     8,254     9,045
Advances pending settlement ................................        31        15
Others .....................................................     1,867     3,696
                                                              --------  --------
            Total other assets .............................    83,023   113,509
                                                              ========  ========

b)   Other liabilities

                                                                 December 31,
                                                                2001      2002
                                                              --------  --------
                                                                MCh$      MCh$

Amounts payable under spot foreign exchange transactions ...    28,502    15,840
Brokerage liabilities ......................................     6,536    26,411
Deferred income taxes (Note 23) ............................     6,221     9,069
Amounts payable from  forward contracts ....................     4,085     2,336
Provision for staff vacation and indemnities ...............     3,842     2,495
Transactions in process (suspense accounts) ................     2,730     2,123
Taxes  payable .............................................    14,771    12,412
Deferred commissions .......................................     1,289     1,363
Others .....................................................       272       382
                                                              --------  --------
            Total other liabilities ........................    68,248    72,431
                                                              ========  ========


                                    F - 25
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


(1) Goodwill consists of the following:

                                                         Net book value at
Acquisition of:                                         2001           2002
---------------                                         ----           ----
                                                        MCh$           MCh$

BBVA Sociedad de Leasing Inmobiliario...............       -              5
BBVA Corredores de Bolsa BHIF S.A...................      35              -
BBVA Corredora Tecnica de Seguros BHIF Ltda.........   2,539          2,177
                                                       -----          -----
                                                       2,574          2,182
                                                       =====          =====

Accumulated amortization amounted to MCh$ 1,057 and MCh$ 1,446 at December 31,
2001 and 2002, respectively.

c)   Contingent liabilities

     Contingent liabilities consist of open and unused letters of credit,
together with guarantees by the Bank in Chilean pesos, UFs and foreign
currencies (principally US dollars). These liabilities represent the Bank's
obligations under such agreements. The Bank's rights under these agreements are
recognized as assets as contingent loans (see Note 6).

NOTE 12 - BORROWINGS
--------------------

     The Bank's long-term and short-term borrowings are summarized below.
Borrowings are generally classified as short-term when they have original
maturities of less than one year or are due on demand. All other borrowings are
classified as long-term, including the amounts due within one year on such
borrowings.

     A summary of short-term and long-term borrowings is as follows:

<TABLE>
                                                                  December 31, 2001
                                                        ------------------------------------
                                                        Long-term    Short-term      Total
                                                        ----------   ----------   ----------
                                                           MCh$         MCh$         MCh$
<S>                                                        <C>          <C>          <C>
Central Bank borrowings:
      Borrowings for renegotiation of loans .........        4,656            -        4,656
      Other Central Bank borrowings .................        6,990            -        6,990
Securities sold under to agreements to repurchase ...            -      172,624      172,624
Mortgage finance bonds ..............................      239,816            -      239,816
Subordinated bonds ..................................       31,904            -       31,904
Other bonds .........................................       43,884            -       43,884
Borrowings from domestic financial institutions .....        1,146       63,996       65,142
Foreign borrowings (1) ..............................       75,959       51,509      127,468
Other obligations ...................................        9,668       30,804       40,472
                                                        ----------   ----------   ----------
            Total borrowings ........................      414,023      318,933      732,956
                                                        ==========   ==========   ==========
</TABLE>


                                    F - 26
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

<TABLE>
                                                                  December 31, 2001
                                                        ------------------------------------
                                                        Long-term    Short-term      Total
                                                        ----------   ----------   ----------
                                                           MCh$         MCh$         MCh$
<S>                                                        <C>          <C>          <C>
Central Bank borrowings:
      Borrowings for renegotiation of loans .........        3,561            -        3,561
      Other Central Bank borrowings .................        5,280            -        5,280
Securities sold under agreements to repurchase ......            -      255,565      255,565
Mortgage finance bonds ..............................      250,999            -      250,999
Subordinated bonds ..................................       31,607            -       31,607
Other bonds .........................................       39,725            -       39,725
Borrowings from domestic financial institutions .....        5,318       63,616       68,934
Foreign borrowings (1) ..............................      108,766       66,279      175,045
Other obligations ...................................        7,405       30,575       37,980
                                                        ----------   ----------   ----------
            Total borrowings ........................      452,661      416,035      868,696
                                                        ==========   ==========   ==========
</TABLE>

(1)  Includes a debt amounting to MCh$ 170,325 (MCh$ 16.221 on 2001) for which
     interest rate risk is hedged by an interest rate swap. See Note 5 b).

a)   Central Bank borrowings

Borrowings for the renegotiations of loans are as follows:

                                                        December 31,
                                                     2001          2002
                                                     ----          ----
                                                     MCh$          MCh$

Renegotiation of mortgage loans ..................  4,656         3,561
                                                    -----         -----
                                                    4,656         3,561
                                                    =====         =====

     These borrowings were provided by the Central Bank to fund renegotiated
loans, which arose from the economic recession and the crisis of the banking
system in the early 1980s. The borrowings for the renegotiation of mortgage
loans is linked to the UF index and carried annual real interest rates of 3 %
at December 31, 2001 and 2002.


                                    F - 27
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


     The maturities of the outstanding amounts due under these borrowings at
December 31, 2002, are as follows:

 During the year
ending December 31,                                             MCh$
-------------------                                             ----

2003 .......................................................      338
2004 .......................................................      308
2005 .......................................................      296
2006 .......................................................      281
2007 .......................................................      268
2008 and thereafter ........................................    2,070
                                                               ------
    Total borrowings for the renegotiation of loans ........    3,561
                                                               ======

Other Central Bank borrowings are as follows:

                                                        December 31,
                                                       2001      2002
                                                       ----      ----
                                                       MCh$      MCh$

Industrial and agriculture finance program ..........   568         -
Credit line for acquisition of ANAP mortgage loans... 6,422     5,280
                                                     ------    ------
                                                      6,990     5,280
                                                     ======    ======

     Loans for the long-term industrial and agriculture finance program are
linked to the UF index and are intended to be a source of financing for private
productive investment projects in the industrial and agricultural sectors.
These borrowings carried an annual real interest rate of 4.5% at December 31,
2001 and 2002.

     The line of credit for the acquisition of mortgage loans from ANAP (the
former National Savings and Loan Association) was provided by the Central Bank
and is linked to the UF index. It carried an annual real interest rate of 6% at
December 31, 2001 and 2002.

The maturities of the long-term portion of these borrowings at December 31,
2002 are as follows:

 During the year
ending December 31,                                             MCh$
-------------------                                             ----

2003 .......................................................    1,330
2004 .......................................................    1,279
2005 .......................................................    1,356
2006 .......................................................    1,315
                                                               ------
    Total Other Central Bank borrowings ....................    5,280
                                                               ======


                                    F - 28
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


b)   Securities sold under agreements to repurchase

     Securities sold under agreements to repurchase generally mature within 7
to 182 days from the transaction date and are entered into principally with
companies which are the Bank's clients. At December 31, 2002 the annual real
interest rates ranged between 1.4% and 3.0% (1.6% and 6.96% at December 31,
2001) on these agreements.

c)   Mortgage finance bonds

     These bonds are used to finance the granting of residential mortgage loans
and certain commercial loans secured by real estate. The outstanding principal
amounts of the bonds are amortized quarterly; the range of maturities of these
bonds is between 3 and 30 years. These bonds principally are linked to the UF
or similar indexes and carried a real weighted annual average rate of interest
of 6.48% at December 31, 2002 (6.26% at December 31, 2001). The maturities of
these bonds at December 31, 2002 are as follows:

 During the year
ending December 31,                                              MCh$
-------------------                                              ----

2003 .......................................................    23,801
2004 .......................................................    21,684
2005 .......................................................    20,857
2006 .......................................................    19,798
2007 .......................................................    18,867
2008 and thereafter ........................................   145,992
                                                              --------
      Total mortgage finance bonds .........................   250,999
                                                              ========

d)   Subordinated bonds

The following are the different series of UF-denominated subordinated bonds:

                                                                     Fixed
                                                                  real annual
                                      December 31,               interest rate
                                   -------------------         -----------------
         Series                     2001         2002          2001         2002
         ------                    ------       ------         ----         ----
                                   MCh$         MCh$            %            %
A bonds ......................      5,041        5,053          8.5          8.5
B1, B2, B3 and B4 bonds ......      6,750        6,717          7.6          7.6
B5 and B6 bonds ..............      3,408        3,407          7.7          7.7
B7 and B8 bonds ..............     16,705       16,430          6.5          6.5
                                   ------       ------
                                   31,904       31,607
                                   ======       ======


                                    F - 29
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


     Payments of interest on the subordinated bonds are made semiannually. The
Series A bonds have an original term of ten years and the entire principal is
due in April 2003. The Series B1, B2, B3 and B4 bonds have original term of
twenty years and principal is payable in equal semiannual installments during
the fourteenth through twentieth year. The final payment is due in 2013 for the
Series B1 bonds and 2014 for the Series B2, B3 and B4 bonds. The Series B5 and
B6 bonds have an original maturity of ten years with the entire principal
balance due at the end of the ten year term. The B5 and B6 bonds are payable
during the years 2003 and 2004. The Series B7 and B8 bonds have an original
term of twenty-one years and principal is payable in equal semiannual
installments during the sixth and twenty-first year.

     The outstanding amount of subordinated bonds is included at their issue
price in the calculation of the Bank's minimum capital requirement, but only up
to 50% of the amount of its Basic Capital (see Note 14). For this purpose, the
amount that can be included in respect of bonds must be reduced annually by 20%
as from the sixth year prior to their maturity.

     The maturities of the subordinated bonds at December 31, 2002 are as
follows:

 During the year
ending December 31,                                              MCh$
-------------------                                              ----

2003 .......................................................    9,119
2004 .......................................................      688
2005 .......................................................      733
2006 .......................................................      780
2007 and thereafter ........................................   20,287
                                                               ------
            Total subordinated bonds .......................   31,607
                                                               ======

e)   Other bonds

Other bonds are summarized as follows:
                                                     December 31,
               Series                              2001         2002
               ------                              ----         ----
                                                   MCh$         MCh$

A-1 bonds....................................         -            -
A-2 bonds....................................       157            -
B-2 bonds....................................         -            -
D-1 bonds....................................     5,820        2,570
D-2 bonds....................................     5,105        2,566
D-3 bonds....................................     5,441        5,578
D-4 bonds....................................     5,192        5,578
D-5 bonds....................................     7,430        7,811
D-6 bonds....................................    14,739       15,622
                                                 ------       ------
         Total other bonds...................    43,884       39,725
                                                 ======       ======


                                    F - 30
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


     These bonds were issued for the financing of lease contracts having a
maturity greater than one year. They are linked to the UF index and carry a
real annual weighted average interest rate of 5.94% (5.61% at December 31,
2001) with interest and principal payments due semiannually. The balance of the
bonds outstanding at December 31, 2002 mature as follows:

 During the year
ending December 31,                                              MCh$
-------------------                                              ----

2003 .........................................................  5,059
2004 .........................................................  3,226
2005 .........................................................  2,032
2006 .........................................................  2,574
2007 and thereafter .......................................... 26,834
                                                               ------
      Total other bonds ...................................... 39,725
                                                               ======

f)   Borrowings from domestic financial institutions

Borrowings from domestic financial institutions are summarized as follows:

                                                                  December 31,
                                                                  2001     2002
                                                                 ------   ------
                                                                  MCh$     MCh$

Long-term ....................................................    1,146    5,318
Short-term ...................................................   63,996   63,616
                                                                 ------   ------
      Total borrowings from domestic financial institutions ..   65,142   68,934
                                                                 ======   ======

     These borrowings are used to fund direct financing leases and the Bank's
general activities. At December 31, 2002, borrowings from domestic financial
institutions aggregating MCh$ 35,806 were linked to the UF index and carried a
real annual weighted average interest rate of 1.80% (5.61% at December 31,
2001), borrowings aggregating MCh$ 13,914 were denominated to the US dollars
and carried a real annual weighted average interest rate of 1.90%, and
borrowings aggregating MCh$ 19,214 were denominated in Chilean pesos and
carried a weighted monthly average nominal interest rate of 0.36% (0.54% at
December 31, 2001).


                                    F - 31
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


Borrowings from domestic financial institutions at December 31, 2002 have the
following maturities:

 During the year
ending December 31,                                                    MCh$
-------------------                                                    ----

2003 .........................................................         5,191
2004 .........................................................            66
2005 .........................................................            61
                                                                      ------
       Total long-term .......................................         5,318
Short-term ...................................................        63,616
                                                                      ------
       Total borrowings from domestic financial institutions..        68,934
                                                                      ======

g)   Foreign borrowings

Outstanding foreign borrowings are summarized as follows:

                                                              December 31,
                                                             2001      2002
                                                             ----      ----
                                                             MCh$      MCh$

Long-term ..............................................    75,959   108,766
Short-term .............................................    51,509    66,279
                                                           -------   -------
                                                           127,468   175,045
                                                           =======   =======

     The proceeds from foreign borrowings are used primarily to make loans to
borrowers in the Chilean export and import sector. These loans are denominated
principally in US dollars and carried an annual nominal weighted average
interest rate of 2.01% at December 31, 2002 (2.33% at December 31, 2001).

     The maturities of these borrowings are as follows:

 During the year
ending December 31,                                                    MCh$
-------------------                                                    ----

2003 .........................................................       104,192
2004 .........................................................         4,275
2005 .........................................................           299
                                                                     -------
       Total long-term .......................................       108,766
Short-term ...................................................        66,279
                                                                     -------
       Total foreign borrowings ..............................       175,045
                                                                     =======


                                    F - 32
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


h)   Other obligations

Other obligations are summarized as follows:

                                                              December 31,
                                                              2001     2002
                                                             ------   ------
                                                              MCh$     MCh$
Long-term obligations:
   CORFO .................................................    9,668    7,405
                                                             ------   ------
       Subtotal ..........................................    9,668    7,405
                                                             ------   ------

Short-term obligations:
   Acceptance of letters of credits ......................   30,804   30,575
                                                             ------   ------
       Subtotal ..........................................   30,804   30,575
                                                             ------   ------

       Total .............................................   40,472   37,980
                                                             ======   ======

     The CORFO borrowings have been provided by Corporacion de Fomento de la
Produccion (CORFO), the Chilean government development agency, to fund export
loans, loans to manufacturing companies and leasing operations. These
obligations are linked to the UF index or to the US dollar. At December 31,
2002, CORFO obligations aggregating MCh$ 6,644 were linked to the UF index and
carried a real annual weighted average interest rate of 5.41% (5.79% at
December 31, 2001) and obligations aggregating MCh$ 761 were linked to the US
dollar and carried an annual nominal weighted average interest rate of 7.18%
(7.48% at December 31, 2001).

Other long-term obligations at December 31, 2002 have the following maturities:

 During the year
ending December 31,                                                     MCh$
-------------------                                                     ----

2003 .........................................................           214
2004 .........................................................           675
2005 .........................................................           521
2006 .........................................................           204
2007 .........................................................            81
2008 .........................................................         5,710
                                                                       -----
       Total long-term obligations ...........................         7,405
                                                                       =====


                                    F - 33
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


NOTE 13 - SHAREHOLDERS' EQUITY
------------------------------

a)   Shares outstanding

     The Bank's capital consists of 361,222,027 no par value common shares
authorized, issued and outstanding at December 31, 2000, 2001 and 2002.

b)   Movements in Shareholders' Equity

     Year ended December 31, 2000
     ----------------------------

     At the Ordinary Shareholder's Meeting held on March 28, 2000, the
shareholders agreed to distribute a dividend amounting to MCh$ 8,653
(historical)

     In September 2000, Banco Bilbao Vizcaya Argentaria S.A. paid MCh$ 60,797
(historical), corresponding to the remaining 45% of the capital increase
subscribed for in September and October 1998.

     In September 2000, share issue expenses amounting to MCh$ 751 (historical)
were deducted from the capital increase.

     Year ended December 31, 2001
     ----------------------------

     At the Ordinary Shareholders' Meeting held on March 16, 2001, the
shareholders approved a capital increase of MCh$ 2 (historical) through the
capitalization of earnings without the issue of new shares and the distribution
of MCh$ 14,033 (historical) as a dividend.

     Year ended December 31, 2002
     ----------------------------

     At the Ordinary Shareholders' Meeting held on April 23, 2002, the
shareholders agreed to distribute a dividend amounting to MCh$ 14,886
(historical).


NOTE 14 - MINIMUM CAPITAL REQUIREMENTS
--------------------------------------

     According to the current General Banking Law, banks should have a minimum
ratio of Total Capital to Risk Adjusted Assets of 8 %, net of required
allowances for loans losses, and a minimum ratio of Basic Capital to Total
Assets of 3 %, net of required allowances for loan losses. For these purposes,
Total Capital means the aggregate of: (a) a bank's paid-in capital and
reserves, excluding capital attributed to subsidiaries and foreign branches,
(b) its subordinated bonds, calculated at the issue price but not exceeding 50
% of its Basic Capital, and (c) its voluntary allowances for loan losses, up to
1.25 % of the Risk Adjusted Assets. Basic Capital includes paid-in capital and
reserves, but excludes the net income for the period. Risk Adjusted Assets are
based on total assets on an unconsolidated basis, which are then classified
into five categories, each of which has a different weight.


                                    F - 34
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


     At December 31, 2002, in accordance with the requirements of the General
Banking Law, the ratio of Total Capital to Risk Adjusted Assets was 12.3 % or
Ch$ 89,408 million higher than the 8 % minimum required by the first test under
the Banking Law. The ratio of Basic Capital to Total Assets was 7.4% or Ch$
140,564 million higher than the 3% minimum Basic Capital required by the second
test under the General Banking Law.

     The Bank's mutual fund and securities brokerage subsidiaries are also
subject to minimum capital requirements as defined under Chilean regulations.
All such minimum regulatory capital requirements were being complied with at
December 31, 2001 and 2002.

NOTE 15 - CONTINGENCIES AND COMMITMENTS
---------------------------------------

a)   Contingencies arising from contractual commitments

Until July 23, 1999, Banco BHIF, currently BBVA Banco BHIF, was required to
administer the "Adjustment account" corresponding to the purchase agreement for
the shares of the former Banco Nacional, signed on July 23, 1989.

The Bank's management and legal counsel believe that no material loss to the
Bank should result from any claim brought by the selling party relating to the
administration of the "Adjustment account", as described in the following
paragraphs.

As part of the purchase agreement, certain principal shareholders of Banco BHIF
acquired 97% of the shares of Banco Nacional from a group of companies and
individuals related to the selling party. This acquisition was made in order to
merge the former Banco Nacional with Banco BHIF, which was completed on
November 15, 1989.

In connection with the acquisition of the shares of the former Banco Nacional
and its subsequent merger with Banco BHIF, the Bank agreed that certain loans
due from the sellers to Banco Nacional would be restructured into
UF-denominated loans, to be repaid over a period of 12 years. The purchase
agreement provided that (i) the amount of recoveries on certain of Banco
Nacional's loans, as indicated by the sellers under the terms of the purchase
agreement (Adjustment account), exceeding the net book value of the loans, and
(ii) an amount equal to the allowance for loan losses released as a result of
improvements in the classification of the loans included in the Adjustment
account, would be credited on a quarterly basis to the Adjustment account and
treated as payment of interest and principal due from the sellers.

The purchase agreement also provided that any dispute relating to the
interpretation of the above agreement or the fulfillment of the parties'
respective obligations thereunder would be submitted to arbitration.

On July 23, 1989, the Adjustment account was divided in two parts with terms of
five and ten years, respectively. The latter, together with the sellers' rights
related to the Adjustment account, expired on July 23, 1999.


                                    F - 35
<PAGE>


                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


In accordance with the shares purchase contract, an Arbitration Court was set
up on April 8, 1997 to deal with the differences between the parties over the
interpretation of the Adjustment account, including the treatment of loans
contained therein, as well as other matters.

To date, both the sellers and the Bank have filed several claim with the
Arbitration Court, which have led to a number of correlated lawsuits referred
to as claims, as described bellow.

Regarding these lawsuits, two cases were settled in 2001. In claim No. 1 the
Bank was sentenced to pay UF 19,062 plus interest, totaling UF 38,003.20, which
was credited for its equivalent in Chilean pesos against Cidef S.A's loan with
the Bank, which is the lowest-rated company of the Errazuriz Group. In claim
No. 2, the Bank was sentenced to pay UF 8,292.12 plus interest, totaling UF
11,216.55, which was deposited for its equivalent in Chilean pesos at the
respective court. A significant part of sum deposited was seized, for the
account of BBVA Banco BHIF in the executive cases brought against companies of
the Errazuriz Group in the ordinary courts.

During 2002 seven arbitration cases were settled, of which the judgments
pronounced in the following claims did not favor the Bank: claim No. 3 for a
total of UF 10,206.67, which was paid by crediting such amount against Cidef
S.A. loans; claim No. 12 for UF 6,053.33 plus interest, a sentence that was
partially paid by crediting the principal amount against Cidef S.A.'s loans,
the calculation of the respective interest is still pending; claim No. 5 for UF
27,431.02 plus interest, a payment that has not been made because the loan was
not duly transferred by the Errazuriz Group, as such it is not possible to
determine who the creditor is; and claim No. 6 for UF 42,715.55 plus interest,
a sentence that has not yet been declared enforceable since it was appealed by
the Bank.

As to the other three judgments pronounced in 2002, the sentence of claim No.
17 accepted the complaint filed by the Bank, declaring that Commercial Las
Dalias S.A. is not a beneficiary of a loan callable against the Bank; the
judgment of claim No. 9 rejected a claim for damages against the Bank for UF
4,071.44 plus interest; and finally, the judgment in claim No. 4 rejected both
an indemnifying complaint filed by the Bank against the Errazuriz Group, and
the counter-claim filed by the latter against the Bank.

The following is the status of the remaining claims: six are pending the
discussion period and four have proceeded to the following stage; three are in
the evidence-gathering stage, and two have completed this stage; three are
awaiting judgement.

Considering the procedural stage of some of the pending proceedings and/or the
complexity of the matters dealt with in others, it is not yet possible to
determine the likely outcome of the actions brought against the Bank. Although
Management believes that the legal arguments presented by the sellers in
support of these actions lack merit, no assurance can be given that the final
outcome will not be adverse to the Bank.

In addition, late in 2000 the Bank was notified of seven consignment and
compensation payments made by debtors of the Errazuriz Group beneficiaries of
the Adjustment account in relation to the loans from the Bank, in order to
extinguish their liabilities. However, the Bank has appealed these resolutions.


                                    F - 36
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


Consequently, the Bank filed claims for the collection of the total amount due
from each of the beneficiaries of the Errazuriz Group, based on the disclaimer
to the due date by the debtors. Judgment has already been rendered in six of
the seven lawsuits to date. In three of the cases, the Bank obtained favorable
sentences, and the remaining three cases were rejected based on technical
reasons, as the offer of total and subsequent consignment payments does not
imply a waiver of the period granted. Therefore, the loans would not have been
required to be paid upon filing the claim and none of the debtors disclaim the
existence of such credits. All the sentences have been appealed by the Bank
and/or the defendants.

Also in 2000 the Bank was notified of three other consignment and compensation
payments made by the debtors of the Errazuriz Group, which are not
beneficiaries of the Adjustment account, seeking to extinguish their
liabilities. This led to the Bank bringing an executory action against these
three debtors, with a sentence favorable to the Bank in two of them to date.
The remaining lawsuit is pending judgement.

Finally, the Errazuriz Group has brought three executive actions against the
Bank before the Ordinary Courts on the basis of the arbitration judgments
pronounced in claims No. 1, 3, 5 and 6. In all these lawsuits, the Bank has
opposed the motions as they are based either on the payment of liabilities that
the Bank has already paid, claims No. 1 and 3, on loans granted through an
irregular procedure, claim No. 5, or else requiring the payment of liabilities
not yet due claim No. 6. Two of these cases are in the discussion stage and one
has concluded its evidence gathering period.

b) Commitments and responsibilities recorded in memorandum accounts

The Bank and its subsidiaries maintain the following memorandum accounts
relating to commitments or responsibilities arising in the ordinary course of
business:

                                                               2001       2002
                                                               ----       ----
                                                               MCh$       MCh$

Safekeeping .............................................    511,840    587,297
Loans approved not yet disbursed ........................    106,417     86,723
Foreign collections .....................................      6,488      9,101
Fixed-income shares and instruments held in custody .....     42,001     47,909
Documents for collection in Chile .......................     52,581     45,653
Leasing contracts signed prior to delivery of assets ....      5,328      5,804

The above includes only the most significant balances. Contingent loans and
liabilities are shown in the Consolidated balance sheets.


                                    F - 37
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


c) Guarantees of operations

In accordance with Article 30 of Law 18,045, the subsidiary BBVA Corredores de
Bolsa BHIF S.A. contracted for an insurance policy with Compania de Seguros de
Credito Continental S.A. to ensure full compliance with its obligations as a
stockbroker. The beneficiaries are its present and future creditors of
brokerage operations, and are represented by the Santiago Stock Exchange and
Electronic Stock Exchange. In addition, BBVA Corredores de Bolsa BHIF S.A.
contracted for a stockbrokers insurance policy with Compania MAPFRE Seguros
Generales in order to comply with the agreements reached by the Board of the
Santiago Stock Exchange at its meeting held on November 24, 1997.

The terms of the policies are as follows:

         Insurance              Commencement       Expiry
          Company                   date            date             Coverage
          -------                   ----            ----             --------

Compania de Seguros de
  Credito Continental S.A.       04/22/2001      04/22/2003       UF     20,000

Cia. de Seguros Generales
  MAPFRE Seguros Generales       04/01/2001      03/31/2003       US$ 5,400,000


d) Securities in guarantee

At December 31, 2002 and 2001, guarantees in the form of marketable equity
securities in favor of the Custody Department of the Santiago Stock Exchange
amount to MCh$ 8,932.3 (MCh$ 8,345.3 in 2001).

e) Other contingencies

At the date of these financial statements, the Bank was involved in other
litigation arising in the ordinary course of business. In the opinion of
Management and its legal counsel, the final outcome of such litigation will not
have a significant effect on the Bank's financial position or its results of
operations.


                                    F - 38
<PAGE>


                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


NOTE 16 - TRANSACTIONS WITH RELATED PARTIES
-------------------------------------------

     In accordance with the General Banking Law, related parties are defined as
individuals and companies who are directors, officers or shareholders who own
more than one percent of the Bank's shares. Companies in which a director,
officer or shareholder of the Bank holds more than a 5% interest are also
considered to be related parties, as well as companies that have common
directors with the Bank.

a) Loans made to related parties

Loans made to related parties, all of which are current, are as follows:

<TABLE>
                                                                 December 31,
                                                    ---------------------------------------
                                                            2001               2002
                                                    ------------------- -------------------
                                                             Collateral          Collateral
                                                     Loans    Pledged    Loans    Pledged
                                                    -------   -------   -------   -------
                                                      MCh$      MCh$      MCh$      MCh$
<S>                                                  <C>        <C>      <C>        <C>
Operating companies:
     Conavicoop ..................................    5,950         -     3,449       485
     Consorcio Persa de Chile ....................      485         -       501         -
     Vina Selentina S.A. .........................        -         -         1         -
     Jardin Infantil Casanueva ...................       23        23        22        22
     Taz S.A. ....................................        -         -         1         -
     Grupo Eulen Chile S.A. ......................        -         -       153         -

Investment companies:
     Banco BNL do Brasil .........................    1,082         -     3,299         -
     Bifactoring S.A. ............................    2,310         -     2,006         -
     BBVA Banco Ganadero S.A. ....................       25         -         -         -
     BBV Banco Frances ...........................      200         -        93         -
     Banco Bilbao Vizcaya Argentaria Mexico ......        -         -       288         -
     Banco Bilbao Vizcaya Argentaria Brasil ......    5,149         -     6,792         -
     Banco Bilbao Vizcaya Argentaria Madrid ......       64         -        48         -
     Banco Bilbao Vizcaya Argentaria New York ....        -         -    10,378         -
     Banco Continental ...........................      108         -       177         -
     Banco Frances Uruguay .......................        3         -     1,697         -
     Banco Provincial S.A. .......................       24         -        25         -
     Sociedad de Inversiones Rio Side Ltda .......       34        26        30        24
     AFP Provida S.A. ............................        1         -         4         -
     Inversiones Penuelas S.A. ...................       12         -         -         -
     Individuals (UF 3,000 or more) ..............    2,158     1,973     2,004     1,892
     Individuals (less than UF 3,000) ............    1,265     1,030     1,404     1,145
                                                    -------   -------   -------   -------
                                                     18,893     3,052    32,372     3,568
                                                    =======   =======   =======   =======
</TABLE>

In the above table, operating companies are defined as commercial or
manufacturing companies and investment companies are defined as companies whose
purpose is to hold shares in other companies.


                                    F - 39
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


b) Other transactions with related parties

     During the years ended December 31, 2000, 2001 and 2002 the Bank had the
following significant revenues (expenses) from services provided to (by)
related parties:

<TABLE>
                                                                              Year ended December 31,
                                                     ---------------------------------------------------------------------------
                                                             2000                        2001                      2002
     Company                    Relationship         Revenues     Expenses       Revenues    Expenses      Revenues     Expenses
     -------                    ------------         --------     --------       --------    --------      --------     --------
                                                       MCh$         MCh$           MCh$        MCh$          MCh$         MCh$
<S>                          <C>                           <C>       <C>               <C>     <C>              <C>       <C>
Redbanc S.A.                 Equity investee               -         (510)             -        (464)            -         (481)

E. Bertelsen Asesorias S.A.  Director of Bank is
                             shareholder in related
                             company                       -         (150)             -        (113)            -         (116)

Banco Bilbao Vizcaya
 Argentaria S.A.             Shareholder                   -       (2,005)             -      (1,538)           20       (1,725)

Jose Domingo Eluchans        Shareholder in
  Asesorias Ltda.            common                        -          (62)             -         (64)            -          (63)

BBVA Compania de             Shareholder in
  Seguros de Vida S.A.       common                        -          (62)             -        (165)          283            -

Constructora y               Shareholder in
  Administradora Uno S.A.    common                        -          (32)             -           -             -            -

Parque Arauco S. A.          Shareholder in
                             common                        -          (98)             -         (96)            -         (120)

Other                        Shareholder in
                             common                        -         (130)             -        (268)           44         (270)
</TABLE>

     Article 89 of the Chilean Companies Law requires that the Bank's
transactions with related parties be on a market basis or on terms similar to
those customarily prevailing in the market.

NOTE 17 - DIRECTORS' EXPENSES AND REMUNERATION
----------------------------------------------

The following items were charged to expense for services provided by the
members of the Board:

                                                         Year ended December 31,
                                                         -----------------------
                                                         2000     2001     2002
                                                         ----     ----     ----
                                                         MCh$     MCh$     MCh$

Remuneration established by the General
  Shareholders' Meeting ............................      561      611      610
Advisory fees ......................................       62       64       63
Travel allowance ...................................       10        7       16
                                                          ---      ---      ---
            Total ..................................      633      682      689
                                                          ===      ===      ===


                                    F - 40
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


NOTE 18 - INCOME FROM SERVICES, NET
-----------------------------------

Income from services and the related expenses are summarized as follows:

<TABLE>
                                                              Year ended December 31,
                                                           -----------------------------
                                                             2000       2001       2002
                                                           -------    -------    -------
                                                             MCh$       MCh$       MCh$
<S>                                                         <C>        <C>        <C>
Fees from services:
      Commissions on insurance brokerage ...............     1,588      1,951      2,170
      Credit cards .....................................     1,144      1,299      1,275
      Current accounts .................................     2,898      4,839      4,459
      Pension payments .................................     1,043      2,719      3,840
      Contingent loans and letters of credit ...........       623      1,001        762
      Automatic teller machines ........................     1,059        541      1,596
      Collections ......................................       798        389        354
      Purchases and sales of foreign exchange ..........       142        214        272
      Lines of credit and overdrafts ...................       919        484        675
      On-line accounts .................................       312        210        169
      Custody and Trust services .......................        57         59        130
      Service charges on deposit accounts ..............       226        206        204
      Service charges on loans .........................       536        380        534
      Fees from collections of insurance premiums ......     1,199      1,260      1,507
      Loan and securities collections ..................       153          -          -
      Brokerage fees ...................................       553        610        737
      Commissions on mutual and investment
        funds administration ...........................     2,176      2,301      2,578
      Lease contracts fees .............................         -        474        483
      Financial advisory services ......................       306        432          -
      Fees charged on prepaid loans ....................         1        573      1,645
      Other ............................................       902      2,340      2,944
                                                           -------    -------    -------
            Total income from services .................    16,635     22,282     26,334
                                                           =======    =======    =======
</TABLE>

<TABLE>
                                                              Year ended December 31,
                                                           -----------------------------
                                                             2000       2001       2002
                                                           -------    -------    -------
                                                             MCh$       MCh$       MCh$
<S>                                                         <C>        <C>        <C>
Services expenses:
      Brokerage expenses ...............................       (64)       (74)       (39)
      Brokerage fees ...................................      (360)      (331)      (305)
      Credit card operators ............................      (613)      (778)    (1,017)
      Automatic teller machines ........................      (791)      (873)    (1,031)
      Collection expenses ..............................       (19)       (12)       (20)
      Commissions on placement and servicing of loans ..    (2,833)    (2,553)    (1,777)
      Other ............................................      (160)      (433)      (383)
                                                           -------    -------    -------
            Total services expenses ....................    (4,840)    (5,054)    (4,572)
                                                           =======    =======    =======
</TABLE>


                                    F - 41
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


NOTE 19 - GAINS AND LOSSES ON FINANCIAL INSTRUMENTS
---------------------------------------------------

Gains and losses on financial instruments are summarized as follows:

<TABLE>
                                                             Year ended December 31,
                                                          -----------------------------
                                                            2000       2001       2002
                                                          -------    -------    -------
                                                            MCh$       MCh$       MCh$
<S>                                                         <C>       <C>        <C>
Gains on financial instruments:
   Gains on sales and mark-to-market valuations
     of financial instruments .........................     4,704     11,640     13,101
                                                          -------    -------    -------
                                                            4,704     11,640     13,101
                                                          =======    =======    =======

Losses on financial instruments:
   Losses on sales and mark-to-market valuations
     of financial instruments .........................      (753)    (3,086)    (6,961)
                                                          -------    -------    -------
                                                             (753)    (3,086)    (6,961)
                                                          =======    =======    =======
</TABLE>

NOTE 20 - RECOVERY OF LOANS PREVIOUSLY CHARGED-OFF
--------------------------------------------------

Recovery of loans previously charged-off include the following items:

<TABLE>
                                                             Year ended December 31,
                                                          -----------------------------
                                                            2000       2001       2002
                                                          -------    -------    -------
                                                            MCh$       MCh$       MCh$
<S>                                                         <C>       <C>        <C>
Recoveries on loans previously charged-off ............     7,572      7,420      9,679
Recoveries of loans reacquired from the Central Bank ..       102         80         17
                                                          -------    -------    -------
                                                            7,674      7,500      9,696
                                                          =======    =======    =======
</TABLE>


                                    F - 42
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


NOTE 21-NON OPERATING INCOME AND EXPENSES
-----------------------------------------

Non-operating income and expenses are set forth below:

<TABLE>
                                                                               Year ended December 31,
                                                                          --------------------------------
                                                                            2000        2001        2002
                                                                          --------    --------    --------
                                                                            MCh$        MCh$        MCh$
<S>                                                                          <C>         <C>         <C>
Non-operating income:
     Gain on sales of Bank premises and equipment .....................          2         176          18
     Recovery of expenses from customers ..............................      1,065       1,855       2,918
     Recovery of assets received in lieu of payment previously
       charged-off ....................................................        685         775         806
     Rental income ....................................................        195         202         218
     Gain on sales of assets received in lieu of payment ..............        102         230         270
     Gains on sales of leasing assets .................................        604          84         137
     Other ............................................................        213         626         409
                                                                          --------    --------    --------
            Total non-operating income ................................      2,866       3,948       4,776
                                                                          ========    ========    ========

Non-operating expenses:
     Provision for Adjustment account (Note 15 a) .....................          -           -        (101)
     Write-offs of assets received in lieu of payment .................     (1,048)       (540)     (1,405)
     Provisions for losses on assets received in lieu of payment ......       (746)     (1,027)       (678)
     Loss on sales of Bank premises and equipment .....................         (4)        (15)        (11)
     Expenses incurred on management of assets received in lieu
      of payment ......................................................       (141)       (210)       (232)
     Amortization of goodwill .........................................       (380)       (418)       (389)
     Discounts to customers on ANAP mortgage loans ....................       (129)       (108)       (122)
     Other ............................................................       (397)       (503)       (785)
                                                                          --------    --------    --------
            Total non-operating expenses ..............................     (2,845)     (2,821)     (3,723)
                                                                          ========    ========    ========
</TABLE>

NOTE 22 - PRICE-LEVEL RESTATEMENT
---------------------------------

     The price-level restatement loss is determined by restating the following
non-monetary assets and liabilities:

<TABLE>
                                                                               Year ended December 31,
                                                                          --------------------------------
                                                                            2000        2001        2002
                                                                          --------    --------    --------
                                                                            MCh$        MCh$        MCh$
<S>                                                                          <C>         <C>         <C>
Restatement of non monetary accounts based on Consumer Price Index:
     Bank premises and equipment ......................................      2,533       1,850       1,806
     Other non-monetary assets and liabilities ........................        876         808         930
     Shareholders' equity .............................................     (8,797)     (7,122)     (6,900)
                                                                          --------    --------    --------
            Net price-level restatement loss ..........................     (5,388)     (4,464)     (4,164)
                                                                          ========    ========    ========
</TABLE>


                                    F - 43
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


NOTE 23 - INCOME TAXES
----------------------

a) Income tax provision

The provision for income taxes charged to income is summarized as follows:

<TABLE>
                                                            Year ended December 31,
                                                        -----------------------------
                                                          2000       2001       2002
                                                        -------    -------    -------
                                                          MCh$       MCh$       MCh$
<S>                                                       <C>         <C>      <C>
Amortization of effects of deferred income taxes
  accumulated at the beginning of the year ..........     3,864        191        295
Provision for current income tax ....................    (1,015)    (6,135)    (6,261)
Deferred income taxes for the year ..................      (865)     5,063      3,448
                                                        -------    -------    -------
            Total income tax benefit (expense) ......     1,984       (881)    (2,518)
                                                        =======    =======    =======
</TABLE>

b) Deferred income tax balances are as follows:

<TABLE>
                                                                              Balances at
                                                                 -------------------------------------
Temporary differences                                            December 31, 2001   December 31, 2002
---------------------                                            -----------------   -----------------
                                                                        MCh$                  MCh$
<S>                                                                   <C>                   <C>
ASSETS
     Allowance for loan losses ..................................      5,280                 5,456
     Charged-off loans that are tax assets ......................      7,055                 7,737
     Lease contracts ............................................      6,234                 9,728
     Allowance for losses from high-risk rated countries ........        234                   234
     Tax loss carryforward ......................................          -                    24
     Interest on overdue and past-due loans .....................      2,026                 3,607
     Accrual for employee vacations .............................        272                   272
     Others .....................................................      1,235                   958
                                                                    --------              --------
            Subtotal ............................................     22,336                28,016
Less:  Unamortized offsetting liability balance .................     (2,405)               (1,892)
                                                                    --------              --------
            Net assets ..........................................     19,931                26,124
                                                                    --------              --------

LIABILITIES
     Accelerated depreciation of bank premises and equipment ....      6,205                 9,053
     Deferred expenses ..........................................      1,185                 1,050
     Others .....................................................        233                   180
                                                                    --------              --------
            Subtotal ............................................      7,623                10,283
     Less:  Unamortized offsetting asset balance ................     (1,402)               (1,214)
                                                                    --------              --------
            Net liabilities .....................................      6,221                 9,069
                                                                    --------              --------
            Net position ........................................     13,710                17,055
                                                                    ========              ========
</TABLE>


                                    F - 44
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


     The offsetting asset and liability accounts correspond to the accumulated
effect of deferred income taxes which, in accordance with regulations up to
1998, were not recorded prior to January 1, 2000. These asset and liability
accounts are amortized for each account over the period of the reversal of the
corresponding temporary difference. The liability corresponding to the effect
on tax loss carryforward is reversed as the loss is used.

NOTE 24 - FOREIGN CURRENCY POSITION
-----------------------------------

     The consolidated balance sheets include assets and liabilities payable in
foreign currencies which have been translated into Chilean pesos at the
applicable exchange rates as of December 31, 2001 and 2002, and assets and
liabilities which are payable in Chilean pesos subject to exchange rate
fluctuations, as detailed below.

<TABLE>
                                              December 31, 2001                       December 31, 2002
                                   -------------------------------------    -------------------------------------
                                     Payable       Payable                    Payable       Payable
                                   in foreign    in Chilean                 in foreign    in Chilean
                                    currency        pesos        Total       currency        pesos        Total
                                   ----------    ----------   ----------    ----------    ----------   ----------
                                      MCh$          MCh$         MCh$          MCh$          MCh$         MCh$
<S>                                  <C>            <C>             <C>       <C>            <C>            <C>
ASSETS
   Cash and due from banks .....       68,720             -       68,720        25,462             -       25,462
   Loans .......................      268,608        56,575      325,183       341,127        56,703      397,830
   Investments .................        1,858        88,047       89,905        58,716       360,630      419,346
   Other assets ................      362,258             -      362,258       370,339             -      370,339
                                   ----------    ----------   ----------    ----------    ----------   ----------
           Total assets ........      701,444       144,622      846,066       795,644       417,333    1,212,977
                                   ==========    ==========   ==========    ==========    ==========   ==========
LIABILITIES
   Deposits and other
      obligations ..............      215,198             1      215,199       121,714             -      121,714
   Foreign borrowings ..........      127,468             -      127,468       188,960             -      188,960
   Other liabilities ...........      499,441         4,572      504,013       897,312           760      898,072
                                   ----------    ----------   ----------    ----------    ----------   ----------
           Total liabilities ...      842,107         4,573      846,680     1,207,986           760    1,208,746
                                   ==========    ==========   ==========    ==========    ==========   ==========
Net assets (liabilities) in
  foreign currency .............     (140,663)      140,049         (614)     (412,342)      416,573        4,231
                                   ==========    ==========   ==========    ==========    ==========   ==========
</TABLE>

     In addition, as disclosed in Note 5, at December 31, 2002 the Bank had
notional amounts of foreign exchange contracts with an asset position of MCh$
306,588 (2001: MCh$ 303,271) and a liability position of MCh$ 614,367 (2001:
MCh$ 390,057).


                                    F - 45
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


NOTE 25 - ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
-------------------------------------------------------

     The estimated fair values of the Bank's financial instruments, their
carrying values and the major assumptions and methodologies used to estimate
fair values at December 31, 2001 and 2002 are presented hereunder. The fair
value of a financial instrument is defined as the amount at which the
instruments could be exchanged in a current transaction between willing
parties, other than in a forced or liquidation sale.

     For those financial instruments with no quoted market prices available,
fair values have been estimated using present value or other valuation
techniques. These techniques are inherently subjective and are significantly
affected by the assumptions used, including the discount rates, estimates of
future cash flows and prepayment assumptions. In that regard, the derived fair
value estimates cannot be substantiated by comparison to independent markets
and, in many cases, could not be realized in immediate settlement of the
instruments.

     In addition, the fair values presented below do not attempt to estimate
the value of the Bank's revenue generating businesses and anticipated future
business activities, that is, they do not represent the Bank's value as a going
concern.

The estimated fair values of financial instruments are as follows:

<TABLE>
                                                 December 31, 2001          December 31, 2002
                                             Carrying      Estimated     Carrying      Estimated
                                              amount      fair value      amount      fair value
                                              ------      ----------      ------      ----------
                                               MCh$          MCh$          MCh$          MCh$
<S>                                         <C>           <C>           <C>           <C>
ASSETS
   Cash and due from banks ............       205,110       205,110       311,023       311,023
   Investments ........................       390,266       390,266       645,880       645,880
   Loans ..............................     1,730,711     1,504,316     1,968,828     2,008,686
   Other assets .......................       150,590       150,590       185,782       185,782

LIABILITIES
   Deposits ...........................     1,425,332     1,463,469     1,912,485     1,909,345
   Central Bank borrowings ............        11,646        11,658         8,841         9,043
   Securities sold under agreements
     to repurchase ....................       172,624       172,624       255,565       255,565
   Mortgage finance bonds .............       239,816       239,816       250,999       285,930
   Other borrowings ...................       308,870       301,238       353,291       373,004
   Other liabilities ..................        68,248        68,248        72,431        72,431
</TABLE>

     The carrying amounts of loans in the above table exclude contingent loans
since they represent undisbursed amounts under undrawn letters of credit and
other credit guarantees granted by the Bank. The offsetting liability amount,
recorded as contingent liabilities in the Consolidated balance sheets, has also
been excluded.

     The carrying amounts of loans do not include lease contracts because
disclosure of fair value of such contracts is not required under the applicable
accounting pronouncement.


                                    F - 46
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


     The following notes summarize the major methods and assumptions used in
estimating the fair values of financial instruments:

Short-term financial instruments

     Short-term financial instruments are valued at their carrying amounts
included in the Consolidated balance sheets, which are believed by the Bank to
be reasonable estimates of fair value due to the relatively short period to
maturity of the instruments. This approach applies to cash and due from banks,
other assets, short-term Central Bank borrowings, securities sold under
agreements to repurchase and other liabilities.

Investments

     The estimated fair value of these financial instruments was determined
using either quoted market prices or dealer quotes where available, or quoted
market prices of financial instruments with similar characteristics.

Loans

     Estimated fair values have been determined for loan portfolios with
similar financial characteristics. Loans were segregated by type such as
commercial and consumer, and each category was further segmented based on fixed
and variable rates and accrual vs. non-accrual status. The fair values of
fixed-rate loans were estimated by discounting scheduled cash flows using
prevailing market rates for those loans at the end of 2001 and 2002,
respectively. For variable-rate loans, their carrying amounts were considered
to be equivalent to their fair values.

     For non-accruing loans, the estimated fair values were based on the
discounted value of estimated cash flows arising from the liquidation of the
collateral or other expected sources at an estimated discount rate. The value
of these loans was then adjusted for the higher risk involved by deducting the
specific provisions for the loans from the discounted cash flow amounts.

Derivatives

     Foreign exchange contracts (included in other assets or liabilities in the
table above) are carried at market value in the Consolidated balance sheets,
based on the Observed Exchange Rate at the end of the year.

     For interest rate swaps, estimated fair values were obtained from dealer
quotes. The total of MCh$ 302 (MCh$ 180 at December 31, 2001) is included in
other assets in the table of fair values of financial instruments set forth
above.

Deposits

     The fair value of deposits with no defined maturity, such as non-interest
bearing deposits and savings accounts, is considered to be the amount payable
on demand at the reporting date. The fair value of fixed-maturity deposits is
estimated using rates currently offered for deposits of similar remaining
maturities. The value of long-term relationships with depositors is not taken
into account in estimating the fair values disclosed.


                                    F - 47
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


Long-term borrowings

     The fair value of long-term borrowings (included in Mortgage finance bonds
and Other borrowings in the table above) is estimated based on the present
value of future cash flows, discounted at interest rates available to the Bank
for new debt of similar type and remaining maturity at December 31, 2001 and
2002.

NOTE 26 - FIDUCIARY ACTIVITIES
------------------------------

     The following items are recorded in memorandum accounts by the Bank and
represent fiduciary safekeeping and custody services:

                                                              December 31,
                                                            2001        2002
                                                            ----        ----
                                                            MCh$        MCh$
Securities held in safekeeping .......................    511,840     587,297
Amounts to be collected on behalf of third parties ...     59,069      54,754
                                                          -------     -------
         Total .......................................    570,909     642,051
                                                          =======     =======

NOTE 27 - INCOME STATEMENTS AND BALANCE SHEETS (SEC FORMAT)
----------------------------------------------

     The presentation of the financial statements prepared in accordance with
Chilean GAAP differs significantly from the format required by the SEC under
Rules 210.9 to 210.9-07 of Regulation S-X ("Article 9"). The Chilean GAAP
financial statements set forth below have been restated in constant Chilean
pesos of December 31, 2002 purchasing power using the adjustment factor arising
from the CPI and are shown in accordance with the format required by Article 9.

     The principal reclassifications which were made to the basic Chilean GAAP
financial statements in order to present them in the Article 9 format are as
follows:

1.   Elimination of contingent assets and liabilities from the balance sheet.
2.   Presentation of Recoveries of loans previously charged-off as a reduction
     of the Provision for loan losses instead of as Other income.
3.   Reclassification of fees relating to contingent loans from interest income
     under Chilean GAAP to Non-interest income under Article 9.

     In connection with the preparation of the Article 9 income statements, the
price-level restatement includes the effect of inflation primarily resulting
from interest-earning assets and interest-bearing liabilities. As the Bank does
not compute the price-level adjustment for separate categories of assets and
liabilities, such adjustment is presented as a component of interest expense.


                                    F - 48
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


Consolidated income statements

<TABLE>
                                                                             Year ended December 31,
                                                                     -----------------------------------
                                                                        2000         2001         2002
                                                                     ---------    ---------    ---------
                                                                        MCh$         MCh$         MCh$
<S>                                                                   <C>          <C>          <C>
Interest income
     Interest and fees on loans ..................................     188,833      180,534      175,620
     Interest on investments .....................................      35,874       36,280       39,542
     Interest on deposits with banks .............................         517          571          536
                                                                     ---------    ---------    ---------
            Total interest income ................................     225,224      217,385      215,698
                                                                     ---------    ---------    ---------

Interest expense
     Interest on deposits ........................................     (76,369)     (64,932)     (57,706)
     Interest on securities sold under agreements to repurchase ..     (17,583)     (15,447)      (6,248)
     Interest on other borrowed funds ............................      (6,693)      (5,492)      (8,441)
     Interest on long-term debt ..................................     (45,265)     (38,981)     (35,055)
     Price-level restatement .....................................      (5,388)      (4,464)      (4,164)
                                                                     ---------    ---------    ---------
            Total interest expense ...............................    (151,298)    (129,316)    (111,614)
                                                                     ---------    ---------    ---------

Net interest income ..............................................      73,926       88,069      104,084
Provision for loan losses ........................................     (16,887)     (24,136)     (21,637)
                                                                     ---------    ---------    ---------
            Net interest income after provision for loan losses ..      57,039       63,933       82,447
                                                                     ---------    ---------    ---------

Other income
     Fees and commissions ........................................      16,848       22,481       26,363
     Brokerage and securities income .............................         193          279          432
     Gain on investment activities ...............................       3,950        8,554        6,140
     Net gains (losses) on foreign exchange ......................       1,377       (4,162)     (14,335)
     Recoveries and restatements of loans
       reacquired from the Central Bank ..........................         102           80           17
     Other revenue ...............................................       2,830        3,914        4,892
                                                                     ---------    ---------    ---------
            Total other income ...................................      25,300       31,146       23,509
                                                                     ---------    ---------    ---------

Other expenses
     Salaries ....................................................     (28,555)     (33,099)     (33,118)
     Net premises and equipment expenses .........................      (3,181)      (3,966)      (4,746)
     Administration expenses .....................................     (28,673)     (30,286)     (31,083)
     Other expenses ..............................................      (9,010)     (11,512)     (14,236)
                                                                     ---------    ---------    ---------
            Total other expenses .................................     (69,419)     (78,863)     (83,183)
                                                                     ---------    ---------    ---------

Income before income taxes .......................................      12,920       16,216       22,773
     Income taxes ................................................       1,984         (881)      (2,518)
                                                                     ---------    ---------    ---------
            Net income ...........................................      14,904       15,335       20,255
                                                                     =========    =========    =========
</TABLE>


                                    F - 49
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


Consolidated Balance Sheets

<TABLE>
                                                                   December 31,
                                                                2001          2002
                                                             ----------    ----------
                                                                MCh$          MCh$
<S>                                                           <C>           <C>
ASSETS
      Cash and due from banks ............................      145,973       284,463
      Interest bearing deposits in other banks ...........       59,137        26,560
      Securities purchased under agreements to resell ....        9,579        56,055
      Trading securities .................................      288,211       312,026
      Available for sale securities ......................       90,980       277,799
      Securities to be held to maturity ..................        1,496             -

      Loans ..............................................    1,798,526     2,037,060
      Unearned income ....................................      (24,550)      (23,187)
      Allowance for loan losses ..........................      (43,264)      (45,045)
                                                             ----------    ----------
      Loans, net .........................................    1,730,712     1,968,828
      Premises and equipment, net ........................       57,566        55,668
      Other assets .......................................       93,090       129,348
                                                             ----------    ----------
            Total assets .................................    2,476,744     3,110,747
                                                             ==========    ==========

LIABILITIES AND SHAREHOLDERS' EQUITY
      Deposits
      Non-interest bearing ...............................      322,511       457,801
      Interest bearing ...................................    1,102,821     1,454,684
                                                             ----------    ----------
                                                              1,425,332     1,912,485

      Short-term borrowings ..............................      146,309       160,470
      Securities sold under agreements to repurchase .....      172,624       255,565
      Other liabilities ..................................       68,248        72,431
      Long-term debt .....................................      414,023       452,661
                                                             ----------    ----------
            Total liabilities ............................    2,226,536     2,853,612
                                                             ----------    ----------

Minority interest in consolidated subsidiaries ...........           88           113
                                                             ----------    ----------

Shareholders' equity
      Common stock .......................................      151,877       151,877
      Reserves ...........................................       98,243       105,145
                                                             ----------    ----------
            Total shareholders' equity ...................      250,120       257,022
                                                             ----------    ----------
            Total liabilities and shareholders' equity ...    2,476,744     3,110,747
                                                             ==========    ==========
</TABLE>


                                    F - 50
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


     Total assets set forth in the basic Chilean GAAP balance sheets are
reconciled to Total assets in the Article 9 balance sheets above as follows:

                                                            At December 31,
                                                           2001          2002
                                                           ----          ----
                                                           MCh$          MCh$

Total assets under Chilean GAAP format .............    2,543,861     3,196,204
Elimination of contingent liabilities ..............      (67,117)      (85,457)
                                                       ----------    ----------
     Total assets under Article 9 format ...........    2,476,744     3,110,747
                                                       ==========    ==========

     The activity in the balances of loans to related parties in accordance
with the Article 9 definition of related parties is as follows:

                                                                         MCh$
                                                                         ----

Balance at January 1, 2001 ......................................       19,249
New loans .......................................................       24,639
Repayments ......................................................      (19,650)
                                                                      --------
Balance at December 31, 2001 ....................................       24,238
New loans .......................................................      106,007
Repayments ......................................................     (113,013)
                                                                      --------
Balance at December 31, 2002 ....................................       17,232
                                                                      ========

NOTE 28 - DIFFERENCES BETWEEN CHILEAN AND UNITED STATES GENERALLY
------------------------------------------------------------------
       ACCEPTED ACCOUNTING PRINCIPLES
       ------------------------------

     Accounting principles generally accepted in Chile vary in certain
important respects from the accounting principles generally accepted in the
United States of America ("US GAAP"). Such differences involve certain methods
for measuring the amounts shown in the consolidated financial statements, as
well as additional disclosures required by US GAAP.

1.   Differences in measurement methods

     Set forth below is a description of the significant differences between
accounting principles generally accepted in Chile and accounting principles of
the Superintendency of Banks (collectively, "Chilean GAAP") and US GAAP. The
effects of differences in the presentation of the financial statements are
shown in Note 27. References below to "SFAS" are to Statements of Financial
Accounting Standards in the United States of America.


                                    F - 51
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


     The cumulative inflation rate in Chile as measured by the Consumer Price
Index for the three-year period ended December 31, 2002 was approximately
10.8%. Chilean accounting principles require that financial statements of banks
be restated to reflect the full effects of the loss in the purchasing power of
the Chilean peso on the financial position of reporting entities. The method,
described in Note 1 c), is based on a model which enables calculations of net
inflation gains or losses caused by monetary assets and liabilities exposed to
changes in the purchasing power of local currency by restating all non-monetary
accounts in the financial statements. The model prescribes that the historical
cost of such accounts be restated for general price-level changes between the
date of origin of each item and the period-end. The inclusion of price-level
adjustments in the accompanying financial statements is considered appropriate
under the prolonged inflationary conditions affecting the Chilean economy.
Accordingly, and as allowed by Item 18 to Form 20-F, the effect of price-level
changes is not eliminated in the reconciliation to US GAAP included under
paragraph 1 s) below.

a)   Loan origination fees and costs

     The Bank recognizes commissions (origination fees) on credit card loans,
lines of credit and letters of credit when collected and records related direct
costs when incurred, Under SFAS No. 91, "Accounting for Nonrefundable Fees and
Costs Associated with Origination or Acquiring Loans and Initial Direct Costs
of Leases", loan origination fees and certain direct loan origination costs
should be recognized over the life of the related loan as an adjustment of
yield. The effect of this difference resulted in an increase in shareholders'
equity under Chilean GAAP of MCh$ 5,992 and MCh$ 6,510 at December 31, 2001 and
2002, respectively. In addition, had US GAAP been applied, net income would
have increased (decreased) by MCh$ 177 in 2000, MCh$ (328) in 2001 and MCh$ 518
in 2002.

b)   Income taxes

     Under Chilean GAAP, effective January 1, 1999 the Bank began recognizing
the effects of deferred income taxes on net income on a prospective basis,
using an asset and liability approach. In prior years income taxes were
recognized on the basis of amounts due in accordance with Chilean tax
regulations and no deferred income taxes were recognized. For US GAAP purposes
the Bank applies SFAS No. 109, "Accounting for Income Taxes", whereby income
taxes are also recognized using substantially the same asset and liability
approach, with deferred income tax assets and liabilities established for
temporary differences between the financial reporting basis and the tax basis
of the Bank's assets and liabilities at enacted rates expected to be in effect
when such amounts will be realized. Deferred tax assets must be reduced by a
valuation allowance when it is more likely than not that such assets will not
be realized. After the year ended December 31, 1998 Chilean GAAP and US GAAP
differ due to the recognition for US GAAP purposes of the reversal of deferred
income taxes included in the US GAAP reconciliation in prior years which are
being recognized under Chilean GAAP in 2000 and future years.


                                    F - 52
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


c)   Mandatory dividend

     As required by the Chilean Company law, unless otherwise decided by the
holders of a majority of the shares represented at the General Shareholders'
Meeting, the Bank has to distribute a cash dividend in an amount equal to at
least 30% of the Bank's net income under Chilean GAAP. Since the payment of the
dividend out of each year's net income is a legal requirement in Chile, an
accrual would have been made for US GAAP purposes to recognize the dividend
obligation under Chilean law. The effect of this accrual would be to decrease
Shareholders' equity by MCh$ 4,600 and MCh$ 6,077 at December 31, 2001 and
2002, respectively.

d)   Interest recognition on non-accrual loans

     The Bank suspends the accrual of interest on loans on the first day that
such loans are overdue. Previously accrued but uncollected interest on overdue
loans is not reversed at the time the loan ceases to accrue interest. Under US
GAAP, recognition of interest on loans is generally discontinued when, in the
opinion of management, there is an indication that the borrower may be unable
to meet payments as they become due. As a general practice, this occurs when
loans are 90 days or more past due. Any accrued but uncollected interest is
reversed against interest income at that time.

     In addition, under Chilean GAAP any payment received on overdue loans is
first applied to reduce the recorded balance of accrued interest receivable, if
any, and thereafter is recognized as income to the extent of interest earned
but not recorded. Any remaining amount is then applied to reduce the
outstanding principal balance. Under US GAAP, any payment received on loans
when the collectibility of the principal is in doubt is treated as a reduction
of the outstanding principal balance of the loan until such doubt is removed.
Management believes that the effect of the difference in interest recognition
on non-accrual loans is not material to the Bank's results of operations.

e)   Troubled debt restructurings

     Under Chilean GAAP, troubled debt restructurings are accounted in a manner
similar to US GAAP. The Bank, however, is not required under Chilean GAAP to
identify all loans which may qualify as troubled debt restructurings and, as a
result, it is not feasible to obtain the necessary information that should be
disclosed under US GAAP.

f)   Contingent loans

     The Bank recognizes rights and obligations with respect to contingent
loans as contingent assets and liabilities. Under US GAAP, such contingent
amounts are not recognized on the balance sheet but are accounted for in
memorandum accounts. Had US GAAP been followed, the total assets and
liabilities of the Bank would have been reduced as of December 31, 2001 and
2002 by MCh$ 67,117 and MCh$ 85,457 respectively. This reclassification is
included in the Article 9 financial statements in Note 27.


                                    F - 53
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


g)   Allowance for loan losses

     Under Chilean GAAP, the allowance for loan losses is calculated according
to specific guidelines issued by the Superintendency of Banks as detailed in
Note 1 k). Under US GAAP, allowances for loan losses should be provided for
impaired and other loans in amounts adequate to cover inherent losses in the
loan portfolio at the respective balance sheet dates. The process followed
under Chilean GAAP differs in some respects from the process a bank would
follow under US GAAP. In this regard, the Bank has estimated its required
allowance for US GAAP purposes in the following manner:

o    All loans of the Bank were classified in accordance with the rules of the
     Superintendency of Banks.

o    The allowances assigned to each loan category were analyzed and adjusted
     to reflect estimated inherent losses for such category.

o    In addition, specific additional allowances were determined for loans on
     the following basis:

     i) Commercial loans with balances exceeding MCh$ 30 which were considered
to be impaired in accordance with the criteria established by SFAS No. 114
"Accounting by Creditors for Impairment of a Loan" were valued at the present
value of the expected future cash flows discounted at the loan's effective
contractual interest rate or at the fair value of the collateral if the loans
were collateral dependant.

     ii) Commercial loans with balances under MCh$ 30 and consumer loans were
reviewed in order to account for all inherent losses in these loans. Such
amounts were considered to approximate losses calculated under SFAS No.114, as
applicable.

     Based on the above calculation, the Bank believes that there is no
significant difference between the amount of the allowance for loan losses
recorded for Chilean GAAP purposes and the amount calculated based on US GAAP
requirements (excluding restructured loans, see paragraph o) below).

h)   Investments in other companies

     Under Chilean GAAP, certain permanent investments of less than 20% of the
outstanding shares of other companies have been recorded using the equity
method of accounting. Under US GAAP, those investments would have been recorded
at cost. The effect of this difference resulted in an increase in shareholders'
equity under Chilean GAAP of MCh$ 470 and MCh$ 350 at December 31, 2001 and
2002, respectively. In addition, had US GAAP been applied, net income would
have increased (decreased) by MCh$ 62 in 2000, MCh$ (255) in 2001 and MCh$
(120) in 2002.


                                    F - 54
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


i)   Derivative financial instruments

     The Bank engages in derivative transactions for its own account and on
behalf of its customers, mainly corporate clients of the import sector. These
transactions arise from forward exchange contracts which are of two types: (i)
transactions covering two foreign currencies and (ii) transactions covering
Chilean pesos against the U.S. dollar. Foreign exchange contracts involve an
agreement to exchange the currency of one country for the currency of another
country or an agreed-upon price and settlement date. These contracts are
generally standardized contracts, normally for periods between 30 and 90 days
and are not traded in a secondary market, however, in the normal course of
business and with the agreement of the original counterparty, they may be
terminated or assigned to another counterparty. When the Bank enters into a
forward exchange contract, it analyzes and approves the creditor's risk (the
risk that the counterparty might default on is obligation). Subsequently, on an
ongoing basis, it monitors the possible losses involved in each contract. To
manage the level of credit risk the Bank deals with counterparties of good
credit standing, enters into master netting agreements whenever possible and
when appropriate, obtains collateral.

     The Central Bank requires that foreign exchange forward contracts be made
only in US dollars and other major foreign currencies. In the case of the Bank,
most forward contracts are made in US dollars against the Chilean peso or the
UF. From time to time, forward contracts are also made in other currencies, but
only when the Bank acts as an intermediary.

     The Bank's counterparties in derivative transaction are mainly
international investment bank and domestic corporate and financial institution
clients.

     Under Chilean GAAP, forward contracts between foreign currencies and U.S.
dollars are reported at fair value with realized and unrealized gains and
losses on these instruments recognized in other income. Forward contracts
between the U.S. dollar and the Chilean peso are valued at the closing spot
exchange rate of each balance sheet date with the initial discount or premium
being amortized over the life of the contract in accordance with Chilean hedge
accounting criteria.

     Under Chilean GAAP interest rate swap agreements that hedge part of the
Bank's investment portfolio are recorded on balance sheet at their estimated
fair market values. Unrealized gains or losses are credited or charged to
income for those agreements that are designated by the Bank's management as
hedges of part of the investment portfolio classified as trading. In the case
of the interest rate swap agreements designated by the Bank's management as
hedges of part of the investment portfolio as permanent investments, unrealized
gains and losses are credited or charged to shareholders' equity.


                                    F - 55
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


     Beginning January 1, 2001, the Bank for US GAAP purposes adopted SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities", as amended
by SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain
Hedging Activities - an amendment of FASB Statement No. 133" (collectively
"SFAS 133"), which establishes comprehensive accounting and reporting standards
for derivative instruments, including certain derivative instruments embedded
in other contracts, and hedging activities. The standard requires that all
derivative instruments be recorded in the balance sheet at fair value. However,
the accounting for changes in fair value of the derivative instruments depends
on whether the derivative instrument qualifies as a hedge. The standard also
requires formal documentation procedures of the hedging relationship and
effectiveness testing when hedge accounting is to be applied. If the derivative
instrument does not qualify as a hedge, changes in fair value are reported in
earnings when they occur. If the derivative instrument qualifies as a hedge,
the accounting treatment varies based on the type of risk being hedged.

     While the Bank enters into derivatives for the purpose of mitigating its
global interest and foreign currency risks, these operations do not meet the
requirements to qualify for hedge accounting under U.S. GAAP. Therefore changes
in the respective fair values of all derivative instruments are reported in
earnings when they occur.

     Current Chilean accounting rules do not consider the existence of
derivative instruments embedded in other contracts and therefore they are not
reflected in the financial statements. For U.S. GAAP purposes, certain implicit
or explicit terms included in host contracts that affect some or all of the
cash flows or the value of other exchanges required by the contract in a manner
similar to a derivative instrument must be separated from the host contract and
measured and accounted for as freestanding derivatives at fair value. As of
December 31, 2002 the Bank did not have embedded derivatives requiring
bifurcation.

     The adoption of SFAS 133 as of January 1, 2001 has not resulted in an
effect on the results of operations of the Bank. The effects of the adjustments
with respect for foreign exchange contracts and interest rate and foreign
currency swaps agreements on the net income and net equity of the Bank are
included in paragraph s) below.

j)   Employee benefits

     Employee benefits and post employment benefits are provided by independent
pension funds and health insurance companies, which are funded by employees'
contributions. The Bank has no responsibility as an employer for payments under
these plans, other than withholding amounts from employees' salaries.

k)   Accrued interest and indexation adjustments

     Accrued interest and indexation adjustments are presented with the related
principal amounts. Under US GAAP accrued interest and indexation adjustments
would be separately recorded. The amount of this reclassification is not
readily determinable.

l)   Recoveries of loans previously charged-off

     Under US GAAP, recoveries of loans previously charged-off are reflected as
a reduction of the allowance for loan losses; under Chilean GAAP they are
included as Other income. This reclassification is included in the Article 9
financial statements in Note 27.


                                    F - 56
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


m)   Fees relating to contingent loans

     Under US GAAP, fees relating to contingent loans are recorded as
non-interest income and not as interest income. This reclassification is shown
in the Article 9 financial statements in Note 27.

n)   Investment securities

     Under Chilean GAAP, investment securities held by the Bank which have a
secondary market (and an original maturity of more than one year) are carried
at market value. Securities held by the Bank's brokerage subsidiary and other
subsidiaries are carried at the lower of cost or market value. Investment
securities not falling under these categories are carried at cost.

     Under SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities", investment securities, which include debt and certain equity
securities, are accounted for as follows:

o    Debt securities that the Bank has the positive intent and ability to hold
     to maturity are classified as held-to-maturity securities and are reported
     at amortized cost.

o    Debt and equity securities that are bought and held principally for the
     purpose of selling them in the near term are classified as trading
     securities and are reported at fair value, with unrealized gains and
     losses included in earnings.

o    Debt and equity securities not classified as either held-to-maturity or
     trading securities are classified as available-for-sale securities and
     reported at fair value, with unrealized gains and losses excluded from
     earnings and reported in a separate component of shareholders' equity.

     The effect of the difference between Chilean GAAP and US GAAP in the
accounting treatment for investment securities was an increase in shareholders'
equity of MCh$ 763 and MCh$ - at December 31, 2001 and 2002, respectively, and
a(n) (decrease) increase in net income of MCh$ (1,918), MCh$ 949 and MCh$
(2,139) for the years 2000, 2001 and 2002, respectively.

o)   Impairment of restructured loans

     US GAAP requires creditors to value certain impaired and restructured
loans at the present value of the expected future cash flows discounted at the
loan's effective contractual interest rate, or at the fair value of the
collateral if the loan is collateral dependent. Under Chilean GAAP, a loss on
impaired and restructured loans is only recognized if the new interest rate is
inferior to the average cost of funds of the Bank. This loss is recognized
through an increase in the allowance for loan losses. Had US GAAP been
followed, net income would have increased by MCh$ 205 during 2000, MCh$ -
during 2001 and MCh$ -, during 2002.


                                    F - 57
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


p)   Fees on Automatic Teller Machines (ATM) and other services

     The Bank recognizes fees on Automatic Teller Machine (ATM) cards and other
services on a cash basis. Under US GAAP, recognition of this income should be
recorded on an accrual basis. The effect of this difference resulted in a
decrease in shareholders' equity under Chilean GAAP of MCh$ 351 and MCh$ 762,
at December 31, 2001 and 2002, respectively. In addition, had US GAAP been
applied, net income would have (decreased) increased by MCh$ (226) in 2000,
MCh$ 383 in 2001 and MCh$ (411) in 2002.

q)   Business combination

     For US GAAP purposes, effective January 1, 2002, the Bank adopted SFAS No.
142, "Goodwill and Other Intangible Assets, " which establishes the following:

     o    The accounting for a recognized intangible asset is based on its
          useful life to the reporting entity. An intangible asset with a
          finite useful life is amortized over the life of the asset, but
          goodwill and other intangible assets with indefinite useful lives are
          not amortized.
     o    The remaining useful lives of intangible assets being amortized are
          evaluated each reporting period to determine whether events and
          circumstances warrant a revision to the remaining period of
          amortization. If the estimate of an intangible asset's remaining
          useful life is changed, the remaining carrying value of the
          intangible asset is amortized prospectively over the revised
          remaining useful life.
     o    Goodwill and other intangible assets with indefinite useful lives
          that are not subject to amortization are tested for impairment at
          least annually.
     o    All goodwill must be assigned to a reporting unit, which is defined
          as an operating segment or one level below an operating segment.

     SFAS No. 142 became effective for years beginning after December 15, 2001.
Accordingly, no goodwill amortization expense was recorded for US GAAP purposes
in 2002 and not impairment charge was deemed necessary.

     The Bank adopted SFAS No. 147 which requires financial institutions to
adopt SFAS No. 142.

     Under Chilean GAAP, the difference between the purchase price and the net
book value of assets and liabilities acquired in a purchase transaction is
considered to be goodwill and is amortized on a straight-line basis over a
period not exceeding ten years. The purchases of ownership interests in BHIF
S.A. Corredores de Bolsa in 1993 and 1997 and in Corredora Tecnica de Seguros
Ltda. in 1998, and the assets and liabilities of Banesto Chile Bank in 1995,
were recorded in accordance with Chilean GAAP.

     Under US GAAP, in a business combination accounted for under the purchase
method of accounting, the acquired company's assets and liabilities are
adjusted to give effect to the purchase price paid by the acquiring company.
If, after the assets and liabilities of the acquired company have been adjusted
to their fair value at the acquisition date, the purchase price exceeds the
amount of such fair value, the excess is recorded as goodwill and is amortized
to expense over the period of benefits. The financial statements of the
constituent companies are combined as of the date of the acquisition and are
not restated for prior periods.


                                    F - 58
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


     In a business combination accounted for by the purchase method involving
the acquisition of a banking institution, intangible assets acquired that can
be separately identified are assigned a portion of the total cost of the
acquired banking institution if the fair values of those assets can be reliably
determined. The fair values of such assets that relate to depositor or borrower
relationships are based on the estimated benefits attributable to the
relationship that exist at the date of acquisition without regard to new
depositors or borrowers that may replace them. Those identified intangible
assets are amortized over the estimated lives of those existing relationships.
If the fair value of liabilities assumed in the purchase exceeds the fair value
of identifiable assets acquired and such assets do not include a significant
amount of long-term interest-bearing assets, the unidentifiable intangible
asset (goodwill) is amortized over a period not exceeding the estimated average
remaining life of the existing customer (deposit) base acquired.

r)   Comprehensive income

     In accordance with SFAS No. 130, "Reporting Comprehensive Income", the
Bank is required to report and display comprehensive income and its components
in a full set of general purpose financial statements. "Comprehensive income"
is defined in this statement as the change in equity (net assets) of a business
enterprise during a period from transactions and other events and circumstances
from nonowner sources. It includes net income and other comprehensive income
(revenues, expenses, gains and losses) that under generally accepted accounting
principles are excluded from net income.



                                    F - 59
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


s)   Effects of conforming to US GAAP

     The following is a reconciliation of consolidated net income under Chilean
GAAP and the corresponding amounts under US GAAP:

<TABLE>
                                                        For the year ended December 31,
                                                         2000        2001        2002
                                                       --------    --------    --------
                                                         MCh$        MCh$        MCh$
<S>                                                      <C>         <C>         <C>
Net income in accordance with Chilean GAAP .........     14,904      15,335      20,255
Loan origination fees and costs (par. 28.1. a) .....        177        (328)        518
Deferred income taxes (par. 28.1. b) ...............     (3,581)       (358)        (38)
Investments in other companies (par. 28.1. h) ......         62        (255)       (120)
Derivative financial instruments (par. 28.1. i) ....       (127)       (118)     (1,537)
Investment securities (par. 28.1. n) ...............     (1,918)        949      (2,139)
Impairment of loans (par. 28.1. o) .................        205           -           -
Fees on services (par. 28.1. p) ....................       (226)        383        (411)
Amortization of goodwill (par. 28.1. q) ............         14          12         389
                                                       --------    --------    --------

Net income in accordance with US GAAP ..............      9,510      15,620      16,917
Other comprehensive income (par. 28. 1. r)
  Net unrealized gains (par. 28. 2. c) .............          -          33       2,481
                                                       --------    --------    --------
Comprehensive income in accordance with
  US GAAP (par. 28. 1.r) ...........................      9,510      15,653      19,398
                                                       ========    ========    ========
</TABLE>

     Accumulated other comprehensive income amounted to MCh$ -, MCh$ 33 and
MCh$ 2,514 as of December 31, 2000, 2001 and 2002, respectively.

     The following is a reconciliation of consolidated shareholders' equity
under Chilean GAAP and under US GAAP:

                                                                 Year ended
                                                                December 31,
                                                              2001        2002
                                                              ----        ----
                                                              MCh$        MCh$

Shareholders' equity in accordance with Chilean GAAP ...    250,120     257,022
Loan origination fees and costs (par. 28.1. a) .........      5,992       6,510
Deferred income taxes (par. 28.1. b) ...................         59        (451)
Accrual for mandatory dividends (par. 28.1. c) .........     (4,600)     (6,077)
Investments in other companies (par. 28.1. h) ..........        470         350
Forward exchange contracts (par. 28.1. i) ..............        728       1,008
Investment securities (par. 28.1. n) ...................        763           -
Fees on services (par. 28.1. p) ........................       (351)       (762)
Amortization of goodwill  (par. 28.1. q) ...............          5         394
Derivative financial instruments (par. 28. i) ..........       (832)     (2,649)
                                                           --------    --------
Shareholders' equity in accordance with US GAAP ........    252,354     255,345
                                                           ========    ========


                                    F - 60
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


      The following summarizes the changes in shareholders' equity under US
GAAP during the years ended December 31, 2000, 2001 and 2002:
                                                                      MCh$
                                                                      ----

Balance at January 1, 2000 ....................................     188,691
Reversal of accrual for minimum dividend-prior year ...........       2,886
      Dividend paid ...........................................      (9,519)
      Minimum dividend at year end required by law ............      (4,471)
      Capital increase, net ...................................      65,369
      Net loss for the year ...................................       9,510
                                                                   --------
Balance at December 31, 2000 ..................................     252,466
      Reversal of accrual for minimum dividend-prior year .....       4,471
      Dividend paid ...........................................     (15,636)
      Minimum dividend at year end required by law ............      (4,600)
      Other incomprehensive income for the year ...............          33
      Net income for the year .................................      15,620
                                                                   --------
Balance at December 31, 2001 ..................................     252,354
      Reversal of accrual for minimum dividend-prior year .....       4,600
      Dividend paid ...........................................     (14,930)
      Minimum dividend at year end required by law ............      (6,077)
      Other incomprehensive income for the year ...............       2,481
      Net income for the year .................................      16,917
                                                                   --------
Balance at December 31, 2002 ..................................     255,345
                                                                   ========

2.   Additional disclosure requirements

a)   Earnings per share

     The following disclosure of earnings per share information is not required
for presentation in the financial statements under Chilean GAAP but is required
under US GAAP.

<TABLE>
                                                                                 Year ended December 31,
                                                                     --------------------------------------------
                                                                          2000            2001            2002
                                                                          ----            ----            ----
<S>                                                                   <C>             <C>             <C>
Basic earnings per share-US GAAP ..................................         26.33           43.24           46.83
Weighted average number of shares outstanding .....................   308,031,444     361,222,027     361,222,027
</TABLE>

b)   Income taxes

The provision for income taxes charged to income is as follows:

<TABLE>
                                                                                 Year ended December 31,
                                                                     --------------------------------------------
                                                                          2000            2001            2002
                                                                          ----            ----            ----
<S>                                                                   <C>             <C>             <C>
Current income tax provision for the year under Chilean GAAP ......        (1,015)         (6,135)         (6,261)
Effect of deferred income taxes under Chilean GAAP ................         2,999           5,254           3,743
US GAAP adjustment:
     Deferred tax effect of applying SFAS 109 .....................        (3,581)           (358)            (38)
                                                                     ------------    ------------    ------------
Income tax (expense) benefit for the year under US GAAP ...........        (1,597)         (1,239)         (2,556)
                                                                     ============    ============    ============
</TABLE>


                                    F - 61
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


Deferred tax assets (liabilities) under US GAAP are summarized as follows:

<TABLE>
                                                           Year ended December 31,
                                                               2001       2002
                                                               ----       ----
                                                               MCh$       MCh$
<S>                                                           <C>        <C>
Deferred tax assets
   Allowance for loan losses, lease contracts .............   18,570     22,921
     and charged-off of assets
   Allowance for losses from high-risk rated countries ....      233        234
   Tax loss carryforward ..................................        -         24
   Others .................................................    3,435      5,099
                                                             -------    -------
                                                              22,238     28,278
                                                             =======    =======

Deferred tax liabilities
   Depreciation ...........................................   (6,205)    (9,053)
   Loan origination fees and cost and deferred expenses ...   (2,031)    (1,969)
   Others .................................................     (233)      (180)
                                                             -------    -------
                                                              (8,469)   (11,202)
                                                             =======    =======
Net deferred tax assets ...................................   13,769     17,076
                                                             =======    =======
</TABLE>

     The US GAAP provision for income taxes differs from the amount of income
tax determined by applying the applicable Chilean statutory income tax rate to
US GAAP pre-tax income as a result of the following differences:

<TABLE>
                                                               Year ended December 31,
                                                             --------------------------
                                                              2000      2001      2002
                                                             ------    ------    ------
                                                              MCh$      MCh$      MCh$
<S>                                                          <C>       <C>       <C>
At statutory Chilean income tax rate (15% in 2000 and 2001,
  16% in 2002) ............................................  (1,666)   (2,529)   (3,116)
Increase (decrease) in rates resulting from:
    Nondeductible expenses ................................    (318)     (357)     (508)
    Nontaxable income .....................................     666       346       382
    Amortization of goodwill ..............................       2         2        62
    Tax credits ...........................................    (307)      (48)      (58)
    Effect of change in enacted tax rates .................       -     1,156       806
    Other .................................................      26       191      (124)
                                                             ------    ------    ------
At effective tax rate .....................................  (1,597)   (1,239)   (2,556)
                                                             ======    ======    ======
</TABLE>


                                    F - 62
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


c)   Investment securities

     Shown below are the carrying amounts, gross unrealized gains and losses
and approximate fair value of investment securities held to maturity under US
GAAP (see paragraph 28.1.o):

<TABLE>
                                                            Gross         Gross
                                           Amortized     unrealized    unrealized
                                             cost           gains        losses       Fair value
                                             ----           -----        ------       ----------
                                             MCh$           MCh$          MCh$           MCh$
<S>                                         <C>              <C>         <C>             <C>
Securities to be held to maturity

December 31, 2002
   Foreign investments .................    2,139             -          (2,139)             -

December 31, 2001
   Foreign investments .................    2,708             -          (1,211)         1,497
</TABLE>

Gross realized gains (losses) on sales of securities available for sale were:

                                               Year ended December 31,
                                           -------------------------------
                                            2000        2001         2002
                                           ------      ------       ------
                                            MCh$        MCh$         MCh$

Gross realized gains (losses):
   Central Bank Securities ............         -          33        2,799
   Other Government Agencies ..........         -           -          166
   Domestic Financial Institutions ....         -          (3)         (28)
   Other ..............................         -           3           16
                                           ------      ------       ------
         Total ........................         -          33        2,953
                                           ======      ======       ======

The scheduled maturities of securities to be held to maturity at December 31,
2002 were as follows:

                                                         Securities to be
                                                         held to maturity
                                                                       Fair
                                                      Amortized     value cost
                                                      ---------     ----------
                                                         MCh$          MCh$

Due in one year or less .......................              -             -
Due from one year to five years ...............          2,139             -
                                                        ------        ------
       Total ..................................          2,139             -
                                                        ======        ======


                                    F - 63
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


d)   Impaired loans

     A loan is considered to be impaired when, based upon current information
and events, it is probable that the Bank will be unable to collect all amounts
due according to the contractual terms of the loan. Impairment is primarily
measured based on the fair value of the loan's collateral.

     At December 31, 2001 and 2002, the recorded investment in loans for which
impairment has been recognized was as follows:

                                                              At December 31,
                                                             2001         2002
                                                             ----         ----
                                                             MCh$         MCh$

Impaired loans ......................................       78,734       73,273
Impaired loans with related allowances ..............       61,547       58,821
Allowance on impaired loans .........................       20,002       19,331
Impaired loans with no related allowance ............       17,188       14,452

Charge-offs and recoveries of loans previously charged-off

     As discussed in note 1 k) of these financial statements, under Chilean
GAAP the Bank charges-off loans when collection efforts have been exhausted.
Under the rules and regulations established by the Superintendency of Banks,
charge-offs must be made within the following maximum prescribed limits:

     -    24 months after a loan is past due (3 months for consumer loans) for
          loans without collateral;
     -    36 months after a loan is past due for loans with collateral.

     Under U.S. GAAP loans should be written-off in the period that they are
deemed uncollectible. The Bank believes that the charge-off policies it applies
in accordance with Chilean GAAP are substantially the same as those required
under U.S. GAAP, and therefore that differences are not significant to the
presentation of its financial statements.

e)   Segment information

     Effective 1998, the Bank adopted SFAS No. 131 "Disclosure about Segments
of an Enterprise and Related Information". This standard establishes standards
for reporting information about operating segments and related disclosures
about products and services and geographic areas. Operating segments are
defined as components of an enterprise about which separate financial
information is available that is regularly used by the chief operating decision
making group in deciding how to allocate resources and assess performance.

     The Bank has strategically aligned its operations into three business
segments based on its market segmentation and the needs of its clients and
trading partners. The three business segments are Retail banking (Residential
mortgage lending and consumer lending); Corporate banking; and Business
banking. The Bank manages these business segments using an internal
profitability reporting system. The accounting policies of the operating
segments are the same as those described in the summary of significant
accounting policies, except as noted below. The information generated is not
necessarily comparable with similar information from any other financial
institution.


                                    F - 64
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


     The Bank uses total operating income excluding provisions for loan losses
(TOIBP) in measuring the financial performance of its operating segments. For
this purpose, the internal profitability reporting system uses a transfer rate
method that assumes perfect matching in maturities or repricing periods and
currencies when the net interest revenue has to be allocated across segments.
The difference between the actual total net interest revenue and that arising
from the abovementioned method, called "gap difference", is allocated to the
Corporate banking segment.

Descriptions of each business segment are as follows:

o    Mortgage lending is the Bank's oldest and most developed retail business.
     In particular, residential mortgage lending business continues to play a
     significant role as part of the Bank's strategy of cross-sellings its
     products to the retail market.

o    Consumer lending includes personal loans, automotive financing and credits
     cards.

o    Corporate banking includes a full range of financial products and services
     to large size companies in Chile, including commercial loans, working
     capital lines of credit, trade financing, payment services and short-term
     and other deposits.

o    Business banking includes a full range of financial products and services
     to small and medium size companies.

     The following table presents summary information in millions of Chilean
pesos related to the Bank's lines of business for the years ending December 31,
2000, 2001 and 2002.

<TABLE>
                                                                         2000
                                        ----------------------------------------------------------------------
                                        Residential
                                         mortgage    Consumer    Business    Corporate  Reconciling
                                          lending     lending     banking     banking    items (2)     Total
                                          -------     -------     -------     -------    ---------     -----
<S>                                       <C>         <C>         <C>         <C>           <C>     <C>
Operating net interest income (1) ...       5,093       7,704      37,326      31,728       3,556      85,407
Income from services, net ...........         407       4,335       2,245       1,274       3,534      11,795
TOIBP ...............................       5,500      12,039      39,571      33,002       7,090      97,202
Interest earnings assets (3) ........     376,879     172,191     409,508     656,242           -   1,614,820
</TABLE>

<TABLE>
                                                                         2001
                                        ----------------------------------------------------------------------
                                        Residential
                                         mortgage    Consumer    Business    Corporate  Reconciling
                                          lending     lending     banking     banking    items (2)     Total
                                          -------     -------     -------     -------    ---------     -----
<S>                                       <C>         <C>         <C>         <C>           <C>     <C>
Operating net interest income (1) ...       8,363      29,500      37,059      18,899       3,913      97,734
Income from services, net ...........           -      10,003       1,052       1,951       4,222      17,228
TOIBP ...............................       8,363      39,503      38,111      20,850       8,135     114,962
Interest earnings assets (3) ........     389,271     198,640     459,263     731,577           -   1,778,751
</TABLE>

<TABLE>
                                                                         2002
                                        ----------------------------------------------------------------------
                                        Residential
                                         mortgage    Consumer    Business    Corporate  Reconciling
                                          lending     lending     banking     banking    items (2)     Total
                                          -------     -------     -------     -------    ---------     -----
<S>                                       <C>         <C>         <C>         <C>           <C>     <C>
Operating net interest income (1) ...       6,278      32,210      25,814      30,992       5,525     100,819
Income from services, net ...........       2,054       7,553         774       6,269       5,112      21,762
TOIBP ...............................       8,332      39,763      26,588      37,261      10,637     122,581
Interest earnings assets (3) ........     454,661     228,496     550,499     741,577           -   1,975,233
</TABLE>


                                    F - 65
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


(1)  Operating net interest income includes: Net interest revenue and Other
     operating income, net, because, with respect to the latter, the bank
     considers gains and losses from financial instruments and from foreign
     exchange transactions to be an integral part of the generation of interest
     income and the incurrence of interest expense.

(2)  Reconciling items mainly include the amounts related to the earnings of
     the subsidiaries mentioned in Note 1.a).

(3)  For purposes of this table, interest earnings assets include only the
     Bank's average balances of loans.

(4)  Reconciliations

     Set forth below are reconciliations of segment information to the
consolidated financial statements:

                                              2000       2001       2002
                                              ----       ----       ----
                                              MCh$       MCh$       MCh$
Net interest revenue ...................     80,079     93,342    109,014
Total other operating income, net ......      5,328      4,392     (8,195)
                                           --------   --------   --------
Operating net interest income, total ...     85,407     97,734    100,819
                                           ========   ========   ========

     There are no significant intersegment results, except for the gap
difference mentioned above for 2000, 2001 and 2002.

     As the Bank's business activity is exclusively carried out in Chile, no
information by geographic area is provided.

a)   Recent accounting pronouncements

     In September 2002, the Chilean Superintendency of Banks issued Circular
No. 3,189, which changed the method for calculating and accounting for the
allowances related to credit risk. Under the new standard, Chilean banks are
permitted to use the evaluation methods and models that each bank consider
appropriate based on its specific kind of loan portfolio or transactions,
following the general guidelines instructed by the Superintendency. Such models
and further modifications have to be approved by the board of directors. The
Bank is required to adopt the provisions as of January 1, 2004.


                                    F - 66
<PAGE>

                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


     In July 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations". FAS No. 143 requires entities to record the fair value
of a liability for an asset retirement obligation in the period in which it is
incurred. When the liability is initially recorded, the entity capitalizes the
cost by increasing the carrying amount of the related long-lived asset. Over
time, the liability is accreted to its present value each period and the
capitalized cost is depreciated over the useful life of the related asset. Upon
settlement of the liability, the entity either settles the obligation for the
amount recorded or incurs a gain or loss. FAS No. 143 is effective for fiscal
years beginning after June 15, 2002. Although the Bank is evaluating the
effects of this Statement on its financial position and results of operations,
management does not consider that the adoption of this Statement will have a
material impact on the results of its operations.

     In June 2002, the FASB issued SFAS No. 146 "Accounting for Costs
Associated with Exit or Disposal Activities" (FAS 146). This statement
supercedes Emerging Issues Task Force (EITF) Issue No. 94-3 "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit
an Activity (including Certain Costs Incurred in a Restructuring)". FAS 146
requires that a liability for a cost associated with an exit or disposal
activity be recognized when the liability is incurred. Under EITF 94-3, a
liability is recognized at the date an entity commits to an exit plan. FAS 146
also establishes that the liability should initially be measured and recorded
at fair value. The provisions of FAS 146 will be effective for any exit and
disposal activities initiated after December 31, 2002. The Bank is evaluating
the effect of this statement on its financial position and results of
operations, however, it does not expect that the adoption will have a material
impact on the Bank's results of operations or financial position.

     In November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others" (FIN 45). FIN 45 requires that upon
issuance of a guarantee, a guarantor must recognize a liability for the fair
value of an obligation assumed under a guarantee. FIN 45 also requires
additional disclosures by a guarantor in its interim and annual financial
statements about the obligations associated with guarantees issued. Initial
recognition and measurement provisions of FIN 45 are applicable on a
prospective basis to guarantees issued or modified. The Bank is evaluating the
impact of the new interpretation, however, the adoption of FIN 45 is not
expected to material impact on Bank's results of operations or financial
position.

     In December 2002, the FASB issued SFAS No. 148 "Accounting for Stock-
Based Compensation- Transition and Disclosure- an amendment of FASB Statement
No. 123" (FAS 148). This statement amends SFAS No. 123 "Accounting for Stock
Based Compensation" (FAS 123) to provide alternative methods of voluntarily
transitioning to the fair value based method of accounting for stock-based
employee compensation. FAS 148 also amends the disclosure requirements of FAS
123 to require disclosure of the method used to account for stock-based
employee compensation and the effect of the method on reported results in both
annual and interim financial statements. The Bank is evaluating the effect of
this statement on its financial position and results operations, however,
management does not expect that the adoption will have a material impact on its
results of operations or financial position.


                                    F - 67
<PAGE>


                                BBVA BANCO BHIF

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


     In November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others" ("FIN 45") requires that upon issuance of
a guarantee, a guarantor must recognize a liability for the fair value of an
obligation assumed under a guarantee. FIN 45 also requires additional
disclosures by a guarantor in its interim and annual financial statements about
the obligations associated with guarantees issued. The recognition provisions
of FIN 45 will be effective for any guarantees that are issued or modified
after December 31, 2002. The disclosure requirements will be effective for our
third quarter of fiscal 2003. The Bank is currently evaluating the impact of
the new interpretation; however, that the adoption of FIN 45 is not expected to
have a material impact on the Bank's results of operations or financial
position.

     In December 2002, the FASB issued SFAS No. 148 "Accounting for Stock-
Based Compensation- Transition and Disclosure- an amendment of FASB Statement
No. 123" ("FAS 148"). This statement amends SFAS No. 123 "Accounting for Stock
Based Compensation" ("FAS 123") to provide alternative methods of voluntarily
transitioning to the fair value based method of accounting for stock-based
employee compensation. FAS 148 also amends the disclosure requirements of FAS
123 to require disclosure of the method used to account for stock-based
employee compensation and the effect of the method on reported results in both
annual and interim financial statements. The Bank believes that this statement
will not be applicable to them, when adopted.

     In January 2003, the FASB issued Interpretation 46, "Consolidation of
Variable Interest Entities" ("FIN 46") requires that companies that control
another entity through interests other than voting interests should consolidate
the controlled entity. FIN 46 applies to variable interest entities created
after January 31, 2003, and to variable interest entities in which an
enterprise obtains an interest in after that date. The related disclosure
requirements are effective immediately. The Bank is presently evaluating the
impact of the new interpretation, however, management does not expect that the
adoption will have a material impact on its results of operations or financial
position.


                                    F - 68