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UNITED STATES

FORM 10-K

	x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

      For the Fiscal Year Ended December 31, 2003

	o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

      For the transition period from                     to

Commission file number 1-10683

MBNA Corporation

      Registrant’s telephone number, including area code: (800) 362-6255

      Securities Registered Pursuant to Section 12(b) of the Act:

Securities Registered Pursuant to Section 12(g) of the Act:  None

      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 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 o

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

      Indicate by check mark, whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes x  No o

      As of June 30, 2003, the aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant calculated by reference to the closing price of the Registrant’s common stock as reported on the New York Stock Exchange was $22,521,573,244. As of March 1, 2004, there were outstanding 1,277,671,875 shares of common stock, par value $.01 per share, which is the only class of the Registrant’s common stock.

DOCUMENTS INCORPORATED BY REFERENCE

      Portions of the 2003 Annual Report to Stockholders for the year ended December 31, 2003 are incorporated by reference into Parts I, II, and IV. Portions of the Definitive Proxy Statement for the Annual Meeting of Stockholders to be held May 3, 2004 (“Definitive Proxy Statement”) are incorporated by reference into Parts II and III.

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MBNA CORPORATION

2003 ANNUAL REPORT ON FORM 10-K

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PART I

      MBNA Corporation (the “Corporation”), a registered bank holding company, was incorporated under the laws of Maryland on December 6, 1990. It is the parent company of MBNA America Bank, N.A. (the “Bank”), a national bank organized in January 1991 as the successor to a national bank formed in 1982 and the Corporation’s principal subsidiary. The Bank has two wholly owned foreign bank subsidiaries, MBNA Europe Bank Limited (“MBNA Europe”) formed in 1993 with its headquarters in the U.K. and MBNA Canada Bank (“MBNA Canada”) formed in 1997. Through the Bank, the Corporation is the largest independent credit card lender in the world and is the leading issuer of endorsed credit cards, marketed primarily to members of associations and customers of financial institutions and other organizations. In addition to its credit card lending, the Corporation makes other consumer loans, including installment and revolving unsecured loan products, and offers insurance and deposit products. The Corporation is the parent of MBNA America (Delaware), N.A. (“MBNA Delaware”), a national bank that offers mortgage loans, aircraft loans and business loan products.

      The Corporation conducts its business in Europe through MBNA Europe and in Canada through MBNA Canada using substantially the same business strategy and operating methods in its international activities as it does in the U.S., with adjustments for local regulation and custom.

Products and Services

      The Corporation offers standard, gold, and Platinum Plus personal and business credit cards and customizes them for thousands of endorsed affinity programs and for programs under its own brand name. In addition, the Corporation offers Customers even more customized, high-end credit card products such as the Quantum card. The Corporation’s card programs offer a variety of benefits and features based on the type of endorsing organization and need of the Customer. These benefits and features include competitive interest rates, group-specific enhancements, rewards (including the World Points rewards program), and compensation to the endorsing organization based on the cardholder’s usage. The Corporation’s approach to marketing and underwriting enables it to offer higher initial credit lines to applicants and periodic credit-line increases to existing Customers, resulting in higher usage and average account balances.

      The Corporation’s credit cards are currently offered under either the MasterCard or Visa brand name and network. MasterCard and Visa offer the Corporation account generation and transaction volume incentives in order to promote their respective brands. In addition, in connection with the Corporation’s co-branding arrangements, MasterCard and Visa enter into endorsing arrangements with certain of the Corporation’s co-branding partners. See discussion of co-branding under “Marketing” on pages 2 through 4 below. In January 2004, the Corporation entered into an agreement with American Express to offer its credit cards under the American Express brand and network and intends to begin offering American Express branded cards upon satisfaction of certain conditions contained in the agreement.

      The Corporation’s other consumer loan products include unsecured lines of credit accessed by check or electronically with either fixed monthly payments or minimum payments similar to credit card accounts. Customers use these products primarily for large purchases or consolidation of other consumer debt. The Corporation markets these products to its existing credit card Customers and to others. In the U.S., the Corporation also offers sales finance accounts, which are unsecured lines of credit marketed to customers of a

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      The Corporation offers specialty finance products, including mortgage and aircraft loans, to consumers in the U.S. through MBNA Delaware and unsecured lines of credit to small businesses through the Bank. The Corporation’s mortgage loans primarily consist of home equity loans offered as a debt consolidation tool. The mortgage loans also include purchase money and refinance loans. The Corporation’s mortgage loans are offered primarily to the Corporation’s credit card and other consumer loan Customers. The Corporation originates and then sells the mortgage loans to third parties. The Corporation does not service any mortgage loans.

      In the U.S., the Corporation offers money market deposit accounts and certificates of deposit through the Bank. Money market deposit accounts provide Customers with liquidity and convenience of service, as well as insurance up to $100,000 per depositor by the Federal Deposit Insurance Corporation (“FDIC”). Certificates of deposit are traditional fixed term investments with maturities that typically range from six to sixty months, and are insured by the FDIC up to $100,000. Deposit products are offered to members of the Corporation’s endorsing associations, to existing credit card Customers and to others.

      The Corporation offers business lending products in the U.S. (through MBNA Delaware), the U.K., and Canada. The Corporation’s business lending products include general purpose business credit cards marketed primarily to small businesses, and purchasing and corporate cards for small and larger businesses for business, travel and corporate purchasing.

      The Corporation offers credit protection products to credit card and other consumer loan Customers of the Bank, and markets credit insurance to Customers of MBNA Europe and MBNA Canada. In addition, the Corporation markets credit-related life and disability insurance to Customers whose accounts have been acquired from other lenders. These insurance and credit protection products are marketed only to the Corporation’s loan Customers, and only in conjunction with their loan accounts with the Corporation and not any other loan accounts. A third-party vendor manages aspects of the sale, retention and administration of certain of these products. Customer acceptance of these products generally has been higher in the U.K. than in the U.S. and, as a result, these products have accounted for a higher proportion of U.K. revenue than U.S. revenue.

      In January 2004, MBNA Europe acquired Premium Credit Limited, an independent premium finance company in the U.K. Premium Credit makes loans to businesses, including professionals and small business owners, to pay premiums on property, general liability, and other types of insurance. Premium Credit also provides loans to retail consumers for financing of premiums on insurance products. Premium Credit generates these loans through its relationships with a network of insurance companies, agents, and brokers. At year-end 2003, Premium Credit had £814 million (approximately $1.5 billion) in outstanding loans.

Marketing

      The Corporation markets its products primarily through endorsements from associations, financial institutions, commercial firms, and others. The Corporation directs its marketing efforts primarily to members and customers of these endorsing organizations, and to targeted lists of people with a strong common interest. The Corporation is the recognized leader in endorsed marketing, with endorsements from thousands of

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      The Corporation generally customizes marketing programs for an endorsing organization in order to attract the organization’s members or customers to the Corporation’s products. For example, credit cards issued to the organization’s members or customers usually carry custom graphics and the name and logo of the endorsing organization.

      The Corporation’s endorsing relationships with commercial firms, including professional sports teams and retailers, include co-branded cards and typically include incentives for Customers to purchase services or merchandise from the co-branding firm. In the U.S., the Corporation also markets sales finance accounts to finance purchases through a limited number of retailers or service providers.

      Under the Corporation’s agreements with endorsing organizations, the Corporation makes royalty payments to the endorsing organizations who grant the Corporation the exclusive right to market the Corporation’s products to the organization’s members or customers and provide their endorsements and mailing lists. Some organizations, such as financial institutions, also market the Corporation’s products to their members or customers. The endorsing agreements generally have a term of five years. The royalty payments the Corporation pays to the endorsing organizations typically include payments based on the number of new accounts, activation, and revenue sharing (for example, a percentage of sales volume on accounts). In some cases the Corporation advances future compensation to the organization.

      The Corporation provides rewards points based on spending volumes to certain Customers, who may include members or customers of the endorsing organizations. The Customers may redeem the rewards points for cash, merchandise, or services. In some cases the Corporation is responsible for the cost of the rewards points and in other cases the endorsing organization is responsible for the cost of the rewards points. In some cases the Corporation pays the endorsing organization a portion of the cost of the rewards points when the endorsing organization is responsible for them. See “Royalties to Endorsing Organizations” in Note 3 on page 73 of the 2003 Annual Report to Stockholders, which is incorporated herein by reference.

      The Corporation primarily uses direct mail, point of sale, event marketing, telesales, and Internet marketing to market its credit cards and other products. Each year, the Corporation develops numerous different marketing campaigns, customized for the Corporation’s endorsing organizations, generating millions of direct mail pieces designed to add accounts and promote account usage. The Corporation’s in-house advertising agency designs custom graphics for credit cards and prepares direct mail programs and advertisements. The Corporation conducts Internet marketing through a combination of banner, e-mail, search engine, and other advertisements.

      In addition, the Corporation’s marketing activities include efforts to retain profitable accounts and programs designed to activate new accounts and stimulate usage of existing accounts, primarily through access check mailings, balance transfer incentives and purchase reward programs.

      The Corporation selectively purchases credit card, other consumer loan, and business loan portfolios from other financial institutions. Generally, the Corporation purchases portfolios when it can also obtain ongoing endorsing arrangements from the seller or from the portfolio’s existing endorsing organizations. See “Loan Receivables” on pages 26 through 29 of the 2003 Annual Report to Stockholders, which is incorporated herein by reference, for the amount of the Corporation’s portfolio purchases.

      The Corporation conducts marketing activities through regional and international offices. These regional and international offices assist the Corporation to obtain endorsements, increase its familiarity with local markets, better understand the needs and motivations of Customers, and assess the competitive environment. In the U.S., MBNA Marketing Systems, Inc. (“MBNA Marketing Systems”), a subsidiary of the Bank, has regional offices in Maine, Ohio, Texas, Maryland, Georgia, New Jersey, California, and New York. MBNA Europe has its headquarters in Chester, England and offices in London, England and Dublin, Ireland. In 2002, MBNA Europe opened a new branch in Las Rozas, Spain and began marketing in Spain. MBNA Ireland Limited has offices in Carrick-on-Shannon, Ireland. MBNA Canada has its headquarters in Ottawa, Ontario and a sales and marketing office in Montreal, Quebec.

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      MBNA Marketing Systems has 16 telesales facilities in 10 states. As of December 31, 2003, it employed approximately 3,300 people in telesales, the majority of whom worked part-time. The telesales organization generates new accounts by calling prospects obtained from membership or customer lists of endorsing organizations and other prospect lists and calls existing Customers to market products.

      In 2003, through telesales to new Customers, the Corporation added approximately 15% of its new accounts in the U.S. and 6.4% of its new accounts in the U.K., Ireland, and Spain (excluding accounts acquired through portfolio acquisitions). In recent periods the Corporation has begun to rely less on telesales in the U.S. In future periods, the Corporation expects to continue to rely less on telesales in the U.S. and more on other marketing channels, such as the Internet, point of sale, and event marketing, because of changing consumer attitudes and acceptance of telesales and federal and state regulatory initiatives such as do-not-call lists that restrict telesales. See “Regulatory Matters — Telemarketing Regulation” on page 13.

Credit

      The credit risk of lending to each Customer is evaluated through the combination of human judgment and the application of various credit scoring models and other statistical techniques. In making a credit determination, the Corporation considers an applicant’s capacity and willingness to repay, stability and other factors. Important information in performing this credit assessment includes an applicant’s income, debt-to-income levels, residence and employment stability, the rate at which new credit is being acquired, and the manner in which the applicant has handled the repayment of previously granted credit. An applicant who has favorable credit capacity and credit history characteristics is more likely to be approved and to receive a relatively higher credit line assignment. Favorable characteristics include low debt-to-income levels, a long history of steady employment, and little or no history of delinquent payments on other debt.

      The Corporation develops credit scoring models to evaluate common applicant characteristics and their correlation to credit risk and utilizes such models in making credit assessments. The scoring models use the information available in the Customer’s application and credit report to provide a general indication of the applicant’s credit risk. Periodically, the scoring models are validated and, if necessary, realigned to maintain their accuracy and reliability.

      In 2003, less than half of the credit applications received by the Corporation were approved. A significant percentage of credit applications that present high risk are declined through an automated decisioning process. Most decisions to approve a credit application are made by credit analysts who consider the credit factors described above and assign credit lines based upon this assessment. Credit analysts are encouraged to call applicants when they believe additional information, such as an explanation of delinquencies or debt levels, may assist the analyst in making the appropriate credit decision. Credit analysts undergo a comprehensive education program that focuses on evaluating an applicant’s creditworthiness.

      Once the credit analyst makes a decision, further levels of review are automatically triggered based on an analysis of the risk of each decision. This analysis is derived from previous experiential data and makes use of credit scores and other statistical techniques. Credit analysts also review applications obtained through pre-approved offers to ensure adherence to credit standards and assign an appropriate credit limit as an additional approach to managing credit risk.

      Some credit applications that present low risk are approved through an automated decisioning process. In addition, credit applications for certain of the Corporation’s accounts are decisioned through an automated system in order to provide instant financing for Customers’ purchases with retailers or service providers.

      Credit lines for existing Customers are regularly reviewed for credit line increases, and when appropriate, credit line decreases. The Corporation’s Portfolio Risk Management division independently reviews selected applications to ensure quality and consistency.

      Prior to acquiring a portfolio of loans, the Corporation reviews the historical performance and seasoning of the portfolio (including the portfolio’s delinquency and loss characteristics, average balances, attrition rates, yields and collection performance) and reviews the account management and underwriting policies and procedures of the financial institution selling the loan portfolio. Accounts that have been purchased by the

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Risk Control

      The Corporation manages risk at the Customer level through sophisticated analytical techniques combined with regular judgmental review. Transactions are evaluated at the point of sale, where risk levels are balanced with profitability and Customer satisfaction. In addition, Customers showing signs of financial stress are periodically reviewed, a process which includes an examination of the Customer’s credit file, the Customer’s behavior with the Corporation’s accounts, and many times a phone call for clarification of the situation. As a result of these reviews, the Corporation may block use of accounts, reduce credit lines on certain accounts, and increase the annual percentage rates on certain accounts (generally after giving the Customer an opportunity to reject the rate increase, unless the increase was triggered by an event set out in the credit agreement).

      A balanced approach is also used when stimulating portfolio growth. Risk levels are measured through statistical models that incorporate payment behavior, employment information, income information, and transaction activity. Credit bureau scores and attributes are obtained and combined with internal information to allow the Corporation to increase credit lines and promote account usage while balancing additional risk.

      The Corporation manages fraud risk through a combination of judgmental reviews and sophisticated technology to detect and prevent fraud as early as possible. Technologies and strategies utilized include a neural net based fraud score, expert systems and fraud specific authorizations strategies. Address and other demographic discrepancies are investigated as part of the credit decision to identify and prevent identity theft.

Collection

      The Corporation’s collection philosophy is to work with each Customer with a past due account at an early stage of delinquency in a persistent yet professional manner. The Corporation employs several computerized systems to assist in the collection of past due accounts. These systems analyze each Customer’s purchase and repayment habits, and select accounts for initial contact with the objective of contacting the highest risk accounts first. Customers who are experiencing significant financial problems and who may consider filing for bankruptcy are referred to specialists who offer alternative payment programs to bankruptcy, including debt counseling, reduced interest rates, and fixed payment arrangements.

      The Corporation works with Customers continually at each stage of delinquency. The Corporation’s policy is to charge off open-end delinquent retail loans by the end of the month in which the account becomes 180 days contractually past due and closed-end delinquent retail loans by the end of the month in which they become 120 days contractually past due. Delinquent bankrupt accounts are charged off the end of the second calendar month following receipt of notification of filing from the applicable court, but not later than the applicable 180-day or 120-day timeframes described above. Accounts of deceased Customers are charged off when the loss is determined, but not later than the applicable 180-day or 120-day timeframes described above. Fraudulent accounts are charged off the end of the calendar month of the 90th day after identifying the account as fraudulent, but not later than the applicable 180-day or 120-day timeframes described above. Accounts failing to make a payment within charge-off policy timeframes are written off. Managers may on an exception basis defer charge-off of an account for another month, pending continued payment activity or other special circumstances. Senior manager approval is required on all such exceptions to charge-off. If an account has been charged-off, it may be sold to a third party or retained by the Corporation for recovery.

      A Customer account may be re-aged to remove existing delinquency. Generally, the intent of a re-age is to assist Customers who have recently overcome temporary financial difficulties and have demonstrated both the ability and willingness to resume regular payments, but may be unable to pay the entire past due amount. To qualify for re-aging, the account must have been opened for at least one year and cannot have been re-aged

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Operations

      Account processing services performed by MBNA Technology, Inc. (“MBNA Technology”), a wholly-owned subsidiary of the Bank, include data processing, payment processing, statement rendering, card production and network services. MBNA Technology’s data network provides an interface to MasterCard and Visa for performing authorizations and settlement funds transfers. Most data processing and network functions are performed at MBNA Technology’s facilities in Dallas, Texas, and Newark, Delaware. MBNA Technology generates and mails monthly statements to Customers summarizing account activity and processes Customer payments. Third-party vendors provide data processing and print and mail services in the U.K. and account processing services for the Corporation’s U.S. business card products. The Corporation depends on the continued availability and reliability of the MasterCard and Visa networks to provide for the exchange of financial information and funds between merchants and the Corporation.

Internet and Technology

      The Corporation offers several Internet-based products and services, including real-time online account access, credit card and consumer loan online applications, deposit products information, online balance transfers, and online shopping and security features.

      The Corporation uses sophisticated systems and technology in all aspects of its business operations to enhance Customer service and improve efficiency. These systems include marketing databases, advanced telecommunications networks to support Customer service and telesales, a credit decisioning system which processes credit card applications with on-line credit bureaus to support credit, neural networks to identify and prevent fraud, and selective statement insertion to customize communications with Customers. These systems enable the Corporation to implement customized marketing and service strategies for endorsing organizations. The Corporation relies primarily on internal development of technology solutions to ensure the flexibility, quality, and responsiveness of computer and telecommunication systems needed in its business.

      In 2004, the Corporation expects to complete a multi-phase project, begun in 2002, extending the use of the Corporation’s U.S. core Customer information systems to MBNA Europe’s business in the U.K. and Ireland, which currently relies on third-party vendors for such information systems. MBNA Canada already uses this system. The project will provide standardization of systems, appropriate infrastructure for an “internationalized” technical platform and systems enhancements for the MBNA Europe processing environment.

Terms and Conditions

      Each Customer and the Corporation enter into an agreement setting forth the terms and conditions of the Customer’s account. The Corporation reserves the right to add or change any terms, conditions, services or features of its accounts at any time, including increasing or decreasing periodic finance charges, other charges, and minimum payment terms. The Customer agreement generally provides that the Corporation may apply such changes, when applicable, to current outstanding balances as well as to future transactions. In the U.S., the Customer can avoid a rate increase by notifying the Corporation and then no longer using the account, unless the increase was triggered by an event set out in the agreement. In some cases the Corporation will

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      A Customer may use an account for purchases and cash advances. Periodic finance charges are calculated monthly by multiplying the applicable average daily balance on the account by the applicable daily periodic rate and by the number of days in the billing cycle.

      The Corporation’s other consumer loan accounts include accounts with a minimum monthly payment similar to credit card accounts, and with a fixed monthly payment amount. On the accounts with a fixed monthly payment amount, Customers take advances on the account and repay the advances over a fixed term with a fixed monthly payment amount, with the term and payment amount reset with each new advance.

      The Corporation offers fixed and variable rates on accounts and also offers temporary promotional rates. In the U.S., variable rates are offered at a percentage rate tied to the U.S. prime rate published in The Wall Street Journal. See “Interest Rate Sensitivity” on pages 57 though 58 of the 2003 Annual Report to Stockholders, which is incorporated herein by reference, for further discussion of the interest rates on the Corporation’s accounts.

      The Corporation assesses annual, late, overlimit, returned check, cash advance, express payment, and other miscellaneous fees earned on the Corporation’s credit card and other consumer loans in accordance with each Customer’s account agreement.

International

      The Corporation’s international activities are performed primarily through the Bank’s two foreign bank subsidiaries, MBNA Europe and MBNA Canada. See “Note 28: Foreign Activities” on page 94 of the 2003 Annual Report to Stockholders, which is incorporated herein by reference, for certain financial information on the Corporation’s international activities. The Corporation has been marketing credit card products through MBNA Europe since 1993 and through MBNA Canada since 1997. MBNA Europe and MBNA Canada also offer other consumer loan products. The Corporation uses substantially the same business strategy and operating methods in its international activities as in the U.S. Although MBNA Europe relies on third party vendors for some processing functions, it uses substantially the same processes as are used in the U.S.

Regulatory Matters

      The earnings of the Bank and the Corporation are affected by general economic conditions, monetary policies and the actions of various regulatory authorities, including the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”), the Office of the Comptroller of the Currency (the “OCC”), and the Federal Deposit Insurance Corporation (the “FDIC”). In addition, numerous federal and state laws and regulations affect the activities of the Corporation. This regulatory framework is intended primarily for the protection of depositors and deposit insurance funds and not for the protection of security holders.

      Set forth below is a description of the material elements of the laws, regulations, policies and other regulatory matters affecting the Corporation and its subsidiaries. The description is qualified in its entirety by reference to the full text of the statutes and regulations, as amended, that are described.

      As a bank holding company, the Corporation is subject to regulation under the Bank Holding Company Act of 1956 (the “BHCA”) and to the BHCA’s examination and reporting requirements. Under the BHCA, bank holding companies may not directly or indirectly acquire the ownership or control of more than five percent of the voting shares or substantially all of the assets of any company, including a bank, without the prior approval of the Federal Reserve Board. In addition, bank holding companies generally are prohibited under the BHCA from engaging in non-banking activities, subject to certain exceptions. The Gramm-Leach-Bliley Act, enacted in 1999 and discussed below, broadened the range of permissible activities.

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      The Bank and MBNA Delaware are subject to supervision and examination by the OCC, the banks’ primary regulator. The Bank and MBNA Delaware are insured by, and therefore are subject to the regulations of, the FDIC and are also subject to requirements and restrictions under federal and state law, including requirements to maintain reserves against deposits, restrictions on the types and amounts of loans that may be granted and the interest that may be charged thereon, and limitations on the types of investments that may be made and the types of services that may be offered.

      MBNA Europe is subject to regulation and supervision by the U.K. Financial Services Authority, the Federal Reserve Board, and the OCC. MBNA Canada is subject to regulation and supervision by the Office of the Superintendent of Financial Institutions, the Canadian Deposit Insurance Corporation, the Federal Reserve Board, and the OCC.

      The principal source of funds to the Corporation to pay dividends, interest and principal on debt securities and to meet other obligations is dividends from the Bank. The Bank and MBNA Delaware are subject to limitations on the dividends they may pay to the Corporation. The Corporation may also be subject to limitations on the payment of dividends to stockholders. See “Dividend Limitations” on pages 45 through 46 and Note 25: “Dividend Limitations” on page 92 of the 2003 Annual Report to Stockholders, which are incorporated herein by reference. In addition, the Corporation, the Bank and MBNA Delaware are subject to various regulatory policies and requirements relating to the payment of dividends, including requirements to maintain capital above regulatory minimums. The appropriate federal regulatory authority is authorized to determine, under certain circumstances relating to the financial condition of a bank or bank holding company, that the payment of dividends would be an unsafe or unsound practice and to prohibit payment thereof. Moreover, neither the Bank nor MBNA Delaware may pay a dividend if it is undercapitalized or would become undercapitalized as a result of paying the dividend. Banking regulators have indicated that banking organizations should generally pay dividends only out of current operating earnings.

      There are various legal restrictions on the extent to which the Corporation and its non-bank subsidiaries may borrow or otherwise obtain credit from, sell assets to, or engage in certain other transactions with, the Bank and MBNA Delaware, the Corporation’s U.S. bank subsidiaries. In general, these restrictions require that any such extensions of credit must be secured by designated amounts of specified collateral and the aggregate of such transactions are limited, as to any one of the Corporation or its non-bank subsidiaries, to 10% of the U.S. bank subsidiary’s capital stock and surplus, and as to the Corporation and all such non-bank subsidiaries in the aggregate, to 20% of the U.S. bank subsidiary’s capital stock and surplus.

      Extensions of credit and other transactions between one of the Corporation’s U.S. bank subsidiaries on the one hand, and the Corporation or one of its non-bank subsidiaries on the other, must be on terms and under circumstances, including credit standards, that are substantially the same or at least as favorable to the Corporation’s U.S. bank subsidiary as those prevailing at the time for comparable transactions between the Corporation’s U.S. bank subsidiary and non-affiliated companies.

      The Federal Reserve Board, the OCC and the FDIC have substantially similar risk-based capital and leverage ratio guidelines for banking organizations. The guidelines are intended to ensure that banking organizations have adequate capital given the risk levels of their assets and off-balance sheet financial instruments.

      Under the risk-based capital guidelines adopted by the Federal Reserve Board for bank holding companies, such as the Corporation, and the OCC for national banks, such as the Bank, the minimum requirement for the ratio of total capital (as defined below) to risk-weighted assets (including certain off-balance sheet items, such as interest rate swaps) is 8%. At least half of the total capital may be comprised of common stockholders’ equity, qualifying non-cumulative perpetual preferred stock, a limited amount of

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      The U.S. federal bank regulatory agencies’ risk-capital guidelines are based upon the 1988 capital accord of the Basel Committee on Banking Supervision (the “Basel Committee”). The Basel Committee is a committee of central banks and bank supervisors/regulators from the major industrialized countries that develops broad policy guidelines that each country’s supervisors can use to determine the supervisory policies they apply. In April 2003, the Basel Committee issued a consultative document for public comment, “The New Basel Capital Accord,” which proposes significant revisions to the current Basel Capital Accord. The proposed new accord would establish a three-part framework for capital adequacy that would include: (1) minimum capital requirements; (2) supervisory review of an institution’s capital adequacy and internal assessment process; and (3) market discipline through increased disclosures regarding capital adequacy.

      In August 2003, an advance notice of proposed rulemaking was published by the Federal Reserve Board, the OCC, the FDIC and the Office of Thrift Supervision (collectively the “Agencies”). The advance notice of proposed rulemaking was titled “Risk-Based Capital Guidelines; Implementation of New Basel Capital Accord; Internal Ratings-Based Systems for Corporate Credit and Operational Risk Advanced Measurement Approaches for Regulatory Capital; Proposed Rule and Notice” (“Proposed Regulatory Guidance”). The Proposed Regulatory Guidance sets forth for industry comment the Agencies’ views on a proposed framework for implementing the New Basel Capital Accord in the United States. In particular, the Proposed Regulatory Guidance describes significant elements of the Advanced Internal Ratings-Based approach for credit risk and the Advanced Measurement Approaches for operational risk. The Agencies have determined that the advanced risk and capital measurement methodologies of the new accord will be applied on a mandatory basis for large, internationally active banking organizations. Institutions subject to the mandatory application of the advanced approaches would be those institutions with total banking assets of $250 billion or more or those institutions, such as the Corporation, with total on-balance-sheet foreign exposure of $10 billion or more.

      The final form of the rules to be adopted by U.S. bank regulators is still to be determined. Adoption of the proposed new accord could lower capital ratios for U.S. banking organizations, such as the Corporation and its banking subsidiaries, due in part to a new capital charge for operational risk and to the final treatment of certain credit risk exposures, including the treatment of credit card loans, unused line amounts and asset securitizations, in calculating regulatory capital.

      Under the National Bank Act, if the capital stock of a national bank is impaired by losses or otherwise, the OCC is authorized to require payment of the deficiency by assessment upon the bank’s stockholders and, if any such assessment is not paid, to sell the stock to make good the deficiency. Under Federal Reserve Board policy, the Corporation is expected to act as a source of financial strength to its U.S. bank subsidiaries and to commit resources to support them. Any non-deposit obligation of the Corporation’s U.S. bank subsidiaries to the Corporation is subordinate in right of payment to deposits, and certain obligations of the Corporation’s U.S. bank subsidiaries to the Corporation are subordinate in right of payment to certain other indebtedness of the Corporation’s U.S. bank subsidiaries. In the event of the Corporation’s bankruptcy, any commitment by the Corporation to a federal bank regulatory agency to maintain the capital of its U.S. bank subsidiaries will be assumed by the bankruptcy trustee and entitled to priority of payment.

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      The Federal Deposit Insurance Act, as amended (the “FDIA”), requires, among other things, the federal banking agencies to take “prompt corrective action” in respect of depository institutions that do not meet minimum capital requirements. The FDIA sets forth the following five capital tiers: “well capitalized”, “adequately capitalized”, “undercapitalized”, “significantly undercapitalized” and “critically undercapitalized”. A depositary institution’s capital tier will depend upon how its capital levels compare with various relevant capital measures and certain other factors, as established by regulation. The relevant capital measures are the total capital ratio, the Tier 1 capital ratio and the leverage ratio.

      Under the regulations adopted by the federal regulatory authorities, a bank insured by the FDIC, such as the Bank, will be: (1) “well capitalized” if it has a total capital ratio of 10 percent or greater, a Tier 1 capital ratio of 6 percent or greater and a leverage ratio of 5 percent or greater and is not subject to any order or written directive by any such regulatory authority to meet and maintain a specific capital level for any capital measure; (2) “adequately capitalized” if it has a total capital ratio of 8 percent or greater, a Tier 1 capital ratio of 4 percent or greater and a leverage ratio of 4 percent or greater (3 percent in certain circumstances) and is not “well capitalized”; (3) “undercapitalized” if it has a total capital ratio of less than 8 percent, a Tier 1 capital ratio of less than 4 percent or a leverage ratio of less than 4 percent (3 percent in certain circumstances); (4) “significantly undercapitalized” if it has a total capital ratio of less than 6 percent, a Tier 1 capital ratio of less than 3 percent or a leverage ratio of less than 3 percent and (5) “critically undercapitalized” if its tangible equity is equal to or less than 2 percent. An institution may be downgraded to, or deemed to be in, a capital category that is lower than is indicated by its capital ratios if it is determined to be in an unsafe or unsound condition or if it receives an unsatisfactory examination rating with respect to certain matters. At December 31, 2003, the Bank and MBNA Delaware were each considered “well capitalized”. See Note 26: “Capital Adequacy” on page 93 of the 2003 Annual Report of Stockholders, which is incorporated herein by reference.

      The FDIA generally prohibits a depository institution from making any capital distributions (including payment of a dividend) or paying any management fee to its parent holding company if the depository institution would thereafter be “undercapitalized”. “Undercapitalized” institutions are subject to growth limitations and are required to submit a capital restoration plan. The agencies may not accept such a plan without determining, among other things, that the plan is based on realistic assumptions and is likely to succeed in restoring the depository institution’s capital. In addition, for a capital restoration plan to be acceptable, the depository institution’s parent holding company must guarantee that the institution will comply with such capital restoration plan. The aggregate liability of the parent holding company is limited to the lesser of (1) an amount equal to five percent of the depository institution’s total assets at the time it became undercapitalized and (2) the amount which is necessary (or would have been necessary) to bring the institution into compliance with all capital standards applicable with respect to such institution as of the time it fails to comply with the plan. If a depository institution fails to submit an acceptable plan, it is treated as if it is “significantly undercapitalized”.

      “Significantly undercapitalized” depository institutions may be subject to a number of requirements and restrictions, including orders to sell sufficient voting stock to become “adequately capitalized,” requirements to reduce total assets, and cessation of receipt of deposits from correspondent banks. “Critically undercapitalized” institutions are subject to the appointment of a receiver or conservator.

      The Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) provided increased funding for the Bank Insurance Fund (“BIF”) of the FDIC and provided for expanded regulation of banks and bank holding companies. The regulation includes expanded federal banking agency examinations and increased powers of federal banking agencies to take corrective action to resolve the problems of insured depository institutions with capital deficiencies. These powers vary depending on which of several levels of capitalization a particular institution meets.

      FDIC regulations adopted under FDICIA prohibit a bank from accepting brokered deposits unless (i) it is well capitalized or (ii) it is adequately capitalized and receives a waiver from the FDIC. A bank that is

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      The Bank and MBNA Delaware are subject to FDIC deposit insurance assessments for the BIF. Each financial institution is assigned to one of three capital groups — well capitalized, adequately capitalized or undercapitalized — and further assigned to one of three subgroups within a capital group, on the basis of supervisory evaluations by the institution’s primary federal and, if applicable, state supervisors and other information relevant to the institution’s financial condition and the risk posed to the applicable insurance fund. The assessment rate applicable to the Bank and MBNA Delaware in the future will depend in part upon the risk assessment classification assigned by the FDIC and in part on the BIF assessment schedule adopted by the FDIC. FDIC regulations currently provide that premiums related to deposits assessed by the BIF are to be assessed at a rate of between 0 cents and 27 cents per $100 of deposits.

      Because of favorable loss experience and a healthy reserve ratio in the BIF, well capitalized and well managed banks, including the Corporation’s U.S. bank subsidiaries, have in recent years paid no premiums for FDIC insurance. In the future, even well capitalized and well managed banks may be required to pay premiums on deposit insurance. The amount of any such premiums will depend on the outcome of legislative and regulatory initiatives as well as the BIF loss experience and other factors.

      The Deposit Insurance Funds Act of 1996 also separated the Financing Corporation assessment to service the interest on its bond obligations from the BIF and the Savings Association Insurance Fund assessments. The amount assessed on individual institutions by the Financing Corporation will be in addition to the amount, if any, paid for deposit insurance according to the Financing Corporation’s risk-related assessment rate schedules. The Financing Corporation assessment rates may be adjusted quarterly to reflect a change in assessment base for the BIF. The current Financing Corporation annual assessment rate is 1.54 cents per $100 of deposits.

      The relationship between the Corporation and its Customers in the U.S. is extensively regulated by federal and state consumer protection laws. The Truth in Lending Act requires consumer lenders to make certain disclosures along with their applications (for credit card accounts) and solicitations, upon opening an account and with each periodic statement. The Act also imposes certain substantive requirements and restrictions on lenders and provides Customers with certain rights to dispute unauthorized charges and to have billing errors corrected promptly. Customers are also given the right to have payments promptly credited to their accounts.

      The Equal Credit Opportunity Act prohibits lenders from discriminating in extending credit on certain criteria such as an applicant’s sex, race and marital status. In order to protect borrowers from such discrimination, the Act requires that lenders disclose the reasons they took adverse action against an applicant or a Customer.

      The Fair Credit Reporting Act generally regulates credit reporting agencies, but also imposes some duties on lenders as users of consumer credit reports. For instance, the Act prohibits the use of a consumer credit report by a lender except in connection with a proposed business transaction with the consumer. The Act also requires lenders to notify consumers when taking adverse action based upon information obtained from credit

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      The federal regulators are authorized to impose penalties for violations of these statutes and, in certain cases, to order the Corporation to pay restitution to injured Customers. Customers may bring actions for damages for certain violations. In addition, a Customer may be entitled to assert a violation of these consumer protection laws by way of set-off against the Customer’s obligation to pay the outstanding loan balance.

      The National Bank Act, which governs the activities of national banks, authorizes national banks to use various alternative interest rates when they make loans, including the highest interest rate authorized for state-chartered lenders located in the state where the national bank is located. This ability to “export” rates, as provided for in the Act, is relied upon by the Bank and MBNA Delaware to charge Customers the interest rates and fees permitted by Delaware law regardless of an inconsistent law of the state in which the Customer is located, thereby facilitating the Bank’s and MBNA Delaware’s nationwide lending activities.

      The National Bank Act also permits the banks to provide debt cancellation and debt suspension products to their loan customers. In 2002, the OCC adopted new regulations governing the offering of these products by national banks, including requirements to provide written disclosures to consumers and obtain written acknowledgement from consumers of their receipt of such disclosures.

      The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 permits bank holding companies, with Federal Reserve Board approval, to acquire banks located in states other than the holding company’s home state, generally without regard to whether the transaction is prohibited under state law. In addition, national and state banks with different home states are permitted to merge across state lines, with approval of the appropriate federal banking agency, unless the home state of a participating bank passed legislation that expressly prohibits interstate bank mergers. Also, a bank may establish and operate a de novo branch in a state in which the bank does not maintain a branch if that state expressly permits de novo branching.

      The Gramm-Leach-Bliley Act:

	•	allows bank holding companies meeting management, capital and Community Reinvestment Act standards to engage in a substantially broader range of nonbanking activities than are otherwise permissible, including insurance underwriting and agency, underwriting and dealing in securities, and making merchant banking investments in commercial companies;
	•	allows insurers and other financial services companies to acquire banks;
	•	removed various restrictions that previously applied to bank holding company ownership of securities firms and mutual fund advisory companies; and
	•	establishes the overall regulatory structure applicable to bank holding companies that also engage in insurance and securities operations.

      In order for a bank holding company to engage in the broader range of activities that are permitted by the Gramm-Leach-Bliley Act, all of its depository institutions must be well capitalized and well managed and it must file a declaration with the Federal Reserve Board that it elects to be a “financial holding company.” In addition, to commence any new activity permitted by the Gramm-Leach-Bliley Act and to acquire any company engaged in any new activity permitted by the Gramm-Leach-Bliley Act, each insured depository institution of the financial holding company must have received at least a “satisfactory” rating in its most recent examination under the Community Reinvestment Act.

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      The Gramm-Leach-Bliley Act also allows a national bank to own a financial subsidiary engaged in certain of the nonbanking activities authorized for financial holding companies. The national bank must meet certain requirements, including that it and all of its depository institution affiliates be well capitalized and well managed. Also, to commence any new activity or acquire any company engaged in any new activity, the national bank must have at least a “satisfactory” Community Reinvestment Act examination rating. In addition, it must obtain approval of the OCC.

      The financial privacy provisions of the Gramm-Leach-Bliley Act generally prohibit financial institutions, including the Corporation, from disclosing nonpublic personal information about consumers to third parties unless consumers have the opportunity to “opt out” of the disclosure. A financial institution is also required to provide an annual privacy notice to its customers. The Gramm-Leach-Bliley Act permits states to adopt more restrictive privacy laws. A number of U.S. states have adopted or are considering the adoption of more restrictive privacy laws, including laws prohibiting sharing of customer information without the customer’s prior permission and laws prohibiting financial institutions, including the Corporation, from disclosing nonpublic personal information about consumers to affiliates unless consumers have the opportunity to “opt out” of the disclosure. These laws may make it more difficult for the Corporation to share Customer information with its marketing partners and among its affiliates and reduce the effectiveness and increase the cost of marketing programs.

      The Community Reinvestment Act requires banks to help serve the credit needs of their communities, including providing credit to low and moderate income individuals and geographies. Should the Corporation’s bank subsidiaries fail to adequately serve the community, potential penalties are regulatory denials to expand branches, relocate, add subsidiaries and affiliates, expand into new financial activities and merge with or purchase other financial institutions.

      The Federal Telephone Consumer Protection Act, among other provisions, requires telemarketers to restrict calling to certain hours of the day and maintain a list of individuals asking to be included on that telemarketer’s “do-not-call” list. In January 2003, the Federal Trade Commission (the “FTC”) amended the Telemarketing Sales Rules further restricting telemarketing by establishing the national “do not call” list on which consumers may place themselves and which telemarketers must obtain to exclude all such consumers from telemarketing calls. In July 2003, the Federal Communications Commission (the “FCC”) amended its implementing regulations under the Telephone Consumer Protection Act to make them substantially consistent with the FTC’s rules. While the FTC’s rules do not apply to banks, the FCC’s rules do. As of January 2004, nearly 55 million phone numbers were registered on the national “do not call” list. Over the past few years, almost all states have passed or are considering similar legislation. All of these laws and regulations provide sanctions for non-compliance and increase the cost and decrease the efficiency and effectiveness of the Corporation’s telesales.

      In 2001, comprehensive anti-terrorism legislation known as the USA PATRIOT Act of 2001 (the “USA Patriot Act”) was enacted. Title III of the USA Patriot Act substantially broadened the scope of U.S. anti-money laundering laws and regulations by imposing significant new compliance and Customer due diligence obligations, creating new crimes and penalties and expanding the extra-territorial jurisdiction of the U.S.

      The U.S. Treasury Department has issued a number of regulations implementing the USA Patriot Act that apply certain of its requirements to financial institutions, including the Corporation’s bank subsidiaries. The regulations impose new obligations on financial institutions to maintain appropriate policies, procedures and controls to detect, prevent and report money laundering and terrorist financing.

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      Failure of a financial institution to comply with the USA Patriot Act’s requirements could have serious legal and reputational consequences for the institution. The USA Patriot Act’s requirement to obtain and verify certain Customer information may hamper the ability of the Corporation to open some accounts where such information cannot be easily obtained or verified.

      As with banking and consumer credit regulation in the U.S., the Corporation’s international businesses are subject to extensive regulation.

	•	U.S. Regulation of International Business

      The Corporation’s investments in MBNA Europe and MBNA Canada, and any further investments the Corporation may decide to make in MBNA Europe or MBNA Canada or in any other company outside the U.S., are subject to regulations adopted by the Federal Reserve Board pursuant to the BHCA and the Federal Reserve Act. Among other things, under certain circumstances these regulations require approval of the Federal Reserve Board to acquire, establish or make investments in companies outside the U.S. These regulations could limit the Corporation’s ability to expand the business of MBNA Europe or MBNA Canada, as well as the Corporation’s ability otherwise to expand its operations outside the U.S.

	•	International Regulation of MBNA Europe

      In the U.K., MBNA Europe is regulated by various agencies with broad investigatory, supervisory, and enforcement powers. MBNA Europe’s primary regulator in the U.K. is the Financial Services Authority (“FSA”). The FSA uses a risk-based supervision methodology.

      In order to establish the FSA as the single statutory body for financial business, the U.K. has enacted the Financial Services and Markets Act 2000 (“FSMA”). The FSMA gives the FSA its legal and regulatory powers and establishes its framework of control, including with respect to the conduct of senior management and MBNA Europe’s business practices.

      Other regulatory bodies in the U.K. are: the Office of the Information Commissioner, formerly the Data Protection Commissioner, which enforces the provisions of, and oversees compliance with, data protection legislation; The Office of Fair Trading, which grants consumer credit licenses, enforces the substantive provisions of consumer credit legislation and regulates fair trade and competition; and the Office of Telecommunication which oversees compliance with telecommunications licensing rules and regulations. The Enterprise Act 2002 gave the U.K. Office of Fair Trading increased powers to act on consumer complaints.

      MBNA Europe’s business in the U.K. is subject to numerous laws and regulations. The U.K. Consumer Credit Act 1974 requires lenders of consumer credit to have a Consumer Credit License. This Act governs the procedures for entering into credit card agreements, the provision of information to customers and the termination of agreements and imposes joint and several liability on the credit card issuer and the merchant for breach of contract or misrepresentation in connection with goods and services purchased with a credit card.

      MBNA Europe is subject to increasing levels of consumer protection regulation in the U.K. The U.K government’s focus on over-indebtedness has resulted in a Committee of U.K. Members of Parliament (the Treasury Select Committee) carrying out an investigation into the transparency of credit card terms (including interest rates, annual percentage rates, interest calculations, and transaction and penalty charges), and into marketing methods for credit cards and products. The Committee made a series of recommendations in its Report publised in December 2003, some of which are included in the Consultation Paper on the proposed revision of the Consumer Credit Act 1974. The recommendations include changes to advertising regulations, the form and content of credit card agreements, and the calculation of the annual percentage rates. If enacted, the recommendations contained in the Report could have the effect of lowering interest rates on credit card products and impacting MBNA Europe’s marketing efforts. In addition, the European Commission has issued a draft amended Consumer Credit Directive which is in its consultation phase. This draft, if adopted, could further regulate the manner in which MBNA Europe markets and delivers its products.

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      Interchange rates in the U.K. have been challenged recently. Interchange income is a fee paid by a merchant bank to the card-issuing bank through the interchange network as a compensation for risk, grace period, and other operating costs. After a lengthy investigation by U.K. regulators of MasterCard interchange rates in the U.K., the regulators issued updated preliminary conclusions on February 11, 2003, finding that the interchange fee paid by merchant acquirers to MasterCard card issuers in the U.K. is anti-competitive and that the agreement between MasterCard’s U.K. members for interchange leads to an unjustifiably high fee being paid to card-issuing banks. A hearing was held on May 21, 2003. The ruling may be appealed and the timing of a final ruling is uncertain. Similar regulatory action could be taken against VISA interchange rates in the U.K. In 2002, in response to European Union regulatory action, VISA agreed to reduce its interchange fee on transactions within the European Union, and in line with this reduction VISA reduced its interchange fee on transactions in the U.K. in October 2003. The Corporation cannot predict if or when interchange rates in the U.K. could be reduced further. Any potential impact could vary based on business strategies or other actions the Corporation will take to attempt to limit the impact.

      The Data Protection Act 1998 requires data controllers to register under this Act and establishes principles to ensure data is processed fairly and securely, and gives consumers a right of access to the data held on them. Similar provisions apply in Ireland and Spain.

      The Unfair Contracts Terms Act 1977 and the Unfair Terms in Consumer Contracts Regulations 1999 prohibit terms in consumer contracts which are unfair to the consumer and impose limits on the extent to which civil liability for breach of contract can be avoided by means of contract terms. In the U.K., default charges such as late, overlimit and returned check fees that exceed a genuine pre-estimate of the cost of the Customer’s breach of contract are illegal. The Office of Fair Trading is carrying out an industry wide investigation into default charges and questioning how the Corporation estimates default charges.

      The personal insolvency provisions of the Enterprise Act 2002, aimed at reducing the stigma of bankruptcy, will become effective in April 2004 and could lead to a rise in the level of bankruptcies in the U.K.

      MBNA Europe in the U.K. currently complies with the Association of British Insurers voluntary regulations applicable to credit insurance. In January 2005, the FSA will become the single governmental body that will regulate insurance and MBNA Europe will be governed by the FSA when offering credit or other insurance related products to its Customers. The effect of this regulatory change on MBNA Europe’s insurance products will depend on the final regulations adopted by the FSA.

      MBNA Europe has operated in Ireland since 1997 through a branch (“MBNA Ireland”) established under the European Union Second Council Directive. Capital and liquidity requirements are governed by FSA regulation. MBNA Ireland is otherwise subject to Irish consumer credit laws and banking laws enforced by the Ireland Financial Services Regulatory Authority. Increases in, or the introduction of, finance charges on Customers’ accounts must be approved by the Ireland Financial Services Regulatory Authority.

      MBNA Europe has operated in Spain since September 2002 through a branch (“MBNA Spain”) established under the European Union Second Council Directive. Capital and liquidity requirements are governed by FSA regulations. MBNA Spain is otherwise subject to Spanish consumer credit and banking laws enforced by the Bank of Spain. New and increased fees on Customers’ accounts and advertisements that refer to the cost of credit must be approved by the Bank of Spain.

	•	International Regulation of MBNA Canada

      MBNA Canada was incorporated by letters patent as a Schedule II Bank pursuant to the Bank Act (Canada). As is required by the Bank Act, MBNA Canada obtained an order permitting it to commence business in November 1997. It is a wholly owned subsidiary of the Bank and is thus a foreign bank for the purposes of regulatory supervision in Canada. The Canadian banking regulatory regime in which MBNA Canada operates is a comprehensive system based on the provisions of the Bank Act, the regulations made under the Bank Act and guidelines and policy statements published by the Office of the Superintendent of Financial Institutions (Canada) (“OSFI”). MBNA Canada is also a member institution of the Canada Deposit Insurance Corporation.

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      The Cost of Borrowing (Banks) Regulations made pursuant to the Bank Act set out, among other things, the requirements imposed on MBNA Canada regarding disclosure of interest charges, the inclusion of certain charges, the cost of borrowing, and the disclosure of the cost of borrowing.

      MBNA Canada is subject to requirements regarding banking policies, procedures and standards. Among other things, the Bank Act requires the board of directors of a Canadian bank to establish investment and lending policies, procedures and standards. MBNA Canada must adhere to investment and lending standards that a reasonable and prudent person would apply and that avoid undue risk of loss and obtain a reasonable return. In addition, MBNA Canada must maintain adequate capital and adequate and appropriate forms of liquidity, and must comply with regulations and OSFI guidelines or policy statements relating to capital and liquidity requirements.

      The Personal Information Protection and Electronic Documents Act (“PIPEDA”) establishes a code of conduct for the collection, use and disclosure of personal information. The code requires that personal information be retained, used and disclosed with consent of the individual to whom it relates, that an individual be given access to his or her personal information and that the personal information be accurate. The provisions of PIPEDA are monitored by the Privacy Commissioner. The Financial Consumer Agency of Canada is responsible for oversight of consumer protection measures applicable to federally regulated financial institutions.

Competition

      The Corporation’s business is highly competitive. The Corporation competes with numerous banks with national, regional and local operations in domestic and international markets and with non-bank competitors who issue credit and charge cards and make other consumer loans. Strategies used by the Corporation’s competitors include targeted marketing, low introductory rates, no annual fee credit cards, balance transfers with promotional rates, rewards programs, affinity marketing, and discounts on products and services. The Corporation also uses these strategies, emphasizing its strategy of marketing to people with a strong common interest and its superior Customer service, to effectively compete with its competitors.

Employees

      As of December 31, 2003, the Corporation had approximately 28,000 employees.

Important Factors Regarding Forward-Looking Statements

      From time to time the Corporation may make forward-looking oral or written statements concerning the Corporation’s future performance. Such statements are subject to risks and uncertainties that may cause the Corporation’s actual performance to differ materially from that set forth in such forward-looking statements. Words such as “believe”, “expect”, “anticipate”, “intend” or similar expressions are intended to identify forward-looking statements. Such statements speak only as of the date on which they are made. The Corporation undertakes no obligation to update publicly or revise any such statements. Factors which could cause the Corporation’s actual financial and other results to differ materially from those projected by the Corporation in forward-looking statements include, but are not limited to, the following:

      The banking and consumer credit industry is subject to extensive regulation and examination. Changes in federal, state and foreign laws and regulations affecting banking, consumer credit, bankruptcy, privacy, consumer protection or other matters could materially impact the Corporation’s performance. In recent years, changes in policies and regulatory guidance issued by banking regulators, and affecting credit card and consumer lending in particular, have had a significant impact on the Corporation and are likely to continue to do so in the future. The Corporation cannot predict the impact of these changes. The impact of changes in bank regulatory guidance is particularly difficult to assess as the guidance in recent years has provided, and is likely to continue to provide, considerable discretion to bank regulators in interpreting how the guidance

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      The Corporation’s business is highly competitive. See “Competition” on page 16 above. Competition from other lenders could affect the Corporation’s loans outstanding, Customer retention, and the rates and fees charged on the Corporation’s loans.

      The Corporation’s business is affected by general economic conditions beyond the Corporation’s control, including employment levels, consumer confidence and interest rates. A recession or slowdown in the economy of the U.S. or in other markets in which the Corporation does business may cause an increase in delinquencies and credit losses and reduce new account and loan growth and charge volume.

      An increase in delinquencies and credit losses could affect the Corporation’s financial performance. Delinquencies and credit losses are influenced by a number of factors, including the credit quality of the Corporation’s credit card and other consumer loans, the composition of the Corporation’s loans between credit card and other consumer loans, general economic conditions, the success of the Corporation’s collection efforts, the seasoning of the Corporation’s accounts, and the impact of actual or proposed changes in bankruptcy laws or regulatory policies.

      An increase in interest rates could increase the Corporation’s cost of funds and reduce its net interest margin. The Corporation’s ability to manage the risk of interest rate increases in the U.S. and other markets is dependent on its overall product and funding mix and its ability to successfully reprice outstanding loans. See “Interest Rate Sensitivity” on pages 57 through 58 of the 2003 Annual Report to Stockholders, which is incorporated herein by reference, for a discussion of the Corporation’s efforts to manage interest rate risk.

      Changes in the amount, type, and cost of funding available to the Corporation could affect the Corporation’s performance. A major funding alternative for the Corporation is the securitization of credit card and other consumer loans. Difficulties or delays in securitizing loans or changes in the current legal, regulatory, accounting, and tax environment governing securitizations could adversely affect the Corporation. See “Liquidity and Rate Sensitivity” on pages 52 through 59 of the 2003 Annual Report to Stockholders, which is incorporated herein by reference, for a discussion of the Corporation’s liquidity.

      The acceptance and use of credit card and other consumer loan products for consumer spending has increased significantly in recent years. The Corporation’s performance could be affected by changes in such acceptance and use, and overall consumer spending, as well as different acceptance and use in international markets.

      The Corporation’s performance could be affected by difficulties or delays in the development of new products or services, including products or services other than credit card and other consumer loans, and in the expansion into new international markets. These may include the failure of Customers to accept products or services when planned, losses associated with the testing of new products or services, or financial, legal or other difficulties that may arise in the course of such implementation. In addition, the Corporation could face

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