UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

      For the Fiscal Year Ended December 31, 2004

      For the transition period from  to                    

Commission file number 1-10683

MBNA Corporation

(Exact name of registrant as specified in its charter)

      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 þ     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 þ     No o

      As of June 30, 2004, 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 $29,714,511,676. As of March 1, 2005, 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 2004 Annual Report to Stockholders for the year ended December 31, 2004 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 2, 2005 (the “Definitive Proxy Statement”) are incorporated by reference into Parts II and III.

MBNA CORPORATION

2004 ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

PART I

Overview

      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. (“MBNA America”), a national bank organized in January 1991 as the successor to a national bank formed in 1982 and the Corporation’s principal subsidiary. MBNA America has two wholly owned non-U.S. bank subsidiaries, MBNA Europe Bank Limited (“MBNA Europe”) formed in 1993 with its headquarters in the United Kingdom (“U.K.”) and MBNA Canada Bank (“MBNA Canada”) formed in 1997. The Corporation is also the parent company of MBNA America (Delaware), N.A. (“MBNA Delaware”), a national bank.

      The Corporation, the largest independent credit card lender in the world and a recognized leader in affinity marketing, is an international financial services company providing lending, deposit, and credit insurance products and services to its Customers. Through MBNA America, the Corporation 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, as well as commercial loans primarily to small businesses. As part of its growth strategy, the Corporation intends to diversify its business by expanding its non-credit card consumer loan business and commercial lending business and by expanding internationally. In 2004, the Corporation diversified its business through the acquisition of insurance premium financing and professional practice financing companies.

      The Corporation conducts its business in the U.K., Ireland and Spain through MBNA Europe, and in Canada through MBNA Canada, using similar business strategies and operating methods as it does in the U.S., with adjustments for local regulation and custom.

Products and Services

      The Corporation makes credit card, other consumer and commercial loans. Other consumer loans include installment and revolving unsecured loan products, mortgage loans, aircraft loans, insurance premium financing loans (to consumers), and other specialty lending products to consumers. Commercial loans include business card products, professional practice financing loans, insurance premium financing loans (to businesses), and small business lines of credit. The Corporation also offers credit insurance and deposit products.

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

      The Corporation’s credit cards are offered on the MasterCard and Visa networks and, since November 2004, the American Express network. MasterCard, Visa and American Express offer the Corporation account generation and transaction volume incentives to issue credit cards processed on their respective networks.

      Other consumer loans include installment and revolving unsecured loan products and specialty lending products, such as mortgage loans, aircraft loans, and insurance premium financing loans (to consumers).

      The Corporation extends unsecured lines of credit which may be accessed by check or electronically and have either fixed monthly payments or minimum payments similar to credit card accounts. Customers primarily use these products for large purchases or debt consolidation. Through MBNA Europe, the Corporation also offers fixed term unsecured loan products with fixed monthly payments.

      Through MBNA Delaware, the Corporation offers U.S. consumers specialty finance products, including mortgage and aircraft loans. The Corporation’s mortgage loans consist primarily 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 generally sells to third parties the mortgage loans it originates, but in 2004 began to hold some mortgages loans. The Corporation does not service mortgage loans.

      In 2004, the Corporation began offering premium finance loan products in the U.K. through the acquisition of Premium Credit Limited (“PCL”). Through PCL, the Corporation makes loans to consumers and businesses (discussed below) for financing of premiums on insurance products. Generally, the Corporation lends to Customers the amount of the insurance policy premium, which the Customer repays over the policy period. If the Customer fails to repay the loan, the insurance policy is terminated and a portion of the premium is refunded to the Corporation. The loans are generated through relationships with an established network of insurance companies, agents, and brokers.

      Commercial loans include business card loans and other commercial loans, such as professional practice financing loans, insurance premium financing loans (to businesses), and small business lines of credit.

      Business card 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.

      In 2004, the Corporation began offering professional practice finance loan products through its acquisition of MBNA Practice Solutions, Inc. (formerly Sky Financial Solutions, Inc.). MBNA Practice Solutions makes secured loans to meet the financing needs of medical professionals, including dentists, other medical dental specialists, medical doctors, optometrists, chiropractors, and veterinarians. The loans are typically used for practice start-up, working capital, practice acquisition, and equipment financing and generally have terms of five to fifteen years. The loans are generated through referrals from equipment and supply vendors, practice brokers, state professional associations and Customers as well as direct mail marketing.

      Through the Corporation’s acquisition of PCL (as described above), in the U.K. the Corporation makes premium financing loans to businesses, including professionals and small business owners, to pay premiums on property, general liability, and other types of insurance.

      The Corporation offers unsecured lines of credit to small businesses through MBNA Delaware.

      The Corporation offers credit protection products to credit card and other consumer loan Customers in the U.S., 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 in the U.S. 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 enrollment, retention and administration of certain of these products. Customer acceptance of these products generally has been higher in the U.K. and Canada than in the U.S. and, as a result, these products have accounted for a higher proportion of U.K. and Canada revenue than U.S. revenue.

      In the U.S., the Corporation offers money market deposit accounts and certificates of deposit through MBNA America. Money market deposit accounts provide Customers with liquidity and convenience of service, as well as insurance by the Federal Deposit Insurance Corporation (“FDIC”) of up to $100,000 per depositor. 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. MBNA Europe began offering deposit accounts in 2004. Deposit products are offered to members of the Corporation’s endorsing associations, to existing credit card Customers and to others.

      The Corporation selectively purchases credit card, other consumer, and commercial 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. 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 Corporation were originally opened using criteria established by financial institutions other than the Corporation and may not have been subject to the same credit review as accounts originated by the Corporation. Once these accounts have been purchased and transferred to the Corporation for servicing, they are generally managed in accordance with the same policies and procedures as accounts originated by the Corporation. See “Loan Receivables” on pages 31 through 34 of the 2004 Annual Report to Stockholders, which is incorporated herein by reference, for the amount of the Corporation’s portfolio purchases. In addition, the Corporation acquires related or complementary businesses in the ordinary course of its business. In addition to credit card and other consumer loan portfolio purchases, the Corporation’s acquisition activities in 2004 included specialty finance products. In making business acquisitions, the Corporation considers earnings impact, credit quality, diversification and other factors.

Marketing

      The Corporation markets its products primarily through endorsements from membership 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 organizations and businesses, including professional associations, financial institutions, colleges and universities, sports teams, and major retailers.

      The Corporation generally customizes marketing programs for an endorsing organization in order to make the Corporation’s products attractive to the organization’s members or customers. 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.

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

      The Corporation provides rewards points based on spending volumes to certain Customers. In recent years, rewards offerings have represented a greater proportion of the Corporation’s marketing. 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 royalty the Corporation pays the endorsing organization is used to fund a portion of the cost of the rewards points. See “Royalties to Endorsing Organizations” in Note 3 on pages 84 through 85 of the 2004 Annual Report to Stockholders, which is incorporated herein by reference.

      The Corporation primarily uses direct mail, person-to-person marketing (such as event marketing), telesales, and Internet marketing to market its credit cards and other products. Each year, the Corporation develops numerous 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 staff 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. The Corporation selectively markets its products to existing Customers through the in-bound calling environment. In 2005, the Corporation initiated a brand awareness campaign, to include television, radio and print advertising.

      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 conducts marketing activities through regional and international offices. These 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 MBNA America, has offices in Maine, Ohio, Maryland, Georgia, New Jersey, California, and New York. MBNA Europe has its headquarters in Chester, England and an office in London, England. In 2002, MBNA Europe opened a 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.

      MBNA Marketing Systems has 15 telesales facilities in 9 states. As of December 31, 2004, it employed approximately 2,300 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 2004, through telesales to new Customers, the Corporation added approximately 11.6% of its new U.S. accounts and 9.3% of its new foreign accounts (excluding accounts acquired through portfolio acquisitions). In recent years the Corporation has relied less on telesales in the U.S. The Corporation expects to continue to rely less on telesales in the U.S. and more on other marketing channels, such as the Internet and person-to-person marketing, because of changing consumer attitudes and acceptance of telesales and federal and state regulatory initiatives, such as do-not-call lists that limit telesales. See “Regulatory Matters — Telemarketing Regulation” on page 15 of this Form 10-K.

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.

      For credit card and other consumer loan credit determinations, 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 appropriate 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 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 2004, less than half of the credit applications received by the Corporation were approved. In the U.S., 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.

      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 and credit line increase requests to ensure quality and consistency.

      Loans to certain commercial lending Customers, such as professional practice finance and business card products to larger businesses, are based upon a review of the financial strength of the Customer, assessment of the Customer’s management ability, sector industry trends, the type of exposure, the transaction structure, and total relationship exposure. Commercial loans are individually approved either by an officer with appropriate authority delegated based upon experience in the product and loan structure being approved or by a loan committee. The commercial portfolio is managed on both a pool basis and an individual basis. For loans greater than a specified threshold, an internal risk rating is assigned and adjusted on an ongoing basis to reflect changes in the Customer’s financial condition, cash flow or ongoing financial stability. For loans less than a specified threshold, Customer accounts are managed based upon scoring models and performance.

      The Corporation’s credit risk is further discussed under “Credit Risk” on page 45 of the 2004 Annual Report to Stockholders, which is incorporated herein by reference.

Risk Control/ Fraud

      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 that includes an examination of the Customer’s credit file, the Customer’s behavior with the Corporation’s accounts, and often a phone call to the Customer for clarification of the situation. 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 notice and an opportunity to reject the rate increase, unless the increase was triggered by an event set out in the credit agreement as a specific basis for a rate increase).

      Commercial Customer accounts may be placed on a “Watch List” when either individual Customer performance or environmental factors warrant. These accounts are subject to additional quarterly reviews by business line management, risk management and senior credit officers in order to assess the Customer’s

financial status and develop the appropriate strategy and action to take on the account. Watch List accounts are also assessed for impairment and appropriate specific reserves are determined.

      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 authorization 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 other restructured loan arrangements.

      The Corporation works with Customers continually at each stage of delinquency. The Corporation charges off open-end delinquent loans by the end of the month in which the account becomes 180 days contractually past due and closed-end delinquent loans by the end of the month in which they become 120 days contractually past due. Delinquent bankrupt accounts are charged-off by 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 the above charge-off policies. If an account has been charged-off, it may be sold to a third party or retained by the Corporation for recovery.

      A Customer’s 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 during the preceding 365 days. An account may not be re-aged more than two times in a 5-year period. To qualify for re-aging, the Customer must also have paid an amount equal to three regular minimum monthly payments within the last 90 days. In addition, the Corporation may re-age the account of a Customer who is experiencing long-term financial difficulties and apply modified, concessionary terms and conditions to the account. Such additional re-ages are limited to one in a 5-year period and must meet the qualifications for re-ages described above, except that the Customer’s three consecutive minimum monthly payments may be based on the modified terms and conditions applied to the account. The Corporation’s senior management and the Corporation’s Loan Review Department approve all re-age strategies. Re-ages may have the effect of delaying charge-offs. For a discussion on the amount of re-ages and their impact, see “Renogiated Loan Programs — Re-aged Loans” on pages 50 and 51 of the 2004 Annual Report to Stockholders, which is incorporated herein by reference.

Operations

      Account processing services performed by MBNA Technology, Inc. (“MBNA Technology”), a wholly-owned subsidiary of MBNA America, include information and data processing, payment processing, statement rendering, card production, fullfillment operations and network services. MBNA Technology’s data network provides an interface to MasterCard, Visa and American Express networks 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 processes Customer payments and generates and mails monthly statements to Customers summarizing account activity. Third-party vendors provide print and mail services in the U.K. and account processing services for the Corporation’s U.S. and U.K. business card products. The Corporation depends on the continued availability and reliability of the MasterCard, Visa and American Express networks to provide for the exchange of financial information and funds between merchants and the Corporation. See “MasterCard and Visa Litigation and Competition” on pages 15 and 16 of this Form 10-K below.

      In 2004, the Corporation successfully completed a multi-phase project, begun in 2002, extending the use of the Corporation’s North American core Customer information systems to MBNA Europe’s business in the U.K. and Ireland, which had relied on third-party vendors for such information systems. The project provides standardization of systems, appropriate infrastructure for an “internationalized” technical platform and systems enhancements for the MBNA Europe processing environment.

Internet and Technology

      The Corporation offers several Internet-based products and services, including online credit card and consumer loan applications, real-time online account access and servicing, 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 that processes credit card applications leveraging on-line credit bureaus, neural networks to identify and prevent fraud, and selective statement insertion technology 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 the internal development of technology solutions to provide the flexibility, quality, and responsiveness to effectively support its business.

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 by giving notice to the Customer, including increasing or decreasing periodic finance charges, other charges, and 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 reject 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 as a specific basis for a rate increase). In some cases the Corporation will initiate a change in terms only after the Customer has accepted the change, such as by continued use of the account after notice.

      The Corporation’s other consumer loan accounts include accounts with a minimum monthly payment similar to credit card loan 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 indexed to the U.S. Prime Rate published in The Wall Street Journal. See “Interest Rate Sensitivity” on pages 66 through 68 of the 2004 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, other consumer and commercial loans in accordance with each Customer’s account agreement.

International

      The Corporation’s international activities are performed primarily through MBNA America’s two non-U.S. bank subsidiaries, MBNA Europe and MBNA Canada. See “Note 30: Foreign Activities” on page 109 of the 2004 Annual Report to Stockholders, which is incorporated herein by reference, for certain financial information on the Corporation’s international activities. The Corporation uses similar business strategies and operating methods in its international activities as in the U.S., with adjustments for local regulations and customs.

      In early 2004, MBNA established a representative office in Shanghai, China in order to explore options for eventually offering credit card loan products and services in China and other Asian markets. Non-Chinese banks, such as the Corporation’s banking subsidiaries, currently are barred from offering loans to Chinese citizens. When China joined the World Trade Organization in 2001, it agreed to lift the restriction on non-Chinese banks beginning in 2007.

Regulatory Matters

      The earnings of the Corporation are affected by monetary policies and the actions of various regulatory authorities, including the Board of Governors of the Federal Reserve System (the “FRB”), 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 some 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. The FRB is the Corporation’s primary regulator and supervises the Corporation’s activities on a continual basis. 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 FRB. 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 for bank holding companies that qualify as “financial holding companies”.

      MBNA America and MBNA Delaware are subject to supervision and examination by the OCC, which is their primary regulator. MBNA America 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 certain state laws, 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 FRB, 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 FRB, and the OCC.

      The principal source of funds to the Corporation to pay dividends and interest and principal on debt securities and to meet other obligations is dividends from MBNA America. MBNA America 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 page 56 and “Note 27: Dividend Limitations” on page 106 of the 2004 Annual Report to Stockholders, which are incorporated herein by reference. In addition, the Corporation, MBNA America 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 MBNA America 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, MBNA America 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 subsidiaries and non-affiliated companies.

      The FRB, OCC and 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 FRB for bank holding companies, such as the Corporation, and the OCC for national banks, such as MBNA America and MBNA Delaware, the minimum requirement for the ratio of qualifying total capital to risk-weighted assets (including certain off-balance sheet items, such as interest rate swaps) is 8%. At least half of the qualifying total capital must be comprised of “Tier I capital”, which includes common stockholders’ equity, qualifying non-cumulative perpetual preferred stock, certain minority interests in the equity accounts of consolidated subsidiaries and in the case of bank holding companies a limited amount of qualifying cumulative perpetual preferred stock and trust preferred securities. The remainder of a bank holding company’s or bank’s qualifying total capital must consist of “Tier II capital”, which includes certain mandatory convertible debt securities, a limited amount of subordinated debt, a limited amount of reserves for possible credit losses, and limited amounts attributable to Tier I capital instruments that are in excess of amounts permitted to be included in Tier I capital. As of July 1, 2003 the Corporation deconsolidated the statutory business trusts that have issued trust preferred securities. As a result, the junior subordinated debentures held by the trusts are now reported on the Corporation’s consolidated balance sheet. See Note 19: “Long-Term Debt and Bank Notes” on pages 96 through 98 of the

2004 Annual Report to Stockholders. In a rule first proposed in May 2004 and adopted as a final rule in March 2005, the FRB has confirmed the continued qualification of trust preferred securities as Tier I capital notwithstanding the change in accounting treatment. The final rule creates an expanded category of “restricted core capital elements” for bank holding companies that includes, in addition to cumulative perpetual preferred stock, trust preferred securities, REIT preferred securities and certain minority interests. Under the final rule, bank holding companies that are internationally active banking organizations, such as the Corporation, must limit restricted core capital elements to 15% of the sum of all Tier I capital elements, net of goodwill less any associated deferred tax liability. While the final rule allows for a transition period to March 31, 2009, the FRB generally expects internationally active banking organizations, such as the Corporation, to limit the amount of qualifying cumulative perpetual preferred stock and qualifying trust preferred securities included in Tier I capital to such a 15% limit immediately. In addition, the FRB has adopted a minimum leverage ratio (Tier I capital to average total assets less goodwill and certain other intangible assets) of 3% for bank holding companies that have the agency’s highest supervisory rating or have implemented the FRB’s market risk capital measure, and 4% for all other bank holding companies. See “Capital Adequacy” on pages 55 through 56 and Note 28: “Capital Adequacy” on page 107 of the 2004 Annual Report to Stockholders, which is incorporated herein by reference. Bank holding companies and banks may be subject to higher risk-based and leverage capital ratios depending on other specific factors, such as interest rate risk, concentrations of credit risk, and the conduct of non-traditional activities.

      Current U.S. federal bank regulatory risk-based capital guidelines are based upon the 1988 capital accord of the Basel Committee on Banking Supervision (the “Basel Committee”). The Basel Committee has been working for a number of years on a revised capital framework focused on securing international convergence on revisions to regulations and standards governing the capital adequacy of internationally active banking organizations. In June 2004, the Basel Committee issued a revised framework document, “The New Basel Capital Accord” (“Basel II”), which proposes significant revisions to the current Basel Capital Accord. Basel II would establish a three-part framework for capital adequacy that would include: (1) minimum regulatory capital requirements; (2) supervisory review of an institution’s capital adequacy and internal capital 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 OCC, the FRB, 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” (the “Proposed Regulatory Guidance”). The Proposed Regulatory Guidance set forth for industry comment the Agencies’ views on a proposed framework for implementing Basel II 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 Basel II 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.

      Both prior and subsequent to the publication of the Proposed Regulatory Guidance, U.S. regulatory agencies have issued guidance on a number of topics regarding implementation of Basel II for U.S. financial institutions. The Agencies are expected to issue a Notice of Proposed Rulemaking sometime in the summer of 2005 with final rules to be issued in the first half of 2006. Adoption of the proposed new rules are expected to increase required regulatory capital for some U.S. banking organizations, such as the Corporation and the Corporation’s 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 and asset securitizations.

      U.S. regulatory agencies recently conducted a Quantitative Impact Study in order to assess the impact of Basel II on capital requirements of U.S. financial institutions. Approximately 30 organizations, including the Corporation, participated in the exercise. The Corporation has determined that its current level of capital is sufficient to meet the increase in required 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 its stockholders and, if any such assessment is not paid, to sell the stock to make good the deficiency. Under FRB 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.

      Each of the Corporation’s banking subsidiaries can be held liable by the FDIC for any loss incurred, or reasonably expected to be incurred, due to the default of any other of the Corporation’s banking subsidiaries and for any assistance provided by the FDIC to any of the Corporation’s banking subsidiaries that is in danger of default and that is controlled by the Corporation. “Default” means generally the appointment of a conservator or receiver. “In danger of default” means generally the existence of certain conditions indicating that a default is likely to occur in the absence of regulatory assistance. An FDIC cross-guarantee claim against a bank is generally superior in right of payment to claims of the holding company and its affiliates against such depository institution.

      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 depository 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 I capital ratio and the leverage ratio.

      Under the regulations adopted by the federal regulatory authorities, a bank insured by the FDIC, such as MBNA America and MBNA Delaware, will be: (1) “well capitalized” if it has a total capital ratio of 10 percent or greater, a Tier I 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 I 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 I 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 I capital ratio of less than 3 percent or a leverage ratio of less than 3 percent and (5) “critically undercapitalized” if its tangible equity ratio 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, 2004, MBNA America and MBNA Delaware were each considered “well capitalized”. See Note 28: “Capital Adequacy” on page 107 of the 2004 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 adequately capitalized and that accepts brokered deposits under a waiver from the FDIC may not pay an interest rate on any deposit in excess of 75 basis points over certain prevailing market rates. There are no such restrictions on a bank that is well capitalized. As of December 31, 2004, MBNA America met the FDIC’s definition of a well capitalized institution for purposes of accepting brokered deposits. For the purposes of the brokered deposit rules, a bank is defined to be “well capitalized” if it maintains a ratio of Tier I capital to risk-adjusted assets of at least 6 percent, a ratio of Total capital to risk-weighted assets of at least 10 percent and a leverage ratio of at least 5 percent and is not subject to any order, direction or written agreement to maintain specific capital levels. Under the regulatory definition of brokered deposits, as of December 31, 2004, MBNA America had brokered deposits of $4.1 billion. See “Deposits” on pages 64 through 65 of the 2004 Annual Report of Stockholders, which is incorporated herein by reference, for discussion of brokered deposits.

      MBNA America and MBNA Delaware are subject to FDIC deposit insurance assessments for the Bank Insurance Fund (“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 MBNA America 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 is in addition to the amount, if any, paid for deposit insurance. 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 1.44 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. It 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, it requires that lenders disclose the reasons they took adverse action against an applicant or a Customer.

      The Fair Credit Reporting Act (“FCRA”) generally regulates credit reporting agencies, but also imposes some duties on lenders as users of consumer credit reports. For instance, it prohibits the use of a consumer credit report by a lender except in connection with a proposed business transaction with the consumer. It also requires lenders to notify consumers when taking adverse action based upon information obtained from credit reporting agencies. Portions of the Act pre-empt state law and establish a uniform, national standard for financial institutions using consumer credit reports. In December 2003, provisions of the Act, which would have expired on January 1, 2004, were extended and important aspects of the Act that pre-empted state law were made permanent through the Fair and Accurate Credit Transactions Act of 2003 (the “FACT Act”). Among other things, the FACT Act revises certain sections of FCRA, establishes additional rights for consumers to obtain and correct credit reports, and establishes additional requirements for financial institutions that provide adverse credit information to a consumer reporting agency. Consumers must be provided with certain disclosures and will have a right to receive a free copy of their credit report once a year. The FACT Act also extends the duration of a consumer’s opt-out of prescreened lists for credit or insurance marketing solicitations, extends the statute of limitations for civil liability for violations of FCRA, and requires consumers to be provided a right to opt out of solicitations for marketing purposes if affiliates that make solicitations for marketing purposes are using certain consumer information received from another affiliate. Regulations concerning affiliate marketing are expected to be finalized in 2005.

      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 MBNA America 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 MBNA America’s and MBNA Delaware’s nationwide lending activities.

      The National Bank Act also permits national 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.

      Federal regulators have become more active in monitoring the specific business practices of financial institutions, including the credit card industry. For example, in September 2004, the OCC issued an advisory letter describing several credit card marketing and management practices that could expose banks to potential compliance and reputation risks, regulatory enforcement and litigation. In the letter, the OCC alerted banks to fully and prominently disclose in promotional materials and credit agreements certain credit card terms, such as the applicability and duration of promotional rates and the ability of banks to alter credit card terms and to change pricing. In addition, in January 2003 under the auspices of the Federal Financial Institutions Examination Council, the OCC, the FRB and the FDIC issued guidance governing account management practices for credit card lending, including with respect to credit line management, over-limit practices, minimum payment requirements and workout and forbearance practices. In issuing the guidance, the bank regulators were focused on addressing potential safety and soundness issues arising from the account management practices. See “Domestic Credit Card Loan Receivables” on pages 32 through 33 of the 2004 Annual Report to Stockholders, which is incorporated herein by reference, for a discussion of the Corporation’s changes to the minimum payment amounts required on certain accounts.

      The Gramm-Leach-Bliley Act (the “GLBA”):

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

      The GLBA 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” CRA examination rating. In addition, it must obtain approval of the OCC.

      The financial privacy provisions of the GLBA 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 GLBA 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 CRA 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 companies.

      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. Telemarketers must obtain the “do not call” list and exclude all consumers on the “do not call” list 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. In September 2003, President Bush signed into law legislation ratifying the FTC’s authority to administer the “do not call” list. While the FTC’s rules do not apply to banks, the FCC’s rules do apply. As of January 2005, over 80 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 program.

      A major focus of governmental policy on financial institutions in recent years has been aimed at combating money laundering and terrorist financing. In 2001, comprehensive anti-terrorism legislation known as the USA PATRIOT Act of 2001 (the “USA Patriot Act”) was enacted. 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 obligations on financial institutions to maintain appropriate policies, procedures and controls to detect, prevent and report money laundering and terrorist financing and to verify the identity of their customers.

      Failure of a financial institution to maintain and implement adequate programs to combat money laundering and terrorist financing could have serious legal and reputational consequences for the institution. The USA Patriot Act’s requirement to obtain and verify certain Customer information prevents the Corporation from opening accounts when such information cannot be easily obtained or verified.

      The Corporation issues credit cards on MasterCard’s and Visa’s networks. MasterCard and Visa are facing significant litigation and increased competition.

      In 2003, MasterCard and Visa settled a suit by Wal-Mart and other merchants who claimed that MasterCard and Visa unlawfully tied acceptance of debit cards to acceptance of credit cards. Under the settlement, MasterCard and Visa were required to, among other things, allow merchants to accept MasterCard or Visa branded credit cards without accepting their debit cards (and vice versa), reduce the prices charged to merchants for off-line signature debit transactions for a period of time, and pay over ten years amounts totaling $3.05 billion into a settlement fund. MasterCard and Visa are also parties to suits by U.S. merchants who opted out of the Wal-Mart settlement.

      In October 2004, the United States Supreme Court decided to let stand a federal court decision in a suit brought by the U.S. Department of Justice, in which MasterCard and Visa rules prohibiting banks that issue cards on MasterCard and Visa networks from issuing cards on other networks (the “Association Rules”) were found to have violated federal antitrust laws (the “Antitrust Decision”). The Antitrust Decision effectively permits banks that issue cards on Visa’s or MasterCar