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  **UNITED STATES****SECURITIES AND EXCHANGE COMMISSION****Washington, D.C. 20549****FORM 10-K** **þ****ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE    SECURITIES EXCHANGE ACT OF 1934**     **For the Fiscal Year Ended December 31, 2004** **  o****TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE    SECURITIES EXCHANGE ACT OF 1934**     **For the transition periodfrom  to                    ****Commission file number 1-10683****MBNA Corporation****(Exact name of registrant as specified in its charter)**   **Maryland** **52-1713008****(State or other jurisdiction of** **(I.R.S. Employer Identification No.)****incorporation or organization)**   **1100 North King Street, Wilmington, DE** **19884-0131****(Address of principal executive offices)** **(Zip Code)**     **Registrant’s telephone number, including area code:**(800) 362-6255     **Securities Registered Pursuant to Section 12(b) of theAct:**     **Name of each exchange on****Title of each class** **which registered**       Common Stock, $.01 par value     New York Stock Exchange    71/2%    Cumulative Preferred Stock, Series A     New York Stock Exchange    Adjustable Rate Cumulative Preferred Stock, Series B     New York Stock Exchange    MBNA Capital A 8.278% Capital Securities, Series A,    guaranteed by MBNA Corporation to the extent described therein     New York Stock Exchange    MBNA Capital B Floating Rate Capital Securities, Series B,    guaranteed by MBNA Corporation to the extent described therein     New York Stock Exchange    MBNA Capital C 8.25% Trust Originated Preferred Securities,    Series C, guaranteed by MBNA Corporation to the extent    described therein     New York Stock Exchange    MBNA Capital D 8.125% Trust Originated Preferred    Securities, Series D, guaranteed by MBNA Corporation to the    extent described therein     New York Stock Exchange    MBNA Capital E 8.10% Trust Originated Preferred Securities,    Series E, guaranteed by MBNA Corporation to the extent    described therein     New York Stock Exchange**Securities Registered Pursuant to Section 12(g) of theAct: **None     Indicate by check mark whether the Registrant (1) has filedall reports required to be filed by Section 13 or 15(d) ofthe Securities Exchange Act of 1934 during the preceding12 months (or such shorter period that the Registrant wasrequired to file such reports), and (2) has been subject tosuch filing requirements for the past90 days.     Yes þ     No o     Indicate by check mark if disclosure of delinquent filerspursuant to Item 405 of Regulation S-K is notcontained herein, and will not be contained, to the best of theRegistrant’s knowledge, in definitive proxy or informationstatements incorporated by reference in Part III of thisForm 10-K or any amendment to thisForm 10-K.     o     Indicate by check mark, whether the registrant is an acceleratedfiler (as defined in Exchange ActRule 12b-2).     Yes þ     No o     As of June 30, 2004, the aggregate market value of thevoting and non-voting common equity held by non-affiliates ofthe Registrant calculated by reference to the closing price ofthe Registrant’s common stock as reported on the New YorkStock Exchange was $29,714,511,676. As of March 1, 2005,there were outstanding 1,277,671,875 shares of commonstock, par value $.01 per share, which is the only class ofthe Registrant’s common stock.**DOCUMENTS INCORPORATED BY REFERENCE**     Portions of the 2004 Annual Report to Stockholders for the yearended December 31, 2004 are incorporated by reference intoParts I, II and IV. Portions of the Definitive ProxyStatement for the Annual Meeting of Stockholders to be heldMay 2, 2005 (the “Definitive Proxy Statement”)are incorporated by reference into Parts II and III.  

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Executive Non-Compete Agreement - Additional InformationForms of Restricted Stock AwardSupplemental Executive Retirement Plan- Additional InformationComputation of Ratio of EarningsMBNA Corporation Annual ReportSubsidiaries of the CorporationConsent of Ernst & Young302 Certification for CEO302 Certification for CFO906 Certification for CEO906 Certification for CFO

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**MBNA CORPORATION****2004 ANNUAL REPORT ON FORM 10-K****TABLE OF CONTENTS**           **Page**         PART I    ITEM 1.     Business  1     ITEM 2.     Properties  21     ITEM 3.     Legal Proceedings  21     ITEM 4.     Submission of Matters to a Vote of Security Holders  22       Executive Officers of the Registrant  22      PART II    ITEM 5.     Market for the Registrant’s Common Equity, Related    Stockholder Matters and Issuer Purchases of Equity Securities  24     ITEM 6.     Selected Financial Data  24     ITEM 7.     Management’s Discussion and Analysis of Financial Condition    and Results of Operations  24     ITEM 7A.     Quantitative and Qualitative Disclosures about Market Risk  24     ITEM 8.     Financial Statements and Supplementary Data  25     ITEM 9.     Changes in and Disagreements with Accountants on Accounting and    Financial Disclosure  25     ITEM 9A.     Controls and Procedures  25     ITEM 9B.     Other Information  25      PART III    ITEM 10.     Directors and Executive Officers of the Registrant  25     ITEM 11.     Executive Compensation  25     ITEM 12.     Security Ownership of Certain Beneficial Owners and Management    and Related Stockholder Matters  25     ITEM 13.     Certain Relationships and Related Transactions  26     ITEM 14.     Principal Accountant Fees and Services  26      PART IV    ITEM 15.     Exhibits and Financial Statement Schedules  26     Signatures  30 

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**PART I****ITEM 1.****BUSINESS****Overview**     MBNA Corporation (the “Corporation”), a registeredbank holding company, was incorporated under the laws ofMaryland on December 6, 1990. It is the parent company ofMBNA America Bank, N.A. (“MBNA America”), a nationalbank organized in January 1991 as the successor to a nationalbank formed in 1982 and the Corporation’s principalsubsidiary. MBNA America has two wholly owned non-U.S. banksubsidiaries, MBNA Europe Bank Limited (“MBNA Europe”)formed in 1993 with its headquarters in the United Kingdom(“U.K.”) and MBNA Canada Bank (“MBNACanada”) formed in 1997. The Corporation is also the parentcompany of MBNA America (Delaware), N.A. (“MBNADelaware”), a national bank.     The Corporation, the largest independent credit card lender inthe world and a recognized leader in affinity marketing, is aninternational financial services company providing lending,deposit, and credit insurance products and services to itsCustomers. Through MBNA America, the Corporation is the leadingissuer of endorsed credit cards, marketed primarily to membersof associations and customers of financial institutions andother organizations. In addition to its credit card lending, theCorporation makes other consumer loans, as well as commercialloans primarily to small businesses. As part of its growthstrategy, the Corporation intends to diversify its business byexpanding its non-credit card consumer loan business andcommercial lending business and by expanding internationally.In 2004, the Corporation diversified its business through theacquisition of insurance premium financing and professionalpractice financing companies.     The Corporation conducts its business in the U.K., Ireland andSpain through MBNA Europe, and in Canada through MBNA Canada,using similar business strategies and operating methods as itdoes in the U.S., with adjustments for local regulation andcustom.**Products and Services**     The Corporation makes credit card, other consumer and commercialloans. Other consumer loans include installment and revolvingunsecured loan products, mortgage loans, aircraft loans,insurance premium financing loans (to consumers), and otherspecialty lending products to consumers. Commercial loansinclude business card products, professional practice financingloans, insurance premium financing loans (to businesses), andsmall business lines of credit. The Corporation also offerscredit insurance and deposit products.*Credit Card Loans*     The Corporation offers a variety of credit card products, suchas standard, gold, *Platinum Plus*and *Quantum,*andcustomizes them for thousands of endorsed affinity programs andfor programs under its own brand name. The Corporation’scredit card programs offer a variety of benefits and featuresbased on the type of endorsing organization and the needs of theCustomer. These benefits and features include competitiveinterest rates, group-specific enhancements, rewards (includingthe *WorldPoints*rewards program), and compensation to theendorsing organization based on Customer usage. TheCorporation’s approach to marketing and underwritingenables it to offer higher initial credit lines and periodiccredit line increases to Customers, resulting in higher usageand average account balances.     The Corporation’s credit cards are offered on theMasterCard and  Visa networks and, since November 2004, the American Expressnetwork. MasterCard, Visa and American Express offer theCorporation account generation and transaction volume incentivesto issue credit cards processed on their respective networks.*Other Consumer Loans*     Other consumer loans include installment and revolving unsecuredloan products and specialty lending products, such as mortgageloans, aircraft loans, and insurance premium financing loans (toconsumers).
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     The Corporation extends unsecured lines of credit which may beaccessed by check or electronically and have either fixedmonthly payments or minimum payments similar to credit cardaccounts. Customers primarily use these products for largepurchases or debt consolidation. Through MBNA Europe, theCorporation also offers fixed term unsecured loan products withfixed monthly payments.     Through MBNA Delaware, the Corporation offersU.S. consumers specialty finance products, includingmortgage and aircraft loans. The Corporation’s mortgageloans consist primarily of home equity loans offered as a debtconsolidation tool. The mortgage loans also include purchasemoney and refinance loans. The Corporation’s mortgage loansare offered primarily to the Corporation’s credit card andother consumer loan Customers. The Corporation generallysells to third parties the mortgage loans it originates, but in2004 began to hold some mortgages loans. The Corporation doesnot service mortgage loans.     In 2004, the Corporation began offering premium finance loanproducts in the U.K. through the acquisition of Premium CreditLimited (“PCL”). Through PCL, the Corporation makesloans to consumers and businesses (discussed below) forfinancing of premiums on insurance products. Generally, theCorporation lends to Customers the amount of the insurancepolicy premium, which the Customer repays over the policyperiod. If the Customer fails to repay the loan, the insurancepolicy is terminated and a portion of the premium is refunded tothe Corporation. The loans are generated through relationshipswith an established network of insurance companies, agents, andbrokers.*Commercial Loans*     Commercial loans include business card loans and othercommercial loans, such as professional practice financing loans,insurance premium financing loans (to businesses), and smallbusiness lines of credit.     Business card products include general-purpose business creditcards marketed primarily to small businesses, and purchasing andcorporate cards for small and larger businesses for business,travel, and corporate purchasing.     In 2004, the Corporation began offering professional practicefinance loan products through its acquisition of MBNA PracticeSolutions, Inc. (formerly Sky Financial Solutions, Inc.). MBNAPractice Solutions makes secured loans to meet the financingneeds of medical professionals, including dentists, othermedical dental specialists, medical doctors, optometrists,chiropractors, and veterinarians. The loans are typically usedfor practice start-up, working capital, practice acquisition,and equipment financing and generally have terms of five tofifteen years. The loans are generated through referrals fromequipment and supply vendors, practice brokers, stateprofessional associations and Customers as well as direct mailmarketing.     Through the Corporation’s acquisition of PCL (as describedabove), in the U.K. the Corporation makes premium financingloans to businesses, including professionals and small businessowners, to pay premiums on property, general liability, andother types of insurance.     The Corporation offers unsecured lines of credit to smallbusinesses through MBNA Delaware.*Insurance*     The Corporation offers credit protection products to credit cardand other consumer loan Customers in the U.S., and marketscredit insurance to Customers of MBNA Europe and MBNA Canada. Inaddition, the Corporation markets credit-related life anddisability insurance to Customers in the U.S. whoseaccounts have been acquired from other lenders. These insuranceand credit protection products are marketed only to theCorporation’s loan Customers, and only in conjunctionwith their loan accounts with the Corporation and not any otherloan accounts. A third-party vendor manages aspects ofenrollment, retention and administration of certain of theseproducts. Customer acceptance of these products generally hasbeen higher in the U.K. and Canada than in the U.S. and, as aresult, these products have accounted for a higher proportion ofU.K. and Canada revenue than U.S. revenue.
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*Deposits*     In the U.S., the Corporation offers money market depositaccounts and certificates of deposit through MBNA America. Moneymarket deposit accounts provide Customers with liquidity andconvenience of service, as well as insurance by the FederalDeposit Insurance Corporation (“FDIC”) of up to$100,000 per depositor. Certificates of deposit aretraditional fixed term investments with maturities thattypically range from six to sixty months, and are insured by theFDIC up to $100,000. MBNA Europe began offering deposit accountsin 2004. Deposit products are offered to members of theCorporation’s endorsing associations, to existing creditcard Customers and to others.*Portfolio Purchases and Acquisitions*     The Corporation selectively purchases credit card, otherconsumer, and commercial loan portfolios from other financialinstitutions. Generally, the Corporation purchases portfolioswhen it can also obtain ongoing endorsing arrangements from theseller or from the portfolio’s existing endorsingorganizations. Prior to acquiring a portfolio of loans, theCorporation reviews the historical performance and seasoning ofthe portfolio (including the portfolio’s delinquency andloss characteristics, average balances, attrition rates, yieldsand collection performance) and reviews the account managementand underwriting policies and procedures of the financialinstitution selling the loan portfolio. Accounts that have beenpurchased by the Corporation were originally opened usingcriteria established by financial institutions other than theCorporation and may not have been subject to the same creditreview as accounts originated by the Corporation. Once theseaccounts have been purchased and transferred to the Corporationfor servicing, they are generally managed in accordance with thesame policies and procedures as accounts originated by theCorporation. See “Loan Receivables” on pages 31through 34 of the 2004 Annual Report to Stockholders, which isincorporated herein by reference, for the amount of theCorporation’s portfolio purchases. In addition, theCorporation acquires related or complementary businesses in theordinary course of its business. In addition to credit card andother consumer loan portfolio purchases, the Corporation’sacquisition activities in 2004 included specialty financeproducts. In making business acquisitions, the Corporationconsiders earnings impact, credit quality, diversification andother factors.**Marketing**     The Corporation markets its products primarily throughendorsements from membership associations, financialinstitutions, commercial firms, and others. The Corporationdirects its marketing efforts primarily to members and customersof these endorsing organizations, and to targeted lists ofpeople with a strong common interest. The Corporation is therecognized leader in endorsed marketing, with endorsements fromthousands of organizations and businesses, includingprofessional associations, financial institutions, colleges anduniversities, sports teams, and major retailers.     The Corporation generally customizes marketing programs for anendorsing organization in order to make the Corporation’sproducts attractive to the organization’s members orcustomers. For example, credit cards issued to theorganization’s members or customers usually carry customgraphics and the name and logo of the endorsing organization.     The Corporation’s endorsing relationships with commercialfirms, including professional sports teams and retailers,include co-branded cards and typically include incentives forCustomers to purchase services or merchandise from theco-branding firm.     Under the Corporation’s agreements with endorsingorganizations, the Corporation makes royalty payments to theendorsing organizations, which grant the Corporation theexclusive right to market its products to the members orcustomers and provide their endorsements and mailing lists. Someorganizations, such as financial institutions, also market theCorporation’s products directly to their members orcustomers. The endorsing agreements typically have a term offive years. The royalty payments are based on the number of newaccounts, activation levels, and account revenue (for example, apercentage of sales volume on accounts). In some cases, theCorporation advances future compensation to the endorsingorganization.
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     The Corporation provides rewards points based on spendingvolumes to certain Customers. In recent years, rewards offeringshave represented a greater proportion of the Corporation’smarketing. Customers may redeem the rewards points for cash,merchandise, or services. In some cases, the Corporation isresponsible for the cost of the rewards points and in othercases the endorsing organization is responsible for the cost ofthe rewards points. In some cases, the royalty the Corporationpays the endorsing organization is used to fund a portion of thecost of the rewards points. See “Royalties to EndorsingOrganizations” in Note 3 on pages 84 through 85of the 2004 Annual Report to Stockholders, which is incorporatedherein by reference.     The Corporation primarily uses direct mail, person-to-personmarketing (such as event marketing), telesales, and Internetmarketing to market its credit cards and other products. Eachyear, the Corporation develops numerous marketing campaigns,customized for the Corporation’s endorsing organizations,generating millions of direct mail pieces designed to addaccounts and promote account usage. The Corporation’sin-house advertising staff designs custom graphics for creditcards and prepares direct mail programs and advertisements. TheCorporation conducts Internet marketing through a combination ofbanner, e-mail, search engine, and other advertisements. TheCorporation selectively markets its products to existingCustomers through the in-bound calling environment. In 2005, theCorporation initiated a brand awareness campaign, to includetelevision, radio and print advertising.     In addition, the Corporation’s marketing activities includeefforts to retain profitable accounts and programs designed toactivate new accounts and stimulate usage of existing accounts,primarily through access check mailings, balance transferincentives, and purchase reward programs.     The Corporation conducts marketing activities through regionaland international offices. These offices assist the Corporationto obtain endorsements, increase its familiarity with localmarkets, better understand the needs and motivations ofCustomers, and assess the competitive environment. In the U.S.,MBNA Marketing Systems, Inc. (“MBNA MarketingSystems”), a subsidiary of MBNA America, has offices inMaine, Ohio, Maryland, Georgia, New Jersey, California, and NewYork. MBNA Europe has its headquarters in Chester, England andan office in London, England. In 2002, MBNA Europe opened abranch in Las Rozas, Spain and began marketing in Spain. MBNAIreland Limited has offices in Carrick-on-Shannon, Ireland. MBNACanada has its headquarters in Ottawa, Ontario and a sales andmarketing office in Montreal, Quebec.     MBNA Marketing Systems has 15 telesales facilities in9 states. As of December 31, 2004, it employedapproximately 2,300 people in telesales, the majority of whomworked part-time. The telesales organization generates newaccounts by calling prospects obtained from membership orcustomer lists of endorsing organizations and other prospectlists and calls existing Customers to market products.     In 2004, through telesales to new Customers, the Corporationadded approximately 11.6% of its new U.S. accounts and 9.3%of its new foreign accounts (excluding accounts acquired throughportfolio acquisitions). In recent years the Corporation hasrelied less on telesales in the U.S. The Corporationexpects to continue to rely less on telesales in the U.S. andmore on other marketing channels, such as the Internet andperson-to-person marketing, because of changing consumerattitudes and acceptance of telesales and federal and stateregulatory initiatives, such as do-not-call lists that limittelesales. See “Regulatory Matters —Telemarketing Regulation” on page 15 of thisForm 10-K.**Credit**     The credit risk of lending to each Customer is evaluated throughthe combination of human judgment and the application of variouscredit scoring models and other statistical techniques.     For credit card and other consumer loan credit determinations,the Corporation considers an applicant’s capacity andwillingness to repay, stability and other factors. Importantinformation in performing this credit assessment includes anapplicant’s income, debt-to-income levels, residence andemployment stability, the rate at which new credit is beingacquired, and the manner in which the applicant has handled therepayment of previously granted credit. An applicant who hasfavorable credit capacity and credit history characteristics ismore likely to be approved and to receive a relatively highercredit line assignment. Favorable characteristics
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include appropriate debt-to-income levels, a long history ofsteady employment, and little or no history of delinquentpayments on other debt.     The Corporation develops credit scoring models to evaluatecommon applicant characteristics and their correlation to creditrisk and utilizes models in making credit assessments. Thescoring models use the information available in theCustomer’s application and credit report to provide ageneral indication of the applicant’s credit risk.Periodically, the scoring models are validated and, ifnecessary, realigned to maintain their accuracy and reliability.     In 2004, less than half of the credit applications received bythe Corporation were approved. In the U.S., a significantpercentage of credit applications that present high risk aredeclined through an automated decisioning process. Mostdecisions to approve a credit application are made by creditanalysts who consider the credit factors described above andassign credit lines based upon this assessment. Credit analystsare encouraged to call applicants when they believe additionalinformation, such as an explanation of delinquencies or debtlevels, may assist the analyst in making the appropriate creditdecision. Credit analysts undergo a comprehensive educationprogram that focuses on evaluating an applicant’screditworthiness.     Once the credit analyst makes a decision, further levels ofreview are automatically triggered based on an analysis of therisk of each decision. This analysis is derived from previousexperiential data and makes use of credit scores and otherstatistical techniques. Credit analysts also review applicationsobtained through pre-approved offers to ensure adherence tocredit standards and assign an appropriate credit limit as anadditional approach to managing credit risk. Some creditapplications that present low risk are approved through anautomated decisioning process.     Credit lines for existing Customers are regularly reviewed forcredit line increases, and when appropriate, credit linedecreases. The Corporation’s Portfolio Risk Managementdivision independently reviews selected applications and creditline increase requests to ensure quality and consistency.     Loans to certain commercial lending Customers, such asprofessional practice finance and business card products tolarger businesses, are based upon a review of the financialstrength of the Customer, assessment of the Customer’smanagement ability, sector industry trends, the type ofexposure, the transaction structure, and total relationshipexposure. Commercial loans are individually approved either byan officer with appropriate authority delegated based uponexperience in the product and loan structure being approved orby a loan committee. The commercial portfolio is managed on botha pool basis and an individual basis. For loans greater than aspecified threshold, an internal risk rating is assigned andadjusted on an ongoing basis to reflect changes in theCustomer’s financial condition, cash flow or ongoingfinancial stability. For loans less than a specified threshold,Customer accounts are managed based upon scoring models andperformance.     The Corporation’s credit risk is further discussed under“Credit Risk” on page 45 of the 2004 AnnualReport to Stockholders, which is incorporated herein byreference.**Risk Control/ Fraud**     The Corporation manages risk at the Customer level throughsophisticated analytical techniques combined with regularjudgmental review. Transactions are evaluated at the point ofsale, where risk levels are balanced with profitability andCustomer satisfaction. In addition, Customers showing signs offinancial stress are periodically reviewed, a process thatincludes an examination of the Customer’s credit file, theCustomer’s behavior with the Corporation’s accounts,and often a phone call to the Customer for clarification of thesituation. The Corporation may block use of accounts, reducecredit lines on certain accounts, and increase the annualpercentage rates on certain accounts (generally after giving theCustomer notice and an opportunity to reject the rate increase,unless the increase was triggered by an event set out in thecredit agreement as a specific basis for a rate increase).     Commercial Customer accounts may be placed on a “WatchList” when either individual Customer performance orenvironmental factors warrant. These accounts are subject toadditional quarterly reviews by business line management, riskmanagement and senior credit officers in order to assess theCustomer’s
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financial status and develop the appropriate strategy and actionto take on the account. Watch List accounts are also assessedfor impairment and appropriate specific reserves are determined.     A balanced approach is also used when stimulating portfoliogrowth. Risk levels are measured through statistical models thatincorporate payment behavior, employment information, incomeinformation, and transaction activity. Credit bureau scores andattributes are obtained and combined with internal informationto allow the Corporation to increase credit lines and promoteaccount usage while balancing additional risk.     The Corporation manages fraud risk through a combination ofjudgmental reviews and sophisticated technology to detect andprevent fraud as early as possible. Technologies and strategiesutilized include a neural net-based fraud score, expert systemsand fraud specific authorization strategies. Address and otherdemographic discrepancies are investigated as part of the creditdecision to identify and prevent identity theft.**Collection**     The Corporation’s collection philosophy is to work witheach Customer with a past due account at an early stage ofdelinquency in a persistent yet professional manner. TheCorporation employs several computerized systems to assist inthe collection of past due accounts. These systems analyze eachCustomer’s purchase and repayment habits, and selectaccounts for initial contact with the objective of contactingthe highest risk accounts first. Customers who are experiencingsignificant financial problems and who may consider filing forbankruptcy are referred to specialists who offer alternativepayment programs to bankruptcy, including debt counseling,reduced interest rates, and other restructured loan arrangements.     The Corporation works with Customers continually at each stageof delinquency. The Corporation charges off open-end delinquentloans by the end of the month in which the account becomes180 days contractually past due and closed-end delinquentloans by the end of the month in which they become 120 dayscontractually past due. Delinquent bankrupt accounts arecharged-off by the end of the second calendar month followingreceipt of notification of filing from the applicable court, butnot later than the applicable 180-day or 120-day timeframesdescribed above. Accounts of deceased Customers are charged offwhen the loss is determined, but not later than the applicable180-day or 120-day timeframes described above. Fraudulentaccounts are charged off the end of the calendar month of the90th day after identifying the account as fraudulent, but notlater than the applicable 180-day or 120-day timeframesdescribed above. Accounts failing to make a payment withincharge-off policy timeframes are written off. Managers may on anexception basis defer charge-off of an account for anothermonth, pending continued payment activity or other specialcircumstances. Senior manager approval is required on all suchexceptions to the above charge-off policies. If an account hasbeen charged-off, it may be sold to a third party or retained bythe Corporation for recovery.     A Customer’s account may be re-aged to remove existingdelinquency. Generally, the intent of a re-age is to assistCustomers who have recently overcome temporary financialdifficulties and have demonstrated both the ability andwillingness to resume regular payments, but may be unable to paythe entire past due amount. To qualify for re-aging, the accountmust have been opened for at least one year and cannot have beenre-aged during the preceding 365 days. An account may notbe re-aged more than two times in a 5-year period. To qualifyfor re-aging, the Customer must also have paid an amount equalto three regular minimum monthly payments within the last90 days. In addition, the Corporation may re-age theaccount of a Customer who is experiencing long-term financialdifficulties and apply modified, concessionary terms andconditions to the account. Such additional re-ages are limitedto one in a 5-year period and must meet the qualifications forre-ages described above, except that the Customer’s threeconsecutive minimum monthly payments may be based on themodified terms and conditions applied to the account. TheCorporation’s senior management and the Corporation’sLoan Review Department approve all re-age strategies. Re-agesmay have the effect of delaying charge-offs. For a discussion onthe amount of re-ages and their impact, see “RenogiatedLoan Programs — Re-aged Loans” on pages 50and 51 of the 2004 Annual Report to Stockholders, which isincorporated herein by reference.
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**Operations**     Account processing services performed by MBNA Technology, Inc.(“MBNA Technology”), a wholly-owned subsidiary of MBNAAmerica, include information and data processing, paymentprocessing, statement rendering, card production, fullfillmentoperations and network services. MBNA Technology’s datanetwork provides an interface to MasterCard, Visa and AmericanExpress networks for performing authorizations and settlementfunds transfers. Most data processing and network functions areperformed at MBNA Technology’s facilities in Dallas, Texas,and Newark, Delaware. MBNA Technology processes Customerpayments and generates and mails monthly statements to Customerssummarizing account activity. Third-party vendors provide printand mail services in the U.K. and account processing servicesfor the Corporation’s U.S. and U.K. business card products.The Corporation depends on the continued availability andreliability of the MasterCard, Visa and American Expressnetworks to provide for the exchange of financial informationand funds between merchants and the Corporation. See“MasterCard and Visa Litigation and Competition” onpages 15 and 16 of this Form 10-K below.     In 2004, the Corporation successfully completed a multi-phaseproject, begun in 2002, extending the use of theCorporation’s North American core Customer informationsystems to MBNA Europe’s business in the U.K. and Ireland,which had relied on third-party vendors for such informationsystems. The project provides standardization of systems,appropriate infrastructure for an “internationalized”technical platform and systems enhancements for the MBNA Europeprocessing environment.**Internet and Technology**     The Corporation offers several Internet-based products andservices, including online credit card and consumer loanapplications, real-time online account access and servicing,deposit products information, online balance transfers, andonline shopping and security features.     The Corporation uses sophisticated systems and technology in allaspects of its business operations to enhance Customer serviceand improve efficiency. These systems include marketingdatabases, advanced telecommunications networks to supportCustomer service and telesales, a credit decisioning system thatprocesses credit card applications leveraging on-line creditbureaus, neural networks to identify and prevent fraud, andselective statement insertion technology to customizecommunications with Customers. These systems enable theCorporation to implement customized marketing and servicestrategies for endorsing organizations. The Corporation reliesprimarily on the internal development of technology solutions toprovide the flexibility, quality, and responsiveness toeffectively support its business.**Terms and Conditions**     Each Customer and the Corporation enter into an agreementsetting forth the terms and conditions of the Customer’saccount. The Corporation reserves the right to add or change anyterms, conditions, services or features of its accounts at anytime by giving notice to the Customer, including increasing ordecreasing periodic finance charges, other charges, and paymentterms. The Customer agreement generally provides that theCorporation may apply such changes, when applicable, to currentoutstanding balances as well as to future transactions. In theU.S., the Customer can reject a rate increase by notifying theCorporation and then no longer using the account (unless theincrease was triggered by an event set out in the agreement as aspecific basis for a rate increase). In some cases theCorporation will initiate a change in terms only after theCustomer has accepted the change, such as by continued use ofthe account after notice.     The Corporation’s other consumer loan accounts includeaccounts with a minimum monthly payment similar to credit cardloan accounts and with a fixed monthly payment amount. On theaccounts with a fixed monthly payment amount, Customers takeadvances on the account and repay the advances over a fixed termwith a fixed monthly payment amount, with the term and paymentamount reset with each new advance.     The Corporation offers fixed and variable rates on accounts andalso offers temporary promotional rates. In the U.S., variablerates are offered at a percentage rate indexed to theU.S. Prime Rate published in The Wall Street Journal. See“Interest Rate Sensitivity” on pages 66 through68 of the 2004 Annual Report to
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Stockholders, which is incorporated herein by reference, forfurther discussion of the interest rates on theCorporation’s accounts.     The Corporation assesses annual, late, overlimit, returnedcheck, cash advance, express payment, and other miscellaneousfees earned on the Corporation’s credit card, otherconsumer and commercial loans in accordance with eachCustomer’s account agreement.**International**     The Corporation’s international activities are performedprimarily through MBNA America’s two non-U.S. banksubsidiaries, MBNA Europe and MBNA Canada. See“Note 30: Foreign Activities” on page 109 ofthe 2004 Annual Report to Stockholders, which is incorporatedherein by reference, for certain financial information on theCorporation’s international activities. The Corporationuses similar business strategies and operating methods in itsinternational activities as in the U.S., with adjustments forlocal regulations and customs.     In early 2004, MBNA established a representative office inShanghai, China in order to explore options for eventuallyoffering credit card loan products and services in China andother Asian markets. Non-Chinese banks, such as theCorporation’s banking subsidiaries, currently are barredfrom offering loans to Chinese citizens. When China joined theWorld Trade Organization in 2001, it agreed to lift therestriction on non-Chinese banks beginning in 2007.**Regulatory Matters**     The earnings of the Corporation are affected by monetarypolicies 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 theCurrency (the “OCC”), and the Federal DepositInsurance Corporation (the “FDIC”). In addition,numerous federal and state laws and regulations affect theactivities of the Corporation. This regulatory framework isintended primarily for the protection of depositors and depositinsurance funds and not for the protection of security holders.     Set forth below is a description of some of the materialelements of the laws, regulations, policies and other regulatorymatters affecting the Corporation and its subsidiaries. Thedescription is qualified in its entirety by reference to thefull text of the statutes and regulations, as amended, that aredescribed.*General*     As a bank holding company, the Corporation is subject toregulation under the Bank Holding Company Act of 1956 (the“BHCA”) and to the BHCA’s examination andreporting requirements. The FRB is the Corporation’sprimary regulator and supervises the Corporation’sactivities on a continual basis. Under the BHCA, bank holdingcompanies may not directly or indirectly acquire the ownershipor control of more than five percent of the voting shares orsubstantially all of the assets of any company, including abank, without the prior approval of the FRB. In addition, bankholding companies generally are prohibited under the BHCA fromengaging in non-banking activities, subject to certainexceptions. The Gramm-Leach-Bliley Act, enacted in 1999 anddiscussed below, broadened the range of permissible activitiesfor bank holding companies that qualify as “financialholding companies”.     MBNA America and MBNA Delaware are subject to supervision andexamination by the OCC, which is their primary regulator. MBNAAmerica and MBNA Delaware are insured by, and therefore aresubject to the regulations of, the FDIC and are also subject torequirements and restrictions under federal and certain statelaws, including requirements to maintain reserves againstdeposits, restrictions on the types and amounts of loans thatmay be granted and the interest that may be charged thereon, andlimitations on the types of investments that may be made and thetypes 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 Canadais subject to regulation and supervision by the Office of the
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Superintendent of Financial Institutions, the Canadian DepositInsurance Corporation, the FRB, and the OCC.*Dividends*     The principal source of funds to the Corporation to paydividends and interest and principal on debt securities and tomeet other obligations is dividends from MBNA America. MBNAAmerica and MBNA Delaware are subject to limitations on thedividends they may pay to the Corporation. The Corporation mayalso be subject to limitations on the payment of dividends tostockholders. See “Dividend Limitations” onpage 56 and “Note 27: Dividend Limitations”on page 106 of the 2004 Annual Report to Stockholders,which are incorporated herein by reference. In addition, theCorporation, MBNA America and MBNA Delaware are subject tovarious regulatory policies and requirements relating to thepayment of dividends, including requirements to maintain capitalabove regulatory minimums. The appropriate federal regulatoryauthority is authorized to determine, under certaincircumstances relating to the financial condition of a bank orbank holding company, that the payment of dividends would be anunsafe or unsound practice and to prohibit payment thereof.Moreover, neither MBNA America nor MBNA Delaware may pay adividend if it is undercapitalized or would becomeundercapitalized as a result of paying the dividend. Bankingregulators have indicated that banking organizations shouldgenerally pay dividends only out of current operating earnings.*Intercompany Borrowings and Transactions*     There are various legal restrictions on the extent to which theCorporation and its non-bank subsidiaries may borrow orotherwise obtain credit from, sell assets to, or engage incertain 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 creditmust be secured by designated amounts of specified collateraland the aggregate of such transactions are limited, as to anyone of the Corporation or its non-bank subsidiaries, to 10% ofthe U.S. bank subsidiary’s capital stock and surplus,and as to the Corporation and all such non-bank subsidiaries inthe aggregate, to 20% of the U.S. bank subsidiary’scapital stock and surplus.     Extensions of credit and other transactions between one of theCorporation’s U.S. bank subsidiaries on the one hand,and the Corporation or one of its non-bank subsidiaries on theother, must be on terms and under circumstances, includingcredit standards, that are substantially the same or at least asfavorable to the Corporation’s U.S. bank subsidiary asthose prevailing at the time for comparable transactions betweenthe Corporation’s U.S. bank subsidiaries andnon-affiliated companies.*Capital Requirements*     The FRB, OCC and FDIC have substantially similar risk-basedcapital and leverage ratio guidelines for banking organizations.The guidelines are intended to ensure that banking organizationshave adequate capital given the risk levels of their assets andoff-balance sheet financial instruments.     Under the risk-based capital guidelines adopted by the FRB forbank holding companies, such as the Corporation, and the OCC fornational banks, such as MBNA America and MBNA Delaware, theminimum requirement for the ratio of qualifying total capital torisk-weighted assets (including certain off-balance sheet items,such as interest rate swaps) is 8%. At least half of thequalifying total capital must be comprised of “Tier Icapital”, which includes common stockholders’ equity,qualifying non-cumulative perpetual preferred stock, certainminority interests in the equity accounts of consolidatedsubsidiaries and in the case of bank holding companies a limitedamount of qualifying cumulative perpetual preferred stock andtrust preferred securities. The remainder of a bank holdingcompany’s or bank’s qualifying total capital mustconsist of “Tier II capital”, which includescertain mandatory convertible debt securities, a limited amountof subordinated debt, a limited amount of reserves for possiblecredit losses, and limited amounts attributable to Tier Icapital instruments that are in excess of amounts permitted tobe included in Tier I capital. As of July 1, 2003 theCorporation deconsolidated the statutory business trusts thathave issued trust preferred securities. As a result, the juniorsubordinated debentures held by the trusts are now reported onthe Corporation’s consolidated balance sheet. SeeNote 19: “Long-Term Debt and Bank Notes” onpages 96 through 98 of the
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2004 Annual Report to Stockholders. In a rule first proposed inMay 2004 and adopted as a final rule in March 2005, the FRB hasconfirmed the continued qualification of trust preferredsecurities as Tier I capital notwithstanding the change inaccounting treatment. The final rule creates an expandedcategory of “restricted core capital elements” forbank holding companies that includes, in addition to cumulativeperpetual preferred stock, trust preferred securities, REITpreferred securities and certain minority interests. Under the finalrule, bank holding companies that are internationally active bankingorganizations, such as the Corporation, must limit restricted corecapital elements to 15% of the sum of all Tier I capital elements,net of goodwill less any associated deferred tax liability. While the final ruleallows for a transition period to March 31, 2009, the FRB generallyexpects internationally active banking organizations, such as theCorporation, to limit the amount of qualifying cumulative perpetualpreferred stock and qualifying trust preferred securities included inTier I capital to such a 15% limit immediately. In addition, the FRB has adopted aminimum leverage ratio (Tier I capital to average totalassets less goodwill and certain other intangible assets) of 3%for bank holding companies that have the agency’s highestsupervisory rating or have implemented the FRB’s marketrisk capital measure, and 4% for all other bank holdingcompanies. See “Capital Adequacy” on pages 55through 56 and Note 28: “Capital Adequacy” onpage 107 of the 2004 Annual Report to Stockholders, whichis incorporated herein by reference. Bank holding companies andbanks may be subject to higher risk-based and leverage capitalratios depending on other specific factors, such as interestrate risk, concentrations of credit risk, and the conduct ofnon-traditional activities.     Current U.S. federal bank regulatory risk-based capitalguidelines are based upon the 1988 capital accord of the BaselCommittee on Banking Supervision (the “BaselCommittee”). The Basel Committee has been working for anumber of years on a revised capital framework focused onsecuring international convergence on revisions to regulationsand standards governing the capital adequacy of internationallyactive banking organizations. In June 2004, the Basel Committeeissued a revised framework document, “The New Basel CapitalAccord” (“Basel II”), which proposessignificant revisions to the current Basel Capital Accord.Basel II would establish a three-part framework for capitaladequacy that would include: (1) minimum regulatory capitalrequirements; (2) supervisory review of aninstitution’s capital adequacy and internal capitalassessment process; and (3) market discipline throughincreased disclosures regarding capital adequacy.     In August 2003, an Advance Notice of Proposed Rulemaking waspublished by the OCC, the FRB, the FDIC and the Office of ThriftSupervision (collectively “the Agencies”). The AdvanceNotice of Proposed Rulemaking was titled “Risk-BasedCapital Guidelines; Implementation of New Basel Capital Accord;Internal Ratings-Based Systems for Corporate Credit andOperational Risk Advanced Measurement Approaches for RegulatoryCapital; Proposed Rule and Notice” (the “ProposedRegulatory Guidance”). The Proposed Regulatory Guidance setforth for industry comment the Agencies’ views on aproposed framework for implementing Basel II in the UnitedStates. In particular, the Proposed Regulatory Guidancedescribes significant elements of the Advanced InternalRatings-Based approach for credit risk and the AdvancedMeasurement Approaches for operational risk. The Agencies havedetermined that the advanced risk and capital measurementmethodologies of Basel II will be applied on a mandatorybasis for large, internationally active banking organizations.Institutions subject to the mandatory application of theadvanced approaches would be those institutions with totalbanking assets of $250 billion or more or thoseinstitutions, such as the Corporation, with total on-balancesheet foreign exposure of $10 billion or more.     Both prior and subsequent to the publication of the ProposedRegulatory Guidance, U.S. regulatory agencies have issuedguidance on a number of topics regarding implementation ofBasel II for U.S. financial institutions. The Agenciesare expected to issue a Notice of Proposed Rulemaking sometimein the summer of 2005 with final rules to be issued in the firsthalf of 2006. Adoption of the proposed new rules are expected toincrease required regulatory capital for some U.S. bankingorganizations, such as the Corporation and theCorporation’s banking subsidiaries, due in part to a newcapital charge for operational risk and to the final treatmentof certain credit risk exposures, including the treatment ofcredit card loans and asset securitizations.     U.S. regulatory agencies recently conducted a QuantitativeImpact Study in order to assess the impact of Basel II oncapital requirements of U.S. financial institutions.Approximately 30 organizations, including the Corporation,participated in the exercise. The Corporation has determinedthat its current level of capital is sufficient to meet theincrease in required regulatory capital.
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*Corporation Support of Banks*     Under the National Bank Act, if the capital stock of a nationalbank is impaired by losses or otherwise, the OCC is authorizedto require payment of the deficiency by assessment upon itsstockholders and, if any such assessment is not paid, to sellthe stock to make good the deficiency. Under FRB policy, theCorporation is expected to act as a source of financial strengthto its U.S. bank subsidiaries and to commit resources tosupport them. Any non-deposit obligation of theCorporation’s U.S. bank subsidiaries to theCorporation is subordinate in right of payment to deposits, andcertain obligations of the Corporation’s U.S. banksubsidiaries to the Corporation are subordinate in right ofpayment to certain other indebtedness of the Corporation’sU.S. bank subsidiaries. In the event of theCorporation’s bankruptcy, any commitment by the Corporationto a federal bank regulatory agency to maintain the capital ofits U.S. bank subsidiaries will be assumed by thebankruptcy trustee and entitled to priority of payment.*Cross Default*     Each of the Corporation’s banking subsidiaries can be heldliable by the FDIC for any loss incurred, or reasonably expectedto be incurred, due to the default of any other of theCorporation’s banking subsidiaries and for any assistanceprovided by the FDIC to any of the Corporation’s bankingsubsidiaries that is in danger of default and that is controlledby the Corporation. “Default” means generally theappointment of a conservator or receiver. “In danger ofdefault” means generally the existence of certainconditions indicating that a default is likely to occur in theabsence of regulatory assistance. An FDIC cross-guarantee claimagainst a bank is generally superior in right of payment toclaims of the holding company and its affiliates against suchdepository institution.*Prompt Corrective Action*     The Federal Deposit Insurance Act, as amended (the“FDIA”), requires, among other things, the federalbanking agencies to take “prompt corrective action” inrespect of depository institutions that do not meet minimumcapital requirements. The FDIA sets forth the following fivecapital tiers: “well-capitalized”, “adequatelycapitalized”, “undercapitalized”,“significantly undercapitalized” and “criticallyundercapitalized”. A depository institution’s capitaltier will depend upon how its capital levels compare withvarious relevant capital measures and certain other factors, asestablished by regulation. The relevant capital measures are thetotal capital ratio, the Tier I capital ratio and theleverage ratio.     Under the regulations adopted by the federal regulatoryauthorities, a bank insured by the FDIC, such as MBNA Americaand MBNA Delaware, will be: (1) “wellcapitalized” if it has a total capital ratio of10 percent or greater, a Tier I capital ratio of6 percent or greater and a leverage ratio of 5 percentor greater and is not subject to any order or written directiveby any such regulatory authority to meet and maintain a specificcapital level for any capital measure; (2) “adequatelycapitalized” if it has a total capital ratio of8 percent or greater, a Tier I capital ratio of4 percent or greater and a leverage ratio of 4 percentor greater (3 percent in certain circumstances) and is not“well capitalized”;(3) “undercapitalized” if it has a total capitalratio of less than 8 percent, a Tier I capital ratioof less than 4 percent or a leverage ratio of less than4 percent (3 percent in certain circumstances);(4) “significantly undercapitalized” if it has atotal capital ratio of less than 6 percent, a Tier Icapital ratio of less than 3 percent or a leverage ratio ofless than 3 percent and (5) “criticallyundercapitalized” if its tangible equity ratio is equal toor less than 2 percent. An institution may be downgradedto, or deemed to be in, a capital category that is lower than isindicated by its capital ratios if it is determined to be in anunsafe or unsound condition or if it receives an unsatisfactoryexamination rating with respect to certain matters. AtDecember 31, 2004, MBNA America and MBNA Delaware were eachconsidered “well capitalized”. See Note 28:“Capital Adequacy” on page 107 of the 2004 AnnualReport of Stockholders, which is incorporated herein byreference.     The FDIA generally prohibits a depository institution frommaking any capital distributions (including payment of adividend) or paying any management fee to its parent holdingcompany if the depository institution would thereafter be“undercapitalized”. “Undercapitalized”institutions are subject to growth limitations and are requiredto submit a capital restoration plan. The agencies may notaccept such a plan
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without determining, among other things, that the plan is basedon realistic assumptions and is likely to succeed in restoringthe depository institution’s capital. In addition, for acapital restoration plan to be acceptable, the depositoryinstitution’s parent holding company must guarantee thatthe institution will comply with such capital restoration plan.The aggregate liability of the parent holding company is limitedto the lesser of (1) an amount equal to five percent of thedepository institution’s total assets at the time it becameundercapitalized and (2) the amount which is necessary (orwould have been necessary) to bring the institution intocompliance with all capital standards applicable with respect tosuch institution as of the time it fails to comply with theplan. If a depository institution fails to submit an acceptableplan, it is treated as if it is “significantlyundercapitalized”.     “Significantly undercapitalized” depositoryinstitutions may be subject to a number of requirements andrestrictions, including orders to sell sufficient voting stockto become “adequately capitalized”, requirements toreduce total assets, and cessation of receipt of deposits fromcorrespondent banks. “Critically undercapitalized”institutions are subject to the appointment of a receiver orconservator.*FDICIA and FDIC Insurance*     The Federal Deposit Insurance Corporation Improvement Act of1991 (“FDICIA”) provided increased funding for theBank Insurance Fund (“BIF”) of the FDIC and providedfor expanded regulation of banks and bank holding companies. Theregulation includes expanded federal banking agency examinationsand increased powers of federal banking agencies to takecorrective action to resolve the problems of insured depositoryinstitutions with capital deficiencies. These powers varydepending on which of several levels of capitalization aparticular institution meets.     FDIC regulations adopted under FDICIA prohibit a bank fromaccepting brokered deposits unless (i) it is wellcapitalized or (ii) it is adequately capitalized andreceives a waiver from the FDIC. A bank that is adequatelycapitalized and that accepts brokered deposits under a waiverfrom the FDIC may not pay an interest rate on any deposit inexcess of 75 basis points over certain prevailing marketrates. There are no such restrictions on a bank that is wellcapitalized. As of December 31, 2004, MBNA America met theFDIC’s definition of a well capitalized institution forpurposes of accepting brokered deposits. For the purposes of thebrokered deposit rules, a bank is defined to be “wellcapitalized” if it maintains a ratio of Tier I capitalto risk-adjusted assets of at least 6 percent, a ratio ofTotal capital to risk-weighted assets of at least10 percent and a leverage ratio of at least 5 percentand is not subject to any order, direction or written agreementto maintain specific capital levels. Under the regulatorydefinition 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 2004Annual Report of Stockholders, which is incorporated herein byreference, for discussion of brokered deposits.*Deposit Insurance*     MBNA America and MBNA Delaware are subject to FDIC depositinsurance assessments for the Bank Insurance Fund(“BIF”). Each financial institution is assigned to oneof three capital groups — well capitalized, adequatelycapitalized or undercapitalized — and further assignedto one of three subgroups within a capital group, on the basisof supervisory evaluations by the institution’s primaryfederal and, if applicable, state supervisors and otherinformation relevant to the institution’s financialcondition and the risk posed to the applicable insurance fund.The assessment rate applicable to MBNA America and MBNA Delawarein the future will depend in part upon the risk assessmentclassification assigned by the FDIC and in part on the BIFassessment schedule adopted by the FDIC. FDIC regulationscurrently provide that premiums related to deposits assessed bythe BIF are to be assessed at a rate of between 0 cents and 27cents per $100 of deposits.     Because of favorable loss experience and a healthy reserve ratioin the BIF, well capitalized and well managed banks, includingthe Corporation’s U.S. bank subsidiaries, have inrecent years paid no premiums for FDIC insurance. In the future,even well capitalized and well managed banks may be required topay premiums on deposit insurance. The amount of any suchpremiums will depend on the outcome of legislative andregulatory initiatives as well as the BIF loss experience andother factors.
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     The Deposit Insurance Funds Act of 1996 also separated theFinancing Corporation assessment to service the interest on itsbond obligations from the BIF and the Savings AssociationInsurance Fund assessments. The amount assessed on individualinstitutions by the Financing Corporation is in addition to theamount, if any, paid for deposit insurance. The FinancingCorporation assessment rates may be adjusted quarterly toreflect a change in assessment base for the BIF. The currentFinancing Corporation annual assessment rate is 1.44 cents per$100 of deposits.*Regulation of the Credit Card and Other Consumer Lending    Businesses in the U.S.*     The relationship between the Corporation and its Customers inthe U.S. is extensively regulated by federal and stateconsumer protection laws. The Truth in Lending Act requiresconsumer lenders to make certain disclosures along with theirapplications (for credit card accounts) and solicitations, uponopening an account and with each periodic statement. It alsoimposes certain substantive requirements and restrictions onlenders and provides Customers with certain rights to disputeunauthorized charges and to have billing errors correctedpromptly. Customers are also given the right to have paymentspromptly credited to their accounts.     The Equal Credit Opportunity Act prohibits lenders fromdiscriminating in extending credit on certain criteria such asan applicant’s sex, race and marital status. In order toprotect borrowers from such discrimination, it requires thatlenders disclose the reasons they took adverse action against anapplicant or a Customer.     The Fair Credit Reporting Act (“FCRA”) generallyregulates credit reporting agencies, but also imposes someduties on lenders as users of consumer credit reports. Forinstance, it prohibits the use of a consumer credit report by alender except in connection with a proposed business transactionwith the consumer. It also requires lenders to notify consumerswhen taking adverse action based upon information obtained fromcredit reporting agencies. Portions of the Act pre-empt statelaw and establish a uniform, national standard for financialinstitutions using consumer credit reports. In December 2003,provisions of the Act, which would have expired onJanuary 1, 2004, were extended and important aspects of theAct that pre-empted state law were made permanent through theFair and Accurate Credit Transactions Act of 2003 (the“FACT Act”). Among other things, the FACT Act revisescertain sections of FCRA, establishes additional rights forconsumers to obtain and correct credit reports, and establishesadditional requirements for financial institutions that provideadverse credit information to a consumer reporting agency.Consumers must be provided with certain disclosures and willhave a right to receive a free copy of their credit report oncea year. The FACT Act also extends the duration of aconsumer’s opt-out of prescreened lists for credit orinsurance marketing solicitations, extends the statute oflimitations for civil liability for violations of FCRA, andrequires consumers to be provided a right to opt out ofsolicitations for marketing purposes if affiliates that makesolicitations for marketing purposes are using certain consumerinformation received from another affiliate. Regulationsconcerning affiliate marketing are expected to be finalized in2005.     Federal regulators are authorized to impose penalties forviolations of these statutes and, in certain cases, to order theCorporation to pay restitution to injured Customers. Customersmay bring actions for damages for certain violations. Inaddition, a Customer may be entitled to assert a violation ofthese consumer protection laws by way of set-off against theCustomer’s obligation to pay the outstanding loan balance.     The National Bank Act, which governs the activities of nationalbanks, authorizes national banks to use various alternativeinterest rates when they make loans, including the highestinterest rate authorized for state-chartered lenders located inthe state where the national bank is located. This ability to“export” rates, as provided for in the Act, is reliedupon by MBNA America and MBNA Delaware to charge Customers theinterest rates and fees permitted by Delaware law regardless ofan inconsistent law of the state in which the Customer islocated, thereby facilitating MBNA America’s and MBNADelaware’s nationwide lending activities.     The National Bank Act also permits national banks to providedebt cancellation and debt suspension products to their loancustomers. In 2002, the OCC adopted new regulations governingthe offering of these products by national banks, includingrequirements to provide written disclosures to consumers andobtain written acknowledgement from consumers of their receiptof such disclosures.
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     Federal regulators have become more active in monitoring thespecific business practices of financial institutions, includingthe credit card industry. For example, in September 2004, theOCC issued an advisory letter describing several credit cardmarketing and management practices that could expose banks topotential compliance and reputation risks, regulatoryenforcement and litigation. In the letter, the OCC alerted banksto fully and prominently disclose in promotional materials andcredit agreements certain credit card terms, such as theapplicability and duration of promotional rates and the abilityof banks to alter credit card terms and to change pricing. Inaddition, in January 2003 under the auspices of the FederalFinancial Institutions Examination Council, the OCC, the FRB andthe FDIC issued guidance governing account management practicesfor credit card lending, including with respect to credit linemanagement, over-limit practices, minimum payment requirementsand workout and forbearance practices. In issuing the guidance,the bank regulators were focused on addressing potential safetyand soundness issues arising from the account managementpractices. See “Domestic Credit Card Loan Receivables”on pages 32 through 33 of the 2004 Annual Report toStockholders, which is incorporated herein by reference, for adiscussion of the Corporation’s changes to the minimumpayment amounts required on certain accounts.*Financial Modernization Legislation: The Gramm-Leach-Bliley    Act*     The Gramm-Leach-Bliley Act (the “GLBA”): •     allows bank holding companies meeting management, capital and    Community Reinvestment Act (“CRA”) 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 broaderrange of activities that are permitted by the GLBA, all of itsdepository institutions must be “well capitalized” and“well managed” and it must file a declaration with theFRB that it elects to be a “financial holdingcompany.” In addition, to commence any new activitypermitted by the GLBA and to acquire any company engaged in anynew activity permitted by the GLBA, each insured depositoryinstitution of the financial holding company must have receivedat least a “satisfactory” rating in its most recentexamination under the CRA.     The GLBA also allows a national bank to own a financialsubsidiary engaged in certain of the nonbanking activitiesauthorized for financial holding companies. The national bankmust meet certain requirements, including that it and all of itsdepository institution affiliates be well capitalized and wellmanaged. Also, to commence any new activity or acquire anycompany engaged in any new activity, the national bank must haveat least a “satisfactory” CRA examination rating. Inaddition, it must obtain approval of the OCC.*Privacy*     The financial privacy provisions of the GLBA generally prohibitfinancial institutions, including the Corporation, fromdisclosing nonpublic personal information about consumers tothird parties unless consumers have the opportunity to “optout” of the disclosure. A financial institution is alsorequired 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 theadoption of more restrictive privacy laws, including lawsprohibiting sharing of customer information without thecustomer’s prior permission and laws prohibiting financialinstitutions, including the Corporation, from disclosingnonpublic personal information about consumers to affiliatesunless consumers have the opportunity to “opt out” ofthe disclosure. These laws may make it more difficult for theCorporation to share Customer information with its marketingpartners and among its affiliates and reduce the effectivenessand increase the cost of marketing programs.
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*Community Reinvestment Act (CRA)*     The CRA requires banks to help serve the credit needs of theircommunities, including providing credit to low and moderateincome individuals and geographies. Should theCorporation’s bank subsidiaries fail to adequately servethe community, potential penalties are regulatory denials toexpand branches, relocate, add subsidiaries and affiliates,expand into new financial activities and merge with or purchaseother companies.*Telemarketing Regulation*     The Federal Telephone Consumer Protection Act, among otherprovisions, requires telemarketers to restrict calling tocertain hours of the day and maintain a list of individualsasking to be included on that telemarketer’s “do notcall” list. In January 2003, the Federal Trade Commission(the “FTC”) amended the Telemarketing Sales Rulesfurther restricting telemarketing by establishing the national“do not call” list on which consumers may placethemselves. Telemarketers must obtain the “do notcall” list and exclude all consumers on the “do notcall” list from telemarketing calls. In July 2003, theFederal Communications Commission (the “FCC”) amendedits implementing regulations under the Telephone ConsumerProtection Act to make them substantially consistent with theFTC’s rules. In September 2003, President Bush signed intolaw legislation ratifying the FTC’s authority to administerthe “do not call” list. While the FTC’s rules donot apply to banks, the FCC’s rules do apply. As of January2005, over 80 million phone numbers were registered on thenational “do not call” list. Over the past few years,almost all states have passed or are considering similarlegislation. All of these laws and regulations provide sanctionsfor non-compliance and increase the cost and decrease theefficiency and effectiveness of the Corporation’s telesalesprogram.*Anti-Money Laundering Initiatives and the USA PATRIOT Act*     A major focus of governmental policy on financial institutionsin recent years has been aimed at combating money laundering andterrorist financing. In 2001, comprehensive anti-terrorismlegislation known as the USA PATRIOT Act of 2001 (the “USAPatriot Act”) was enacted. The USA Patriot Actsubstantially broadened the scope of U.S. anti-moneylaundering laws and regulations by imposing significant newcompliance and Customer due diligence obligations, creating newcrimes and penalties and expanding the extra-territorialjurisdiction of the U.S.     The U.S. Treasury Department has issued a number ofregulations implementing the USA Patriot Act that apply certainof its requirements to financial institutions, including theCorporation’s bank subsidiaries. The regulations imposeobligations on financial institutions to maintain appropriatepolicies, procedures and controls to detect, prevent and reportmoney laundering and terrorist financing and to verify theidentity of their customers.     Failure of a financial institution to maintain and implementadequate programs to combat money laundering and terroristfinancing could have serious legal and reputational consequencesfor the institution. The USA Patriot Act’s requirement toobtain and verify certain Customer information prevents theCorporation from opening accounts when such information cannotbe easily obtained or verified.*MasterCard and Visa Litigation and Competition*     The Corporation issues credit cards on MasterCard’s andVisa’s networks. MasterCard and Visa are facing significantlitigation and increased competition.     In 2003, MasterCard and Visa settled a suit by Wal-Mart andother merchants who claimed that MasterCard and Visa unlawfullytied 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 Visabranded credit cards without accepting their debit cards (andvice versa), reduce the prices charged to merchants for off-linesignature debit transactions for a period of time, and pay overten years amounts totaling $3.05 billion into a settlementfund. MasterCard and Visa are also parties to suits byU.S. merchants who opted out of the Wal-Mart settlement.
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     In October 2004, the United States Supreme Court decided to letstand a federal court decision in a suit brought by theU.S. Department of Justice, in which MasterCard and Visarules prohibiting banks that issue cards on MasterCard and Visanetworks from issuing cards on other networks (the“Association Rules”) were found to have violatedfederal antitrust laws (the “Antitrust Decision”). TheAntitrust Decision effectively permits banks that issue cards onVisa’s or MasterCard’s networks, such as theCorporation’s banking subsidiaries, also to issue cards oncompetitor networks. Discover and American Express alsoinitiated separate civil lawsuits against MasterCard and Visaclaiming substantial damages stemming from the Association Rules.     MasterCard and Visa are parties to suits alleging thatMasterCard’s and Visa’s currency conversion practicesare unlawful.     The costs associated with these and other matters could causeMasterCard and Visa to invest less in their networks andmarketing efforts and could affect adversely the interchangepaid to their member banks, including the Corporation’sbanking subsidiaries.*Regulation of International Business*     As with banking and consumer credit regulation in the U.S., theCorporation’s international businesses are subject toextensive regulation. • *U.S. Regulation of International Business*     The Corporation’s investments in MBNA Europe and MBNACanada, and any further investments the Corporation may decideto make in MBNA Europe or MBNA Canada or in any other companyoutside the U.S., are subject to regulations adopted by the FRBpursuant to the BHCA and the Federal Reserve Act. Among otherthings, under certain circumstances these regulations requireapproval of the FRB to acquire, establish or make investments incompanies outside the U.S. These regulations could limitthe Corporation’s ability to expand the business of MBNAEurope or MBNA Canada, as well as the Corporation’s abilityotherwise to expand its operations outside the U.S. • *International Regulation of MBNA Europe*     In the U.K., MBNA Europe is regulated by various agencies withbroad investigatory, supervisory, and enforcement powers. MBNAEurope’s primary regulator in the U.K. is the FinancialServices Authority (“FSA”). The FSA uses a risk-basedsupervision methodology.     In order to establish the FSA as the single statutory body forfinancial business, the U.K. enacted the Financial Services andMarkets Act 2000 (“FSMA”). The FSMA gives the FSA itslegal and regulatory powers and establishes its framework ofcontrol, including with respect to the conduct of seniormanagement and MBNA Europe’s business practices.     Other regulatory bodies in the U.K. include: the Office of theInformation Commissioner, formerly the Data ProtectionCommissioner, which enforces the provisions of, and overseescompliance with, data protection legislation; The Office of FairTrading (“OFT”), which grants consumer creditlicenses, enforces the substantive provisions of consumer creditlegislation and regulates fair trade and competition; and theOffice of Communications, which oversees compliance withtelecommunications licensing rules and regulations. TheEnterprise Act 2002 gave the OFT increased powers to act onconsumer complaints.     MBNA Europe’s business in the U.K. is subject to numerouslaws and regulations. The U.K. Consumer Credit Act 1974 requireslenders of consumer credit to have a Consumer Credit License.This act governs the procedures for entering into credit cardagreements, the provision of information to customers and thetermination of agreements and imposes joint and severalliability on the credit card issuer and the merchant for breachof contract or misrepresentation in connection with goods andservices purchased with a credit card.     MBNA Europe is subject to increasing levels of consumerprotection regulation in the U.K. The U.K government’sfocus on over-indebtedness has resulted in a Committee of U.K.Members of Parliament (the “Treasury SelectCommittee”) carrying out an investigation into thetransparency of credit card terms
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(including interest rates, annual percentage rates, interestcalculations, and transaction and default charges), and intomarketing methods for credit cards and other credit products.The Committee made a series of recommendations in its reportpublished in December 2003. The U.K. credit card industry hasresponded to the recommendations by agreeing to self-regulatingguidelines on matters such as summary boxes and credit cardaccess checks. A further report was issued by the TreasurySelect Committee in February 2005 recommending additionalpractices, such as including clearer interest calculationmethods, reduced default charges, comprehensive data sharingamong lenders, refraining from unsolicited issuing of creditcard access checks and changing the marketing and provision ofcredit insurance. A draft Consumer Credit bill was published inDecember 2004 proposing amendments to some provisions of theConsumer Credit Act 1974, including a provision enablingconsumers to challenge consumer credit agreements on the basisof unfairness. The Consumer Credit Act 1974 was amended in 2004to introduce changes to advertising regulations, the form andcontent of credit card agreements, and the calculation of theannual percentage rates. The amendments require changes to theCorporation’s U.K. advertising and the terms and conditionsof Customer agreements. In addition, the European Commission hasissued a draft amended Consumer Credit Directive that, ifadopted, could further regulate the manner in which MBNA Europemarkets and delivers its products.     The European Commission and the OFT have challenged interchangerates in the European Union and the U.K. Interchange is a feepaid by a merchant bank to the card-issuing bank, such as MBNAEurope, through the interchange network as compensation forrisk, grace period, and other operating costs. MasterCard andVisa each set the interchange rates it charges.     In 2002, the European Commission and Visa reached an agreementon Visa’s cross-border interchange rates within theEuropean Union. As a result, in 2002 Visa reduced itsinterchange rates on transactions within the European Union and,effective October 2003, reduced its interchange ratesapproximately 10 basis points on transactions in the U.K.Effective October 2004, MasterCard also reduced its interchangerates approximately 10 basis points on transactions in theU.K.     The OFT has conducted a lengthy investigation ofMasterCard’s U.K. interchange rates. In November 2004, itissued draft conclusions finding that the setting of U.K.interchange rates at their current levels represents arestriction of competition leading to an unjustifiably highinterchange rate. If the OFT’s draft conclusions areimplemented, MasterCard interchange rates in the U.K. would besignificantly reduced. MasterCard and its U.K. members havechallenged the OFT’s draft conclusions. A final OFTdecision is expected in June 2005 and will be subject to anappeal process. The appeal process could postpone the finalresolution of the OFT’s investigation, and its effects, to2006. In October 2004, the OFT extended its interchangeinvestigation to Visa U.K. interchange rates.     The Corporation cannot predict the amount and timing of anyreductions to interchange rates in the U.K., including as theresult of the OFT investigations described above. However, asindicated above, reductions to interchange rates in the U.K.could be substantial.     The Data Protection Act 1998 requires registration of datacontrollers in the U.K., establishes principles to ensure datais processed fairly and securely and gives consumers a right ofaccess to the data held on them. Similar provisions apply inIreland and Spain.     The Unfair Contracts Terms Act 1977 and the Unfair Terms inConsumer Contracts Regulations 1999 prohibit terms in consumercontracts that are unfair to consumers and impose limits on theextent to which civil liability for breach of contract can beavoided by means of contract terms. In the U.K., default chargessuch as late, overlimit and returned check fees that exceed agenuine pre-estimate of the cost of the Customer’s breachof contract are illegal. The OFT is carrying out anindustry-wide investigation into alleged unfair contract termsin Customer agreements and questioning how MBNA Europeestablishes default charges, such as late, overlimit andreturned check fees, in the U.K. The OFT asserts that the UnfairTerms in Consumer Contracts Regulations 1999 renderunenforceable consumer credit agreement terms relating todefault charges to the extent they are disproportionately highin relation to their actual cost to the Corporation. The OFTmust seek a court injunction to enforce such provisions. In July2004, the Corporation received a letter from the OFT indicatingthat the OFT is challenging the amount of the Corporation’sdefault charges in the U.K. The Corporation responded to the OFTletter in September 2004 and in February 2005 the OFT
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requested additional information. In the event the OFT’sview prevails, the Corporation’s default charges in theU.K. could be significantly reduced. In addition, should the OFTprevail in its challenge, the Corporation may also be subject toclaims from Customers seeking reimbursement of default charges.The Corporation is assessing the OFT challenge and cannot statewhat its eventual outcome will be.     The personal insolvency provisions of the Enterprise Act 2002,aimed at reducing the stigma of bankruptcy, became effective inApril 2004 and gave rise to a modest increase in the levels ofbankruptcy filings in the U.K. during the third and fourthquarter of 2004.     MBNA Europe in the U.K. currently complies with the Associationof British Insurers voluntary regulations applicable to creditinsurance. In January 2005, the FSA became the singlegovernmental body that regulates insurance and MBNA Europe isgoverned by the FSA when offering credit or otherinsurance-related products to its Customers. MBNA Europe changedCustomer communications and procedures in response to FSA rulesprior to the January 2005 effective date.     MBNA Europe has operated in Ireland since 1997 through a branch(“MBNA Ireland”) established under the European UnionSecond Council Directive. Capital and liquidity requirements aregoverned by FSA regulation. MBNA Ireland is otherwise subject toIrish consumer credit laws and banking laws enforced by theIreland Financial Services Regulatory Authority. Increases in,or the introduction of, finance charges on Customer accountsmust be approved by the Ireland Financial Services RegulatoryAuthority.     MBNA Europe has operated in Spain since 2002 through a branch(“MBNA Spain”) established under the European UnionSecond Council Directive. Capital and liquidity requirements aregoverned by FSA regulations. MBNA Spain is otherwise subject toSpanish consumer credit and banking laws enforced by the Bank ofSpain. New and increased fees on Customer accounts andadvertisements that refer to the cost of credit must be approvedby the Bank of Spain. • *International Regulation of MBNA Canada*     MBNA Canada was incorporated by letters patent as aSchedule II Bank pursuant to the Bank Act (Canada). As isrequired by the Bank Act, MBNA Canada obtained an orderpermitting it to commence business in November 1997. It is awholly owned subsidiary of MBNA America and is thus a foreignbank for the purposes of regulatory supervision in Canada. TheCanadian banking regulatory regime in which MBNA Canada operatesis a comprehensive system based on the provisions of the BankAct, the regulations made under the Bank Act and guidelines andpolicy statements published by the Office of the Superintendentof Financial Institutions (Canada) (“OSFI”). MBNACanada is also a member institution of the Canada DepositInsurance Corporation.     The Cost of Borrowing (Banks) Regulations made pursuant to theBank Act set out, among other things, the requirements imposedon MBNA Canada regarding disclosure of interest charges, theinclusion of certain charges, the cost of borrowing, and thedisclosure of the cost of borrowing.     MBNA Canada is subject to requirements regarding bankingpolicies, procedures and standards. Among other things, the BankAct requires the board of directors of a Canadian bank toestablish investment and lending policies, procedures andstandards. MBNA Canada must adhere to investment and lendingstandards that a reasonable and prudent person would apply andthat avoid undue risk of loss and obtain a reasonable return. Inaddition, MBNA Canada must maintain adequate capital andadequate and appropriate forms of liquidity, and must complywith regulations and OSFI guidelines or policy statementsrelating to capital and liquidity requirements.     The Personal Information Protection and Electronic Documents Act(“PIPEDA”) establishes a code of conduct for thecollection, use and disclosure of personal information. The coderequires that personal information be retained, used anddisclosed with consent of the individual to whom it relates,that an individual be given access to his or her personalinformation and that the personal information be accurate. Theprovisions of PIPEDA are monitored by the Privacy Commissioner.The Financial Consumer Agency of Canada is responsible foroversight of consumer protection measures applicable tofederally regulated financial institutions.
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**Competition**     The Corporation’s business is highly competitive. TheCorporation competes with numerous banks with national, regionaland local operations in domestic and international markets andwith non-bank competitors who issue credit and charge cards andmake other consumer loans. Strategies used by theCorporation’s competitors include targeted marketing, lowintroductory rates, balance transfers with promotional rates,rewards programs, affinity marketing, and discounts on productsand services. The Corporation also uses these strategies,emphasizing its strategy of marketing to people with a strongcommon interest and its Customer service, to effectively competewith its competitors.**Employees**     As of December 31, 2004, the Corporation had approximately28,000 employees.**Important Factors Regarding Forward-Looking Statements**     From time to time, the Corporation may make forward-looking oralor written statements concerning the Corporation’s futureperformance. Such statements are subject to risks anduncertainties that may cause the Corporation’s actualperformance to differ materially from that set forth in suchforward-looking statements. Words such as “believe”,“expect”, “anticipate”, “intend”,“estimate”, “project” or similar expressionsare intended to identify forward-looking statements. Suchstatements speak only as of the date on which they are made. TheCorporation undertakes no obligation to update publicly orrevise any such statements. Factors which could cause theCorporation’s performance (financial or otherwise) todiffer materially from those contained in forward-lookingstatements include, but are not limited to, the following:*Legal and Regulatory*     The banking and consumer credit industry is subject to extensiveregulation and examination. Changes in federal, state andforeign laws and regulations affecting banking, consumer credit,bankruptcy, privacy, consumer protection or other matters couldmaterially impact the Corporation’s performance. In recentyears, changes in policies and regulatory guidance issued byregulators of the Corporation’s business, and affectingcredit card and consumer lending in particular, have had asignificant impact on the Corporation and are likely to continueto do so in the future. For example, see “InternationalRegulation of MBNA Europe” on page 16 above. TheCorporation cannot predict the impact of these changes. Theimpact of changes in bank regulatory guidance is particularlydifficult to assess as the guidance in recent years hasprovided, and is likely to continue to provide, considerablediscretion to bank regulators in interpreting how the guidanceshould be applied generally or to particular lenders. Forexample, see “Regulation of the Credit Card and OtherConsumer Lending Businesses in the U.S.” on page 13above. In addition, the Corporation could incur unanticipatedlitigation or compliance costs.*Reputation Risk*     The Corporation has reputation risk arising from negative publicopinion. The Corporation’s reputation impacts its business,including its ability to attract and retain Customers and tooffer new and existing products. The Corporation’sreputation is highly dependent upon perceptions by Customers andregulators of the Corporation’s business practices andother activities.*Competition*     The Corporation’s business is highly competitive. See“Competition” on page 19 above. Competition fromother lenders could affect the Corporation’s loansoutstanding, Customer retention, and the rates and fees chargedon the Corporation’s loans.*Economic Conditions*     The Corporation’s business is affected by general economicconditions beyond the Corporation’s control, includingemployment levels, consumer confidence and interest rates. Arecession or slowdown in the economy
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of the U.S. or U.K., or in other markets in which theCorporation does business may adversely impact delinquencies,credit losses, new accounts, loans outstanding and charge volume.*Delinquencies and Credit Losses*     An increase in delinquencies and credit losses could affect theCorporation’s financial performance. Delinquencies andcredit losses are influenced by a number of factors, includingthe credit quality of the Corporation’s credit card, otherconsumer and commercial loans, the composition of theCorporation’s loans among credit card, other consumer andcommercial loans, general economic conditions, the success ofthe Corporation’s collection efforts, the seasoning of theCorporation’s accounts, and the impact of actual orproposed changes in bankruptcy laws or regulatory policies.*Interest Rate Increases*     An increase in interest rates could increase theCorporation’s cost of funds and reduce its net interestmargin. The Corporation’s ability to manage the risk ofinterest rate increases in the U.S. and other markets isdependent on its overall product and funding mix and its abilityto successfully reprice outstanding loans. See “InterestRate Sensitivity” on pages 66 through 68 of the 2004Annual Report to Stockholders, which is incorporated herein byreference, for a discussion of the Corporation’s efforts tomanage interest rate risk.*Availability of Funding and Securitization*     Changes in the amount, type, and cost of funding available tothe Corporation could affect the Corporation’s performance.A major funding alternative for the Corporation is thesecuritization of credit card and other consumer loans.Difficulties or delays in securitizing loans or changes in thecurrent legal, regulatory, accounting, and tax environmentgoverning securitizations could adversely affect theCorporation. See “Liquidity and Rate Sensitivity” onpages 62 through 68 of the 2004 Annual Report toStockholders, which is incorporated herein by reference, for adiscussion of the Corporation’s liquidity.*Customer Behavior*     The Corporation’s performance could be affected by changesin acceptance and use of consumer loan products, includingcredit cards and overall consumer spending, as well as differentacceptance and use in international markets.*New Products and Markets*     The Corporation’s performance could be affected bydifficulties or delays in the development of new products orservices, including products or services other than credit cardand other consumer loans, and in the expansion into newinternational markets. These may include the failure ofCustomers to accept products or services when planned, lossesassociated with the testing or acquisition of new products orservices, or financial, legal or other difficulties that mayarise in the course of such implementation. In addition, theCorporation could face competition with new products orservices, which may affect the success of such efforts. With theexpansion to new international markets, the Corporation couldexperience difficulties and delays related to legal andregulatory issues, local custom, competition, and other factors.*Growth*     The growth of the Corporation’s existing business and thedevelopment of new products and services will be dependent uponthe ability of the Corporation to continue to develop thenecessary operations, systems, and technology, hire qualifiedpeople, obtain funding for significant capital investments, andselectively pursue loan portfolio and other businessacquisitions.
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**Available Information**     The Corporation maintains an Internet website atwww.mbna.com/investor, where the Corporation makes availablefree of charge on or through its Internet website, its annualreport on Form 10-K, quarterly reports on Form 10-Q,current reports on Form 8-K, and amendments to thosereports filed or furnished pursuant to Section 13(a) or15(d) of the Securities and Exchange Act of 1934 (the“Exchange Act”) as soon as reasonably practicableafter it electronically files such materials with, or furnishesthem to, the Securities and Exchange Commission. In the eventthe Corporation’s Internet website is temporarilyunavailable or the Corporation ceases to provide suchinformation on or through its website free of charge, theCorporation will voluntarily provide electronic or paper copiesof its filings free of charge upon request. TheCorporation’s corporate governance guidelines and thecharters of its Audit Committee, Governance Committee andCompensation Committee are also available on its Internetwebsite at www.mbna.com/investor and in print to any stockholderupon request.**ITEM 2.****PROPERTIES**     The Corporation has approximately 3,300,000 square feet ofadministrative offices and credit card facilities in five officecomplexes that it owns in Delaware, including theCorporation’s headquarters in Wilmington. The majority ofthese facilities were designed and built expressly for theCorporation’s credit card operations.     MBNA Technology conducts its processing from an approximately587,000 square foot facility that the Corporation owns inDallas, Texas as well as from approximately 548,000 squarefeet of office space at the facilities owned by the Corporationin Newark, Delaware. MBNA Technology has a backup data center inan approximately 108,000 square foot facility inRichardson, Texas that the Corporation owns. In addition, MBNATechnology leases 79,000 square feet of space in Addison,Texas.     MBNA Marketing Systems has its headquarters in Belfast, Maine,and regional offices in the following locations: Cleveland,Ohio; Kennesaw, Georgia; Hunt Valley, Maryland; Aliso Viejo,California; Newark, New Jersey; and New York City, New York.These facilities are owned by the Corporation, except for theleased New York City and Aliso Viejo offices.     MBNA Marketing Systems has telesales and other facilities inDelaware, New Hampshire, Ohio, Pennsylvania and in severallocations in Maine. Most of these facilities are owned by theCorporation.     MBNA Europe has approximately 512,000 square feet ofadministrative offices and credit card facilities that it ownsin Chester, England. MBNA Europe is currently constructing anadditional 142,000 square feet of space to support ongoingexpansion. It also has leased sales offices in London, England.In Madrid, Spain, MBNA Europe owns a 141,000 square footoperations center. MBNA Ireland Limited owns a138,000 square foot operations center inCarrick-on-Shannon, Ireland.     MBNA Canada has approximately 200,000 square feet of ownedoffice space for its credit card operations in Ottawa, Ontarioand 5,000 square feet of leased space in Montreal, Quebec.An additional 140,000 square feet of owned space in Ottawais currently under renovation.**ITEM 3.****LEGAL PROCEEDINGS***Foreign Currency Conversion Fees Litigation*     The Corporation and MBNA America are among the many card issuerswho are defendants in *In Re Currency Conversion Fee AntitrustLitigation,* a class action, filed in the U.S. DistrictCourt for the Southern District of New York, that relates toforeign currency conversion fees to customers. MasterCard andVisa applied a currency conversion rate, equal to a wholesalerate plus 1%, to credit card transactions in foreign currenciesfor conversion of the foreign currency into U.S. dollars.They required the Corporation’s banking subsidiaries andother member banks to disclose the 1% add-on to the wholesalerate if the bank chose to pass it along to the creditcardholder. The Corporation’s banking subsidiariesdisclosed this information in their cardholder agreements. InJanuary 2002, the Corporation and MBNA America were added asdefendants in
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the matter. The plaintiffs claim that the defendants conspiredin violation of the antitrust laws to charge foreign currencyconversion fees and failed to properly disclose the fees insolicitations and applications, in initial disclosure statementsand on cardholder statements, in violation of theTruth-in-Lending Act. The plaintiffs also claim that the bankdefendants and MasterCard and Visa conspired to charge the 1%foreign currency conversion fee assessed by MasterCard and Visaand an additional fee assessed by some issuers. Unlike mostother issuers, in the United States the Corporation’sbanking subsidiaries did not charge the additional fee onconsumer credit cards in addition to the fee charged byMasterCard and Visa, but did charge such an additional fee onbusiness credit cards. The plaintiffs are seeking unspecifiedmonetary damages and injunctive relief. In July 2003, the courtgranted a motion to dismiss certain Truth-in-Lending Act claimsagainst the Corporation and other defendants, but denied amotion to dismiss the antitrust claims against the defendants.In October 2004, a class was certified by the Court. TheCorporation and MBNA America intend to defend this mattervigorously and believe that the claim is without merit.     The Corporation, MBNA America and their affiliates are commonlysubject to various pending or threatened legal proceedings,including certain class actions, arising out of the normalcourse of business. In view of the inherent difficulty ofpredicting the outcome of such matters, the Corporation cannotstate what the eventual outcome of these matters will be.However, the Corporation believes, based on current knowledgeand after consultation with counsel, that the outcome of suchmatters will not have a material adverse effect on theCorporation’s consolidated financial condition or resultsof operations.**ITEM 4.****SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**     During the fourth quarter of 2004, no matters were submitted toa vote of security holders of the Corporation. **EXECUTIVE OFFICERS OF THE REGISTRANT**     Information concerning the Corporation’s executive officersis set forth below.     Randolph D. Lerner (43) has been Chairman of theCorporation since November 2002. He has been a director of theCorporation and MBNA America since April 1993. He is the ownerof the Cleveland Browns football team and a member of theNFL’s Business Ventures Committee. He serves as Co-Chairmanof the U.S. Marine Corps Heritage Foundation and is amember of Business Executives for National Security. He waspreviously a partner in Securities Advisors, L.P., which he hadmanaged since September 1991. He is a member of the Board ofTrustees of the Hospital for Special Surgery in New York City.He is a member of the District of Columbia and New York Bar.     Bruce L. Hammonds (56) has been President and ChiefExecutive Officer of the Corporation and a director of theCorporation since December 30, 2003. He previously servedas Chairman and Chief Executive Officer of MBNA America, andprior thereto as Chief Operating Officer of MBNA America. He hasbeen a director of MBNA America since 1986. He has 35 yearsof management experience in consumer lending and was a member ofthe management team that established MBNA America in 1982.Mr. Hammonds is also a director of the Financial ServicesRoundtable and the Delaware Business Roundtable and serves asChairman of the Roundtable’s Education Committee. He is amember of the Federal Reserve Board’s Advisory Council.     John R. Cochran III (53) is the Chief OperatingOfficer of the Corporation and is the Chairman, Chief ExecutiveOfficer and President of MBNA America. He previously served asthe Chief Operating Officer and Chief Marketing Officer of MBNAAmerica. He has 32 years of management experience in thefinancial services industry and was a member of the managementteam that established MBNA America in 1982. He has been adirector of MBNA America since 1986.     Gregg Bacchieri (49) is a Group Executive of MBNA America.He is responsible for U.S. Card Business Operations, whichincludes credit, loss prevention, portfolio management, andCustomer satisfaction and Customer marketing. He is a member ofthe MasterCard International Operations Committee. He has more
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than 26 years of management experience in retail lendingand was a member of the management team that established MBNAAmerica in 1982.     Randall J. Black (48) is the Chief Accounting Officer andAssistant Treasurer of the Corporation and MBNA America. He isalso a Senior Executive Vice President of MBNA America. He isthe Controller for MBNA America and is responsible for all ofthe Corporation’s financial reporting, accounting policy,financial operations, and corporate taxes. He has over20 years of experience in the financial services industryand has been with the Corporation for 13 years.     Douglas R. Denton (58) is a Vice Chairman of theCorporation and MBNA America. He also serves as Chief TechnologyOfficer of MBNA America. He is responsible for data processing,payment processing, statement rendering, card production andnetwork services. His 36 year career has included a broadrange of experience within the financial services industry andhe has been with the Corporation for 15 years.     Louis J. Freeh (55) is a Vice Chairman and General Counselfor the Corporation and MBNA America. He is responsible forlegal matters and government affairs. He also serves as theEthics Officer. Prior to joining the Corporation in 2001, heserved as director of the FBI for eight years, as a federaljudge and as a federal prosecutor.     Charles C. Krulak (63) is a Vice Chairman of theCorporation and MBNA America. He is responsible for corporatedevelopment and acquisitions, personnel, compensation andbenefits, and education and career development. He previouslyserved as Chief Executive Officer of MBNA Europe. Before joiningthe Corporation in 1999, General Krulak had a 35 yearcareer in the U.S. Marine Corps, including serving fouryears as Commandant.     John W. Scheflen (58) is a Vice Chairman of MBNA America.He also serves as Secretary of the Corporation and MBNA America.He is responsible for corporate governance, compliance,information security, operational risk management, and portfoliorisk management. He assisted with the legal aspects of theCorporation’s initial public offering in 1991. He has30 years experience in law and has been with theCorporation for 13 years.     Richard K. Struthers (49) is a Vice Chairman of theCorporation and MBNA America. He is also a director and servesas Chief Loan Officer of MBNA America, as well as Chairman ofMBNA Europe and MBNA Canada. In addition, he is a director andserves as Chairman and Chief Executive Officer of MBNA Delaware.He is responsible for international operations, consumerfinance, business lending, and MBNA America’s AmericanExpress credit card program. He has 27 years of experiencein consumer lending and was a member of the management team thatestablished MBNA America in 1982.     Kenneth A. Vecchione (50) is a Vice Chairman and ChiefFinancial Officer of the Corporation and MBNA America. He hasbeen a director of MBNA America since January 2005 and alsoserves as Chief Financial Officer of MBNA Delaware. He isresponsible for accounting, corporate and strategic planning,treasury and financial operations, business analysis (includingM&A analysis), financial planning, and investor relations.He previously served as Chief Financial Officer at AT&TUniversal Card Services, First Data Corporation’sElectronic Funds Management business, and Citicorp’s CreditCard business. He has 28 years experience in the financialservices industry and he has been with the Corporation for7 years.     Lance L. Weaver (50) is a Vice Chairman of the Corporationand MBNA America. He is also a director of MBNA America. He isresponsible for MBNA America’s U.S. credit cardbusiness, including business development, marketing, sales,Customer satisfaction, U.S. regional operations, credit,Customer assistance and fraud. He is a board member and formerchairman of MasterCard International Inc. He has 30 yearsof experience in consumer lending and administration and hasbeen with the Corporation for 14 years. He has been adirector of MBNA America since 1993.
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**PART II****ITEM 5.****MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED    STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES**     “Common Stock Price Range and Dividends” onpage 120 and “Dividend Limitations” onpage 56 of the 2004 Annual Report to Stockholders areincorporated herein by reference. “Securities Authorizedfor Issuance Under Equity Compensation Plans” onpage 23 of the Definitive Proxy Statement is incorporatedherein by reference.**Issuer Purchases Of Equity Securities****Summary of Stock Repurchases**