Capital One 2007 Annual Report Download - page 29

7
Compliance Risk Management
Compliance risk is the risk of non-conformance to laws, rulings, regulations and applicable supervisory guidance. Generally,
compliance risk occurs when there are errors or omissions in the companys operating processes. Our business area executives are
responsible for allocating sufficient resources to ensure the development and maintenance of compliant operating processes. The Chief
Compliance Officer is responsible for ensuring that systems, processes, and personnel are in place to provide reasonable assurance we
are in substantive compliance on a day to day basis. This includes measuring compliance risk and working with business areas to
prevent or mitigate possible compliance issues, errors, or violations. Compliance results and trends are discussed in a variety of
management forums such as the Risk Management Committee and its Compliance sub-committee.
Technology / Systems
We leverage information technology to achieve our business objectives and to develop and deliver products and services that satisfy
our customers needs. A key part of our strategic focus is the development of efficient, flexible computer and operational systems to
support complex marketing and account management strategies and the development of new and diversified products. Our
commitment to managing risk and ensuring effective controls is built into all of our strategies. We believe that the continued
development and integration of these systems is an important part of our efforts to reduce costs, improve quality and provide faster,
more flexible technology services. Consequently, we continuously review capabilities and develop or obtain systems, processes and
competencies to meet our unique business requirements.
As part of our continuous efforts to review and improve our technologies, we may either develop such capabilities internally or rely on
third party outsourcers who have the ability to deliver technology that is of higher quality, lower cost, or both. Over time, we have
increasingly relied on third party outsourcers to help us deliver systems and operational infrastructure. Consistent with this approach,
in August 2005 Capital One and Total System Services Inc. (TSYS) finalized a five year definitive agreement for TSYS to provide
processing services for Capital Ones North American portfolio of consumer and small business credit card accounts. The subsequent
transition of the North American portfolio to the TSYS platform was completed in 2007. Work is now underway to migrate our United
Kingdom credit card portfolio to the European version of the TSYS processing platform during the first quarter of 2008. We believe
that, over time, our transfer to this new technology platform will allow us to achieve cost savings, increase speed to market, expand
product and service flexibility, and enhance our ability to innovate while reducing operational risk.
Planning is complete for North Fork Banks integration into Capital Ones existing technology infrastructure, and we expect to
complete the conversion of the majority of North Forks systems in 2008.
Funding and Liquidity
A discussion of our funding programs and liquidity has been included in Item 7 Managements Discussion and Analysis of Financial
Condition and Results of OperationsFunding.
Competition
As a marketer of credit card, consumer and commercial financial products and services, we face intense competition in all aspects of
our business from numerous bank and non-bank providers of financial services. In addition, our industry has experienced substantial
consolidation and may continue to do so; such consolidated and/or larger competitors may have a more diversified product and
customer base, operational efficiencies and more versatile technology platforms than we do.
We compete with international, national, regional and local issuers of Visa® and MasterCard® credit cards, as well as with American
Express®, Discover Card® and, to a certain extent, debit cards. In general, customers are attracted to credit card issuers largely on the
basis of price, credit limit and other product features, and customer loyalty is often limited.
We compete with national and state banks for deposits, commercial loans and trust accounts and with savings and loan associations
and credit unions for loans and deposits. We also compete with other financial services providers for loans, deposits, investments,
insurance and other services and products. In addition, we compete against non-depository institutions that are able to offer products
and services that were typically banking products and services. Finally, we compete against other lending institutions in our healthcare
financing business.
In motor vehicle finance, we face competition from banks and non-bank lenders who provide financing for dealer-originated loans.
We also face competition from a small, but growing number of online automobile finance providers.
We believe that we are able to compete effectively in both our current and new markets. There can be no assurance, however, that our
ability to market products and services successfully or to obtain adequate returns on our products and services will not be impacted by
the nature of the competition that now exists or may later develop. For a discussion of the risks related to our competitive
environment, please refer to Risk FactorsWe Face Intense Competition in All of Our Markets.