ABSTRACT

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

%ULJDGHRIWKHVW,QIDQWU\'LYLVLRQ7KLV%ULJDGHZDVWKHQG$UPRUHG'LYLVLRQ )RUZDUGEULJDGHIURP*HUPDQ\*HQHUDO%URZQ¶VWDQNHUVIDFHGVHYHUDOWRXJK PLVVLRQVEUHDFKLQJILJKWLQJSDVVDJHRIOLQHVORQJUDQJHDGYDQFHPHQWVWKURXJK HQHP\VHFWRUVDQGPXOWLSOHVKDUHGREMHFWLYHV7KHVHFKDOOHQJHVGHPDQGHGQHDU SHUIHFWLRQ DW DOO OHYHOV 6RPHWLPHV DV WKH DXWKRU SRLQWV RXW WKLV ZDV DQ XQDWWDLQDEOHJRDOGHVSLWHWKHVXSHULRUWUDLQLQJDQGWHFKQRORJ\RIWKH86IRUFHV %XWLQWKHHQGWKHVW,QIDQWU\'LYLVLRQDFFRPSOLVKHGLWVPLVVLRQDQGPRUH 7KURXJKVQDSVKRWVRIDFWLRQDQGLQVLJKW*HQHUDO%URZQRIIHUVDQDQDO\VLVRI

NH\ FKDUDFWHU WUDLWV DQG WKH UHOHYDQFH RI WKRVH WUDLWV WR PRGHUQ FRPEDW RSHUDWLRQV 7KH WUXH YDOXH RI WUDLWV VXFKDV GLVFLSOLQH DWWHQWLRQ WR GHWDLO DQG WUXWKIXOQHVV JLYHV $PHULFDQPLOLWDU\ OHDGHUVKLS WKH YLWDO HGJH ,Q WKH HQG WKH DXWKRU VKRZV FKDUDFWHUPDWWHUVDQGQRWRQO\DW WKH LQGLYLGXDO OHYHO*HQHUDO %URZQ¶V H[SHULHQFHDOVR VKRZV WKDWZKHQ WKHVH WUDLWV EHFRPHSDUW RI D XQLW¶V FKDUDFWHU WKH\ EHFRPH WUHPHQGRXV FRPEDW PXOWLSOLHUV /HDGHUV RI FKDUDFWHU

EXLOGXQLWVRIFKDUDFWHU$QGDVZHVHHLQWKLVDFFRXQWRIVPDOOXQLWZDUIDUHLQ WKH*XOI:DUXQLWVRIFKDUDFWHUZLQEDWWOHV

$WKRXUVRQ)HEUXDU\ WKHEULJDGHVL]HGQG$UPRUHG'LYLVLRQ )RUZDUGDWWDFKHGWRWKHVW0HFKDQL]HG,QIDQWU\µ%LJ5HG2QH¶SXOOHGRQOLQH DIWHUDIRUZDUGSDVVDJHWKURXJKWKH9,,&RUS¶VQG$UPRUHG&DYDOU\5HJLPHQW 7KHFDYDOU\PHQDUUD\HGDORQJWKHHDVWLQJZHVWRI.XZDLWSDVVHGLQWHOOLJHQFH WKDW WKH EDWWOHILHOG ZDV FOHDU IRU NLORPHWHUV IRUZDUG 7KH\ ZHUH SUHFLVHO\ FRUUHFW$WWKHHDVWLQJWKHEULJDGH¶VOHDGLQJ0$WDQNVUROOHGLQWRDILHUFH H[FKDQJHZLWKGXJLQ,UDTLWDQNVDQGLQIDQWU\7KHEORRGLHVWVLQJOHHQJDJHPHQW RIWKH*XOI:DUWKHEDWWOHIRUDPDSRYHUOD\JRRVHHJJFRGHQDPHGµ1RUIRON¶ ZDVRQ 7KHSDWFKRIWUDFNOHVVGHVHUWEHLQJFRQWHVWHGPD\KDYHKDGDQDPHRWKHUWKDQ

1RUIRONLILWGLGWKH$PHULFDQVILJKWLQJIRULWGLGQ¶WNQRZLW7KHQG$UPRUHG 'LYLVLRQ)RUZDUG¶VDWWDFNZDVEXWDVPDOOIUDFWLRQRIWKHJLJDQWLFWDQNEDWWOHLQ ZKLFK9,,&RUSV FUXVKHG ,UDT¶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±DQGZRPHQ±WRGR

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

IDFLQJ DQ DQWLFLSDWHG DWWDFNXS WKH:DGL DO%DWLQ YHKLFOH UHYHWPHQWV RULHQWHG ƒPDJQHWLF)RUW\RQHGD\VRIDHULDOERPEDUGPHQWKDGOLWWHUHGWKHEDWWOHILHOG ZLWK ZUHFNHG HTXLSPHQW 1HYHUWKHOHVV SOXV VXUYLYLQJ WDQNV DQG VHYHUDO GR]HQSHUVRQQHOFDUULHUV±IRU WKHPRVWSDUWIURPWKHWK%ULJDGHRI WKH,UDTL WK$UPRUHG'LYLVLRQ±ZHUHKLGGHQLQWKHQG$UPRUHG'LYLVLRQ)RUZDUG¶V VHFWRUDPRQJPRUHWKDQGHVWUR\HGYHKLFOHVDQGSLHFHVRIRWKHUW\SHVPRVWO\ WUXFNVDQGDUWLOOHU\ 7KH$PHULFDQVDWWDFNHGDWQLJKWGXHHDVWRXWRIWKHGHVHUW 7KHDWWDFNLQJEULJDGH UROOHG LQD WLJKWO\RUJDQL]HGPDVVZLWK WDVN IRUFHV WKUHH DEUHDVWDQGDWRWDORIHLJKWFRPSDQLHVLQWKHILUVWZDYHIURQWDJHVRIPHWHUV

SHU FRPSDQ\ PHWHUV SHU WDQN:LWKLQ FRPSDQLHV YHKLFOHV ZHUH DFWXDOO\ PHWHUVDSDUWZLWKVHYHUDOWLPHVWKDWGLVWDQFHVHSDUDWLQJFRPSDQLHVDQGRYHUD NLORPHWHUEHWZHHQWDVNIRUFHV0%UDGOH\VFRXWVZRUNHGWKHLQWHUYDOVEHWZHHQ WKHWDVNIRUFHV 7KH ILUVW H[FKDQJHV ZHUH HDV\ $PHULFDQ ZLQV 7KH ,UDTLV KDG QR WKHUPDO

VLJKWVFRXOGQRWVHHWKURXJKWKHGDUNQHVVDQGZHUHIDFLQJWKHZURQJZD\6RPH ,UDTL WDQNV FRXOG QRW DGHTXDWHO\ WUDYHUVH EHFDXVH RI VSRLO WXUQHGXS HDUWK ±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¶VIHOO LQWRWDQNGLWFKHVRUWKURXJKWKHURRIVRI,UDTLEXQNHUV0RVWFUHZVVHOIUHFRYHUHG EXWDIHZKDGWREHUHVFXHGE\LQWUHSLG0$0HGLXP5HFRYHU\9HKLFOHV7KH 0$FUHZVKDGWRUXVKIRUZDUGWRILQGWKHVWULFNHQYHKLFOHLQWKHFRQIXVLRQ DQGGDUNQHVVDQGKDGWRFRQGXFWDPDMRUSRUWLRQRIWKHLUZRUNGLVPRXQWHGDPLG WKHWKUHDWRIPLQHVDQGLQFRPLQJILUH 7KHPRVW GDQJHURXV DVSHFW RI WKH REVWDFOHV DQG UHFRYHU\ HIIRUWV DVVRFLDWHG

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

GHIHQVHV D GHVSHUDWH ILJKW HUXSWHG LQ WKHLU UHDU )LYH 7 WDQNV DQG VRPH DVVRFLDWHG,UDTL LQIDQWU\ZLWK$7*0VLQDGYHUWHQWO\PLVVHGLQWKHGDUNQHVVE\ WKH0$VURVHEHKLQGWKHPDQGRSHQHGILUHRQDWUDLOLQJ0%UDGOH\FRPSDQ\ :H ZLOO H[DPLQH WKLV HQJDJHPHQW LQ VRPH GHWDLO ODWHU 7KH ILHUFH H[FKDQJH GHVWUR\HGWKH,UDTLVEXWOHIWIRXU$PHULFDQVGHDGHLJKWHHQZRXQGHGDQGWKUHH

0VGLVDEOHG0HDQZKLOHWKHOHDGLQJWDQNVVZHSWRQWKURXJKWKHVHFRQGEHOWRI ,UDTLGHIHQVHV+HUHWKH\HQFRXQWHUHGIHZHUREVWDFOHVSRRUO\GXJSRVLWLRQVDQG OHVV LQIDQWU\ 7KH ,UDTL JXQQHUV PLVVHG PRVW RI WKH WLPH DQG KLW ZLWKRXW SHQHWUDWLQJ WKH UHVW RI WKH WLPH 7KH $PHULFDQV QHYHU PLVVHG DQG DOZD\V SHQHWUDWHG,QOLWWOHPRUHWLPHWKDQLWZRXOGKDYHWDNHQWRVLPSO\GULYHWKURXJK ZLWKRXWILJKWLQJWKH0$VZHUHRQWKHLUZD\WRWKHWKLUGEHOW ,Q WKH WKLUG EHOW WKH$PHULFDQ WDQNHUV IRXQG WKHPVHOYHV LQ WKHPLGVW RI DQ

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±WKDWILJXUHFDQQHYHUEHFHUWDLQ:HGRNQRZ WKH $PHULFDQ ORVVHV VL[ GHDG DQG WZHQW\ILYH ZRXQGHG ,Q UHWURVSHFW PDQ\ $PHULFDQVFRQFOXGHGWKDWWKHORSVLGHGFDVXDOWLHVLQGLFDWHGDILJKWWKDWKDGEHHQ HDV\,WZDVQRW7KHVXSHULRULWLHV$PHULFDQVROGLHUVGHPRQVWUDWHGZLWKUHVSHFW WR GLVFLSOLQH WHDPZRUN DQG WUDLQLQJ UDGLFDOO\ EURDGHQHG DPDUJLQ RI WDFWLFDO DGYDQWDJHWKDWZDVQRWDVJUHDWLQLWLDOO\DVPRVWPLJKWWKLQN $WWHQWLRQ WR GHWDLO LV D WUDLW PRVW PLOLWDU\ HVWDEOLVKPHQWV SULGH WKHPVHOYHV

XSRQ DQG $PHULFDQ PLOLWDU\ OHDGHUV KDYH H[WHQGHG WKDW FKDUDFWHULVWLF LQWR D SUHVFULSWLYH IUDFWLRQ RI LWV WUDLQLQJ V\VWHP WKDW GHILQHV WDVNV FRQGLWLRQV DQG VWDQGDUGV IRU LQGLYLGXDOV DQG XQLWV DW HYHU\ OHYHO 7KH$PHULFDQ SHQFKDQW IRU VXFKµFKHFNOLVWWUDLQLQJ¶HPHUJHGIURPWKHXQPLOLWDU\FKDUDFWHURIWKH$PHULFDQ SHRSOH*LYHQWLQ\SHDFHWLPHPLOLWDU\HVWDEOLVKPHQWVZDUVSULRUWREURXJKW SDUR[\VPV RI H[SDQVLRQ WKDW FRXOG KDYH EHHQ LPSHUYLRXV WR RUGHU $PHULFDQ

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¶VQRWHERRNFDSWXUHVWKHFRPSOH[LW\LQYROYHGFRQWDFWSRLQWVSDVVDJH ODQHV UHOHDVH SRLQWV IULHQGO\ LGHQWLILFDWLRQ FKDOOHQJH DQG UHVSRQVH WUDLQ ORFDWLRQVDQGFULWLFDOLQWHOOLJHQFH7KLVFRRUGLQDWLRQRFFXUUHGRYHUWKHUDGLRIURP WKH WXUUHWV RI PRYLQJ YHKLFOHV XQGHU EODFNRXW FRQGLWLRQV 1HYHUWKHOHVV FRPPDQGHUVZKRKDGQHYHUPHW±KRPHVWDWLRQHGDVIDUDSDUWDV%DYDULD/RZHU 6D[RQ\ DQG )RUW 5LOH\ .DQVDV ± IORZHG WKURXJK HDFK RWKHU ZLWK D VPRRWK YLUWXRVLW\7KH\PD\QRWKDYHNQRZQHDFKRWKHUEXWWKH\NQHZWKHPLVVLRQDQG WKH\NQHZWKHGHWDLOHGFRRUGLQDWLRQQHFHVVDU\WRFDUU\LWRXW $WDQHQWLUHO\GLIIHUHQWOHYHOWDQNJXQQHU\SURYLGHG\HWDQRWKHUH[DPSOHRI

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

'R]HQV RI ,UDTL WDQNV GHVWUR\HGZLWK D VLQJOH URXQG UHYHDOHG QHDWO\ GHILQHG PPHQWU\SRLQWVFHQWHUHGRQWKHWXUUHWULQJ9HKLFOHVWKDWZHUHH[SRVHGPHUH LQFKHVDERYHWKHLUUHYHWPHQWVZHUHDQQLKLODWHGDWWKHVDPHSDFHDVPRUHKRUULEO\

H[SRVHGEUHWKUHQDWWHPSWLQJWRVKLIWSRVLWLRQVRUHVFDSH86$5(85JXQQHUVKDG WUDLQHG WR WKH VWDQGDUG RI EULQJLQJ GRZQ LQGLYLGXDO (W\SH VLOKRXHWWHV DW PHWHUVZLWKWKHLUPP0FRD[PDFKLQHJXQV,UDTL$7*0JXQQHUV DQG LQIDQWU\PHQ VOXPSHG EDFN LQWR RSHQ IR[KROHV SUHFLVHO\ GULOOHG WKURXJK KHOPHWVDQGXSSHUWRUVRV:KDWHYHURQHPD\IHHODERXWWKHKXPDQFRQVHTXHQFHV RQHPXVWDFNQRZOHGJHWKHWHFKQLFDOVNLOOGHPRQVWUDWHGE\$PHULFDQJXQQHU\ %\ WKLV DXWKRU¶V FRXQW1RUIRON UHTXLUHG WKH WUDQVODWLRQ WR WKHEDWWOHILHOGRI

QLQHWHHQ EDWWDOLRQ $UP\ 7UDLQLQJ DQG (YDOXDWLRQ 3URJUDP $57(3 WDVNV WZHQW\WKUHH FRPSDQ\ $57(3 WDVNV WZHQW\QLQH SODWRRQ $57(3 WDVNV DQG HDFKRIWKH7DQN7DEOH9,,,DQG7DQN7DEOH;,,HQJDJHPHQWVOHVV1%&1XFOHDU %LRORJLFDO&KHPLFDO+RZRQHWUDLQVLVKRZRQHILJKWV7KHEULJDGHKDGWUDLQHG KDUGLWIRXJKWZHOO 7KH JUHDWHVW GDQJHU LQ FKHFNOLVW WUDLQLQJ DQG LWV FRPPLWPHQW WR GULOOHG

UHVSRQVHV DSSHDUV ZKHQ XQDQWLFLSDWHG ± DV RSSRVHG WR DQWLFLSDWHG ± FLUFXPVWDQFHVHPHUJH1RRQHFDQIRUHVHHDOOWKDWZLOOGHYHORSLQEDWWOH$VQHDU DILWDVQG$UPRUHG'LYLVLRQ)RUZDUG¶VWUDLQLQJZDVWRWKHEDWWOHLWDFWXDOO\ IRXJKW WKHUH ZHUH VXUSULVHV $ SHQFKDQW IRU DWWHQWLRQ WR GHWDLO FDQ EHFRPH D VWUDLWMDFNHW LI LW LV QRW ZHGGHG WR WKH IOH[LELOLW\ QHFHVVDU\ WR GHDO ZLWK WKH XQH[SHFWHG $Q H[DPSOH RI WKH IOH[LELOLW\ UHTXLUHG LQZDU HPHUJHG IURP FRQWUDGLFWLRQV

LQKHUHQWLQWKHSXUSRVHVWKHEULJDGH¶VDWWDFNZDVWRVHUYH,WKDGRUGHUVWRFOHDU LWVVHFWRU\HWLWDOVRZDVHQMRLQHGWRVXVWDLQDUDSLGSDFHRIDGYDQFHWRIDFLOLWDWH WKHH[SHGLHQWGHVWUXFWLRQRIWKH,UDTL$UP\%RWKZHUHOHJLWLPDWHSULRULWLHVWKH ILUVW VDQLWL]HV WHUUDLQ IRU WKHVXEVHTXHQWSDVVDJHRIYXOQHUDEOH ORJLVWLFDODVVHWV WKH VHFRQG DFFHOHUDWHV WKH FROODSVH RI DQ DOUHDG\ GLVRUGHUHG RSSRQHQW 8QIRUWXQDWHO\WKHWZRFRQFHSWV±FHUWDLQO\LQVRIDUDVWKH\KDGEHHQH[HUFLVHGLQ WUDLQLQJ±KDYHDQWLWKHWLFDOFKDUDFWHULVWLFV&OHDUDQFHLVSDLQVWDNLQJO\PHWKRGLFDO VHDUFKDQGGHVWUXFWLRQLQYROYLQJFRQVLGHUDEOHGLVPRXQWHGDFWLYLW\7KHSDFHRI WKH DGYDQFH WKDW VHQLRU FRPPDQGHUV VRXJKW WR VXVWDLQ RQ WKH RWKHU KDQG KDG DOUHDG\ EHHQ NLORPHWHUV LQ D GD\ 1R RQH ZDV ZURQJ LQ GLFWDWLQJ ERWK SULRULWLHV)ROORZRQORJLVWLFVKDGWRSXVKIRUZDUGTXLFNO\ WKHSUHVVXUHRQ WKH ,UDTLV KDG WR EH VXVWDLQHG DQG WKHUH ZDV LQVXIILFLHQW µUDPS VWUHQJWK¶ ± GLVPRXQWHG LQIDQWU\PHQ ± LQ DQ 0 %UDGOH\ EDWWDOLRQ WR OHDYH LQIDQWU\ PHWKRGLFDOO\ FOHDULQJ1RUIRONZKLOH RWKHU EDWWOHV UHPDLQHG WR EH IRXJKW 7KLV ZRUOG LV DQ LPSHUIHFW SODFH 7KH PRVW IHDVLEOH GXDOSXUSRVH VROXWLRQ ZDV DGRSWHG HLJKW FRPSDQLHV¶ZRUWK RI DUPRUHG YHKLFOHV FDPH RQ OLQH DQG UROOHG WKURXJKWKHVHFWRULQVXFKDPDQQHUWKDWQRSRLQWZDVPRUHWKDQPHWHUVIURP WKHSDWKRI DQ DUPRUHGYHKLFOH LQ WKH ILUVWZDYH$ VHFRQGHFKHORQRI FRPEDW YHKLFOHV FRYHUHG PXFK WKH VDPH JURXQG EHIRUH FRPEDW VXSSRUW DQG FRPEDW VHUYLFHVXSSRUWYHKLFOHVDWWHPSWHG WKHFURVVLQJ9HKLFOHVHQFRXQWHUHGHQ URXWH ZHUHGHVWUR\HGDQGSULVRQHUVRIZDUGLVDUPHGDQGGLUHFWHGWRPDUFKWRWKHUHDU XQHVFRUWHG EXW LQ FROXPQ DQG IXOO\ HUHFW 7KHPDWUL[ RI RQFRPLQJ $PHULFDQ YHKLFOHVDOORIZKLFKZHUHLQFRPPXQLFDWLRQZLWKHDFKRWKHUZDVGHQVHHQRXJK

WKDW VXFK D FROXPQ RI GLVPRXQWHG ,UDTLV FRXOG EH NHSW XQGHU FRQWLQXRXV REVHUYDWLRQ XQWLO WKH\ ILQDOO\ UHDFKHG WKH WUDLQV DQGZHUH ORDGHG LQWR D FDUJR +HDY\ ([SDQGHG 0RELOLW\ 7DFWLFDO 7UXFN +(077 RU WUDLOHU DQG PRYHG WR WKHUHDU 7KLV LPSURYLVHG FOHDUDQFH WHFKQLTXHZRUNHG UHDVRQDEO\ZHOOZLWKRXWPXFK

LQKLELWLQJWKHSDFHRIDGYDQFH+RZHYHUVHYHUDOGR]HQ,UDTLLQIDQWU\DQGILYH7 V UHPDLQHG TXLHWO\ KLGGHQ LQ GHHS UHYHWPHQWVZLWK WKHLU HQJLQHV RII 7KHVH ZHUHLQYLVLEOHWRWKHWKHUPDOVLJKWVRIWKH0$VWKDWPRYHGSDVWWKHPGXULQJ WKHKRXUVRIGDUNQHVV 7KHFLUFXPVWDQFHRI7VWRWKHUHDURIWKHDGYDQFHZDVIXUWKHUFRPSOLFDWHG

E\WKHIRUZDUGPRYHPHQWRIFRPEDWWUDLQV±WKHVPDOOFRQWLQJHQWRIIXHOWUXFNV FDUJRWUXFNVPHFKDQLFVDQGPHGLFVWXFNHGLQVLGHDEDWWDOLRQWDVNIRUFHHQJDJHG LQ D SURORQJHG DGYDQFH 'RFWULQH LV FOHDU WKHVH VXSSOLHV DQG VHUYLFHV DUH VR FULWLFDO WKDW WKH\ FDQQRW EH DOORZHG WR GLVDSSHDU UHDUZDUGV RI WKRXVDQGV RI FRPEDW DQG FRPEDW VXSSRUW YHKLFOHV FKXUQLQJ DORQJ LQ WKH ZDNH WKH OHDGLQJ WDQNV$VDUXOHRIWKXPEWKHFRPEDWWUDLQVDFFRPSDQ\WKHWDVNIRUFH±JHQHUDOO\ LQVLGHLWVDUPRUHGHQYHORSH±LQDGYDQFHVRINLORPHWHUVRUPRUH,QWUDLQLQJ IHZWDVNIRUFHVHQFRXQWHUFLUFXPVWDQFHVZKHUHLQWKH\DFWXDOO\PRYHWKHLUFRPEDW WUDLQVZLWKWKHP(YHQDWWKHVSDFLRXV)RUW,UZLQ1DWLRQDO7UDLQLQJ&HQWHUWDVN IRUFHVJHQHUDOO\FRPSOHWHWKHLUPLVVLRQVWKHQEULQJFRPEDWWUDLQVIRUZDUGZKHQ FRQVROLGDWLQJRQDQREMHFWLYHRUUHDOLJQLQJWKHLUGHIHQVHV7KHVXVWDLQHGFKDUJH LQWR,UDTSHUPLWWHGQRVXFKQHDWSDXVHVFRPEDWWUDLQVUROOHGZLWKWKHWDQNV7KH ZRUNLQJPHFKDQLFVRIPDQHXYHULQJ UHODWLYHO\XQZLHOG\FROOHFWLRQVRI WUXFNV± IHZRIZKLFKKDGUDGLRV±DQGWKLQVNLQQHGYHKLFOHVRQWKHEDWWOHILHOGKDGEHHQ UHKHDUVHGEXWZHUHLQFRPSOHWHO\UHVROYHG,QWKHEULJDGH¶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± LH VROLGPHWDO±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

PDFKLQHJXQ,UDTLVZKRZHUHDOUHDG\GHDG7KHPXOWLSOLFDWLRQRIUHSRUWVRIVXFK µKRW¶ WDUJHWV LQHYLWDEO\ FRPSOLFDWHG WKH WDVNV RI RIILFHUV DQG KHDGTXDUWHUV DWWHPSWLQJ WRPDQDJH WKHEDWWOH:KHQ1RUIRON WXUQHG LQWRDƒEDWWOH VXFK WDUJHWLGHQWLILFDWLRQSUREOHPVEHFDPHHYHQPRUHDFXWH $Q RYHUDOO WUDLQLQJ DVVHVVPHQW PXVW FKDUDFWHUL]H WKH $PHULFDQV DWWDFNLQJ

1RUIRON DV VXSHUEO\ SUHSDUHG IRU WKH PLVVLRQ WKH\ XQGHUWRRN 7KH\ H[HFXWHG GR]HQVRIWDVNVYHU\ZHOODQGPDQ\IODZOHVVO\,QDIXOOQLJKW±HLJKWFRQWLQXRXV KRXUV ± RI ILHUFH ILJKWLQJ RQO\ D IHZ FLUFXPVWDQFHV HYDGHG HDV\ PDVWHU\ UHFRQFLOLQJWKHGHWDLOVRIFOHDUDQFHZLWKWKHQHHGIRUVSHHGVPDOOSRFNHWVRI,UDTL WDQNVDQGLQIDQWU\OHIWLQWKHUHDUDQGGLIILFXOW\GLVWLQJXLVKLQJWKHILULQJIURPWKH KLWDQGWKHOLYLQJIURPWKHGHDG ,IDQ\VLQJOHFKDUDFWHULVWLFPRVWLPSUHVVHGWKH$PHULFDQSXEOLFZLWKUHVSHFW

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¶VPRVW IRUPLGDEOHKHOLFRSWHUVDQG IDVWHVW DQGPRVW OHWKDO WDQNVSUHFLVH\HWTXLFNDQG RYHUZKHOPLQJDUWLOOHU\DFDSDEOHIOHHWRIFRPEDWHQJLQHHUYHKLFOHVVRSKLVWLFDWHG DLU GHIHQVHV DEOH WR GHVWUR\ QRW RQO\ SODQHV EXW DOVR PLVVLOHV FRPSXWHU IDFLOLWDWHG FRPPXQLFDWLRQV DQG UHSHDWHGO\ GHPRQVWUDWHG ZRUOGZLGH ORJLVWLFDO FDSDELOLWLHV7KH$PHULFDQ$UP\DQGLWVDOOLHVKDGSUHSDUHGWRGHIHDWWKHPLJKW RIWKH6RYLHW$UP\WKH\ZHUHDFWXDOO\FDOOHGXSRQWRILJKWVRPHWKLQJOHVV &ROG:DUGROODUVSURYHGWRKDYHEHHQZHOOVSHQW$VQG$UPRUHG'LYLVLRQ

)RUZDUGUDFHGWRZDUG1RUIRONIURPLWVEUHDFKLQWKH,UDTLERUGHUGHIHQVHVLW ZLWQHVVHGWKHGHYDVWDWLRQZURXJKWE\IRXUWHHQEDWWDOLRQVRIDUWLOOHU\RQDVLQJOH GLYLVLRQ¶VIURQW+LJKWHFKLQWHOOLJHQFHKDGSURGXFHGGHWDLOHGVHFWRUSKRWRJUDSKV GHSLFWLQJ LQGLYLGXDO YHKLFOHV IR[KROHV DQG ILJKWLQJ SRVLWLRQV 7KHVH ZHUH H[SORLWHG E\$PHULFDQ DUWLOOHU\PHQZLWK KRUULILF HIIHFW 7KH EUHDFK LWVHOIZDV HQWLUHO\PHFKDQL]HGQRWDVLQJOH$PHULFDQVROGLHUH[SRVHGKLPVHOIRXWVLGHRIWKH UROOHU DQG SORZEHDULQJ 0$ WDQNV DUPRUHG HQJLQHHU YHKLFOHV RU RYHU ZDWFKLQJ0%UDGOH\LQIDQWU\ILJKWLQJYHKLFOHVFDUU\LQJLWRXW7KHGHYDVWDWHG ZDNHRI KXQGUHGVRI DLU VWULNHV OLWWHUHG WKHEULJDGH¶V URXWH WR1RUIRON6XSHUE FRPEDW VHUYLFH VXSSRUW EURXJKW YLUWXDOO\ HYHU\ FRPEDW YHKLFOH RQWR WKDW EDWWOHILHOGIXOO\PLVVLRQFDSDEOHDQGUHGXQGDQWFRPPXQLFDWLRQV OLQNHGWKHOHDG WDQNVWKURXJKQHWZRUNVRIFRPPDQGWR5L\DGKDQGEH\RQG7KHDSRWKHRVLVRIWKH $PHULFDQ ZD\ RI ZDU RQ 1RUIRON LWVHOI ZDV WKH DZHVRPH 0$ WDQN ,UDTL PXQLWLRQV LQ DOO FDOLEHUV ULFRFKHWHG KDUPOHVVO\ RII LWV KLJKWHFK LQWHJUDWHG &KREKDPDUPRUHGIURQWVORSHV0$FUHZVGLGQRWHYHQNQRZWKH\KDGEHHQ KLWE\URXQGVDVIRUPLGDEOHDVWKHPPVDERW:HKDYHDOUHDG\GLVFXVVHGWKH

LQFUHGLEOHSUHFLVLRQDQGOHWKDOLW\±GD\RUQLJKW±RIWKH0$¶VPPFDQQRQ DQG PP0PDFKLQHJXQ ,WV KRUVHSRZHU WXUELQH DQG 7 OLYH ZLGH WUDFN EXOOHG WKURXJK REVWDFOHV QR RWKHU YHKLFOH LQ WKHZRUOG FRXOG KDYH WUDYHUVHG 7KH0$ZDV DPHWDSKRU IRU WKHPDWHULDO VXSUHPDF\ RI$PHULFD WKDWQLJKW 1R VROGLHUV DQGKRSHIXOO\ IHZFLYLOLDQVKDYH WKH LPSUHVVLRQ WKDW DOO RI WKLV

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

FRXQWHUSDUW:KDWHYHUWKH$PHULFDQSHRSOHPD\IHHODERXWRIILFHUVDQGWKHXSSHU OHYHOVRIWKHPLOLWDU\KLHUDUFK\DWDQ\DJLYHQWLPHWKH\KDYHDOZD\VVHHQWKHLU 1&2VDVZRUNLQJFODVVKHURHV±PHQQRWRI WKHSULYLOHJHGFODVVHV±ZKRKDYH DGYDQFHGWKURXJKWKHVFKRRORIKDUGNQRFNV,QWKH$PHULFDQWUDGLWLRQWKHVHPHQ FRPELQHH[SHULHQFHDQGSHUVRQDOOHDGHUVKLSZLWKDNHHQWHFKQLFDOPDVWHU\RIWKH HTXLSPHQW LQ XVH LQ WKHLU XQLW 7KH LPDJH RI µ2OG %LOO¶ WKH LGHDO 1&2 KDV UHPDLQHGXQFKDQJHGVLQFHWKHQLQHWHHQWKFHQWXU\DOWKRXJKKDVW\PRELOL]DWLRQV DQG FRQWUDFWLRQV LQ IDFW FUHDWHG D TXDOLWDWLYH UROOHUFRDVWHU IURP WKURXJK 6LQFH9LHWQDPKRZHYHU1&2SURIHVVLRQDOLVPKDVEHHQDFRQVLVWHQW$UP\

SULRULW\ FHQWUDOL]HG PHULW SURPRWLRQV UHVWULFWLYH UHWHQWLRQ SROLFLHV IRUPDO VFKRROLQJ DW HYHU\ OHYHO WKURXJK &RPPDQG 6HUJHDQW 0DMRU VRSKLVWLFDWHG WHFKQLFDO WUDLQLQJDQGDKLJKO\VWUXFWXUHG UDWLQJV\VWHP ,QDQHUDRI WHFKQLFDO DGYDQFH1&2VVWLOOPDVWHUVROGLHUVDQGHTXLSPHQWDOLNH2Q1RUIRONWKLVSURYHG WREHDIDLWKZHOOSODFHG 6RPHIUDFWLRQRI1&2SHUIRUPDQFHRQ1RUIRONZDVVWUDLJKWIRUZDUGKHURLVP

LQ WKH ROG VW\OH :H KDYH PHQWLRQHG WZR ,UDTL WDQNV WKDW URVH LQWR SRVLWLRQ LPPHGLDWHO\ EHKLQG WKH FRPEDW WUDLQV RI WKH FHQWHU WDVN IRUFH 7KH\ DSSHDUHG ZLWKLQPHWHUVRIWKH&RPPDQG6HUJHDQW0DMRU&60RIWKDWWDVNIRUFHZKR KDGJRQHEDFNZLWKWKUHHGULYHUVDUPHGZLWK0VWRIOXVKZKDWWKH\WKRXJKWZDV D VLQJOH VQLSHU 7KH &60 KDG VHHQ JUHHQ WUDFHUV ± RXUV DUH UHG ±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

SDLQVWDNLQJO\ GHYHORSHG JXQQHU\ VNLOOV *XQQHU\ ± SUHSDUDWRU\ PDLQWHQDQFH ERUHVLJKWLQJ VLPXODWLRQV GULOOV DQG WKH WDQN WDEOHV WKHPVHOYHV ± LV 1&2 EXVLQHVV *XQQHUV DUH EXFN VHUJHDQWV DQG PRVW WDQN FRPPDQGHUV DUH VHQLRU 1&2V 7KH EDWWDOLRQ PDVWHU JXQQHU ± DQ 1&2 FKDUJHG WR IDFLOLWDWH JXQQHU\ WUDLQLQJ± LVDUHYHUHGILJXUHDW WKHSLQQDFOHRI WHFKQLFDOSURILFLHQF\:HKDYH DOUHDG\ GHVFULEHG WKH H[WUDRUGLQDU\ PDUNVPDQVKLS GHPRQVWUDWHG RQ 1RUIRON 7DQNFRPPDQGHUVPDGHOLJKWQLQJIDVWGHFLVLRQVLQDGYHUVHFLUFXPVWDQFHV2QH 0 VFRXW SODWRRQ VHUJHDQW WHOOV RI ULGLQJ WKH LQWHUYDO EHWZHHQ WZR WDVN IRUFHV ZKHQ D7 MHUNHGRXW RI D QHDUE\SLW DQGKDGKLP LQ LWV VLJKWV %HIRUH WKH 7PDGHLWVILQDOOD\WZR$PHULFDQ0VDERWURXQGVZKLVWOHGSDVWRQHRYHU WKHSODWRRQVHUJHDQW¶VIURQWVORSHDQGRQHSDVWKLVUHDUUDPS7KH7EXUVWLQWR IODPHVDQGWKHVHUJHDQWFRQWLQXHGKLVPLVVLRQDOWRJHWKHUVHUYLFHDEOHH[FHSWIRU KLVGUDZHUV :HPHQWLRQHG HOHYHQ WDQNV IDOOHQ LQWR WDQNGLWFKHVRU WKURXJK WKH URRIV RI

,UDTL EXQNHUV (LJKW RI WKHVH VHOIUHFRYHUHG 7KH W\SLFDO µVWLFN¶ SURJUHVVHG DV IROORZV7KHFUHZUHFRJQL]HGWKH\KDGKLWDGLWFKZKHQWKHKXOOMHUNHGWRDGL]]\ DQJOH DQG WKUHZ WKHP DFURVV WKH WXUUHW 7KH DFFRPSDQ\LQJ ZLQJPDQ WDQN UHFRJQL]LQJWKDW WKHWDQNFRPPDQGHUZRXOGVRRQH[SRVHKLPVHOI VDQLWL]HGWKH YLFLQLW\RIWKHVWULFNHQWDQNZLWKPDFKLQHJXQILUH7KHWDQNFRPPDQGHUFOLPEHG WKURXJKKLVKDWFKDQGFODPEHUHGDORQJWKHIHQGHURIKLVWDQNWRDYRLGPLQHVOLNHO\ WREH LQ WKHERWWRPRI WKHGLWFK:KHQKH VKLQHGKLV UHG OHQV IODVKOLJKW GRZQ

DORQJ WKH WUDFNVKHVDZVRPHYDULDWLRQRQVWXFNYHKLFOHFLUFXPVWDQFHVKHKDG HQFRXQWHUHGGR]HQVRIWLPHVEHIRUH,QDOOFDVHVRQ1RUIRONWKHVWXUG\7WUDFN KDGKHOGWRJHWKHUEXWWKHWDQNLWVHOIDQJOHGGLDJRQDOO\QRVHGRZQLQWRWKHGLWFK ZLWKRXWWUDFWLRQRQRQHWUDFNRUWKHRWKHU:LWKDYLUWXRVLW\JDLQHGRQO\WKURXJK \HDUV RI H[SHULHQFH WKH 1&2 VKRXWHG LQVWUXFWLRQV WR WKH GULYHU ZKR EDFNHG DGYDQFHGRUQHXWUDOVWHHUHGWKHWRQEXONWKURXJKLQFUHPHQWDOVKLIWVLQFKLQJ LWVQRVHWRZDUGDULJKWDQJOHZLWKWKHIDUVLGHRIWKHGLWFK$OOWKHZKLOHWKHORDGHU LQQLJKWYLVLRQJRJJOHVPDQQHGKLVPDFKLQHJXQDERYHWKHWXUUHWLIWKHUHFRYHU\ ODVWHGPRUHWKDQDIHZPLQXWHVPHFKDQLFVDUULYHGDQGDVVLVWHGZLWKUHFRYHU\DQG VHFXULW\ZKLOHWKHZLQJPDQWDQNFDXJKWXSZLWKWKHEDWWDOLRQIRUPDWLRQ:KHQ WKHWDQNFRPPDQGHUKDGWDONHGKLPLQWRDFKLHYLQJSXUFKDVHZLWKERWKWUDFNVDQG DSHUSHQGLFXODUDWWDFNDQJOHLQWRWKHIDUVLGHRIWKHGLWFKWKHGULYHUVODPPHGWKH KRUVHSRZHU HQJLQH LQWR IXOO WKURWWOH 7KH PLJKW\ 0$ YLUWXDOO\ OHDSW IRUZDUG ULSSLQJ RII WKH GLWFK¶V IDU OLS ZLWK LWV VQRXW WHHWHULQJ GL]]LO\ IRU DQ LQVWDQWRQWKHIDUVLGHDQGHDVLQJGRZQRQWRLWVVKRFNDEVRUEHUV±UHDG\WRUROO :KDWRIWKHWKUHHWDQNVWKDWFRXOGQRWVHOIUHFRYHU"$QH[DPSOHLVWKH0$

WKDWFUDVKHGWKURXJKWKHURRIRIDQ,UDTLEXQNHUFROODSVLQJLQWRDQH[FDYDWLRQWKDW DOPRVWSUHFLVHO\ ILW WKHGLPHQVLRQVRI WKH WDQN7KHZLQJPDQ WKRXJKW WRDVVLVW ZLWKDWRZEXWDQRWKHU,UDTLEXQNHUZDVDOLJQHGZLWKWKHILUVWLQVXFKDPDQQHU WKDWWKHZLQJPDQZRXOGKDYHFROODSVHGWKURXJKLWLQKLVDSSURDFK7KH0$ PHGLXPUHFRYHU\YHKLFOHFDOOHGIRUZDUGIURPLWVSRVLWLRQPHWHUVEHKLQGWKH OHDGLQJWDQNVVRRQDUULYHG7KDWYHKLFOH¶VFRPPDQGHUMRFNH\HGDURXQGWRFUHDWH PLQHVDIH IRRWSDWKVZLWKKLVYHKLFOH WUDFNV DQG WKHQJRWRXWRQ WKHJURXQG WR H[DPLQH WKHVWLFN2XWFDPHWKHPDLQFDEOHPDQKDQGOHG WKURXJKDKDOIGR]HQ YHKLFOHOHQJWKVRIWRUWXUHGJURXQGDQGWKHQIRUFHGRQWRWKH0$¶VWRZIL[WXUH ZKLFKWKHWDQNFUHZKDGDOUHDG\KDVWLO\H[SRVHGLQDIUHQ]\RIGLJJLQJ'RZQ ZHQWWKH0$¶VEODGHDQGXSZHQWLWVIURQWVORSHSHUFKLQJWKHJUHDWGUXPRI LWVPDLQZLQFKLQWKHPRVWDGYDQWDJHRXVSRVLWLRQ$IHZTXLFNLQVWUXFWLRQVWRWKH WDQNFRPPDQGHUDQGDFDUHIXOO\FKRUHRJUDSKHGVHTXHQFHEHJDQWKHFDEOHSXOOHG WDXWWKHZLQFKLQFKHGWKHUHDURIWKHWDQNWRZDUGWKHOLSRIWKHGLWFKDWSUHFLVHO\ WKHULJKWSRLQWRISXUFKDVHWKH0$DVVLVWHG±EXWQRWWRRIDVWRULWZRXOGKDYH SLWFKHG LQWR WKH VHFRQGEXQNHU ±ZLWK LWV WUDFNV DV WKH0$ WHHWHUHGRQ WKH VDGGOHEHWZHHQWKHEXQNHUVWKHZLQFKTXLFNO\OHWRXWWKHFDEOHWKHWDQNVSXQLQWR DQLQHW\GHJUHHQHXWUDOVWHHUDQGWKHWDQNSLWFKHGFOHDURIERWKH[FDYDWLRQVHYHQ DVWKHVDGGOHEHWZHHQWKHPFROODSVHGXQGHUWKHYLROHQFHRIWKHPDQHXYHU7KH UHFRYHU\ZRXOGKDYHEHHQDFUHGLWWRWKH5HFRYHU\0260LOLWDU\2FFXSDWLRQDO 6SHFLDOW\LQDQ\FLUFXPVWDQFHVLWZDVSKHQRPHQDOZKHQH[HFXWHGXQGHUILUHLQ WKHGDUN 7KH FDWDORJ RI 1&2 FRQWULEXWLRQV RQ 1RUIRON ZDV XQFRXQWDEOH 3RVWZDU

GHEULHILQJVHVWDEOLVKHGWKDWYLUWXDOO\HYHU\1&2GLGVRPHDPD]LQJWKLQJWRNHHS WKHJUHDWPDVVRIDUPRUEHHWOLQJIRUZDUGWKURXJKWKHLQIHUQR7KRVHZLWKWKHUPDO VLJKWV JXLGHG WKRVH ZLWKRXW WKHP WKURXJK WKH PLQHILHOGV 'R]HQV RI KDVW\ PDLQWHQDQFHVDYHV±VRPHE\PHFKDQLFVDQGPRVWQRW±EURXJKWHYHU\FRPEDW

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¶V SHUVRQDO FDU WKH OHDG GULYHU ZDV DQ1&2 ,W LQ QRZD\ GLPLQLVKHV WKH FRQWULEXWLRQRIRIILFHUVDQGSULYDWHVROGLHUV WRDVVHUW WKDW WKHFKDUDFWHULVWLF WKDW PRVWGLVWLQJXLVKHVXVIURPRXUSRWHQWLDODGYHUVDULHVLVWKHFDOLEHURIRXU1&2V 1R DUP\ H[FHHGV DQG IHZ DSSUR[LPDWH WKH FRPELQDWLRQ RI H[SHULHQFH OHDGHUVKLSDQGWHFKQLFDONQRZOHGJHUHSUHVHQWHGE\SD\JUDGHV(WKURXJK( 7KH EDWWOHILHOG LV D FRPSOH[ DQG FRQIXVLQJ SODFH $Q LQFUHGLEOH QXPEHU RI PLQLDWXUH±EXWOLIHWKUHDWHQLQJ±FULVHVHUXSWVLPXOWDQHRXVO\6PDOOFOXVWHUVRI PHQPXVWDFFRPSOLVKH[WUDRUGLQDU\WKLQJVZLWKQRQRWLFHOLWWOHKHOSDQGXQGHU DGYHUVHFLUFXPVWDQFHV%XOOLQJDFURVV1RUIRONZDVDQDUGXRXVWDVNIRUDOOSDUWLHV LQYROYHG,WZRXOGQRWKDYHVXFFHHGHGLIWKHRQO\WDFWLFDOFLUFXPVWDQFHVUHVROYHG KDGEHHQWKRVHRIZKLFKFRPPDQGHUVZHUHDZDUH :KDW RI WKH WUXWK" $UP\ RIILFHUV ZRXOG PXFK UDWKHU EH FKDUDFWHUL]HG DV

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

GHIHQVHVWKHOHDGLQJ0$VSDVVHGE\ILYH,UDTL7VZLWKLQIDQWU\VXSSRUWLQ WZRSRVLWLRQV%\DFFLGHQWRUGHVLJQWKHVHWDQNVKLGGHQLQUHYHWPHQWVZLWKWKHLU HQJLQHVRIIZHUHLQYLVLEOHWKURXJKWKHUPDOVLJKWVHYHQWKRXJK$PHULFDQWDQNV SDVVHG ZLWKLQ PHWHUV RI WKHP :KHQ WKH WUDLOLQJ WDQN FRPSDQ\ DQG WKH FRPEDW WUDLQVRI WKHFHQWUDO WDVNIRUFHKDGSDVVHG WKH7VURVHIURPKLGH WR ILULQJ SRVLWLRQV 7KH ULJKW WDVN IRUFH¶V OHIW WUDLOLQJ %UDGOH\ FRPSDQ\ZDV MXVW SXOOLQJ LQWR IRUPDWLRQ IURP WKHSDVVDJH ODQHV7KLVFRPSDQ\RULHQWHGQRUWK LQ FROXPQUDWKHU WKDQHDVWRQ OLQHEHFDXVH LWVFRPPDQGHUKDGEHHQ IRUFHG LQWRD FLUFXLWRXV URXWH+LV RZQ0%UDGOH\ZLWK*OREDO3RVLWLRQLQJ6\VWHP *36 DERDUGKDGEHFRPHGLVDEOHGGXULQJWKHSDVVDJHRI OLQHV+HULJKWO\MXPSHGWR

DQRWKHUYHKLFOHDOEHLWQHFHVVDULO\WRRQHZLWKRXW*36WRFRQWLQXHLQWKHOHDGRI KLVFRPSDQ\+HTXLFNO\JRWKLVEHDULQJVIURPWKHFRPSDQ\FRPPDQGHUWRKLV ULJKWZKRKDGDZRUNLQJ*36DQGWXUQHGQRUWKWRDVVXPHKLVDVVLJQHGSRVLWLRQ 7KLVFDUULHGKLPIRUZDUGLQWKHGLUHFWLRQDJDLQVWZKLFK,UDTLGHIHQVHVKDGEHHQ RUJDQL]HGZKHQKLVOHDGLQJSODWRRQFDPHLQWRWKHLOOXPLQDWLRQFDVWE\EXUQLQJ YHKLFOHVWKHVXUYLYLQJ,UDTLVRSHQHGILUHIURPWKUHHVLGHV 7KHLQLWLDO,UDTLYROOH\PLVVHGZLWKWZRWDQNURXQGVDQGWZR$7*0VDQGKLW

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¶VJXQWXEHDQGLWVKXOOSUHYHQWLQJWKHJXQWXEHIURP WUDYHUVLQJWRWDNHDLP7KHSODWRRQVHUJHDQWWKHQOHDSHGIURPKLVYHKLFOHRQWRWKH WDQNSXWWLQJDJUHQDGHGRZQLWVKDWFKWRGHVWUR\LW7KH0$WDQNHUVILUHGRQ WKH %UDGOH\V KLW WZR GLUHFWO\ DQG RQH E\ ULFRFKHW DQG NLOOHG RQHPDQZKLOH ZRXQGLQJVRPHIUDFWLRQRIWKHHLJKWHHQ$PHULFDQVLQMXUHGLQWKHDPEXVK,W LV LPSRUWDQWWRQRWHWKDWWKH0$JXQQHUVµVDZ¶HYHU\YHKLFOHDVD7,WPD\ QRWKDYHEHHQZKDWZDVDFWXDOO\WKHUHEXWLWLVZKDWWKH\VDZ7KH0$FRXOG HQJDJHDQGGHVWUR\WDUJHWVLQWKHGDUNDWUDQJHVFRQVLGHUDEO\JUHDWHUWKDQWKRVH DWZKLFKLWVJXQQHUVFRXOGDGHTXDWHO\LGHQWLI\WKHP:HKDYHDOUHDG\GLVFXVVHG WKHJXQQHUV¶UHODWLYH ODFNRIH[SHULHQFHZLWK WKHDFWXDO WKHUPDO LPDJHU\RI WKH EDWWOHILHOG 7KH FLUFXPVWDQFHV DVNHG D ORW RI IDWLJXHG \RXQJ JXQQHUV ILJKWLQJ GHVSHUDWHO\ WKURXJK D MXQN\DUG LQ WKH GDUN DJDLQVW 7V WKDW FRXOG SXW \HW DQRWKHUURXQGHYHU\WHQVHFRQGVLQWRWKLQVNLQQHGYHKLFOHVRULQWRWKHUHDURIRXU WDQNV $VEDGDVWKLVIUDWULFLGHZDVLWFRXOGKDYHEHHQPXFKZRUVH,QDPDWWHURI

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

FRPPDQGHU KLPVHOI UHYLHZHG WKH ILQGLQJV DQG GHWHUPLQHG WKHUH ZDV QR IDXOW LQYROYHG:LWKUHVSHFWWRIUDWULFLGHWKLVZDVQRWDOZD\VWKHFDVH 1RRQHNQRZVDWVHYHQWHHQZKDWWKH\ZLOOEHGRLQJZKHQPLGGOHDJHG0RUH

RIWHQRQH WKLQJ OHDGV WRDQRWKHURYHU WLPHDQGVHQLRURIILFHUV ILQG WKHPVHOYHV FDUU\LQJUHVSRQVLELOLWLHVWKH\FRXOGQRWKDYHLPDJLQHGLQWKHLU\RXWKV±ZLWKRXW SDUWLFXODUO\XQGHUVWDQGLQJKRZWKH\DFTXLUHG WKHP%H WKDWDV LWPD\RQHFDQ DOZD\VUHVWDVVXUHGWKDWFKDUDFWHUZLOOPDWWHU7UDLWVVXFKDVGLVFLSOLQHDWWHQWLRQ WR GHWDLO IOH[LELOLW\ WHFKQLFDO FRPSHWHQFH IDLWK SODFHG DQG LQVSLUHG LQ VXERUGLQDWHVDQGWUXWKIXOQHVVZLOOVHUYHRQHZHOOUHJDUGOHVVRIWKHSDWKOLIHWDNHV ,I DQ HQWLUH RUJDQL]DWLRQ LV LPEXHG ZLWK VXFK WUDLWV LW SURYHV WKDW PXFK WKH VWURQJHU 7KH EDWWOH IRU 1RUIRON ZLWQHVVHG VXFK DQ RUJDQL]DWLRQ DQG LW SURYHGWKHSULQFLSOH