Donald J. Toumey, Esquire
Sullivan & Cromwell
125 Broad Street
New York, New York 10004-2498

Dear Mr. Toumey:

This is in response to your May 3, 1996, letter in which you refer to my April 1, 1996, letter addressing the use of dual employees by NatCity Investments, Inc. ("NatCity"), a section 20 subsidiary of National City Corporation, to sell annuities on behalf of a third party insurance agent ("Agent"). When you submitted the original proposal, you indicated that NatCity was operating in office space leased from unaffiliated third parties, and did not have offices in branches of affiliated banks. You now indicate that NatCity intends to move some of its offices to the branches of affiliated banks, and you seek clarification that NatCity may continue the dual employee arrangement from offices located on bank premises. You have indicated that there is no other change to the facts discussed in my April 1 letter, and that NatCity would continue the steps it has taken to reinforce the employee relationship with Agent and to address the potential for customer confusion about NatCity's role after the NatCity offices are moved to bank premises. Those steps include disclosure that the annuities are not products of NatCity and that the Agent selling the annuities is a separate and distinct corporate entity, and that the annuities are not insured by the FDIC, are not deposits of or other obligations of affiliated banks or guaranteed by affiliated banks, and are subject to investment risk, including possible loss of principal. You have further indicated that the lease between NatCity and affiliated banks would be entered into on an arm's length basis on terms at least as favorable as those prevailing for comparable transactions with or involving other nonaffiliated companies.

Based on all the facts of record, staff would not recommend that the Board take action if NatCity continues to use the dual employee arrangement in offices located on bank premises. This opinion only addresses the specific question of whether NatCity would be considered engaged in the business of selling annuities for purposes of the Bank Holding Company Act, and does not address other issues which may arise from NatCity's presence in bank branches, including requirements that NatCity's offices be clearly distinguished from those of the bank. I understand that NatCity is discussing these issues with the Federal Reserve Bank of Cleveland and will not relocate offices in bank branches until these collateral issues are resolved.

If in the future, the terms of the lease between NatCity and Agent indicate that NatCity is engaged in the sale of annuities for purposes of the Bank Holding Company Act, the Federal Reserve System may require termination of the proposed arrangement to ensure compliance with, and to prevent evasion of, the provisions of the Act. Accordingly, you should notify Board staff promptly if there are any additional changes to the facts discussed in my April 1 letter.

Sincerely,

(signed) J. Virgil Mattingly

J. Virgil Mattingly