Mr. Thomas A. Plant
Vice President, Assistant General Counsel,
    and Assistant Secretary
National City Corporation
1 Cascade Plaza
Akron, Ohio 44308

Dear Mr. Plant:

This is in response to your letter dated July 15, 1996, in which you request an interpretation of an exemption from section 106 of the Bank Holding Company Act Amendments of 1970 (12 U.S.C. § 1972) recently granted to National City Corporation, Cleveland, Ohio ("National City"). The exemption permits National City's subsidiary banks and nonbank subsidiaries to offer a "floorplan" loan at a reduced rate to an automobile dealership based on the amount of retail paper financing sold by the dealership to the subsidiary or an affiliate, or originated by the dealership on behalf of the subsidiary or an affiliate. See Huntington Bancshares, Incorporated and National City Corporation, 82 Federal Reserve Bulletin 688 (1996).

You seek confirmation that the exemption would permit National City to offer a reduced rate on loans other than floorplan loans based on the amount of retail paper financing sold to National City or originated by the dealership on behalf of National City. Specifically, National City anticipates offering a reduced rate on all loans to a dealership needed to finance the dealership's business that assist in meeting the financial needs of the dealership. You also request confirmation that "retail paper financing" includes automobile leases sold to, or originated on behalf of, National City in addition to traditional automobile loans. You indicate that the lease of an automobile is the functional equivalent of an extension of credit to the lessee, and that automobile dealerships often sell and originate leases on behalf of lenders in a manner similar to that of traditional automobile financing.

Based on the facts presented in your letter and a review of the exemption granted to National City, the modifications detailed in your letter do not raise any additional anticompetitive concerns under section 106. The Board's analysis is not altered because National City seeks to offer a different type of loan to the automobile dealership. In addition, a lease is the equivalent of an extension of credit. Therefore, it is encompassed within the meaning of retail paper financing. Accordingly, it would be consistent with the exemption for National City to offer a reduced rate on any loan to an automobile dealership based on the amount of retail paper financing--including loans and leases--sold to National City or originated by the dealership on behalf of National City. If you have any questions regarding this matter, please call Gregory Baer (202/452-3236) of my staff.

Sincerely,

(signed) J. Virgil Mattingly

J. Virgil Mattingly

cc: Federal Reserve Bank of Cleveland