The merger between Bank of New York (BNY) and Mellon Financial in December last year is unique, says Tim Keaney, senior executive vice-president and head of the asset servicing business at BNY. “In the past in the custody industry, consolidation happened when either a big player bought a smaller player or a strong custodian bought a weak one,” he says. “Never before have we seen two strong and growing custodians merge.”

The transaction has been unanimously approved by each company’s board of directors and is expected to be completed early in the third quarter of 2007, subject to regulatory and shareholder approvals

If the deal is given the go ahead in the summer, the resultant The Bank of New York Mellon Corporation will be the largest securities servicing and asset management firm in the world, say the two companies. It will have $16.6trn (€12.8trn) in assets under custody, $8trn in assets under trusteeship and $1.1trn in assets under management.

The merged company will have 5,500 employees in 16 countries in Europe and 25% of its revenue will be generated by non-US sources in Europe, Asia Pacific and the

The cost of the merger will be around $, pre-tax and the two banks estimate cost savings of about $700m, to be phased in over three years.

Thomas Renyi chairman and chief executive of BNY, who will be executive chairman of the merged bank says: “We are creating one of the world’s leading financial services growth companies. Both our companies focus their businesses in highly attractive sectors of the financial services industry. Together, we will be the global leader in securities servicing, and one of the top providers of asset and wealth management worldwide. Together, we will have the scale, the technology, the capital, and the people we need to compete and win in the rapidly expanding global marketplace.”

Robert Kelly, president, chairman and chief executive of Mellon, will serve as chief executive officer of the new company and will succeed Renyi as chairman of the board.

Keaney will become co-chief executive of the asset servicing business of the new company, sharing his role with Jim Palermo, the current president of Mellon Global Securities Services. Keaney says the two men will be given the flexibility to create a “best in class asset servicing company”.

Keaney says there are two main objectives on the asset servicing side: to improve customers’ experiences during and throughout the integration of the two banks, and to continue to grow the business during the integration.

An area of focus will be what to do with the joint ventures both banks have established and that have grown the banks’ business in Europe, says Keaney. These alliances include ING/BNY, AIB/ING and ABN Amro Mellon Securities Services. “These ventures have been good partnerships and our partners have become important clients in their own right,” says Keaney. “We certainly hope to be able to articulate our plan for them before the close of the transaction this summer.”

Keaney is keen to point up that in merging, the two banks will be able to broaden out their service offerings. For example, BNY has a relatively small offering on the cash management side (around $300bn in liquid cash assets that are invested on clients’ behalf in about 13 fund families).

Conversely, Mellon has a well developed range of cash management products and Keaney says BNY clients are already asking when they will be able to access some of these capabilities, such as Mellon’s wholly owned subsidiary, Dreyfus Corporation, a mutual fund that manages more than $190bn in more than 200 mutual fund portfolios throughout the US.

An area from which Mellon clients can benefit is in fixed income. “BNY’s custody business globally is fairly fixed income focused, representing more than 50% of assets under custody,” says Keaney. “We are one of the biggest clearers of US Government securities and have a strong track record in lending US Treasury securities on behalf of customers. Mellon clients would like to take advantage of our capability here, and BNY clients would like to tap into Mellon’s expertise in international equities and equities securities lending.”

Both banks have focused in recent years on the same three activities: asset servicing, asset management and private banking, says Keaney. “All three of these areas benefit from scale. There were strengths and weaknesses in both banks’ businesses. By merging we both feel we will create a stronger company that can be more competitive in these areas.”

Keaney says there is “no doubt” that further consolidation of the custody world will continue. “I believe there are other sizeable global custodians that are evaluating their options. We feel in a very strong position because we have chosen to work with each other.” The suggestion being that others in the custody world will not be so lucky.