The Federal Reserve announced Tuesday that it has approved Bank of Montreal's application to acquire Marshall & Ilsley Corp. of Milwaukee, clearing the way for the deal to close July 31.

Bank of Montreal of Toronto announced in December that it would buy the M&I for $4.1 billion and would merge the $50 billion-asset bank with its U.S. subsidiary, Chicago-based Harris Bank.

The deal would create the 22nd-largest bank in the U.S., with roughly $126 billion of assets and $70 billion of deposits. M&I shareholders approved the merger last month.

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