Merrill Lynch & Co. has chartered a federal savings bank to streamline the marketing of its burgeoning trust business.

The New York-based investment house received approval last week from the Office of Thrift Supervision to establish a thrift, Merrill Lynch Trust Co. FSB, in Somerset, N.J.

The thrift charter will allow Merrill Lynch Trust Cos., a 10-year-old division managing $48 billion of assets, to solicit business nationwide.

"The federal savings bank charter simplifies the expansion of the business," said James R. Wiggins, a Merrill Lynch spokesman. Currently, the unit has been selling trust services in eight states through separate state-chartered trust companies. The firm will continue to manage trusts under its existing charters in California, Florida, Illinois, Michigan, New Jersey, New York, North Carolina, and Texas.

"Rather than go through this 42 more times, with a thrift charter Merrill can do business nationwide," said John Downey, OTS executive director of supervision.

Thrifts are becoming the vehicle of choice for trust operations of brokerage firms, which otherwise would have to get charters in each state in which they want to administer trusts.

Merrill will not be the first brokerage to market trust administration through a thrift. Dean Witter Trust FSB, Jersey City, was created when the brokerage acquired a failing California thrift last year. Advest Group Inc., a Hartford, Conn.-based regional brokerage, obtained a thrift charter this spring.

Those moves came after a June 1996 opinion by OTS chief counsel Carolyn Buck. "A federally chartered thrift institution may market and advertise its trust services in any state even if state law prohibits such activities by out-of-state fiduciary entities," the interpretive letter stated.

Marketing activities covered by that opinion included mail and telephone solicitations, information seminars, and personal visits to describe trust services. "It gives you parity with institutions in the different states," said Michael W. Herlihy, president of Advest Bank and Trust Co.

OTS granted the thrift charter only after Merrill Lynch agreed to recapitalize Metro Savings Bank, Orlando, a troubled minority-owned institution with $13 million of assets.

A 1987 law bars companies like Merrill Lynch from chartering a thrift unless the company is bailing out a troubled institution. By acquiring some of Metro's assets and liabilities, Merrill Lynch qualified for that exemption, Mr. Downey explained. u

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.