securities processing business will thin rapidly during the next few years, according to a Salomon Brothers report published last week. The report, by Salomon bank analyst Diane Glossman, said the recent spate of bank mergers has spurred corporations to reexamine their relationships with financial institutions that provide various securities handling services, such as master trust, master custody, and global custody. "Users of these services are increasingly flocking to companies with a demonstrated commitment to these businesses," Ms. Glossman said in the report. Signs of such commitment are "ongoing investment in technology and service capability, relative importance of these business lines as a percentage of corporate total, health of the organization, and the likelihood of a merger that could alter the long-term commitment," she said. The flurry of bank mergers - highlighted by the Chemical Bank-Chase Manhattan deal announced earlier this year - has spurred corporate trust clients to determine whether current business relationships will suffice, Ms. Glossman said. "At these points, users tend to revisit the market to assure themselves of the correctness of their original choice" in view of the expectation of disruptions after a merger takes place, she noted. As a result of such reexaminations, $800 billion in U.S. tax-exempt assets - or about 20% of the entire market - have switched banks during the past two years, Ms. Glossman said. Even more ominous for regional banks is the fact the largest securities processors are garnering most of these migrating assets. Citing a recent survey conducted by Pensions & Investments magazine, Ms. Glossman said 90% of the $328 billion in master trust and master custody assets that switched banks in the year that ended June 30 were moved to the 10 largest banks in the business. The No. 1 trust and custody servicer, State Street Bank, led the way in winning new business, garnering more than $84 billion in assets in the 12 months, according to the survey. Following State Street was Bank of New York, winning $71 billion in assets, and Bankers Trust, with $55.5 billion in assets taken from competitors.

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