Increased competition has prompted US banks to merge

The move will create the third-biggest lender in the US with almost $1 trillion of assets and 5,600 branches.

Earlier this week, the two companies agreed to pay $675m to settle a scandal over improper stock trading practices.

The US market has seen a raft of mergers in recent months, with other lenders including JP Morgan Chase and Bank One preparing to join forces.

Close relationship

The newly-formed Bank of America and Fleetboston group will stretch from New England to California and control just under 10% of the country's total deposits.

The view that big is better didn't receive universal acceptance, however, with some shareholders complaining that local markets may not receive the attention they deserve.

Bank of America chief executive Kenneth Lewis was more optimistic, saying that he hopes to build a "broad, deep relationship with customers."