Bank of America acknowledged Friday that 29 of its biggest institutional trust accounts have been moved to a Boston bank after B of A's failure to develop a new computer system for its own trust business.
The disclosure followed news Monday that B of A was transferring more than 95% of its institutional trust accounts to Seattle-First National Bank. The two banks are units of San Francisco's BankAmerica, the nation's third-largest bank holding company.
The two moves mean that Bank of America, once the leading trust bank on the West Coast, will no longer be doing data processing for the trust accounts of corporations, unions and government agencies. However, the bank said it will retain a staff in California to administer the accounts at the Seattle affiliate.
The abandonment of data processing for trust accounts, one of the most complex tasks in banking, came after B of A's failure to develop an advanced computer system for the job. The bank said it spent $60 million last year trying to repair the $20-million system before abandoning it.
The 29 accounts given to State Street Bank & Trust of Boston, a leading trust administrator, represent the most complex and high-volume accounts among the more than 700 trust account clients of B of A. The business was deemed too difficult for the computer system used at the Seattle bank.
Bank of America's statement on the transaction did not say whether the accounts were sold or given to the Boston bank and neither bank would comment on the financial arrangements. However, sources familiar with the deal said State Street Bank did not pay B of A for the accounts.
5 Years of Development
B of A spent five years developing a new accounting and reporting service for the $38 billion worth of assets belonging to its institutional trust customers. After the system was put into use last March, it was plagued by computer crashes and other problems that meant months of delays in issuing account statements, angering some customers.
"Originally, we hoped these difficulties could be overcome in a reasonable amount of time and that we could provide our customers with the level and quality of service they deserve," said a bank statement issued Friday. "However, continuing operational problems have made it clear that we must transfer all institutional accounts to another trust accounting system."