The new group will provide settlement services for markets representing 60% of the Eurotop 300, 52% of the domestic fixed income securities outstanding in Europe, and 62% of Eurobonds held by common depositories.

Euroclear and CrestCo together settled over 120 million transactions (net) with a value of over £140 trillion in 2001. They held over £6.6 trillion of assets in custody at the end of 2001.

Alongside the merger, CrestCo and Euroclear have published a new business model for European settlement which lays the basis for the creation of an integrated European capital market offering cross-border settlement at the cost of domestic transactions.

The move was warmly elcomed by Clara Furse, chief executive of the London Stock Exchange: "This deal is very good news for our customers. In bringing together two user-owned, user-governed 'horizontal' settlement organisations to create Europe's largest settlement organisation, Euroclear and CrestCo will be able to further reduce the cost of settlement and, by extension, the cost of capital."

The combined entity expects to deliver, by early 2005, a Single Settlement Engine allowing customers to work with a single securities account for all securities serviced by the new group. From 2008, the plan is for customers to be able to access all group securities through one securities account, with one interface, one payment relationship and a choice of service levels and tariffs.

It is anticipated that users will be able to subscribe to either a domestic package or "Full Service" offering providing a single point of access to group and international securities from 27 markets. The reduction in cross-border settlement fees will be 90 percent over time, says Euroclear, which is also forecasting substantial savings in back office technology costs for mutual customers.

Sir Nigel Wicks, chairman of CrestCo, says: "This merger gives customers what they have been asking for: settlement consolidation while preserving customer choice and open access to services...This is a giant step towards the delivery of an integrated European capital market."

In a clear dig at the so-called horizontal model for European settlement advocated by rival Clearstream and parent company Deutsche Borse, Chris Tupker, chairman of Euroclear and Euroclear Bank, adds: "Our conviction that the settlement function must remain user governed and not controlled by stock exchanges remains as strong as ever."

Under the terms of the merger, CrestCo shareholders will receive 30.15 Euroclear ordinary shares for each CrestCo share held, representing in aggregate 19 per cent of the fully diluted equity share capital of Euroclear following completion of the merger.

CrestCo users will receive shortly after completion of the transaction an aggregate rebate of income of £13 million in relation to their usage of the CrestCo system by reference to the year ended 31 December 2001.

Chris Tupker will remain as chairman of Euroclear and Euroclear Bank and Sir Nigel Wicks will become deputy chairman of Euroclear and Euroclear Bank. Wicks will also chair the business model implementation committee.

Pierre Francotte will remain as chief executive officer of Euroclear Bank. Hugh Simpson will continue as chief executive of CrestCo and will become an executive director of the board of Euroclear Bank and a member of the management committee of the board of Euroclear Bank.

CrestCo will continue to trade as CrestCo Limited and the Crest brand and services will continue in the UK at least until the launch of the Single Settlement Engine in early 2005.

The merger will not result in any increase in charges or tariffs to any Euroclear Group or CrestCo customer, state the companies.