Trustee and servicer operations are under new management at JPMorgan Treasury & Securities Services (TSS) and it appears so is the unit's image as a business line, thanks to the spotlight thrown on it by the July 1 merger completion date with Bank One Corp.

The former CFO of Banc One, Heidi Miller, replaced Don Layton as head of JPMorgan's Treasury & Securities Services, the largest trustee for U.S. bond issuers and the third-largest asset custodian with $7.6 trillion of assets. Though the $58 billion merger garnered all the headlines, JPMorgan had actually purchased Banc One's trust platform for $720 million prior to the coupling, in October 2003.

"People, in general, are much more sensitive to the role the trustee plays and, perhaps, are slightly more attentive...to what they're doing and how they do it," said Miller of doing business in today's climate. "We've really firmed up in light of what I think is a changed environment related to trust risk," she said.

Integrating trustee and servicer operations from Banc One produced fewer conflicts than initially envisioned. But taking over the reins has meant more than just reconciling different infrastructures or expanding business. Miller enters a highly charged climate in the ABS market, where the role of the trustee has been challenged, quite openly at industry conferences, due to instances of lax trustee transaction oversight that opened the door to fraudulent behavior.

"Historically, perhaps, at traditional trust businesses, people thought there were only instructions on a page and they followed instructions on that page and everything's OK," Miller explained. "We now all appreciate that it's not just if you follow the instructions, it's actually your insight and the value [added] that you may create."

In Miller's mind, the job a trustee is hired to do includes capturing fraud, doing due diligence on original issuance and creating greater security and support. "In our organization, we have spent a lot of time reviewing all our processes around the underwriting standards, who we take on, the compliance around whether we're doing our job not just to the letter of the law but above and beyond, so that we bring greater intelligence to the tasks at hand," she said.

Noting that its business lines are ripe for expansion, and denying rumors that it is seeking to exit the processing business, Miller stated the merger has helped to highlight the trustee and servicing platform as a core franchise. "Treasury and securities [is viewed as] extremely central to the future of the organization, [which is] expecting to see these units grow, not only as a core franchise, but because of its financial profile," she said. TSS is expected to do its part in growing revenues at the newly merged banking entity, Miller explained.

While Banc One ran a noteworthy servicing platform prior to the sale, Miller acknowledged the business was a "small-scale player" in a unit that needed a technology investment. The sale provided that upgrade, and prior to the merger of the two units' platforms, due

diligence was performed to prevent any conflicts of interest from emerging before transactions landed on the books.

"We looked through every name and [went] back to the issuers to make sure the transfer was accepted and OK in the due diligence," Miller explained. "Where JPMorgan is precluded it will remain precluded conflicts didn't change because of the merger," she noted.

Copyright 2004 Thomson Media Inc. All Rights Reserved.

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