The Bank of New York will pay $16.5 billion to acquire Pittsburgh’s Mellon Financial Corp., creating the largest securities servicing firm and corporate trustee in the world, both firms said today.

The deal—BoNY’s second this year, following its April agreement to swap its consumer banking business for JPMorgan Chase’s corporate trust business—creates a giant which will compete for hedge funds’ securities lending, servicing and trusteeship business. The new firm, which will be based in New York, has been dubbed Bank of New York Mellon Corp., and boasts some $16.6 trillion in assets under custody, $8 trillion in assets under trusteeship and $1.1 trillion across its various asset management branches, including hedge funds and the Dreyfus mutual funds.

BoNY Chairman and CEO Thomas Renyi will head the new firm as executive chairman for 18 months following the close, and will be succeeded by Mellon Chairman and CEO Robert Kelly, who will serve as CEO of BoNY-Mellon under Renyi. BoNY President Gerald Hassell will be president of the combined entity.

The merger comes eight years after—and $6.5 billion under—BoNY’s rejected 1998 bid for Mellon. The transaction, which has been approved by both boards, is expected to close in the third quarter of next year.