The vote was 6-0 by the central bank's board of governors, who determined the merger of the nation's eighth-largest bank with Germany's largest would not threaten banking competition in this country. New York-based Bankers Trust concentrates on banking for big corporations and does no business with consumers.

The merger, proposed last November, would create a financial powerhouse with $830 billion in assets.

The acquisition of Bankers Trust is the biggest takeover of a US financial institution by a foreign bank. The institution would be larger than UBS AG of Switzerland, currently the largest bank, and the recently formed Citigroup Inc.

The Fed's approval was the latest in a series of big hurdles cleared by the merger recently. Earlier this month, under pressure from the US State Department, New YorkCity Comptroller Alan Hevesi withdrew his opposition to the deal, acknowledging that the two banks had made progress in resolving Holocaust claims.

Holocaust survivors and heirs have been seeking restitution for millions of dollars in Jewish property and financial holdings stolen by the Nazis in the World War II era and hidden in various European banks. A State Department official had warned that opposition to the merger on political grounds could chill the U.S. economy. In the resolution of another matter, Bankers Trust agreed in March to pay $63.5 million in fines to settle federal prosecutors' charges that it boosted its financial performance by unlawfully diverting millions of dollars from unclaimed customer accounts into its own coffers.

The plea entered in a federal court brought a speedy resolution to accusations that the bank made false entries in its books to conceal the true source of $19.1 million its employees diverted.