Merrill Lynch boss 'set to leave'

Stan O'Neal has been in the top job for five years

Speculation is intensifying that US investment bank Merrill Lynch is to part company with embattled chief executive Stan O'Neal.

US newspapers say the announcement is expected early this week after Merrill's board agreed at the weekend that Mr O'Neal needs to go.

Calls for his departure grew last week after the firm was forced to admit a $7.9bn (£3.85bn) exposure to bad debt.

Merrill Lynch has yet to comment on the reports regarding Mr O'Neal's future.

Bad investments

Merrill's $7.9bn bad debt write-off was caused by over-exposure to the downturn in the US housing market, that has centred on record loan defaults in the sub-prime mortgage sector.

The write-off contributed to the firm posting a third quarter net loss of $2.3bn, its worst financial performance since 2001.

The real power in any investment bank rests with its fee-generators and top traders, rather than with its shareholders or even its board Robert Peston BBC Business Editor Read Robert Peston's blog

Mr O'Neal admitted last week that errors had been made at the company.

"I'm not going to talk around the fact that there were some mistakes that were made," he said.

The BBC's business editor, Robert Peston said Mr O'Neal was likely to pay the price for the firm's high-risk investment strategy which saw it repackage loans to US homeowners with poor credit histories into tradable securities.

The huge losses incurred by this move would hit the annual bonuses of Merrill's top traders, he added, eroding their support for the management.

Slave background

The 56-year-old Mr O'Neal became chief executive at the end of 2002 and was elected chairman several months later.

He is the grandson of a former slave whose father moved his family from the cotton fields of Alabama to Georgia when he was young.

Mr O'Neal began his career at General Motors which saw his ability and sent him to study at its Institute, where he gained a degree in industrial administration.

He later graduated from Harvard with a degree in business administration.

As one of the best-paid and most high-profile executives in the US, Mr O'Neal will be entitled to a multi-million dollar severance package if he does step down.