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WASHINGTON - The Federal Reserve (news - web sites) on Monday approved the proposal of John Hancock Financial Services and Canada's Manulife Financial Corp. to merge and create the second-largest life insurance company in North America.

The Fed's board of governors voted to approve the merger, finding that Manulife's acquisition of Hancock in a stock swap valued at $10.4 billion when announced last September, would not threaten competition or unduly concentrate banking resources.

The merger, which has been approved by shareholders of Boston-based Hancock, still must be cleared by Massachusetts' insurance commissioner. At a public hearing before the commissioner last month, no one spoke to oppose it. The merger is expected to be completed this quarter.

Hancock, best known for its life insurance policies and the skyscrapers in Boston and Chicago that bear its name, is seeking through the merger to diversify a business that proved vulnerable during the stock market downturn.

Toronto-based Manulife, whose primary businesses are life and health insurance, is looking to reap the benefits of the well-known brand that Hancock has nurtured since its founding in 1862.

In addition, both companies would benefit from a wider distribution network through which to sell their insurance policies, annuities and mutual funds, while saving about $255 million by sharing costs such as information technology. Widespread layoffs were not expected among the combined company's approximately 21,000 workers, company officials have said.

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