Massachusetts Treasurer Steven Grossman says the state will save $2.7 million on certain banking services over the next five years thanks to Sovereign Bank and Bank of America.

The two banking giants came out on top of competitive bidding to take on four state banking functions: State payroll; tax and fee collection accounts; lockbox and electronic credit and debit services; and checking accounts used by state agency administrators and the state Trial Court.

The same banks hold roughly half those duties under the current contract, which hasn’t been put out to bid "in some time," Grossman told Banker & Tradesman this morning.

Currently, the state pays $2.77 million for these services each year. Under the new contracts, which are yet to be negotiated, the state will pay $1.86 million per year, Grossman said.

Although competitively bid, the winners seem to go against Grossman’s push begun early this year to send more state business toward "smaller local and regional banks."

Under Grossman’s "Move Money" program, state cash deposits under the treasury’s control were moved to small regional and local banks that committed to increasing the amount of small business lending they did.

Grossman said the bidding was open to any bank. The complexity and technology requirements of the services required by the contract may have excluded smaller banks with fewer resources, he said. Six banks bid on the contracts.

Also, bidding banks were asked to make a commitment to add jobs in Massachusetts, which both Bank of America and Sovereign did.

Still, allowing Bank of America to do business with the state doesn’t sit well with some.

In the spring, Southern Essex District Register of Deeds John O’Brien demanded Grossman move registry funds out of Bank of America accounts and to a bank that is not a member of the troubled Mortgage Electronic Registration System (MERS).

Under the new arrangement, Bank of America would manage state accounts used to "streamline the collection of tax payments and government fees, as well as electronic credit and debit services," according to Grossman.

The three other services put out to bid will be awarded to Sovereign.

O’Brien was less than enthusiastic about that.

"My problem with Bank of America is they’ve corrupted my land records and we’re still rewarding them with taxpayers’ money," he said this morning. "I would’ve excluded Bank of America from bidding in the first place."