Mumbai: Morgan Stanley, the No 2 US investment bank, is weighing options for merger with a commercial bank, according to CNBC, even as the Financial Times said the global financial services major would rather remain independent despite the current market turbulence.

Morgan Stanley and its peer Goldman Sachs believe they have the financial strength to survive as stand-alone investment banks and are not interested in pairing with a commercial bank, the FT report said.   

''In the wake of the collapse of Lehman Brothers and the sale of Merrill Lynch to Bank of America at the weekend, the two Wall Street firms maintained that they could survive as independents without linking up with a commercial bank to gain access to broader sources of funding,'' the report said.   

The CNBC report said the Morgan Stanley officials were not in merger talks as of late Tuesday, adding, that senior Morgan officials have conceded that further volatility in the company's stock price could force the company to change course.

Morgan Stanley is working with a group of global commercial and investment banks that included Bank of America, Barclays, Citibank, Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan, Merrill Lynch, and UBS, to  help enhance liquidity and mitigate the unprecedented volatility in global equity and debt markets. 

Morgan Stanley shares ended 10.8 per cent down at $28.70 on Tuesday, having fallen 46 per cent so far this year.

The banks plan to assist markets in maximising liquidity through their mutual commitment to their ongoing trading relationships, dealer credit terms and capital committed to markets.

Morgan Stanley also plans to establish a collateralised borrowing facility, with nine other banks - Bank of America, Barclays, Citibank, Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan, Merrill Lynch and UBS - who have committed to fund for $7 billion each ($70 billion in total).  The facility will be available to these participating institutions for liquidity up to a maximum of one third of the facility for any one bank. It is anticipated that the size of the facility may increase as other banks are permitted to join the facility.

The banks would help facilitate an orderly resolution of OTC derivatives exposures between Lehman Brothers and its counterparties. 

Reports that Morgan Stanley is considering a merger with a commercial bank comes amidst market fears whether Morgan Stanley or Goldman Sachs is a safe bet.

Goldman Sachs maintained that it was not interested in merging with a commercial bank, even as it reported a 70 per cent fall in third-quarter profits, its highest decline in quarterly earnings since it went public in 1999.   

Goldman Sachs Group Inc saw its quarterly net income down at $845 million - its worst performance since 2005 and a 70 per cent decline from the three months ended August 2007. (See: Goldman Sachs profits plunge 70 per cent)

Morgan Stanley was comparatively better off with a 7.7 per cent year-on-year fall in its net income to $1.4 billion.   

Most US banks said they are committed to continuing to work closely with one another as well as the US Treasury Department, the Federal Reserve, the Securities and Exchange Commission and the government, considering the current market situation.