In a bid to resolve a dispute over the state's deposit cap, the House of Representatives has decided to raise the limit immediately by 3 percentage points, to 28%, and to 30% by July 1998.

The House also agreed to create a commission to examine whether the cap has an adverse effect on small and medium-size institutions.

The bill is awaiting Senate passage, which is expected shortly.

The deposit cap has long been a facet of Massachusetts banking. It became an issue this year when Bank of Boston agreed to buy BayBanks Inc.

The Community Bank League of New England, which represents thrifts, opposed raising the cap for fear that it would let the state's three dominant banks - Bank of Boston, Fleet Financial Group, and Citizens Financial Group - control 90% of the market.

The group has points out that the three banks already control 56%, making the market one of the most concentrated in the nation.

Citizens Financial Group had also opposed the cap increase, saying no state market should be so concentrated.

The compromise has the support of the Massachusetts Bankers Association, the Community Bank League, and Citizens Financial.

"It's a reasonable way to address the concerns," said Kevin Kiley, executive vice president of the bankers association.

The bill is expected to be signed by the governor.

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