Shawmut Agrees To Cap Dividends

Shawmut National Corp. entered into an agreement with the Federal Reserve Bank of Boston that constrains the bank's abilities to pay dividends.

Analysts said the lid should not have a big effect on merger negotiations between Shawmut and Bank of Boston, a deal that would create New England's largest bank if consummated.

The regulatory agreement requires Shawmut to receive Fed approval for intercompany transactions, payment of dividends, and capital plans. It strengthens a memorandum of understanding (a less stringent form of regulatory control) that was imposed on the bank by the Fed in July 1990.

Shawmut also signed regulatory agreements last year with the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp.

Analysts dismissed the new Fed action as a minor tightening of controls. The Fed last month similarly tightened agreements it had negotiated with Bank of Boston Corp.

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