document: Bank of Boston Corp. 's decision to treat its Third World loans much more conservatively is expected to have significant domestic and international repercussions , bankers and analysts say . Domestically , the move reflects the competitive advantage that regional banks with large loan-loss reserves have over their big brothers in such money centers as New York , Chicago and San Francisco . Internationally , it appears that it will be even more difficult for economically troubled developing nations to attract new bank loans . U.S. banks are increasingly splitting into two groups . On one hand , there is a small group of money-center banks with comparatively thin reserves against large loans to developing countries . On the other hand is a group of regional institutions which , with relatively small exposure to developing countries , are willing to establish big reserves against such loans or , as Bank of Boston decided Monday , to completely write off some loans as uncollectible . `` It 's a parting of the ways between the money centers who are out to collect on their assets and the regionals who want to get out , '' says Lawrence Cohn , an analyst at Merrill Lynch & Co. . The Bank of Boston decision `` may well drive a wedge between the money-center banks and the regional banks , '' adds James J. McDermott , Jr. , director of research at Keefe Bruyette & Woods Inc. , a securities firm which specializes in bank stocks . `` It 's created an enormous quandary for many money-center banks , '' Mr. McDermott says . Actions such as that taken by Bank of Boston highlight a potential competitive edge that regional banks have over money-center banks . Management could use their reserve position to emphasize stength when competing for deposits and banking business against larger banks . The reserve action also could make it easier for institutions like Bank of Boston to attract investors to their stock and other securities , bank analysts said . While the large banks are eager to remain competitive with such regionals as Bank of Boston , they also want to ensure that the regionals continue to lend to heavily indebted developing nations . Earlier this year , Bank of Boston proved one of the more difficult regionals to corral into a $ 6 billion bank loan for Mexico , according to New York bankers . Now that Bank of Boston has reserved and written off most of its loans to less-developed countries , it 's likely to be much less willing to join any such new efforts . That could add to the lending burden for the biggest U.S. banks . Moreover , most of the nation 's big banks could n't afford to follow Bank of Boston 's lead without crippling their capital , and reducing their common equity-asset ratios to unacceptably low levels . For instance , if Manufacturers Hanover Corp. imitated Bank of Boston 's action , it would have to add $ 3.13 billion to reserves and would have a common assets ratio of only 0.69 % , Keefe Bruyette estimates . In order to take steps similar to Bank of Boston 's , large money-center banks would have to sell assets , shrink balance sheets and slash dividends -- and they show little sign of doing that . Yesterday , Manufacturers Hanover announced a regular quarterly dividend of 82 cents a share , offering investors a yield of more than 13 % annually . Manufacturers Hanover declined to comment on whether it might follow Bank of Boston 's action . Other large New York banks also declined to disclose their plans , although a spokeman for Chase Manhattan Corp. , said , `` We 're obviously looking at it . '' Mellon Bank Corp. said yesterday that it expects a fourth-quarter loss of about $ 220 million , and that it would increase loan-loss reserves by about $ 180 million to cover troubled foreign loans . The stocks of several major money-center banks fell sharply yesterday in New York Stock Exchange composite trading . Chase Manhattan skidded $ 2.25 to close at $ 20.125 , Manufacturers Hanover fell $ 2.375 to $ 24.25 , and J.P. Morgan & Co. was off $ 1.50 to $ 30 . Bank of Boston closed up 50 cents at $ 20.75 , while Mellon fell $ 1 to $ 26.25 . Analysts expect that other regional banks may copy the action taken by Bank of Boston . `` I would n't be surprised if some of the medium-sized regionals decided to follow , '' said Cheryl Swaim , an analyst and vice president at Oppenheimer & Co. . In Boston , there were rumors Bank of New England might announce a similar move , but a company spokesman said `` reserve levels are appropriate . '' Bank of Boston announced Monday that it was writing off $ 200 million of loans to less-developed countries and that it was placing all but a small portion of its loans to the Third World on a non-accrual basis . When a loan is placed on non-accrual , a bank only credits interest it actually receives , and does n't automatically accrue interest due . Bank of Boston also placed on non-accrual $ 470 million in loans to less-developed countries that are unrelated to trade . Along with $ 330 million in such loans previously put on non-accrual , Bank of Boston has now either charged off , or put on non-accrual , all of its $ 1 billion loans to heavily indebted developing countries . This does n't include $ 170 million in trade-related debt . While Bank of Boston 's action is the most striking to date to remove Latin exposure from its balance sheet , smaller similar actions began at other banks around mid-year . First Bank System Inc. , Minneapolis , the nation 's 15th biggest banking concern , charged off $ 25.4 million in troubled foreign loans during the third quarter . First Chicago Corp. , the 11th largest banking concern , charged off $ 48.9 million in Third World loans during the quarter . And even before the big reserves were set aside , banks were quietly charging off Latin debt , though on a smaller scale . Last March , Continental Illinois Corp. said it had charged off about half of its $ 100 million of loans to Peru . Continental would n't comment yesterday on Bank of Boston 's action . -- Jeff Bailey contributed to this article . -- The Cost to Big Banks of Following Bank of Boston -LRB- All dollar figures in millions -RRB- Bank of Boston *** TOTAL THIRD WORLD EXPOSURE ... $ 800 -LRB- As of 9/30/87 -RRB- * EXISTING THIRD WORLD RESERVE ... $ 430 -LRB- As of 9/30/87 -RRB- * ACTUAL RESERVE COVERAGE OF THIRD WORLD EXPOSURE * . . 54 % ADDITIONAL PROVISION NECESSARY TO COVER ... $ 0 54 % OF THIRD WORLD EXPOSURE * COMMON EQUITY ASSETS ... 4.77 % -LRB- As of 9/30/87 -RRB- ** COMMON EQUITY ASSETS ... 5.02 % -LRB- As of 3/31/87 -RRB- Citicorp TOTAL THIRD WORLD EXPOSURE ... $ 14,000 -LRB- As of 9/30/87 -RRB- * EXISTING THIRD WORLD RESERVE ... $ 3,342 -LRB- As of 9/30/87 -RRB- * ACTUAL RESERVE COVERAGE OF THIRD WORLD EXPOSURE * . . 25 % ADDITIONAL PROVISION NECESSARY TO COVER ... $ 4,093 54 % OF THIRD WORLD EXPOSURE * COMMON EQUITY ASSETS ... 2.37 % -LRB- As of 9/30/87 -RRB- ** COMMON EQUITY ASSETS ... 4.00 % -LRB- As of 3/31/87 -RRB- Bank of America TOTAL THIRD WORLD EXPOSURE ... 10,054 -LRB- As of 9/30/87 -RRB- * EXISTING THIRD WORLD RESERVE ... 1,808 -LRB- As of 9/30/87 -RRB- * ACTUAL RESERVE COVERAGE OF THIRD WORLD EXPOSURE * . . 18 % ADDITIONAL PROVISION NECESSARY TO COVER ... 3,596 54 % OF THIRD WORLD EXPOSURE * COMMON EQUITY ASSETS ... 0.58 -LRB- As of 9/30/87 -RRB- ** COMMON EQUITY ASSETS ... 3.42 -LRB- As of 3/31/87 -RRB- Manufacturers Hanover TOTAL THIRD WORLD EXPOSURE ... 9,234 **** -LRB- As of 9/30/87 -RRB- * EXISTING THIRD WORLD RESERVE ... 1,833 **** -LRB- As of 9/30/87 -RRB- * ACTUAL RESERVE COVERAGE OF THIRD WORLD EXPOSURE * . . 20 ADDITIONAL PROVISION NECESSARY TO COVER ... 3,130 54 % OF THIRD WORLD EXPOSURE * COMMON EQUITY ASSETS ... 0.69 -LRB- As of 9/30/87 -RRB- ** COMMON EQUITY ASSETS ... 4.17 -LRB- As of 3/31/87 -RRB- Chase Manhattan TOTAL THIRD WORLD EXPOSURE ... 8,670 -LRB- As of 9/30/87 -RRB- * EXISTING THIRD WORLD RESERVE ... 1,970 -LRB- As of 9/30/87 -RRB- * ACTUAL RESERVE COVERAGE OF THIRD WORLD EXPOSURE * . . 23 ADDITIONAL PROVISION NECESSARY TO COVER ... 2,690 54 % OF THIRD WORLD EXPOSURE * COMMON EQUITY ASSETS ... 1.79 -LRB- As of 9/30/87 -RRB- ** COMMON EQUITY ASSETS ... 4.47 -LRB- As of 3/31/87 -RRB- Chemical TOTAL THIRD WORLD EXPOSURE ... 5,945 **** -LRB- As of 9/30/87 -RRB- * EXISTING THIRD WORLD RESERVE ... 1,505 **** -LRB- As of 9/30/87 -RRB- * ACTUAL RESERVE COVERAGE OF THIRD WORLD EXPOSURE * . . 25 ADDITIONAL PROVISION NECESSARY TO COVER ... 1,690 54 % OF THIRD WORLD EXPOSURE * COMMON EQUITY ASSETS ... 1.61 -LRB- As of 9/30/87 -RRB- ** COMMON EQUITY ASSETS ... 4.74 -LRB- As of 3/31/87 -RRB- J.P. Morgan TOTAL THIRD WORLD EXPOSURE ... 5,367 -LRB- As of 9/30/87 -RRB- * EXISTING THIRD WORLD RESERVE ... 1,317 -LRB- As of 9/30/87 -RRB- * ACTUAL RESERVE COVERAGE OF THIRD WORLD EXPOSURE * . . 25 ADDITIONAL PROVISION NECESSARY TO COVER ... 1,568 54 % OF THIRD WORLD EXPOSURE * COMMON EQUITY ASSETS ... 4.91 -LRB- As of 9/30/87 -RRB- ** COMMON EQUITY ASSETS ... 6.33 -LRB- As of 3/31/87 -RRB- Bankers Trust TOTAL THIRD WORLD EXPOSURE ... 4,000 -LRB- As of 9/30/87 -RRB- * EXISTING THIRD WORLD RESERVE ... 1,000 -LRB- As of 9/30/87 -RRB- * ACTUAL RESERVE COVERAGE OF THIRD WORLD EXPOSURE * . . 25 ADDITIONAL PROVISION NECESSARY TO COVER ... 1,150 54 % OF THIRD WORLD EXPOSURE * COMMON EQUITY ASSETS ... 3.58 -LRB- As of 9/30/87 -RRB- ** COMMON EQUITY ASSETS ... 4.90 -LRB- As of 3/31/87 -RRB- First Chicago TOTAL THIRD WORLD EXPOSURE ... 3,100 -LRB- As of 9/30/87 -RRB- * EXISTING THIRD WORLD RESERVE ... 930 -LRB- As of 9/30/87 -RRB- * ACTUAL RESERVE COVERAGE OF THIRD WORLD EXPOSURE * . . 30 ADDITIONAL PROVISION NECESSARY TO COVER ... 736 54 % OF THIRD WORLD EXPOSURE * COMMON EQUITY ASSETS ... 2.38 -LRB- As of 9/30/87 -RRB- ** COMMON EQUITY ASSETS ... 5.16 -LRB- As of 3/31/87 -RRB- * Data used in calculations are net of previous -LRB- or intended in BKB 's case -RRB- Third World charge-offs . ** Resulting Common Equity/Asset ratio reflecting the additional provision . A common equity/assets ratio of 4 % is generally regarded as the minimum prudent level . *** BKB 's exposure excludes short-term trade-related credits . **** As of June 30 , 1987 . Source : Keefe Bruyette & Woods Inc. . -LRB- Revised WSJ Dec. 22 , 1987 -RRB-
extractive_keyphrases: third world loans boston corp regional banks developing countries
abstractive_keyphrases: loan-loss reserves money-center banks u.s. banks