Fed Issues Enforcement Actions Against Two Bank-Holding Cos

The U.S. Federal Reserve announced enforcement actions Tuesday against Commerce Bancshares, Inc. (CBSH) and Merchants Bancorp (MBNC), moves taken to help maintain financial soundness at the companies, according to the Fed orders.

Under a written agreement, Oklahoma-based Commerce Bancshares cannot declare or pay any dividends without prior approval from the Fed.

The bank-holding company also cannot directly or indirectly take dividends or any other form of payment representing a reduction in capital from its state-chartered Bank of Commerce.

Similarly, California-based Merchants Bancorp cannot declare or pay any dividends without prior approval from the Fed, according to its agreement. Merchants Bancorp is also restricted from directly or indirectly taking dividends or any other form of payment representing a reduction in capital from any of its subsidiaries.

Both bank holding companies, Commerce Bancshares and Merchants Bancorp, also cannot incur or increase or guarantee any debt without prior written approval from the Fed.

Among other things, Commerce Bancshares must submit to Fed officials a written plan to maintain sufficient capital. Merchants Bancorp must submit a written cash flow projection for 2010 and written progress reports regarding their agreement with Fed officials.

-By Darrell A. Hughes, Dow Jones Newswires; 202-862-9255; [e-mail]