Expert panel proposes FSA monitor regional bank mergers

Jiji PressTOKYO (Jiji Press) — A panel of experts set up by the Financial Services Agency on Wednesday proposed that the agency monitor potential adverse effects of mergers in the country’s regional banking industry.

The proposal came as an antitrust examination by the Fair Trade Commission of a merger plan between Fukuoka Financial Group Inc. and Eighteenth Bank has been prolonged.

Fukuoka Financial, which owns Nagasaki Prefecture-based Shinwa Bank, and Eighteenth Bank, also based in the prefecture, reached a merger agreement in February 2016.

The FTC is concerned that the merger, which would lift their combined lending share in the prefecture to some 70 percent, would cause a loss of competition and lead to problems such as the forced lifting of lending rates.

The FTC’s cautious approach forced Fukuoka Financial and Eighteenth Bank to postpone their merger indefinitely, though the FSA pushes for consolidation of regional banks in the country.

The FSA’s panel called for an early FTC approval of the merger.

The experts’ panel said mergers of regional banks operating in the same regions are one option to help them maintain financial health as they face a tough business environment amid the country’s declining population.

There are few risks of an undue increase in lending rates because banks engage in competition across municipal and prefectural borders, the panel said.

The panel also suggested that the FSA and FTC work together in examining mergers of regional banks.

The panel expressed opposition to the FTC’s suggestion that Fukuoka Financial and Eighteenth Bank lower the lending share by selling branches and loan claims. Such moves will not serve customer interests, the panel said.

There are an increasing number of mergers between Japanese regional banks as they are struggling with depopulation and low interest rates.

Earlier this month, Mie Bank and Daisan Bank, both based in Mie Prefecture, set up a joint holding company to integrate their operations.

Daishi Bank and Hokuetsu Bank, both based in Niigata Prefecture, are scheduled to launch a joint holding company in October to integrate their operations.Speech

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