Regional bank merger bills approved by LDP lawmakers; headed to Diet

Liberal Democratic Party lawmakers concerned with banking sector reforms approved bills Thursday for promoting mergers among regional financial institutions.

The bills are designed to create a framework for preventing further declines in regional financial institutions’ capital by injecting public funds when they merge.

The bills are to be submitted to the Diet during the current session. If passed, they would be enacted into law in January.

The approval came at a joint meeting of the LDP’s task force on antideflation measures, the finance and banking commission and other concerned groups.

At the meeting, some of the lawmakers said they should wait to give their approval until Financial Services Minister Heizo Takenaka and his project team conclude debates on a fresh antideflation package, according to LDP officials.

But they finally signed off on the bills in view of the pressing need to stabilize regional financial systems, they said.

Under the bill, regional banks, shinkin banks and credit unions would be required to submit five-year management plans for strengthening the financial base of a newly merged entity to obtain public funds. The funds would be used to prevent the merger from causing a drop in capital adequacy ratio.

The Financial Services Agency would examine the plans and publicize those it finds suitable for getting official aid. After the mergers, the agency would continue checking if the profitability of the merged institutions is indeed improving based on the plans.