OSAKA — Tanabe Credit Cooperative and Chogin Osaka Credit Association Branch, two Osaka-based small financial institutions that are burdened with mounting bad loans, announced May 14 they will transfer their assets and operations to other financial institutions.

The Osaka Prefectural Government, which supervises the credit cooperatives, said Tanabe’s deposits and assets will be transferred to Sakura Bank, its longtime business partner, and Tanabe will ask the Deposit Insurance Corp. to take over its nonperforming loans.

As for Chogin Osaka, whose customers are mainly Korean residents in Osaka, its deposits and assets will be taken over by Chogin Kinki, a new financial institution to be created as a result of mergers of five Chogin credit association branches based in Hyogo, Kyoto, Shiga, Nara and Wakayama prefectures. Tanabe’s business transfer to Sakura and the creation of Chogin Kinki will be conducted as soon as possible, and before the end of next March, prefectural government officials said.

The movements follow the failures of three credit cooperatives in Osaka over the past two years. They all went bankrupt as business conditions of small and medium-size firms — the credit unions’ major customers — deteriorated after the bursting of the asset-inflated bubble economy, and as loans to real estate developers became nonperforming amid the steep fall in land prices.

According to prefectural government officials, Tanabe was to close the books for fiscal 1996 with losses of 70 billion yen, and Chogin Osaka with 200 billion yen. Both were expected to end up with liabilities exceeding their assets. The officials said they let the two credit cooperatives transfer business to other institutions, instead of ordering them to suspend business, to minimize the negative impact on customers and depositors. All of the deposits with the institutions will be protected, but all of the invested capital in the two credit cooperatives will be used to make up the losses, they said.

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