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The Financial Services Agency tentatively decided Thursday to inject 12 billion yen in public funds into Gifu Bank, a second-tier regional bank, to boost its capital, the agency said.

The FSA also formally decided the same day to provide public funds of 60 billion yen to Kinki Osaka Bank, a regional bank affiliated with Daiwa Bank, for the same reason, the agency said.

The decisions were made at a meeting of the agency’s top policymaking consultative panel. A formal decision on Gifu Bank will be made after a hearing with the bank’s top management and other final procedures.

Agency officials said the FSA believes the two cases will help promote reorganization of the regional banking industry. Gifu Bank is expected to join the Tokai Bank group while Kinki Osaka Bank in February took over the assets of Namihaya Bank, a collapsed regional bank also based in Osaka.

The FSA decided earlier this month to inject public funds into Higashi-Nippon Bank and Kansai Sawayaka Bank.

By the end of the month, Kyushu Bank and Fukuoka City Bank are also expected to apply to the agency for funding to boost their weak capital bases.

Kyushu Bank and Shinwa Bank are looking to integrate, as are Fukuoka City Bank and the Bank of Nagasaki, and the FSA is likely to inject funds into one member of each of these pairings.

The FSA is increasingly receiving last-minute requests by regional banks ahead of the March-end deadline for government assistance in overcoming bad debts.

Given plunging stock prices, many regional banks also want to strengthen their capital bases before the fiscal 2001 introduction of a new accounting rule. Under this rule, banks will be obliged to book stock portfolios based on market value instead of book value.

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