Choshi Shinkin Bank and Asahi Shinkin Bank have agreed to merge by the end of the year, creating a major financial institution in Chiba Prefecture with combined deposits of 500 billion yen, financial sources said Wednesday.

The two “shinkin” — or credit — banks, both based in the northeastern part of the prefecture, were to officially announce the merger plan in the afternoon, the sources said.

The banks, expecting fierce competition from other banks after the April 1 abolition of the full government guarantee on time deposits at failed banks, hope the merger will win them further trust from customers.

The merged bank is expected to have a capital adequacy ratio of nearly 8 percent, surpassing the 4 percent ratio required for domestic financial institutions.

Choshi Shinkin, which has no subsidiaries, reported net profits of 1.9 billion yen, with deposits of 334.4 billion yen when it closed its books in March 2001. Its capital adequacy ratio stood at 8.78 percent.

Asahi Shinkin, which has one affiliate, logged parent-only net profits of 700 million yen, with deposits of 208.2 billion yen. Its capital adequacy ratio was 5.16 percent.

Ashikaga severs ties

UTSUNOMIYA, Tochigi Pref. (Kyodo) Struggling Ashikaga Bank said Wednesday it will cancel a contract allowing it to remit money and settle accounts for North Korean financial institutions as part of its restructuring plan.

The regional bank, based in Utsunomiya, Tochigi Prefecture, will stop accepting requests for cash remittances or other financial transactions with North Korea on April 10, bank officials said.

The move is in line with Ashikaga Bank’s efforts to downsize its overseas operations.

The bank said it remitted a total of about $1 million to North Korea on 333 occasions between April and late February.

Shin Iizuka, Ashikaga Bank president, earlier told the Tochigi Prefectural Assembly that his bank began carrying out cash remittances to North Korea as part of humanitarian moves about 30 years ago, when the country had defaulted.

Ashikaga Bank recently secured nearly 30 billion yen in subscriptions for its new share issue on Jan. 31 to bolster its capital base. The Tochigi government was one of the subscribers.

Temporary takeover

KANAZAWA, Ishikawa Pref. (Kyodo) Administrators of failed Ishikawa Bank will temporarily hand over operations of the second-tier regional bank to the government-backed Bridge Bank of Japan, banking sources said.

The temporary takeover will be announced later this week, the sources said Tuesday, noting it is aimed at marking time for ongoing negotiations that are unlikely to be completed before the April 1 termination of full government guarantees on time deposits at banks.

The administrators have been negotiating with Toyama-based regional lender Hokuriku Bank to take over the operations, but they have also recently decided to seek cooperation from regional banks in Ishikawa and Fukui prefectures.

The bridge bank was established earlier this month to temporarily take over the assets and deposit liabilities of failed banks.

The administrators plan to seek financial aid from the state-run Deposit Insurance Corp., should the Financial Services Agency find Ishikawa Bank’s assets adequate for takeover by the bridge bank.

Meanwhile, they will continue talks with the regional banks.

Ishikawa Bank filed for insolvency proceedings with the FSA in December, with a negative net worth of 22.8 billion yen as of September.

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