A group of second-tier regional banks on Thursday joined the chorus urging the government to consider extending its blanket guarantee on demand deposits.

The presidents of member banks of the Second Association of Regional Banks made the appeal during a meeting at the Financial Services Agency headquarters in Tokyo, industry officials said.

Hiroshima-Sogo Bank President Hiromichi Morimoto, who serves as chairman of the association, delivered the appeal to FSA Commissioner Shokichi Takagi.

The association believes the planned end to the full-refund guarantee on ordinary deposits next April 1 will create panic among depositors and undercut banking system stability, the officials said.

This past April, the government imposed a cap of 10 million yen per bank per depositor on refunds of time deposits in the event a bank fails.

Morimoto also suggested the government raise the upper limit on the amount of demand deposits per bank per depositor that the government will refund under the Deposit Insurance Law.

But Takagi held firm at the meeting and stressed the significance of ending the full-refund guarantee on all types of deposits.

The government has remained opposed to extending the full-refund guarantee, citing the national treasury's fiscal constraints.

Meanwhile, many ruling coalition lawmakers are also urging the government to postpone the ceiling, citing a potential run on deposits from financially fragile banks.

On June 21, Yukihiko Nagano, chairman of the National Association of Shinkin Banks, urged the government to put off the plan.

In a Wednesday meeting of directors of the Second Association of Regional Banks, the participants analyzed forecasts on the possible consequences of the government's plan, noting that the end of the full guarantee on time deposits led depositors to relocate massive amounts of savings to major banks.

The association is concerned the planned abolition of the blanket guarantee may trigger a further flight of deposits from member banks, making it hard for them to extend loans to small and midsize companies with which they have long-standing business ties.