• Kyodo

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Kansai Urban Banking Corp. and Biwako Bank, two second-tier regional banks based in the Kansai region, are finalizing a deal to merge in spring 2010, sources said Wednesday.

The two want to conclude a basic agreement in March, they said.

Merger talks between Kansai Urban Banking, based in the city of Osaka, and Biwako Bank, headquartered in Otsu, Shiga Prefecture, are under way at a time when a growing number of regional banks are struggling to survive worsening financial conditions brought on by a deepening recession and expanding bad loans.

Among regionals based in Kansai, where as many as 12 are engaged in fierce competition, Bank of Ikeda and Senshu Bank, both affiliated with Bank of Tokyo-Mitsubishi UFJ, have already agreed to integrate management teams under a joint holding company in October before merging in the future.

The merger of Kansai Urban and Biwako Bank, which had combined deposits worth ¥3.74 trillion as of the end of September, will create one of the largest financial institutions in the Kansai region.

Kansai Urban and Biwako Bank want to survive expanding their operational bases beyond their prefectural boundaries, banking industry watchers said.

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