The Bank of Yokohama and Higashi-Nippon Bank are in the final stage of negotiations on a merger that would create the country's biggest regional banking group, sources close to the matter said Tuesday.
They plan to set up a joint holding company in spring 2016, the sources said. Their combined total assets were about ¥15.8 trillion at the end of last March, more than the current largest regional banking group, Fukuoka Financial Group.
Hoping to expand their business and improve profitability through cutting costs, the Bank of Yokohama and Higashi-Nippon, which is based in Tokyo, are in talks on the ratio at which shares will be exchanged and the location of the head office, according to the sources.
The Bank of Yokohama, the second-largest among 85 listed regional lenders, and Higashi-Nippon, which ranks 63rd, released separate statements acknowledging they are "considering the possibility of business integration."
The government of Prime Minister Shinzo Abe has identified regional banks as needing drastic measures to enhance their competitiveness as part of the push for economic reforms and growth.
The Abe administration has been pressing regional lenders to realign themselves as the business climate for smaller banks toughens: An aging population results in a shrinking market.
In a similar move, Tokyo Tomin Bank and Yachiyo Bank, both based in the capital, merged last month to form Tokyo TY Financial Group Inc.