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Japan's antitrust watchdog greenlights merger of Nagasaki banks

Fukuoka Financial Group and Eighteenth Bank have been waiting 30 months

The Fukuoka Financial Group, parent of Shinwa Bank, and Eighteenth Bank had to ask their customers to move to other lenders in order to get their planned merger approved.   © Kyodo

TOKYO -- Japan's Fair Trade Commission on Thursday decided to approve a merger plan between the Fukuoka Financial Group, the parent of Shinwa Bank, and Eighteenth Bank, operating in the Kyushu region.

An announcement could come on Friday.

The pending approval was made possible by the banks' corporate borrowers, some of whom agreed to shift debt of around 100 billion yen ($903 million) to rival lenders.

The FTC was keen to gain borrower cooperation to keep the merged bank from nearly monopolizing the regional lending market for small to midsize companies.

After the banks receive official notification, they are expected to merge in April 2019.

The novel approach to the merger, asking for assistance from borrowers, may set an example for regional banks wishing to merge in prefectures suffering from weak economies.

On Tuesday, the banks submitted a revised merger plan that proposes an independent entity to monitor lending rates.

The antitrust watchdog's five-member committee met on Thursday afternoon and agreed to approve the merger plan submitted by the banks.

The banks reached a basic agreement to merge in February 2016.

Back then, the banks' combined share of lending to small and midsize companies in Nagasaki Prefecture was over 70%. In response, the commission subsequently notified the lenders it would be difficult to approve the plan for fear that the merger would create too powerful a lender in the prefecture, potentially forcing borrowers to accept unfavorable loan conditions.

The banks in July 2017 postponed the merger, but the commission kept holding back a decision. This past spring, it notified the banks that it planned to issue an order to halt the merger based on the Antimonopoly Act. It would have been the first such order since World War II.

The banks then asked all its borrowers whether they were willing to shift their loans to rival banks, aiming to avert the order

The banks apparently received enough affirmative answers. They also managed to obtain agreements from rival regional banks, credit unions, megabanks and Shoko Chukin Bank to take over the loans.

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