Yomiuri: Japan's Regional Banks Move to Merge Across Prefectures

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By Miyu Okada and Kohei Nakashima / Yomiuri Shimbun Staff WritersJapan's regional banks are moving forward with cross-prefecture mergers. With regional economies shrinking due to population decline and a drop in deposits considered inevitable, the mergers are aimed at securing new business opportunities by expanding business reach. The Financial Services Agency, which stresses the role of regional banks as financial infrastructure in regional economies, is also supporting these "cross-prefecture reorganizations."Seeking synergy"By applying San ju San's strength — its advanced financial expertise — in Aichi Prefecture, where Aichi (Financial Group Inc.) has built its base, we will be able to help our customers solve their challenges even more efficiently," said Gotaro Michihiro, president of San ju San Financial Group Inc., at a press conference in Nagoya held in May by the two companies after they agreed on a merger. San ju San Financial is based in the neighboring prefecture of Mie.Under the agreement, a holding company will be set up in April 2027, and this will control the companies' subsidiaries, Aichi Bank Ltd. and San ju San Bank Ltd. The two groups aim to expand their businesses by combining Aichi Financial's customer base in Aichi Prefecture, where there is a thriving manufacturing sector, with San ju San Financial's strengths, such as its advanced lending expertise.Japan is seeing a wave of mergers across prefectures.In March, Shizuoka Financial Group Inc. and the Bank of Nagoya Ltd. announced they will merge operations, aiming to complete the move by April 2028. The resulting firm will have the fourth most assets among regional bank groups in Japan.Gunma Bank Ltd. and Niigata-based Daishi Hokuetsu Financial Group Inc. have also announced that they plan to merge their operations by April 2027. In the Tohoku region, two banks under the umbrella of Fidea Holdings Co. — Shonai Bank Ltd., based in Yamagata Prefecture, and Hokuto Bank Ltd., based in Akita Prefecture — plan to merge in January 2027 to establish Fidea Bank Ltd., which will be the first cross-prefecture regional bank in the region.Besides these plans, there is at least one more merger between regional banks in the works.Crisis modeThe wave of mergers is being driven by the likelihood that deposits and loans will drop off as regional economies contract due to population decline.According ...

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