Hokkaido Takushoku Bank, one of the nation's 10 major city banks, and the regional Hokkaido Bank announced Apr. 1 that they will merge on April 1, 1998, to cut costs ahead of the proposed "Big Bang" of financial deregulation.

Hokkaido Takushoku officials added that the bank's 20 overseas branches and subsidiaries will cease operations by April 1998 and that the new bank, tentatively named New Hokkaido Bank, will operate solely in Japan. Hokkaido Takushoku has long been rumored to be in dire straits over its massive bad loans, and market investors and depositors have become increasingly wary of dealing with the bank.

Takushoku Vice President Chuji Ohno admitted at a news conference that such concerns over its creditworthiness are also a factor behind the merger decision. "We have come to the conclusion that our survival cannot be achieved through continuing to remain a global bank, but by galvanizing our core operations, which in the case of both our banks is to serve the Hokkaido region," Ohno said.

Hokkaido Takushoku and Hokkaido Bank are rival financial institutions, but the presidents of the two banks agreed last month that they should pool their resources if they are to survive the implementation of the Big Bang reforms, according to Hokkaido Takushoku officials. They added that their efforts to close their overseas branches, representative offices and subsidiaries will be supported by the Long-Term Credit Bank of Japan.

In addition, the closures will enable the new bank to operate under less stringent capital adequacy requirements as a purely domestic bank. But Takushoku's Ohno denied media reports that the new bank will be classified as a regional bank, stressing that given such circumstances as the close ties they have with customers in the Tokyo metropolitan area, they will remain a city bank.