OSAKA -- Deposit Insurance Corp. will purchase roughly 250 billion yen worth of nonperforming loans held by two second-tier regional banks here ahead of their merger in October, sources close to the matter said Tuesday.
The deal involves sour loans held by Osaka-based Fukutoku Bank and the Bank of Naniwa, which agreed last fall to merge and form Namihaya Bank on Oct. 1.
According to the sources, the purchase would also include a portion of loans the banks have classified as falling under "category two," or those for which collection requires caution. Category-two loans not bought by DIC will be transferred to the new bank along with other assets and healthy loans, the sources said.
As of March, Fukutoku Bank had reported nonperforming loans of 102.3 billion yen, while the figure came to 25.3 billion yen for the Bank of Naniwa, bringing the combined figure to 127.6 billion yen. The amount of category-two loans to be bought by DIC could come to more than 120 billion yen.
The merger of the two banks will be the first time the revised Deposit Insurance Law, which allows DIC to extend financial assistance to a merger between weak banks, will be applied.