A merger of two leading regional banks in Nagasaki Prefecture put on hold by the Fair Trade Commission out of antitrust concerns represents a dilemma involved in the realignment of regional banks, which is deemed a solution to the threats posed to the industry from depopulation and the protracted ultra-low interest rate policy. A breakup of the merger talks could result in discouraging other banks eyeing mergers to survive in an increasingly tough business climate. The parties involved in the gridlock should find a way out by seeking to reconcile the need to maintain a competitive environment in the banking industry with the need to ensure each institution's business health as both are requisite for sustaining the nation's struggling regional economies.

Regional banks face severe business prospects as the nation's population decline threatens to deplete their client base and the protracted ultra-easy monetary policy cuts their lending profit margins. According to a Financial Services Agency estimate released last year, more than 60 percent of the 106 banks that mainly serve local clients stand to suffer losses in their mainstay lending and other businesses in fiscal 2025 — compared with roughly 40 percent of the total that incurred such losses in the business year to March 2015.

It is against this background that regional banks across the country have been pursuing mergers in recent years to ensure their future survival. Fukuoka Financial Group Inc. and Eighteenth Bank, based in Nagasaki, are among them. They initially planned to integrate their operations in April — creating the nation's second-largest regional banking group with total assets of about ¥19 trillion — and merge Eighteenth Bank and Shinwa Bank under the FFG's wing next year. That plan, however, was delayed to October and was recently postponed "indefinitely" due to the protracted antitrust review by the FTC.