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19 Korean-linked credit unions sign merger accord.

OSAKA, Jan. 30 Kyodo

A total of 19 ''shogin'' credit unions serving Korean residents in Japan on Tuesday signed an agreement to merge around July, the Association of Korean Credit Cooperative (Kanshinkyo), the umbrella body grouping the 19, said.

The presidents of the 19 credit unions inked the pact at their meeting in Tokyo, Kanshinkyo said.

The credit unions also decided to consider filing of an application with the Japanese government to replenish their depleted capital bases, ridden with loan losses, from public funds, it said.

The 19 will seek to merge to create a commercial bank that has its legal basis in the banking law, it said.

Japan has 131 commercial banks, which are free from some operational limits imposed on the activities of credit unions.

The 19 will proceed with preparations to obtain a Financial Services Agency (FSA) permit to become a commercial bank, while seeking to arrange for their existing major capital contributors to approve the proposed merger, it said.

The 19 would make the envisioned bank take over the assets and liabilities of the failed credit unions, including Osaka-based Kansai Kogin and Tokyo Shogin credit cooperatives, two relatively large unions under the umbrella body.

The 19 appear to have determined that a capital injection would help revive their financial health, which would then enable the envisioned bank to have sufficient capital to cushion the impact of the planned acquisition of the loss-ridden failed credit unions, industry officials said.

In addition to the planned application for a capital-injection, Kanshinkyo officials earlier said they are considering asking the South Korean government to inject up to 30 billion yen into the capital base of the planned bank.

On Dec. 17, Japan's Financial Reconstruction Commission (FRC) declared Kansai Kogin and Tokyo Shogin insolvent and sent in administrators to the two, believing they were severely undercapitalized following massive loan losses.

Shogin unions have been funneling credit mainly to businesses run by Korean residents loyal to the South Korean government.

Kansai Kogin's negative net worth was 51 billion yen and Tokyo Shogin's was 19.3 billion yen as of the end of June, the FSA has said.
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Publication:Asian Economic News
Date:Feb 5, 2001
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