Merger of 3 Japanese Banks Breaks Down

A merger among three Japanese banks to create the world’s third-largest bank by assets broke down when Asahi Bank said it had decided to cancel the deal with Sanwa and Tokai banks. The withdrawal deals a direct blow to efforts to restructure Japan’s debt-plagued banking sector as it wrestles with an overhang of bad loans from the “bubble” economy of the 1980s and confronts a new era of fast-growing online competition. Asahi President Tatsuro Ito said his bank was unhappy with the proposal by Sanwa and Tokai to move away from a joint holding company and into a conventional merger under the deal, which was expected to give Sanwa the strongest control. Sanwa and Tokai said they would stick to their merger schedule despite Asahi’s exit, which shrank the merged bank’s prospective size to Japan’s fifth-largest in terms of assets, compared with second if Asahi had been included.