Two Japanese banks agree to merge

A name for the merged bank has not yet been agreed

Japan's Shinsei Bank and Aozora Bank have agreed to merge to form the country's sixth largest bank, with assets of 18tn yen ($186bn; £113bn).

Shinsei reported a loss of 143bn yen last year while Aozora lost 243bn yen.

They have big US private equity shareholders. JC Flowers holds 33% of Shinsei and Cerberus Capital Management owns more than half of Aozora.

Both banks are descended from lenders that were nationalised in Japan's banking crisis in the 1990s.

This time round, they have struggled with the downturn, and have been hit by restructuring costs and high-risk foreign investments.

"As the business environment in Japan has rapidly evolved, it has become imperative for financial institutions to improve competitiveness by attaining sufficient scale and by strengthening their capital bases," the banks said in a statement.

Aozora Bank shareholders will receive one Shinsei share for each share they own.

No name for the merged bank has yet been announced.

The merger is planned to be effective from October 2010.