Mitsubishi Tokyo Financial Group and UFJ Holdings said Friday they would delay their merger to become the world's biggest bank by three months to January 1 to allow more time to fully integrate their computer systems.

The two banks, which sealed a merger this year after a prolonged battle, said they needed more time to conduct tests to ensure the massive integrated computer system will function properly.

"The changes in the names of the banks, names of the branches and various fees scheduled for October 1, 2005 will be postponed until January 1, 2006," they said in a joint statement.

The banks said they will merge some ATM services as part of the tests and would go ahead with merging their management on time.

In 2002, Japan experienced 25 million problematic transactions when banking giant Mizuho was launched from a merger of three banking groups.

"Due to the tremendous social impact of the planned merger of the two banks, we have been thoroughly examining all possible risk reduction measures ... to minimize any risks arising from the integration of the banks and their business systems," the statement said.

It said the two banks were "preparing assiduously for the integration of their computer system".

Newspaper reports had reported that the merger would be delayed due to an unusual intervention by the Financial Services Agency, a government watchdog, which was concerned about the systems integration.

Mitsubishi Tokyo, the second-largest of Japan's big four banking groups, and UFJ, the smallest of the four, signed a contract in April after a merger battle among big banks that was unprecedented in Japan for its competitiveness.

Together, the banks would have assets of 189 trillion yen (1.7 trillion dollars), making the new company the largest bank in the world.

The only financial institution that would be bigger is Japan Post, which sits on more than three trillion dollars in assets and is used by many Japanese to store their savings.