TOKYO, Oct 10 (Reuters) - Two Tokyo-based local lenders on Thursday confirmed their plans to merge in a move that could prompt a long-awaited but slow-moving banking industry consolidation in a country beset with weak loan demand.

Tokyo Tomin Bank Ltd 8339.T and Yachiyo Bank Ltd 8409.T said they will announce the merger agreement later in the day. Presidents of both banks will hold a news conference to explain the details of the deal.

The talks between the two were reported by media early last month, though the banks have so far only said a merger was one of the options they could consider.

The two, with combined assets worth 4.7 trillion yen ($48.4 billion), do businesses in greater Tokyo metropolitan area, where not only top lenders like Mitsubishi UFJ Financial Group

8306.T but local banks from other regions are locked in fierce competition.

Japan's big banks, those with nationwide branch networks, underwent waves of drastic consolidation in the late 1990s and early 2000s after many of them almost sank under the weight of massive bad loans in the aftermath of the asset bubble burst. The top lenders, numbered a dozen in late 1980s, have now consolidated into three megabanks.

In contrast, local banks, about 100 nationwide, remained almost intact despite their challenging business environment, where lenders are awash with pension savings but cannot find enough borrowers.

There is growing speculation there are likely to be more mergers among regional banks recently as Japan's banking regulator has made clear it will closely check on future business viability of smaller lenders, a policy widely seen pushing for consolidation of weaker ones.

($1 = 97.1950 Japanese yen)

(Reporting by Taiga Uranaka; Editing by Jeremy Laurence)

((taiga.uranaka@thomsonreuters.com)(+81-3-6441-1813)(Reuters Messaging: taiga.uranaka.reuters.com@reuters.net))

Keywords: TOKYO BANKS/MERGER