May 4--TOKYO -- Sumitomo Mitsui Financial Group reached a basic agreement last week to acquire two financial businesses from U.S. banking giant Citigroup Inc. -- Nikko Cordial Securities Inc. and Nikko Citigroup Ltd., Citi's investment banking unit.

SMFG also has been eyeing further strengthening its already potent alliance with Daiwa Securities Group.

The deal between SMFG and Citigroup will mark the birth of Japan's first comprehensive financial group as one of the nation's banking giants takes control of one of the country's largest brokerage houses.

It also is expected to have a major impact on the future actions of the nation's two other mega banks and could lead to a further realignment of the nation's financial sector.

Reports about the deal reminded me of what a senior official at a major securities company told me when I was still a fledgling economic news reporter.

He said that, essentially, bankers lend money they collect from depositors and wait patiently for the interest rate spread to be realized -- much like farmers waiting for a crop yield.

He compared this with the securities business, which is more aggressive in a wide range of areas deemed profitable, an approach he said was more like hunting.

This difference in corporate cultures between the banking and securities business sectors, would, he said, make it almost impossible for bankers to run a brokerage.

Back then, the banking and securities sectors bickered fiercely over what was referred to as the "boundary issue," or the problem of how to enable entities in the banking and securities sectors to operate on each other's turf.

The debate took place against the backdrop of a shift in emphasis in the financial sector away from "indirect financing" toward "direct financing" following changes in the nation's securities market as the economy rapidly matured after a period of high growth.

Banks at that time were eyeing the possibility of engaging in operations that had traditionally been considered the exclusive turf of securities firms.

The views of the senior securities official I mentioned might therefore have reflected the sense of competition between banks and securities firms.

The issue was eventually resolved when the two sides reached an agreement on a formula that allowed them to establish subsidiaries in each other's operations.

The move toward fusing banking and securities operations has continued as Japan has followed on the United States' heels in financial reforms.