SINGAPORE (Reuters) - Malaysia's CIMB Group, RHB Capital Bhd and Malaysia Building Society Bhd (MBSB) have agreed on a merger deal that will create the country's biggest banking group, a source with direct knowledge of the matter said.

The deal will involve a share swap between Malaysia's second-biggest lender CIMB and fourth-largest bank RHB, the source said, adding that an announcement is expected later on Thursday.

A combination of the three lenders would give birth to a banking group with assets totalling around $190 billion, surpassing the country's largest lender Malayan Banking Bhd (Maybank) and making it Southeast Asia's fourth-biggest lender.

The deal will still require approval from Bank Negara Malaysia, the central bank, the source said, who asked not to be identified ahead of the formal announcement.

It was not immediately clear how a deal with MBSB will be structured, but Malaysia's Star newspaper reported on its website that it may involve shares and cash.

The lenders said in July that they had obtained central bank approval to begin talks on a merger that could include the creation of a large Islamic bank that would operate separately.

A 90-day exclusivity agreement for the talks ends on Wednesday.

The merger proposal comes as members of the Association of Southeast Asian Nations slowly work on plans to partially integrate their economies and financial systems. Although little progress has been made and financial system integration is not due to start until 2020, countries in the 10-nation alliance are keen to build national champions.

Shares of the three banks were suspended on Thursday pending an announcement.

Employees Provident Fund (EPF), a big shareholder in all three banks, is seen as instrumental in deciding how the merger will be shaped, sources said.

The EPF owns about 41 per cent of RHB, 65 per cent of Malaysia Building Society and 14.5 per cent of CIMB.