"It is true that Shinsei Bank is currently considering various measures to respond" to SBI's tender offer, the Tokyo-based lender said in a statement.

"However, it is not factual that a decision has been made at this time," it said, adding that any decisions would be disclosed in a timely manner.

The Nikkei financial daily reported https://www.reuters.com/article/shinsei-bank-m-a-sbi-holdings-idUSKBN2GA0TF on Tuesday that Shinsei Bank's board could meet this week to discuss a possible issuance of stock warrants to existing shareholders to dilute the holdings of SBI.

Shinsei Bank is also talking to potential white knights, including Seven & i Holdings and Sony Group Corp, the Nikkei reported.

Shares of Shinsei Bank dropped more than 3% briefly early Wednesday, while SBI shares tumbled more than 4% before recouping part of its loss.

SBI last week announced an offer to buy a near majority stake in Shinsei Bank to take effective control of the lender, as SBI aims to become Japan's fourth largest banking group.

(Reporting by Makiko Yamazaki; editing by Richard Pullin)