There could be mergers and acquisitions in the German banking sector to offset the costs of low interest rates, a member of the European Central Bank's executive board told CNBC on Monday.
While the economy is strong, margins and profitability at German banks have been squeezed by low interest rates. There have been reports that Deutsche Bank and Commerzbank were considering a merger last summer but that hasn't materialized. John Cryan, the chief executive officer of Deutsche Bank, has said the German banking system needed more mergers to become more profitable.
"We have a very good economy right now but the risk margins banks are taking in for their business are low. So there might be a case for consolidation," Sabine Lautenschläger, member of the ECB's executive board, told CNBC.
Despite the need to improve margins, there seems to be some reluctance in the sector to move in that direction. However, Lautenschläger told CNBC that there has been improvements in this field.
"When you look at the number of banks in Germany, there you can see that some steps were made. We had I think 2,3,4 years ago still more than 2000 banks. We are down now at 1800, if I remember correctly…mergers are happening, but there might be some room for further consolation," she said.
However, she added that it's not the task of the ECB as a supervisor to push for consolidation.