Europe News

German banking regulator warns mergers are not 'miracle weapons'

Key Points
  • One of the biggest challenges that the German lenders face is overbanking.
  • There are also concerns about the lack of digitalization and a low interest rate environment.
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Not surprised about collapse of Deutsche-Commerzbank merger: BaFin

German banks should not look at mergers as a miracle that will fix their problems, the president of the German banking regulator told CNBC Wednesday.

The two top lenders in Germany, Deutsche Bank and Commerzbank, announced last month that their merger talks ended in failure. However, both lenders still seem interested in joining forces with other banks.

"The point I try to make again and again and again is very simple: It is perfectly okay to think about mergers and it is perfectly okay to think about cross-border mergers, but mergers are not miracle weapons," Felix Hufeld, president of BaFin, the German financial regulator, told CNBC.

According to media reports, ING and UniCredit are also interested in acquiring Commerzbank. Meanwhile, Swiss bank UBS is reportedly looking at the asset management arm of Deutsche Bank, called DWS.

"I do not believe that one or two or three major mergers do fix the challenges of the German banking market, no way," Hufeld told CNBC's Annette Weisbach. "There is a far broader range of challenges, which have to be addressed."

One of the biggest challenges that the German lenders face is overbanking. There are also concerns about the lack of digitalization and a low interest rate environment.