According to Reuters, Berlin is now so concerned with the health of Deutsche Bank that they are now pushing for a merger with Commerzbank. The news has been welcomed by the markets, and shares in both banks have risen as a result. The leadership of both German banks have agreed to hold talks, so they will likely welcome the news from Berlin as well.
The news surrounding Berlin’s stance on the potential for a merger carries several significant consequences. While the result would avoid a disaster at Deutsche Bank, there are fears that it could cause a financial shortfall in Europe’s largest economy. Commerzbank has already agreed to the talks, and the German government owns 15% of Commerzbank, and would presumably be a shareholder in the merger’s aftermath. One government official has commented that a tie-up could result in a financial hole. When banks switch ownership, the bank is legally obligated to reevaluate assets like government bonds.
Deutsche Bank has found itself in some troubled waters in recent years. The future of the bank was brought into question as a result of high costs, which have left them with worryingly low profits.
