Mergers won't necessarily make the system stronger says German banking chief

Oliver Gill
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M&A is not the only one way forward says Hufeld (Source: Getty)

The head of the Federal agency that supervises the German financial sector has warned that consolidation among banks would not necessarily strengthen the banking system.

President of BaFin, Felix Hufeld said that "consolidation cannot be a goal in itself” when addressing a banking conference today.

The news comes the day after local media reported that Germany’s two largest lenders, Deutsche Bank and Commerzbank had recently explored prospects for a merger.

The merger talk was quickly shot down by Deutsche chief executive John Cryan.

Read more: Commerzbank and Deutsche Bank merger shot down but share prices still up

Nevertheless, Cryan did say that he felt more M&A activity in the banking sector was required.

"We need more mergers, [not just] at a national level, but even also across national borders. Only then can we be profitable in the long run,” he said.

However, Hufeld cautioned against such sentiment.

He said that extracting synergies from mergers was hard work and – although not specifically referencing Deutsche Bank and Commerzbank – said that merging two weak banks would not usually create a strong one.