German Chancellor Angela Merkel said it’s up to Deutsche Bank AG and Commerzbank AG executives to decide if their historic merger plans make sense, exposing divisions in her coalition over a deal that threatens as many as 30,000 jobs.
The plan to combine Germany’s two biggest lenders is a private business matter, Merkel said at the Global Solutions summit in Berlin Tuesday, after the lenders announced talks on a deal that could transform the country’s banking landscape. The government would have “a certain interest” to look at the deal because of its near 16 percent shareholding in Commerzbank, she said.
“I very much don’t want the government to intervene,” Merkel said in an onstage discussion with John Micklethwait, editor-in-chief of Bloomberg News. “Only the companies can and must assess this for themselves."
A merger between the two Frankfurt-based banks poses a risk for Merkel, whose government must balance the potential loss of tens of thousands of financial-sector jobs with the prospect of a fallout should the lenders be dragged under by an economic downturn. The chancellery has been more muted on a deal that was seen as being pushed forward by German Finance Minister Olaf Scholz, a Social Democrat, and deputy Joerg Kukies.
Finance Ministry
The finance ministry had backed a merger as a way to assert a national banking champion for Germany and help ensure that country has a domestic lender capable of funding its export-oriented economy. Merkel’s chief of staff, Helge Braun, this week said jobs would be top priority in any government decision on Deutsche Bank -- and that Germany could get by without a global player in finance.
The two banks confirmed the move to deeper discussions in statements on Sunday, capping months of speculation and behind-the-scenes talks with the Finance Ministry. Both firms have struggled to restore revenue growth after deep cuts to their investment banking units -- a task made more difficult by a sluggish economy that has pushed back expected interest rate rises.
Merkel’s government is likely to keep the holding in Commerzbank if the banks go through with the merger. That would preclude the politically perilous option of burdening German taxpayers with losses from selling shares the government acquired during a 2009 bailout.
The lenders are said to be working with investment banks to evaluate a combination. The structure of the resulting, enlarged bank is still unclear, with asset sales and fundraising among the possible options. Deutsche Bank expects to spend the next month in negotiations, a person briefed on the talks has said.
Read this for more on what the merger talks are set to focus on
Merkel also said that private parties involved are best placed to take the decision because they face “the challenges, chances and risk.”
Kukies, a former Goldman Sachs banker, on Tuesday canceled a speech in Frankfurt, which is home to both banks and their most important regulators. Those watchdogs, meanwhile, signaled the creation of a new national banking champion may not be relevant in their assessments of any deal.
National Champion
“The term ‘national champion’ isn’t a category supervisors use,” said Joachim Wuermeling, a top Bundesbank official who also sits on the European Central Bank’s oversight arm. Regulators don’t base their decisions on what they or others think the banking industry should look like and they don’t let national interests shape their actions, he said.
That echoes comments from Andrea Enria, who leads the ECB’s supervisory arm. “I don’t particularly like the idea of national champions, of European champions,” he said in an interview with the Financial Times published on the ECB’s website. “If there are foreign banks, foreign investors, bringing their expertise, their capital, into your jurisdiction, that should be welcome.”
Their views matter because bank mergers require the ECB’s approval. Investors aren’t sold yet either and the evaluation of a tie-up follows a series of failed turnaround plans by the companies.
“Only the parties involved can evaluate this,” transaction, Merkel said. “It is nothing new that we have consolidation in the European banking market. But personally I will wait for what the economic actors will have to say and will not express an opinion."
--With assistance from Nicholas Comfort.
To contact the reporters on this story: Patrick Donahue in Berlin at pdonahue1@bloomberg.net;Arne Delfs in Berlin at adelfs@bloomberg.net
To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, ;Ben Sills at bsills@bloomberg.net, Ross Larsen
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