Banks and insurance
The German state wants to strengthen its position in the world banking system and begin negotiations on the merger of several local and regional financial institutions to create a financial giant with assets of $ 260 billion and over 11,000 employees, reports Financial Times.
The decision to officially begin talks between the creditors of Helab in Frankfurt and the asset manager of Deka was made on Tuesday by the heads of the regional banks that control them – both are under state control.
Landesbanken are regional banks focused on helping local banks save money, called Sparkassen – and are co-owned by the same Sparkassen, which is assisted by the regional government.
Thus, the new lender that would emerge should the merger continue will become a major force in the consolidation of the fragmented German banking system, which, as a result, has high operating costs.
"In the long term, Sparkassen local banks need a large financial institution to support local banks with far greater savings," according to anonymous sources quoted by FT.
Furthermore, the Helaba-Dek merger could become a vehicle for future mergers, including other regional banks such as LBBW in Stuttgart and BayernLB in Munich.
"The sector needs radical reforms, and the merger of Helaba and Deke could be the starting point," says Jan Pieter Krahnen, professor of finance at the University of Frankfurt.
Previous attempts at consolidation have failed after Helaba dropped its merger talks with the NordLB regional bank in Hanover. Later, NordLB made a $ 3.5 billion government bailout.
So far, regional bankers and government officials have been reluctant to relinquish control over regional creditors.
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