German Economy Minister Rainer Bruederle has urged the country's state-owned Landesbanks to merge. "There should at last be a shake up in the whole sector. In my view, one Landesbank would be plenty," Bruederle, a member of the pro-business Free Democrats, who share power with Chancellor Angela Merkel's conservatives, was quoted saying on Sunday by the Tagesspiegel daily.
The financial crisis has hit the regional Landesbank sector hard and several, including WestLB, LBBW and BayernLB, have been forced to make big writedowns.
Berlin has long called for consolidation in the Landesbank sector but the financial crisis has strengthened its argument by highlighting the lenders' weaknesses. Some state governments which partly own the lenders, are, however, reluctant to usher in a wave of consolidation as they fear heavy job cuts.
The VOeB Association for German Public banks rejected Bruederle's demand, saying the lenders were an indispensible part of the regional financing system which helped small and medium-sized firms.