Explainer: Why Germany wants a merger to underpin Deutsche Bank

FRANKFURT - The German government has pressured Deutsche Bank into merger talks with state-backed Commerzbank amid concerns for the health of the country’s flagship bank, according to officials familiar with the matter.

German officials fear that a recession or big fine, for example, could derail the bank’s fragile recovery. Commerzbank, like Deutsche, has struggled to rebound, and German officials say it is vulnerable to a foreign takeover. If an international rival snapped it up, that would increase competition for Deutsche on its home turf.

Deutsche’s chief executive officer Christian Sewing would prefer to have more time to stabilize the bank before taking on a merger, people familiar with the matter have said.In February, Deutsche’s management board gave Sewing the go-ahead for exploratory talks with Commerzbank, a person with knowledge of the matter said. There have been contacts among a small circle of executives. Talks could end without a deal, the person said.

The deal would make the German government a shareholder in the country’s largest bank and executives would want to curb its influence. The continued pressure from Berlin makes it harder for Deutsche to go it alone. Merging with a state-owned lender, in the officials’ view, offers a safe harbor.

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