Deutsche Bank CEO says Europe needs ‘strong banks‘ amid merger speculation with Commerzbank

A tie-up between two biggest banks could be on the cards sooner rather than later, .

and domestic rival have been at the center of merger speculation for years, but the Financial Times reported Tuesday that many external observers based in Frankfurt now believe a proposed deal simply comes down to a question of when — and not if.

To be sure, with almost 2 trillion euros ($2.2 trillion) in total assets, a Deutsche Bank-Commerzbank merger would create Europe‘s third-largest European bank after and .

“The emergence of true European champions hinges on a unified regulation in Europe, a single financial market,” Deutsche Bank CEO Christian Sewing said at a banking conference in Frankfurt on Wednesday, adding consolidation in the sector was likely to increase considerably. Sewing did not directly comment on the merger speculation surrounding Deutsche Bank and the German lender has never confirmed the reports.

Sewing added Wednesday: “Europe does not need as many banks as possible, Europe first and foremost needs strong banks.”

European banks are constantly shrinking in size. Blame it on the financial crisis, the low interest rate environment or the massive fines that these banks have had to incur, but the sector is gradually becoming smaller.

In the last year, lenders like , and have announced their plans to close operations that they see as less profitable. Banks across Europe have also seen mergers and consolidation, especially in Spain and Italy in order to save banks from going bankrupt, which could lead to a bigger systemic risk across the region.

In June 2017, Spanish lender Santander Banco Popular for a symbolic price of one euro after the European Central Bank declared the latter was “failing or likely to fail.”

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