German watchdog says bank mergers no panacea

September 1, 2016 6:05 AM EDT

A logo of a branch of Germany's Deutsche Bank is seen in Cologne, Germany, July 18, 2016. REUTERS/Wolfgang Rattay/File Photo

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FRANKFURT (Reuters) - Banking mergers can help to lower banks' costs but are no panacea for the problems confronting the sector in an era of negative central bank interest rates, the head of Germany's financial watchdog said on Thursday.

"Consolidation cannot be a goal in itself," Felix Hufeld told a banking conference, a day after news emerged that Germany's two biggest lenders, Deutsche Bank and Commerzbank had recently explored prospects for a merger. [nL8N1BC1WN]

It is tough work to extract synergies from mergers, and merging two weak banks does not usually create a strong one, Hufeld added.

(Reporting by Jonathan Gould; Editing by Maria Sheahan)

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