Deutsche Bank is reportedly seeking assurances from Chancellor Angela Merkel that it will receive government backing if it moves forward with a possible merger with rival firm Commerzbank AG.
According to a report from Bloomberg published today, which cites people involved in the discussions who don’t want to be named, the firm wants to secure government backing for potential job cuts if they consider going public with the potential plans.
Poor Performance and Scandals Put Deutsche in Tough Position
As Finance Magnates reported, towards the end of January this year, reports surfaced that Deutsche Bank may be forced to merge with rival firm Commerzbank AG, following a number of scandals and poor financial performance.
The main reason for the merger, according to Bloomberg, is that German officials don’t think that the bank’s CEO, Christian Sewing will be able to return Deutsche Bank to its glory days and want a deal done before any possible economic downturn occurs and exacerbates the situation.
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Unionists Push Back Against Deutsche Bank Merger
However, the possible merger has faced strong pushback from supervisory board members, with labor representatives on Deutsche’s oversight body opposing the deal, according to reports.
Specifically, Jan Duscheck and Stephan Szukalski told Bloomberg that a merger between the two German banks would result in 30,000 job losses. Furthermore, the labor representatives argued that a merger would actually make the two banks weaker, which defeats the purpose of any deal between them.
So far, the German Finance Ministry has encouraged the struggling banks to combine. However, according to the unnamed sources, Merkel remains skeptical that a merger would fix any of Deutsche’s problems and has stayed on the sidelines so far.
Nonetheless, Merkel will not be able to stay on the sidelines forever, as the government owns 15 percent of Commerzbank. If the deal is to go ahead, the chancellor will eventually have to make a decision one way or the other.