The fallout from the global credit and financial crisis has helped Germany to kick-off a long overdue round of consolidation in the nation's fragmented banking business.

From Munich to Hamburg, German bankers and politicians are busy rescuing their banks from the US credit crisis. As the US-originated subprime crisis engulfed Germany, few banks were bailed out and few others were taken over by foreign banks. Germany's Chancellor, Angela Merkel has announced a ¤500 bn (£393 bn) bail out package for its banks. Fears of vanishing have kindled fires of consolidation among the German banks. Amid the rising credit costs and global financial crisis, German banks have kicked off a major consolidation drive that has been due for a long time. In Spetember 2008, Germany's No.1 bank, Deutsche Bank, bought a major stake in retail bank, Deutsche Postbank for $14.4 bn. The move came just a fortnight after Germany's No.2 lender, Commerzbank, struck a $13.73 bn deal to buy the No. 3 player Dresdner Bank from its owner, insurer Allianz. These two mergers have hitherto given a mesage to the world that Germany is set for a round of bank consolidations.

German bankers and politicians view the US financial turmoil that hit their domestic markets as an opportunity to switch gears within the German banking system. With reference to the problems that have hit the German banks, Peer Steinbrück Germany's Finance Minister said, "the situation is serious and the current difficulties should prompt change." According to a survey conducted by the German business daily Handelsbatt, 31% of the 791 German business managers polled expressed concern about the reputation of German banks. Given the status quo of German banks, many experts fear possible takeovers from abroad. Banks like Spain's Santander, Italy's Intesa Sanpaolo and Dutch group ING are keenly eyeing the German market for possible acquisitions. Already France's Credit Mutuel took over Citigroup's retail banking operations in Germany in July 2008 and the US private equity investor Lone Star bought IKB in August 2008. In this backdrop, Deutsche Bank's Head Josef Ackermann and many other banking professionals are emphasizing the need for banking sector consolidation in Germany. Premier rating agency Fitch also conforms prevailing crisis to be a potential catalyst for consolidation of the German banking market.

Professional Banker Magazine, German Banking Market, Global Financial Crisis, US Credit Crisis, Subprime Crisis, Foreign Banks, German Banking System, Banking Analysts, Internal Banking Mergers, Global Markets, Mergers and Acquisition, Global Economy.