"More competition is fundamentally welcome," Reinhold von Eben-Worlee, head of the Family Businesses Association, told Reuters. "Therefore, we see no reason why the two banks should merge."

Mario Ohoven, president of the German Association for Small and Medium-sized Enterprises (DMB), made similar remarks when asked about a possible merger.

"When two troubled banks come together there is no guarantee this will result in an economically powerful institution," Ohoven told Reuters. "Put bluntly: putting two limping entities together doesn't result in a European Champion."

(Reporting by Rene Wagner; Writing by Joseph Nasr; Editing by Arno Schuetze)