FRANKFURT (Reuters) – Europe needs bigger, stronger banks that can compete with U.S. and Chinese rivals, the president of the European Central Bank (ECB) said on Monday, as Italian bank UniCredit seeks to put its hand on its German competitor Commerzbank.

UniCredit, Italy’s second-largest bank, is pushing for a merger between the two groups after buying a stake in Commerzbank earlier this month, sparking criticism from the bank and German politicians who want to preserve the bank’s independence.

Christine Lagarde explained during a hearing at the European Parliament’s Economic and Monetary Affairs Committee that such changes of scale are in Europe’s interest and that it is up to private sector players to decide whether they want to make deals.

“Cross-border mergers that create banks that are truly able to compete on scale, depth and breadth with other institutions around the world, including US banks and Chinese banks, are in my view desirable.” , said the ECB president, adding that her comments should not be seen as direct intervention in any particular agreement.

Sources had previously indicated that ECB officials supported the principle of the agreement and saw Berlin’s opposition as going against the principle of European integration.

Christine Lagarde believes that it is up to the private sector to determine whether a deal makes sense, although cross-border mergers carry certain risks.

“Cross-border mergers, if they produce larger, more agile institutions, which have more scope and more depth, present many advantages,” judged Christine Lagarde.

The ECB’s supervisory body will have to approve Commerzbank’s increased stake in UniCredit while the Governing Council is expected to give its approval for a possible merger.

(Reporting by Balazs Koranyi, Bertrand de Meyer, edited by)

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