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Tuesday, December 8, 1998 Published at 07:42 GMT

Business: The Company File

Doubts cast over bank mega-merger

The huge financial merger has run into problems

One of the biggest bank mergers in history could be severely delayed by calls for compensation for Holocaust victims.

Deutsche Bank's $10.1bn merger with Bankers Trust of the US is at risk after Alan Hevesi, the financial controller of New York City, said the deal should not be approved until the big German bank resolves billions of dollars of Holocaust claims.

"When federal and state governments review this proposed merger, they should consider how Deutsche Bank is dealing with Holocaust-related claims," he said.

Mr Hevesi could impose sanctions against Deutsche Bank if it refuses to co-operate.

Swiss compensation

He took a similar approach with the merger of the two largest Swiss banks earlier this year, helping to convince them to reach a $1.25bn settlement with victims of the Holocaust.

Deutsche Bank has already been sued in the US over its role in handling stolen gold during World War II.

As one of the largest ever cross-border financial deals, the merger of Deutsche Bank and Bankers Trust could become a focal point for the campaign by Holocaust victims to receive compensation from some of Germany's largest companies.

The merger, which stands to create the world's largest bank in terms of assets, must be approved by the US Federal Reserve and by New York state banking officials as the city is a major world financial centre.

High level talks underway

When the merger was announced, Deutsche Bank chief executive Rolf Breuer said German banks were already looking at ways to resolve issues related to the Holocaust.

He added German Chancellor Gerhard Schroeder's attempts to intervene in the Holocaust issue meant those matters are now being dealt with collectively by Germany at a higher level.

The World Jewish Congress, (WJC) whose objections to the merger of Swiss Bank Corporation and the Union Bank of Switzerland earlier this year were heeded by New York State banking regulators said it was in talks with Deutsche Bank, as well as the German government, and should decide in about two weeks what position it would take.

WJC president Edgar Bronfman Sr said he believes Deutsche Bank's merger with Bankers Trust will not go through unless the German bank admits its errors during World War II and makes restitution.

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