Deutsche Bank CEO says Europe must create conditions for banking consolidation

FRANKFURT (Reuters) - Europe needs to create the conditions for banking consolidation before the continent can form true European banking champions, Deutsche Bank's (DBKGn.DE) chief said on Tuesday.

Christian Sewing, the new CEO of Germany's largest bank, said that the German and European markets were too fragmented, with disparate rules on insolvency, consumer protection, and mortgage securities.

"We don't have a single market," Sewing told politicians in Berlin. "At the moment, we have 28 individual markets."

Sewing said that large banks are a "gigantic advantage" and needed to compete with financial institutions in the U.S. and China. But it doesn't make economic sense to create European champions at the moment, he said.

"Even if a lot has already happened in Europe, we are far from reaching our goal of building a common banking and financial market," Sewing said in prepared remarks.

Sewing's remarks appear to pour cold water on the idea of big cross-border mergers anytime soon.

Last week, Deutsche Bank downplayed the idea that a deal with cross-town rival Commerzbank (CBKG.DE) could materialise soon, after Bloomberg reported that top shareholders had been consulted about a potential tie-up.

"We will need strong international banks in Germany and Europe," Sewing said. "And therefore the conditions for more consolidation must be created."

"We call for a common European market and an end to the fragmentation of the banking system. Only then will we be able to stand up to non-European competition in the long run - at least in our home market of Europe."

(Reporting by Tom Sims; Editing by Victoria Bryan)