Peer Steinbrück, Germany's finance minister, yesterday increased political pressure on regional governments to speed up consolidation of the country's public-sector Landesbanken, warning them not to further delay "inevitable" change.

Germany's banking market has been the worst hit in Europe by the recent credit market turbulence, which caused two banks to collapse and forced politicians to engineer two bail-outs.

Analysts see the weaknesses of the banks in one of the continent's most fragmented markets as a central factor in the collapses and a fresh incentive for consolidation.

Mr Steinbrück's strongly worded call underscores growing concern in Berlin that regional political rivalries and sensitivities could hinder restructuring of the system.

"The question of how this inevitable consolidation at the Landesbanken level should take shape - by which I mean the question of who should link up with whom - is perceived differently in different regions. This is a product of our federal system," Mr Steinbrück told a conference in Frankfurt.

"But, given the breakneck pace of financial globalisation, it would be grossly mistaken to think that the status quo, or the postponement of a decision on Landesbanken consolidation, is at all an option."

The federal government has long pressed for faster consolidation of the sector.

Successive finance ministers have seen it as a potential risk to the economy, with the small and mid-sized companies that form its backbone still reliant on loans for funding.

However, Berlin's efforts have so far been hampered by its lack of significant leverage - either on the commercial banks or on the Landesbanken, which are controlled by regional governments and savings banks. - ( Financial Times service )