BERLIN (Reuters) - The International Monetary Fund on Friday urged Germany's banks to speed up their restructuring plans to become more profitable and reduce risks.
The comments come after Deutsche Bank and Commerzbank ended merger talks in April. German government officials had pushed for a tie-up to create a national banking champion and end questions over the future of both banks, which have struggled to recover since the financial crisis.
"Restructuring must be accelerated in the banking sector through further consolidation, cost-cutting, and continued development of fee-based income," the IMF said in a report on Germany.
The IMF said the life insurance sector - which has been struggling to pay out on life insurance policies in an era of historically low interest rates - needed to speed up its move away from conventional guaranteed-return products to other kinds of products.
"In this context, supervisors should continue monitoring interest rate risk and progress in implementing adjustment plans in both banking and insurance sectors," the IMF said.
The IMF also said Germany's short-term growth outlook remained good but Europe's largest economy faced major risks including a worsening of trade tensions, a further China slowdown, a disorderly Brexit and more trouble in the euro zone.
It urged the German government to reform its tax system to promote growth, saying that the combination of greater tax relief for households and wage growth - would boost consumption, helping rebalance the economy.
(Reporting by Michelle Martin; Editing by Tassilo Hummel and Thomas Escritt)