LBBW’s takeover of Sachsen LB will likely be followed by more consolidation in Germany’s public bank sector, but power games among their owners are bound to complicate the process.

The liquidity squeeze in the capital markets has already had a lasting impact on the German banking sector. The rescue of Sachsen LB, after it was unable to provide credit facilities it had pledged to one of its investment funds, led to the Landesbank for the state of Saxony being sold to LBBW, its bigger peer, on Sunday.