"The outcome is still open, and there is nothing more to say at this time," Deutsche Bank spokesman Dierk Hartwig said. A spokesman for Dresdner said the talks are at an advanced stage but declined to comment further. A spokesman for Allianz AG Holding said both banks "have informed us of their talks," but declined to comment further.

Allianz holds 21.7% of Dresdner and roughly 5% of Deutsche Bank. Deutsche Bank holds 7% of Allianz and Dresdner holds an additional 10% of Germany's largest insurer.

This complex cross-shareholding structure has long been seen as an obstacle to financial-sector consolidation in Germany. But recent plans by the German government to lift the capital-gains tax on the sale of industrial holdings is set to change that problem.

An advance copy of a report in this month's Manager Magazin reported Tuesday the two banks plan to merge to form the largest bank in the world with total assets of 2.5 trillion marks ($1.23 trillion). The banks' supervisory boards will agree to the merger later this week, the report said.

Deutsche Bank, the world's largest bank in asset terms since it acquired Banker's Trust Corp. in 1999, and Dresdner Bank, Germany's third-largest bank, had discussed cooperation in the past.

The banks held discussions last year about a possible merger of their retail-banking operations, but broke off talks in October. At that time, Dresdner Bank said cooperating with Deutsche Bank in this area would have created a great burden. Officials from Dresdner and Deutsche Bank met well into the morning Tuesday to discuss the potential deal, a person familiar with the talks said. Representatives of both banks continued talks on the potential deal Tuesday at an undisclosed location.

(An Interactive Journal News Roundup)