FRANKFURT, Sept 18 (Reuters) - Any merger of Commerzbank

and UniCredit must create a competitive

institution robust enough to support German economic growth,

Bundesbank chief Joachim Nagel said on Wednesday.

Italy's second-largest bank took a 9% stake in Commerzbank

last week, catching German authorities off guard and getting a

hostile reception from local management, who want to fend off

any takeover attempt.

It will now be up to the European Central Bank whether to

allow UniCredit to increase its stake, so any comment from the

Bundesbank - whose representative sits on the ECB's Supervisory

Board - is likely to be closely scrutinized.

"We need strong and robust banks so that companies can

tackle and finance their future tasks," Nagel told a Commerzbank

event in Frankfurt.

"In case of possible mergers, it is important that a

competitive institution is created which fulfils this task as

best as possible," Nagel said, without any specific reference to

either of the lenders.

UniCredit is among the best capitalised banks in Europe,

with a common equity tier 1 or CET1 capital ratio of 16.2% at

the end of the first half, despite a generous dividend and share

buy-back programme.

This would suggest that UniCredit has the financial capacity

to engineer a viable takeover.

However, any deal is likely to be politically charged since

Germany's banking sector is dominated by two large institutions:

Deutsche Bank and Commerzbank.

The sale of Commerzbank to UniCredit would increase

competition for Deutsche Bank and leave Commerzbank under

foreign control, a potentially sensitive issue for a government

facing elections next year.

However, the ECB has repeatedly voiced support for

cross-border mergers to improve European banking

competitiveness, so the supervisor is unlikely to block the deal

if UniCredit can present a plan that creates a financially sound

mega-bank.