BERLIN, Aug 27 (Reuters) - German banks blocked PayPal ( PYPL )

payments totalling more than 10 billion euros ($11.7

billion) over fraud concerns, the Sueddeutsche Zeitung newspaper

reported on Wednesday, without specifying its sources.

The payments were halted on Monday after lenders flagged

millions of suspicious direct debits from PayPal ( PYPL ) that appeared

last week, the newspaper said.

Asked to comment on the report, a PayPal ( PYPL ) spokesperson said a

temporary service interruption had affected "certain

transactions from our banking partners and potentially their

customers", but that the issue had now been resolved.

A banking source, who spoke on condition of anonymity, told

Reuters the value of payments stopped by banks fell somewhere

between hundreds of millions and billions of euros.

The digital payments giant has a security system that

usually filters out scams trying to extract money from banks.

But the Sueddeutsche Zeitung said that system was either

completely or largely disrupted late last week, meaning the

payments app was sending unvetted direct debits to banks.

"We quickly identified the cause and are working closely

with our banking partners to ensure that all accounts have been

updated," the PayPal ( PYPL ) spokesperson said.

Shares of the U.S.-based payment app were 1.9% lower after

market open at $68.89, versus broadly flat indicators for the

main Wall Street indexes.

Germany's Savings Banks and Giro Association, representing

more than 300 local savings banks and financial service

providers, said in a statement on Wednesday that instances of

unauthorised direct debits from PayPal ( PYPL ) had a "significant impact

on payment transactions" throughout Europe, and particularly in

Germany.

The association added that PayPal ( PYPL ) transactions for customers

at Sparkasse banks were operating normally as of early on

Tuesday and said supervisory authorities had been informed of

the incidents.

Germany's BaFin financial regulator confirmed it had been

informed but did not provide any further details.

A spokesperson for the CSSF regulator in Luxembourg, where

PayPal Europe has its headquarters, said there were currently no

major ongoing disruptions which required the regulator to

intervene, declining to comment on PayPal ( PYPL ) specifically.

($1 = 0.8542 euros)