MILAN (Reuters) -UniCredit has built a "federal model" as a pan-European bank with subsidiaries in each of its 13 markets that can act locally, CEO Andrea Orcel said, as he called on Europe to promote financial integration.

UniCredit last month sparked a backlash in Germany by building a near 21% stake in Commerzbank, subject to supervisory approval, that would make the Italian group the biggest investor in the German rival.

Orcel, reiterating his view that Europe cannot thrive without more integrated banking and capital markets, said each UniCredit subsidiary had the "flexibility and the agility to act locally."

"We're a pan-European bank running a federal model where 13 distinct banks from different countries come together as partners," Orcel said in a video message at a business conference.

Orcel has said a Commerzbank merger would be the most beneficial outcome for all stakeholders, while not ruling out UniCredit could simply sell its stake.

Germany has rejected Orcel's approach as "hostile" with politicians and union leaders expressing concerns about UniCredit expanding by taking control of Germany's second-biggest listed bank.

"This is not just about growing and increasing our footprint, it's about creating value for the whole of Europe. Our future depends on our ability to collaborate," Orcel said.

Commerzbank's new CEO Bettina Orlopp, who took up her job on Tuesday, told staff the bank's leadership fully supports its strategy built on independence.

Several people familiar with UniCredit's past attempts to buy Commerzbank have told Reuters a possible scenario could be folding UniCredit's German business HVB into Commerzbank while retaining the German bank's listing to safeguard its local roots.

Orcel said UniCredit's model worked because it combined a "unified strategy and culture" with component banks that are decentralised.

Since arriving at UniCredit in 2021, Orcel has simplified decision making, giving more power to staff in client-facing roles. Previously, the emphasis was on risk control and decisions were strongly centralised.

The UniCredit CEO reiterated his call for "bigger, stronger" European banks to underpin the bloc's economy and help it address a large output gap with the United States.

With an economy that has grown by 4.2% since the COVID-19 pandemic hit, Italy has "the credibility to push for the reforms that Europe needs," Orcel said.

"Just as Italy has been a leader in European economic recovery, so too it must play a leading role in advocating for its integration," he added.