Shares in both Dresdner Bank and Commerzbank rose Friday, following unconfirmed reports that the two banks are in talks (again) about a possible merger. The two firms tried to tie the knot in 2000, but the deal fell apart then as officials were said not to have been able to agree on the financials and the allocation of executive roles.

It remains unclear what would become of Dresdner's investment banking arm, Dresdner Kleinwort, in the event that the deal does go ahead this time. Commerzbank refocused its own investment banking operations a few years back on a more client-driven strategy. Wags say that the combination of Dresdner and Commerzbank would result in the creation of the world's largest second-tier bank.

Dresdner is also said to have exchanged data with Deutsche Postbank (which Lloyds TSB might be after too). Commerzbank has said that it might be up for a three-way merger with Dresdner and Deutsche Postbank.

In the meantime, Reuters reports that shares in Wachovia fell last week to their lowest levels since 1992. Some feel that the bank is now ripe for a merger, feeling that Merrill Lynch (although itself currently in difficulty) may be the preferred partner. Ironically, Merrill Lynch's then CEO, Stan O'Neal, is said to have got it in the neck from his board (and subsequently fired) last year for making an alleged unauthorized call to Wachovia CEO Ken Thompson about the possibility of a deal. Thompson was forced out by his board earlier this month.

The news agency also reports that Fortis is having problems selling the parts of ABN AMRO is acquired last year and has to sell for anti-trust reasons. Deutsche Bank is said to be the only firm willing to buy ABN's Dutch commercial advisory and corporate client business but, according to Dutch daily newspaper Telegraaf, has imposed 'ridiculous condtions' on a sale.

The Daily Telegraph reports that Barclays is 'on the verge' of re-filing its $300 - $400m hedge fund lawsuit against Bear Stearns. The suit is said to also likely now name Bear's new owner JPMorgan Chase as a defendant. The Wall Street Journal reports that US federal prosecutors are thought be be preparing to file criminal charges against managers of the two Bear hedge funds which went belly up last summer, and effectively kicked-off the credit crunch. At issue is whether the hedge fund managers deliberately misled investors about the true financial state of the funds.

The Wall Street Journal reports that Credit Suisse has confirmed that it has gained approval from Chinese financial regulators to establish a joint securities unit in China. Credit Suisse is to own a third of the equity, with Chinese partner Founder Securities owning the rest.

Finally, Bloomberg reports that Credit Suisse ($265m) and UBS ($283)  have agreed to pay $548m to settle all legal claims related to their role in the financing of failed Italian dairy company Parmalat. Both banks deny wrongdoing.

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