Germany's banking watchdog has thrown merger talks between Dresdner Bank and Commerzbank into confusion by rendering Commerzbank's biggest shareholder powerless to influence the outcome.

The Bundesaufsichtsamt fur das Kreditwesen has barred Cobra from exercising voting rights on its 17 per cent stake.

The regulator declined to give details of its ruling, which observers saw as unexpected.

Mr Hansgeorg Hofmann, who heads Cobra, said it was based solely on personal income tax irregularities reported three years ago when he was a member of Dresdner's management board.