Unlisted Dutch Rabobank and German co-operative DG Bank said yesterday they were merging their corporate and investment banking activities as a first step in the formation of a wider European network of mutuals.

Rabobank, the third-largest Dutch bank, and DG Bank said in a joint statement their 50-50 venture would take the working name DG-Rabo International, with operational head offices in Amsterdam and Frankfurt.

"(The) long-term plan is to establish a European co-operative bank based on a network of co-operative financial groups with a strong domestic franchise," they said.