MILAN (Reuters) -Germany's finance ministry on Sunday denied that the country was considering introducing a law to protect domestic banks from cross-border takeovers as Italy's UniCredit seeks a merger with Germany's Commerzbank.

Italian newspaper La Repubblica on Sunday cited a source close to the matter that the German government was considering a law preventing foreign lenders from buying 100% of any bank and requiring it remain listed in Germany.

"We deny that," a spokesperson for the German finance ministry said.

Berlin was taken aback by UniCredit's swoop to build a large stake in state-backed Commerzbank, a move the Italian bank says could lead to a merger.

(Reporting by Sara Rossi and Klaus Lauer; additional writing by Tom Sims; editing by Gavin Jones, Christina Fincher and Hugh Lawson)