* Pressure to cut costs still exists after merger talks
* Bafin studying possible erosion of credit lending standards
* Bafin has set up unit to study sickly banks (Recasts with comments on Deutshe Bank-Commerzbank merger talks)
FRANKFURT, May 7 (Reuters) - The failure of merger talks between Deutsche Bank and Commerzbank was "not a surprise", a German official said on Tuesday.
The statement by Raimund Roeseler, an executive with Germany's financial markets watchdog, marked the regulator's first public comments on the failed merger talks, which were discontinued last month after six weeks of negotiations.
The banks attributed the failure to risks of doing a deal, restructuring costs and capital demands.
The banks will still be under pressure to cut costs, Bafin president Felix Hufeld said. He dismissed the notion that hurdles stood in the way to cross-boarder banking mergers in Europe.
The comments, made at an annual news conference, came as Bafin disclosed that it was looking into a possible erosion of bank lending standards in Germany and has also created a new department to deal with especially troubled banks.
Bafin and the Bundesbank in April started a survey of nearly 100 financial institutions, according to Roeseler.
"A possible erosion of lending standards in conjunction with reduced risk provisioning can lead to a threat to financial stability," Roeseler said. "We are therefore taking a closer look at this."
The survey is still being conducted and Bafin said it would provide results when they were available.
Bafin founded the new department - a so-called intensive care station - at the beginning of this year.
Bafin decided to take this step while the economy was good "in order to be prepared when there really is a need for a downturn", he said.
Roeseler added that there were banks on the intensive care station but he would not provide further details except to say it was a single-digit figure.
Reporting by Tom Sims and Hans Seidenstuecker, Editing by Mark Heinrich and Ed Osmond