* Blocked for conflict of interest - sources
* Another hiccup for bank as it restructures (Updates with details)
FRANKFURT, Oct 10 (Reuters) - In a rare intervention, Deutsche Bank's regulators are blocking a banker backed by its largest shareholder, Qatar, from a seat on the supervisory board because of a conflict of interest, according to two people with knowledge of the matter.
The rejection is a further hiccup for the German lender, which has reshuffled management, is cutting thousands of jobs and closing down some businesses in an effort to make a profit.
Deutsche Bank chair Paul Achleitner had announced in August the appointment of former UBS manager Juerg Zeltner, praising him as a valuable addition and "a top-level European banker with proven expertise".
Zeltner was also to represent the interests of Qatar's royal family - a top shareholder in the German lender. KBL is controlled by the same family.
Deutsche's regulators - the European Central Bank and financial markets watchdog BaFin - have now determined that Zeltner's position on Deutsche's board would be a conflict of interest because he is also the chief executive officer of KBL European Private Bankers (KBL epb), a business that overlaps with Deutsche's.
"It's a done deal. It is now only a matter of finding a face-saving way out," the person said.
Deutsche Bank declined to comment.
The bank said last month in a statement that all potential conflicts of interest that could arise from Zeltner's activities and his relationship with one of Deutsche's major shareholders had been reported to the supervisory board and the company.
"They were reviewed by the Nomination Committee and considered to be low," Deutsche said at the time.
Achleitner chairs the committee that recommends new board members who represent shareholders.
The ECB, BaFin, KBL and a spokesman for Zeltner declined to comment. (Reporting by Tom Sims, Patricia Uhlig, Frank Siebelt, Hans Siebelt, John O'Donnell, and Angelika Gruber; Editing by Kathrin Jones, Tassilo Hummel and Giles Elgood)