* Commerzbank agrees to pay 17 mln euros - source
* Court still needs to approve deal - source
* Commerzbank, prosecutors decline comment (Adds information from source, background)
FRANKFURT, Oct 15 (Reuters) - Commerzbank, Germany's second-biggest bank by market value, has agreed to pay 17 million euros ($20 million) in fines for helping clients evade taxes, under a deal with Cologne prosecutors, a person familiar with the matter told Reuters.
Commerzbank is the third German lender after Hypovereinsbank (part of Italy's UniCredit ) and HSH Nordbank to be fined for illicit business in Luxembourg and Panama.
The source told Reuters on Thursday that a court would have to approve the deal, which was first reported by German daily Sueddeutsche Zeitung on Wednesday.
The Cologne prosecutor's office and Frankfurt-based Commerzbank declined comment.
Prosecutors launched an investigation into Commerzbank and its clients in February on suspicion that the lender, through its Luxembourg-based subsidiary, helped wealthy German customers stash away assets in shell companies in Panama and so helped them evade taxes.
Commerzbank said at the time the investigation concerned old cases that date back 10 years or more, adding it was fully cooperating with authorities.
$1 = 0.8724 euros Reporting by Matthias Inverardi and Alexander Huebner; Writing by Andreas Cremer and Maria Sheahan; Editing by David Holmes