Some of Europe's biggest banks are in talks with Italy's UniCredit SpA about its proposal for a 20 billion euros ($25.2 billion) private sector fund to help failing lenders, a source close to the issue said.
The privately financed fund would be an alternative to a European Union (EU) proposed bank tax to help pay for the financial crisis, the source said Monday. UniCredit Chief Executive Alessandro Profumo has criticized the EU levy.
UniCredit, Italy's biggest lender, has discussed the fund with Deutsche Bank, Spain's Banco Santander and France's BNP Paribas, the source told Reuters.
The reception has been generally favorable but they (Deutsche Bank, Santander, BNP Paribas) have to decide. They would bring it up to the board (level) because it is an investment, said the source, who spoke on condition of anonymity.
Santander, BNP Paribas and Deutsche Bank declined to comment.
Profumo outlined the fund proposal in the Financial Times on Monday. He wrote in an opinion piece it would provide guarantees to support ailing banks to issue secured notes.
The proposed fund would be for lenders that regulators consider viable, said the source. It could group about 20 European cross-border banks, including UniCredit, which carried out two capital increases totaling 7 billion euros during the financial crisis.
The UniCredit-proposed fund is among a number of proposals to shore up the banking system and curb risk from failing lenders in the wake of the financial crisis.
EARLY INTERVENTION FUND
The EU's 27-nation bloc is drafting plans for a network of national bank resolution funds, based on a bank tax. The funds would pay for the winding-up of ailing banks so that taxpayers do not foot the bill in the future.
Profumo, who also is president of the European Banking Federation, said last month that the tax was deeply mistaken.
The source said the proposed 20 billion euro fund could be raised over five years and could be discussed among other big European banks in coming weeks.
It is an early intervention fund, so it would be only for banks that authorities consider financially viable. It is not at all for a bank that will fail, the source said.
It would be to help three, four, five banks, not for a systemic crisis.
A German banking source said it was doubtful that Profumo's proposal would get industry backing. Most members of the Institute of International Finance (IIF), the banking lobby group, oppose a bail-out fund, and a resolution fund to wind down ailing banks will become a reality in most countries, the source said.
Asked about Profumo's proposal, EU Internal Market Commissioner Michel Barnier called it encouraging. He said it should not rule out wider funding from the financial sector.
We should not have taxpayers footing the bill and banks should pay for the banks, he told a news conference in Brussels.
A banking analyst said there appeared to be little difference between the EU tax and Profumo's proposal.
If that's his solution, I can't see the difference between a tax and a fund and a voluntary contribution for a fund, he said.
Deutsche Bank Chief Executive Josef Ackermann has asked for a European fund that is co-financed by governments to wind down ailing banks without any dangers for the whole banking system. He has stressed that banks alone would be unable to build up such a fund fast enough.
Speaking in South Korea Monday, Ackermann, who is also chairman of the IIF, said a balance needed to be set between stability and the ability of the banking system to support growth.
Shares in UniCredit were up 1.34 percent at 2.08 euros by 1403 GMT, and the STOXX Europe 600 banking index was up 1.01 percent.
(Additional reporting by Edward Taylor and Philipp Halstrick in Frankfurt, Huw Jones in London, Marcel Michelson in Paris and Paul Day in Madrid; Editing by Sharon Lindores)