Some of Europe's biggest banks are in talks over a proposal by Italy's UniCredit SpA to create a 20 billion euros ($25.2 billion) private sector fund to help failing lenders, a source close to the issue said on Monday.
UniCredit, Italy's biggest lender, has discussed the privately financed 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 have to decide. They would bring it up to the board because it is an investment, said the source, who spoke on condition of anonymity.
UniCredit Chief Executive Alessandro 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, and is an alternative to a European Union (EU) proposed bank tax, the source said.
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 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 to help pay for the financial crisis was deeply mistaken.
The source said the 20 billion euros 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.
Deutsche Bank Chief Executive Josef Ackermann has asked for a European rescue fund that is co-financed by governments for a bail-out of banks in another crisis. He has stressed that banks alone would not be able to build up such a fund quickly enough.
Speaking in South Korea on Monday, Ackermann said a balance needed to be set between stability and the ability of the banking system to support growth.
Every single measure must be carefully assessed against the aim of making the financial system less accident-prone and more resilient, he said.
(Additional reporting by Edward Taylor and Philipp Halstrick in Frankfurt and by Madrid newsroom)
(Reporting by Ian Simpson; editing by Jeffrey Benkoe, Mike Nesbit)