UniCredit Pushes for Private Europe Bank Bailout Fund

Monday, 12 Jul 2010 07:29 AM

 

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A privately financed European recovery fund that would be used to bail out failed banks could raise up to 20 billion euros ($25.36 billion) of capital over a few years, the head of Italy's biggest bank said.

"It would not be a resolution fund. It would provide specific guarantees to support ailing banks to issue secured notes," UniCredit Chief Executive Alessandro Profumo wrote in the Financial Times' Monday edition.

In the article titled "Europe's banks need a recovery fund," Profumo said the fund would be created using voluntary contributions from top European banks and would not require funding from European authorities or member states.

"The option for authorities to use the fund to stabilize one or a few large, ailing banks can assure the market that the crisis can be contained at an early stage," he wrote.

"The fund would be one of the three necessary elements to avoid intervention in the next financial crisis: a supervisory and regulatory system that prevents, as much as possible, the causes of systemic crises."

He said the fund would act as "an effective system of crisis management" used to avoid contagion.

The European Union is in the process of drafting plans for a network of national bank resolution funds, based on a bank tax, which would pay for the winding up of ailing banks so that taxpayers don't foot the bill in the future.

Profumo said last month that a European Union-backed tax on bank to help pay for the financial crisis was "deeply mistaken."

© 2014 Thomson/Reuters. All rights reserved.

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