European banks mull 20-bn-euro private bailout fund: Report

LONDON: Some big European banks are mulling the creation of a 20-billion-euro private sector recovery fund to bail out troubled financial institutions, the head of UniCredit bank told a newspaper on Monday.

Writing in a leading English newsdaily, UniCredit chief executive Alessandro Profumo, said the 25.2-billion-dollar (31.7-billion-dollar) fund could provide help to European banks in the event of another crisis.

Distressed banks would be able to turn themselves around without state bailouts, Profumo explained.

"With voluntary contributions from the large European cross-border banks -- say, the top 20 -- a European recovery fund could accumulate a significant amount of risk capital (20 billion euros) over a few years," he said.

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

"The fund would not require a contribution from member states or European authorities."

Profumo has already pushed the plan with other leading eurozone banks, including Deutsche Bank and Santander, and will promote the idea to others in coming weeks, the report said.

But Dow Jones Newswires quoted German bank sources as saying Profumo had gotten a lukewarm response from the biggest German banks.

The sources said that the banks felt a private fund would place a strain on their earnings and be an "unnecessary burden in an already tense situation."

The idea that smaller banks that did not pay into such a fund might nonetheless be able to call on it for help was scoffed at by major German institutions, a source added.



German banks are already bracing for a string of possible new levies and regulations aimed at preventing another banking crisis, Dow Jones noted.

In Brussels meanwhile, European finance ministers vowed Monday to help banks that fail "stress tests" on their ability to withstand a new financial crisis.

"We will take the necessary measures" if some banks show weaknesses, Belgian Finance Minister Didier Reynders, whose country holds the rotating EU presidency, said on the sidelines of the first of two days of meetings.

Such tests are being carried out on 91 European banks, with the results to be published on July 23.