UPDATE 2-UniCredit in 20 bln euro bank fund talks-source

* UniCredit talking with Deutsche, BNP, Santander – source

* Reception “generally favourable” – source

* Fund would be an alternative to proposed EU tax

* Proposal unlikely to get industry support – bank source

(Adds EU, analyst comment, banks’ no comment)

By Ian Simpson

MILAN, July 12 (BestGrowthStock) – Some of Europe’s biggest banks
are in talks with Italy’s UniCredit SpA (CRDI.MI: ) 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 on Monday. UniCredit Chief
Executive Alessandro Profumo has criticized the EU levy.

UniCredit, Italy’s biggest lender, has discussed the fund
with Deutsche Bank (DBKGn.DE: ), Spain’s Banco Santander (SAN.MC: )
and France’s BNP Paribas (BNPP.PA: ), the source told Reuters.

The reception has been “generally favourable 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

Santander, BNP Paribas and Deutsche Bank declined to

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. [ID:nN11153967]

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 totalling 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.


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

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

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 on 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

Shares in UniCredit were up 1.34 percent at 2.08 euros by
1403 GMT, and the STOXX Europe 600 banking index (.SX7P: ) 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)
($1=.7885 euros)
([email protected]; +44 20 7542 2580)

UPDATE 2-UniCredit in 20 bln euro bank fund talks-source