UniCredit in talks on 20b euro bank rescue fund

Milan: Some of Europe's biggest banks are in talks over a proposal by Italy's UniCredit SpA to create a 20 billion euros (Dh92 billion) private sector fund to help failing lenders, a source close to the issue said 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 said.

The reception has been "generally favourable 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 yesterday. 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.