Alessando Profumo, the CEO of Italy’s UniCredit, suggested in the Financial Times that banks create a a €20bn private sector European Recovery Fund.
Governments should never again have to ensure continuity of vital financial services to millions of citizens by being forced to rescue failing financial institutions and all their creditors.
His proposed recovery fund would provide a failed bank with a bailout if they needed it, so that a government bailout wouldn’t be necessary.
Too bad Germany’s main listed banks hate the idea, according to the Wall Street Journal.
One banker told the WSJ that the fund would be an “unnecessary burden in an already tense situation.”
Here’s one issue German banks in particular have with it:
Some smaller insitutions that wouldn’t have to contribute funds ahead of time, but they could access the bailout fund. So the biggest cross border banks in Europe would have to pay for their bailout if anything went wrong.
And here’s another:
The fund would be a further strain on their earnings power.
In our opinion, the fact that the proposed contributions to the fund would be volutary also seems problematic.
Plus, Profumo’s fund would replace a broader bank tax levy which Markus Henn, a markets expert for Weed e.V. in Germany, told us banks (generally) don’t have an issue with.
The one proposal they do have a big issue with is the proposed transaction tax.
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