UniCredit Says Global Rule Needed to Bail In Big Deposits
By Boris Groendahl - Apr 4, 2013 1:17 PM GMT
Uninsured deposits could be used in future bank failures provided global rulemakers agree on a common approach, according to Federico Ghizzoni, the chief executive officer of Italy’s biggest lender, UniCredit SpA. (UCG)
Cutting large deposits in failing banks, along with other liabilities such as bonds, to offset losses is acceptable as long as small savers’ funds remain protected, Ghizzoni told reporters in Vienna late yesterday. The European Union has to introduce identical rules in all of its member statesand ideally those rules would be coordinated globally, he said.
| Sponsored Links | |||||||
| Buy a link | |||||||
Including deposits “is acceptable if it becomes a European solution,” said Ghizzoni, 57. “What we cannot accept is differentiation country by country inside the same area. I would strongly suggest to make this decision not only within Europebut within the Basel Committee, where all countries are represented. Otherwise we would open the market for arbitrage.”
Cyprus became a testing ground for investor losses when euro-area authorities last month required restructuring of the country’s two biggest banks as a condition of a 10 billion-euro ($12.8 billion) rescue. The Cyprus program was the first to impose losses on uninsured depositors as the EU continues to hash out how to handle failing banks on a case-by-case basis. Its banking resolution law is still under discussion.
‘Sensitive Issue’
Ghizzoni said deposits should only be included when bonds aren’t sufficient, and those below the guaranteed level of 100,000 euros should be off limits. While he would prefer not to touch them at all, including deposits in a global plan was a acceptable solution, he said.
“The deposit issue is very sensitive,” he said. “It will become part of the discussion for the bail-in instruments related to the resolution plans of banks. I hope it will be addressed carefully and with clarity.”
EU lawmakers and national governments agreed on March 19 to a provisional deal to turn theEuropean Central Bank into a supervisor for banks in the euro zone and other willing nations.
The EU also is working on proposals to standardize procedures for insuring deposits and shutting down banks, including which investors should absorb losses. Those rules are due to be agreed on by mid-2013, and proposals for a common bank resolution framework are due later this year.
Deposits Stable
Ghizzoni said he had been “afraid” of his clients’ reaction to the measures in the Cyprus rescue and asked for monitoring of deposit flows in all 22 European countries -- stretching from Italy,Germany and Austria as far as Russia and Turkey -- where his Milan-based bank operates. It didn’t find any loss of deposits, he said.
“Really, we were afraid, we started to monitor on a daily basis the flow of deposits in different countries,” he said. “Maybe I’m disappointing you, but in reality we had no reaction so far from customers.”
UniCredit increased its deposits in Italy by 8 percent last year, Ghizzoni said. While this was good for the bank’s funding, it was also a worrying sign for the Italian economy that people aren’t increasing consumption, he said.
While the inconclusive election in Italy has created uncertainty about who will govern the nation in the future, Ghizzoni noted that this uncertainty hasn’t carried over into higher debt costs so far.
“If you forget the equity market and look at fixed-income rates and spreads, it didn’t move in spite of the fact that there is quite high political uncertainty,” he said.
To contact the reporter on this story: Boris Groendahl in Vienna at bgroendahl@bloomberg.net
To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net
Posts
