UniCredit halted, Italy cbank tries to calm jitters

ROME (Reuters) - Italy's central bank sought to calm market jitters on Monday by saying liquidity in the banking system was "satisfactory and adequate," after shares in Italian lender UniCredit (CRDI.MI) were briefly suspended for excessive losses.

Trading in UniCredit, Europe's fourth-biggest bank by market value, resumed after a halt. The shares were down 9.32 percent at 3.005 euros at 1322 GMT, having hit a 10-year low of 2.99 euros before ticking higher. The DJ Stoxx index of bank shares .SX7P was down 5.99 percent.

After the suspension, five-year senior credit default swaps on UniCredit were 50 basis points wider at 140 basis points, a trader in London said. That means it costs 140,000 euros ($200,900) a year to insure 10 million euros of debt against default.

The central bank official said: "Since the start of the current turbulence the Bank of Italy has started a constant monitoring of market conditions and comprehensive screening on the liquidity of the banking system and the interbank market.

"From this information gathering and analysis, it has emerged that the liquidity of the Italian banking system, even in the current difficult conditions, appears satisfactory and adequate to face the obligations assumed by intermediaries," said the official, who asked to remain anonymous.

UniCredit is the Italian bank most exposed to the global credit crunch. It gets half its revenue from outside Italy's conservative lending market.

European governments scrambled to shore up banks on Monday as the credit crisis hit Germany, Britain, Belgium and beyond. Belgian-Dutch group Fortis FOR.BR underwent nationalisation on Sunday.

Confirming newspaper reports over the weekend, a UniCredit spokesman said the bank was weighing creating a performing-assets joint venture with an international partner.

A source close to the issue said the fund would be worth 1.5 billion euros and the partner could be U.S. bank Merrill Lynch & Co. Inc. MER.N.

(Additional reporting by Natalie Harrison in London, Gianluca Semararo in Milan; Writing by Ian Simpson in Milan; Editing by Quentin Bryar)