EFSF's CFO says bank demands on fund may be limited

BRUSSELS Oct 14 (Reuters) - The demands on the euro zone's rescue fund for any bank recapitalisations may be limited because the private sector and governments must be tapped first, the finance chief of the European Financial Stability Facility (EFSF) said on Friday.

"If you consider the three-step approach -- private sector, national level and then European -- as the EFSF would come in last, the amounts required may actually be reasonably limited," Christophe Frankel told journalists.

"Also you must take into account that Ireland, Portugal and Greece already have amounts set aside for bank recapitalisations within their programmes," said Frankel, who is chief financial officer of the EFSF, and deputy to its chief executive.

Frankel's remarks come amid concerns on financial markets that demands for help from the EFSF to bolster weak banks would leave the 440 billion euro fund with little firepower to rescue a country, if that were to prove necessary.

European officials are attempting to launch a recapitalisation drive, with estimates for the final bill ranging from 100 to 200 billion euros and beyond.

Frankel also said the EFSF would tap short-term funding markets -- paper with a maturity of less than one year -- which makes it easier to raise big sums.

He said the EFSF's funding would become more flexible and diversified.

"This also means that we will implement a short-term funding strategy which could be structured around a bill programme."

Frankel said preparation for the new permanent euro zone support scheme, the European Stability Mechanism (ESM), was under way and that technically, the EFSF could already carry out its mission.

"ESM will have the same mission as the EFSF so in practical terms, we are already ready," he said. "We have already started preparing the ESM internally." (Reporting by Ilona Wissenbach, writing by John O'Donnell; editing by Rex Merrifield)