ECB's Constancio: may need public money in bank failures

HELSINKI Tue Feb 12, 2013 2:40am EST

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HELSINKI Feb 12 (Reuters) - Banks should pay for winding down their failing peers but sometimes taxpayer money may also be needed in this process, European Central Bank Vice President Vitor Constancio said on Tuesday.

There may be a need for "temporary use of public money when, for example, a bridge bank needs to be created," Constancio told a bank regulation conference in Helsinki.

The contribution of public money should be in the form "of credit lines that need to be repaid later on."

He added that banks should be the first line of funding for any bank resolution schemes.

Constancio also said that the euro zone banking union project, seen as a key factor in avoiding future financial crises, did not necessarily need to involve a joint deposit guarantee agency from the beginning, but added that it might increase depositor confidence in banks.

(Reporting by Sakari Suoninen and Ritsuko Ando)

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