* Czechs say may agree to common bank regulation-cbank gov
* Demand guarantee against allowing capital outflow from
* Czech banks very well capitalised, mostly foreign owned
PRAGUE, Dec 8 The Czech Republic will only back
the European Union's proposed banking union plan if it is given
a guarantee that its lenders will not be forced to backstop
those of struggling euro zone countries, its central bank
governor told daily Lidove Noviny.
The non-euro EU state has threatened to veto the banking
union plan if it exposes the Czechs' highly capitalised and
healthy financial sector - 90 percent of which is foreign owned
- to risks by forcing it to pool assets with risker EU members.
Prague has found potential allies in Britain and Sweden,
other countries outside the euro, which are resisting handing
supervision of their banks to the European Central Bank that is
answerable only to the currency's users.
Germany has also objected to any deal that would give the
ECB final say over regulation and says that should mostly be
left with local authorities.
Central Bank Governor Miroslav Singer told the newspaper he
would travel as an adviser to Prime Minister Petr Necas to a
Dec. 13-14 EU summit at which officials would try to hammer out
details of the first stage of the banking union.
EU member states have set the goal of creating rules by the
year end that will put the regulation of all banks primarily
under the ECB, removing the final say from local regulators like
the Czech central bank.
Singer said the Czechs could potentially agree, but only if
there was a guarantee it would not allow the Czech banking
system to become a cash pot for euro zone lenders.
"Countries outside of the euro zone that don't want to share
the risk shouldn't be pulled into it," Singer told Lidove
Noviny. "Why would I want to share risk for the euro zone
project and drill pipes for them to take money from us? Why
would I do that for a project aimed at saving the euro zone that
we don't need?"
With a negative loan-to-deposit ratio, meaning there are
more bank deposits than outstanding loans, and a capital
adequacy rate of 16 percent, or double the global mandatory
requirement, Czech banks are among the EU's most secure.
Officials in the country of 10.5 million fear their lenders,
almost all owned by western European banking groups, will
therefore be among the first to be called on if their parent
units or fellow subsidiaries in other countries need to shore up
their balance sheets.
They see the banking union as a threat because it would
force the Czechs to contribute to an EU-wide deposit guarantee
fund, force their banks to assist other units in their banking
groups by providing capital, and allow parent banks to convert
subsidiaries into branches.
"We said fine, you want something and you need our vote,"
Singer said. "And because only the first step - common
regulation - is to be passed unanimously, for the others we want
... to hear a guarantee that with the other pillars you don't
say: prepare the pipes that at one point will allow money to
flow to the euro zone."
Like most of the EU's 10 newest members, the Czechs sold
their state banks into private hands after the fall of
Communism, a crucial step in transforming from a
centrally-planned to a market-based economy.
Now the Czechs' main lenders are owned by Austria's Erste
Bank, Italy's Unicredit, France's Societe
Generale and Belgium's KBC.
(Reporting by Michael Winfrey; editing by James Jukwey)