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BERLIN (Reuters) - Former German finance minister Peer Steinbrueck, who could challenge Chancellor Angela Merkel in next year's election, wants to create a bank bailout mechanism funded by lenders rather than governments, a German news magazine reported.
"If a bank is on the brink of bankruptcy, it should not be immediately be helped with government money," Steinbrueck was quoted as saying by Der Spiegel, in an advance copy of an interview due to be published on Sunday.
"Creditors and shareholders have to do their bit first."
Asked how this would work, Steinbrueck said creditors would receive shares in a troubled bank in return for their money.
He said it was also necessary to set up an equivalent of the European Stability Mechanism (ESM), the euro zone's permanent bailout fund, for banks. He added this fund would be financed by banks rather than governments.
"Big systemically-relevant banks can refinance themselves more cheaply because the markets assume that no government will allow them to fail," Steinbrueck was quoted as saying.
"We need to siphon off this interest rate advantage - which governments effectively make available to them by being their guarantor - and invest it in an ESM for banks."
Steinbrueck said a sum of between 150 and 200 billion euros ($195 billion to $260 billion) was necessary for such a bank bailout fund, which he said would not be possible to collect within just a few years.
"For that reason it would need to have the possibility of refinancing itself via bonds in the start-up phase," he said.
He also said he wanted to separate investment banking businesses from lending and deposit operations, which would affect Deutsche Bank (DBKGn.DE).
Der Spiegel also quoted him as saying in a working paper that he wanted to ban commodity speculation.
Steinbrueck is one of three Social Democrat (SPD) leaders jostling to lead the party into the 2013 election.
Reporting by Michelle Martin; Editing by Sophie Hares