VIENNA (Reuters) - The chief executive of UniCredit is open to the idea of a private-sector contribution to the Greek crisis and said it was important for Athens to have enough liquidity to meet its obligations.
Federico Ghizzoni urged policymakers to decide on a rescue plan for Greece and said banks and insurers could do their part.
“We have not received any request so far,” he said, adding he did not know what would emerge from the discussions.
“If you are talking about a rollover of the debt on a voluntary basis I think the private sector -- banks and insurers -- could consider such a proposition. I am not in principle against an involvement of the private sector,” he said late on Thursday in Vienna in remarks for release on Friday.
The most important thing was ensuring Greece had enough liquidity to meet its obligations while it imposed a package of reforms that could help it regain access to capital markets.
Asked if a “haircut” for Greek debt could be avoided in the long run, he said: “I am not excluding this possibility. Probably one year ago it would have been accepted, today not.”
If after a year of inconclusive discussions officials decided on a haircut now it would lead to “massacre of Ireland and Portugal and maybe other countries”, he said.
Ghizzoni, head of the biggest lender in central and eastern Europe, said Greece must not be allowed to default.
“A default of Greece could have a very negative impact on the European economy, starting from the weakest countries like Portugal and Ireland,” he said.
Greek Prime Minister George Papandreou named a new cabinet on Friday to muster support for painful economic reforms, despite public unrest and a split in his party that could push the country closer to default.
UniCredit, Italy’s biggest bank, has only around 800 million euros ($1.13 billion) in Greek exposure on its 1 trillion euro balance sheet, he said, but added the issue was more about what a Greek collapse could have on the rest of Europe.
Ghizzoni confirmed the bank’s outlook that earnings would continue to improve this year and its core tier 1 capital ratio would rise from the 9.1 percent level at the end of March.
While the bank was well capitalized, it was keeping a close eye on discussions of additional capital that banks deemed to be of systemic importance might be required to hold, he said.
He expected to know more about this at the end of July so that a decision on additional capital buffers if any could be made at a Group of 20 meeting in early November. This was not just a question of capital, but also of the treatment of hybrid instruments and anti-cyclical buffers.
“And this is also the reason why we don’t want to go for any increase of capital now. Our level of capital is very high,” he said, noting it was close to 9 percent of risk-weighted assets under new “Basel III” rules that are due to take effect in 2013.
Should the final new rules boost UniCredit’s capital requirements by an extra percentage point, it was already placed to handle it. An extra two percentage points “doesn’t need too much”, he said, adding: “If the extra is three (points) or more and they ask for it in six months there is not too much to say.”
Realigning its business to reflect the new capital regime is part of a master plan the bank is set to release by year’s end.
Ghizzoni said the plan would confirm the group’s European focus. “There is no retrenchment of business in Europe, on the contrary we think we can grow.”
It would also highlight the full integration of corporate and investment banking, its push to expand in China, and its “100 percent” commitment to its businesses in Austria and in central and eastern Europe.
Ghizzoni said the bank was making good progress in its home market of Italy, where margins have been unsatisfactory in the past but where it posted a 400 million euro swing in profitability in the first quarter versus the last 2010 quarter.
Demand for loans was coming back, with April lending volumes up 7 percent compared to flat volumes in Austria.
He said UniCredit needed “a couple of years of intense work to reach what we want to reach” in Italy and will cut costs.
“But the trend is positive, also May is better than April.”
Still, non-performing loans rates were growing slightly, while those in Austria and Germany were declining. ”The problem is the cost of risk (in Italy) is still high compared to some time ago. It is there where we have to work most.
Editing by Andrew Callus