MILAN (Reuters) - Top Italian banks Intesa Sanpaolo (MI:ISP) and UniCredit (MI:CRDI) will contribute 1 billion euros ($1.14 billion) each to a planned fund being set up by the country's financial institutions to shore up weaker lenders, a source with direct knowledge of the matter said.
State lender CDP will put in 500 million euros, smaller banks will contribute between 500 and 700 million euros, banking foundations will contribute around 520 million euros and insurers a further 500-700 million euros, the source said.
In total, the fund is aiming to gather contributions for 5-6 billion euros, the source said, adding 70 percent of those funds would be used to help plug capital shortfalls by buying into cash calls at ailing lenders.
The rest of the resources should be used to help banks get rid of bad loans, the source said.
The fund may need to invest 2 billion euros in upcoming rights issues at Banca Popolare di Vicenza and Veneto Banca if there are a lot of unsold shares, and may end up taking control of at least one of the lenders, the source said.
Italian banks, insurers, banking foundations and state lender CDP agreed on Monday to set up the fund to help ailing banks in a state-orchestrated plan to avoid a crisis in the euro zone's fourth-biggest banking sector.