Bailouts are cheaper than bank runs: ECB's Kranjec

RIGA (Reuters) - Bailing out financial institutions is cheaper than allowing bank runs, European Central Bank Governing Council member Marko Kranjec said on Monday.

Addressing the Baltic Financial Forum, Kranjec said financial market turmoil would continue for some time. "In my opinion the financial sector has to deleverage, deleverage in an orderly way ... If they do it at the same time the system will collapse," said Kranjec, who heads the Slovenian central bank.

Bank bailouts were "cheaper than allowing a run on financial institutions. I cannot imagine what would happen in that situation (if there were a run on the banks)," he said. The comments follow an agreement by the Belgian, Dutch and Luxembourg governments to inject 11.2 billion euros into financial group Fortis (FOR.BR), in the wake of similar moves in the United States.

In London, regulators were also preparing to nationalise part of mortgage lender Bradford & Bingley BB.L, and sell off its branch network and deposit business to Spain's Banco Santander (SAN.MC).

"The financial turmoil will continue. It will continue for some time," Kranjec added, without saying for how long. "We need a combination of market-based and regulatory solutions."

(Reporting by Patrick Lannin, writing by Krista Hughes; editing by David Stamp)