ECB's Nowotny: EU needs to coordinate banks

By Boris Groendahl

VIENNA (Reuters) - The European Union needs to coordinate deposit guarantees and a possible system of bank rescue funds, European Central Bank governing council member Ewald Nowotny told Reuters in a phone interview on Thursday.

Nowotny said he did not believe an EU-wide fund to support banks in trouble was a possible way to go, because of the differences in national legal rules and in banking sector structures in the 27-country bloc.

"Our idea is that there should be national funds which are acting in a coordinated fashion," Nowotny said in an interview over the phone when asked about proposals of a European Union-wide fund to rescue banks that get into trouble.

Several European government sources have said France had floated the idea of a 300 billion euro (236 billion pound) EU bank rescue fund ahead of a of an EU leaders meeting on Saturday, although Paris denied the existence of such a proposal.

The Netherlands backed the reported French idea, saying EU countries should set aside 3 percent of their gross domestic product in national bank rescue funds that could be used in a coordinated fashion.

Nowotny said he had seen such proposals but declined to say where they were coming from and would not comment on the size of possible funds.

"The proposals that we have seen are about a European framework, but that within that framework there would be national funds," he said. "Everything beyond that would be difficult to execute, given the current legal differences."

Nowotny said many details of the fund still had to be sorted out, and he had not yet seen a draft that was detailed enough.