Germany's Bundesbank urged banks to use a markets recovery to restructure and prevent a rerun of the financial crisis even as Deutsche Bank's chief called for a common bailout fund with taxpayer backing.

The responsibility for avoiding future financial crisis lies with the credit industry itself, said Bundesbank President Axel Weber, who also sits on the European Central Bank's policymaking Governing Council.

Our contribution as regulators will be that we help to make sure that that is recognized and carried out.

Speaking at the same conference in Frankfurt, Deutsche Bank CEO Josef Ackermann defended the need for large global banks and backed the creation of an international bailout fund as a new tool to rescue stricken lenders.

Although large banks should be required to hold extra capital as a buffer to offset a downturn, Ackermann said taxpayer funds would likely be needed in future crises.

We will probably in the end have to accept that the state, in the case of systemically relevant banking crises, will remain the shareholder of last resort, said Ackermann, who also chairs the International Institute of Finance bank lobby group.

Without making clear how such a fund would work, Ackermann called for public-sector contributions to such a bailout fund to head off the need for midnight rescues.

But the idea met with resistance.

We see any form of a common pot or spillover system as problematic, said Uwe Froehlich, president of the Association of German Cooperative Banks. German cooperative banks have so far avoided large-scale failures and have not tapped taxpayer funds.

Deciding who should pay for such a fund also remains a thorny issue in the 27-member European Union, which is home to over 40 large banks with cross-border operations.

The idea of levying a tax on financial transactions -- the so-called Tobin tax -- has met with widespread skepticism.

BUNDESBANK IS WATCHING

Weber urged policymakers not to lose their zeal for regulatory reform despite steadier economies and markets.

The stabilization of the system cannot be the end of tackling the crisis, he said. Banks should use the support of fiscal and monetary stimulus programs to restructure and reform the banking sector.

The Bundesbank will closely monitor how banks use profits gleaned from stimulus measures. Do they use these to pay out profits in the form of dividends? Bonus payments play an even greater role ... We will have to keep an eye on these developments, Weber said.

Deutsche Bank will overhaul its bonus system to include a claw-back option, Ackermann said, even as he appealed for new capital rules to be introduced gradually.

The Swiss head of Germany's flagship lender told a Euro Finance Week seminar that regulators may be underestimating the danger that banks could start reining in their balance sheets simply in anticipation of new capital rules.

Against this background it seems worth considering whether the...different approaches should not be phased in gradually rather than introduced at the same time, Ackermann said.

This way we could get a better handle on unexpected side effects or unexpected restrictive effects.

(additional reporting by Eva Kuehnen and Philipp Halstrick; Editing by David Cowell)

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