"Small and midsize companies, almost all of which are owned by entrepreneurs, are the backbone of Italian capitalism. Yet they are stagnating, contributing to Italy's annual economic growth rate of well under 1 percent."

So says Alessandro Profumo, chief of UniCredito. The public-spirited boss of the country's No. 2 bank is using the new Basel II reserve rules to waive certain personal financial guarantees for entrepreneurs of companies with less than E50 million ($60.8 million) in sales, provided they promise to put the resulting savings back into their businesses.

The goal, says the former McKinsey consultant, is to lower the collateral burden on worthy entrepreneurs from an average of 80 percent of their wealth to about 30 percent in three to five years. The freed-up funds, he says, will go directly into their businesses and "could change the basic dynamics of the Italian economy."

Profumo credits Basel II, the updated international capital-adequacy guidelines for banks that were announced in June, with giving UniCredito the flexibility to set lower loan-loss reserves for clearly creditworthy borrowers. "This program would not have been possible without Basel II," declares the 47-year-old banker.

For its part, UniCredito -- Italy's most profitable bank during Profumo's seven years as CEO -- will generate additional fees if the companies grow faster and need more services. "It's not a totally altruistic move," he concedes, "but it should be good for both Italy and UniCredito."