| Author (Person) | Fox, Benjamin |
|---|---|
| Series Title | EUObserver |
| Series Details | 21.06.13 |
| Publication Date | 21/06/2013 |
| Content Type | News |
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Eurozone Finance Ministers agreed upon the main features of the European Stability Mechanism's (ESM) direct bank recapitalisation instrument on the 20 June 2013. The Eurogroup has agreed there will be strict eligibility criteria as well as a clear pecking order for the instrument. An appropriate level of bail-in will be applied before the bank is recapitalised by the ESM in line with EU State aid rules, and applying of the forthcoming Bank Recovery and Resolution Directive (BRRD) as of the start of the supervision by the SSM. A burden-sharing scheme will determine the contributions of the requesting Member State and the ESM in order to cater for the existence of legacy assets and to ensure that incentives remain aligned between the ESM and the requesting Member State. €60bn will be the limit on the volume of possible direct bank recapitalisations. Potential retroactive application of the instrument will have to be decided on a case-by-case basis and by mutual agreement. Possible cases will have to be discussed and assessed on their own merits once the instrument enters into force. The instrument is to be finalised when the BRRD has been agreed with the European Parliament. Once this has happened and national parliamentary scrutiny procedures have been finalised and the Single Supervisory Mechanism is established and effective, the ESM Board of Governors will be able to add this instrument to their toolkit. Reports in news sources suggested that the power to 'directly recapitalise' banks through the ESM, would be seen as a key achievement to help eurozone countries avoid the fate of Ireland, Spain and Cyprus, where national governments were put at risk of a cut-off from financial markets when they were unable to deal with massive bank bailouts on their own. |
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| Source Link | Link to Main Source http://euobserver.com/economic/120588 |
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| Subject Categories | Business and Industry, Economic and Financial Affairs |
| Countries / Regions | Europe |
