The President of the Eurogroup, Jeroen Dijsselbloem, has released a statement announcing that the eurozone has reached a political understanding on the operational framework of a direct recapitalisation instrument (DRI) for the European stability mechanism (ESM). FAQs have also been published setting out the details of the arrangement.
The DRI will apply to systemically relevant credit institutions and to financial holding companies and mixed financial holding companies. The DRI will only be engaged if an institution is unable to meet its capital requirements, is unable to obtain sufficient capital from private sources and the member state concerned is unable to provide financial assistance without damaging its own financial stability.
A limit of €60 billion will be set on the total amount of ESM resources available for the direct recapitalisation of these institutions.
The DRI will become operational if the ESM Board of Governors takes a unanimous decision to adopt it and the eurozone member states complete their national procedures successfully.