The President of the Eurogroup has announced 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 which set out further detail on the agreement.

The DRI would be applicable to systemically relevant credit institutions and to financial holding companies and mixed financial holding companies only in circumstances such as if an institution was unable to meet its capital requirements, was unable to obtain sufficient capital from private sources and the ESM member concerned was unable to provide financial assistance without damaging its own fiscal sustainability. The DRI will only 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.

View Statement by the President of the Eurogroup: ESM direct recapitalisation instrument, 10 June 2014

View FAQ on the preliminary agreement on the future ESM direct bank recapitalisation instrument, 10 June 2014