22nd June 2014

Eurogroup endorses ESM direct recapitalization instrument

On 10 June, the eurozone has reached political agreement on the ESM direct recapitalization instrument. When formally adopted by the board of governors of the ESM, it will become functional with the launch of the Single Supervisory Mechanism. The instrument constitutes an important part of the nascent banking union. In case a Member State is not able to proceed with the recapitalization of a failing bank alone, the ESM may be asked for help. For a transitional period until the end of 2015, the precondition for such aid would be a bail-in of 8% of all the bank´s liabilities. As of 2016, the functioning will go according to the Bank Recovery and Resolution Directive. The maximum recapitalization capacity of the ESM will be €60 billion.

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Members of the American Chamber of Commerce in the Czech Republic