On June 10, a statement by the President of the Eurogroup was published announcing that the Eurozone has reached a political understanding on the operational framework of a direct recapitalization instrument (DRI) for the European stability mechanism (ESM).  The ESM has also published FAQs setting out the detail of the agreement.

Once operational, the DRI would be applicable to systemically relevant credit institutions (as defined in the SSM Regulation (Regulation 1024/2013)) and to financial holding companies and mixed financial holding companies (as defined in the Capital Requirements Regulation (Regulation 575/2013)).  The DRI could only be activated 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.  Statement.  FAQs.