SG/BoG/2014/[●]/[●]

EUROPEAN STABILITY MECHANISM
BOARD OF GOVERNORS
Meeting of dd Month 2014
_________

RESOLUTION No. [●]
Establishment of the instrument for the direct recapitalisation of institutions

THE BOARD OF GOVERNORS,
Having regard to the Euro Area Summit Statement of 29 June 2012, stating that, “when an
effective single supervisory mechanism is established, involving the ECB, […] the ESM could,
following a regular decision, have the possibility to recapitalise banks directly”,
Having regard to the establishment of such a single supervisory mechanism through Council
Regulation (EU) No 1024/2013,
Having regard to the purpose of the ESM, pursuant to Article 3 of the Treaty, to mobilise
funding and provide stability support under strict conditionality, appropriate to the financial
assistance instrument chosen, to the benefit of ESM Members which are experiencing, or are
threatened by, severe financing problems, if indispensable to safeguard the financial stability
of the euro area as a whole and of its Member States,
Having regard to the limitation, pursuant to Article 8(5) of the Treaty, of the liability of each
ESM Member which, in any circumstance, is set through its portion of the authorised capital
stock at its issue price,
Having regard to the principles as set out in Article 12 of the Treaty,
Having regard to the framework set through Council Regulation (EU) No 1024/2013, and
aiming at consistency with the definitions therein,
RESOLVES, pursuant to Article 19 of the Treaty, to establish the ESM instrument for the
direct recapitalisation of institutions in the meaning of Article 2(3) to (5) Council Regulation

European Stability Mechanism
6a, Circuit de la Foire Internationale L-1347 Luxembourg Tel (+352) 260 962 401 Fax (+352) 260 911 400 www.esm.europa.eu

(EU) No 1024/2013 (“institutions”) as a financial assistance instrument and to define the
framework following Article 13 of the Treaty, including, in particular, the procedure for
granting financial assistance under this instrument:
1. While the procedure for granting financial assistance in the form of direct
recapitalisation follows Article 13 of the Treaty, additional procedural steps and
provisions as well as tasks allocated to the Managing Director, the European
Commission, the ECB and, wherever appropriate, the IMF, specific to this
instrument, are detailed hereinafter and in the specific guideline mentioned in
paragraph (5) below.
2. The Board of Governors may decide to grant financial assistance in the form of
direct recapitalisation of institutions in accordance with Article 12 of the Treaty. The
financial assistance shall be subject to specific conditionality relevant to this
instrument.
3. The Board of Governors shall not decide to grant or to implement financial
assistance through the instrument for the direct recapitalisation of institutions when
the emergency voting procedure pursuant to Article 4(4) of the Treaty applies, unless
mutual agreement can be reached.
4. Without prejudice to Articles 107 and 108 TFEU, the financial terms and
conditions of financial assistance in the form of direct recapitalisation of institutions
shall be specified in a financial assistance facility agreement, to be signed by the
Managing Director. The institution specific conditions for each institution and the
details of the recapitalisation operation shall be set out in an institution specific
agreement, to be based on a proposal by the Managing Director which is approved by
the Board of Governors, and in full compliance with the provisions of Article 13 of the
Treaty. The institution specific agreement and, where applicable, the first tranche of
the assistance shall be approved by the Board of Directors. The institution specific
agreement shall be signed by the Managing Director.
5. The Board of Directors shall adopt a detailed guideline on the modalities,
including, in particular, the eligibility criteria for the requesting ESM Member and
the institution concerned, and the allocation of specific tasks to the Managing
Director, the European Commission, the ECB and, wherever appropriate, the IMF,
for implementing financial assistance in the form of direct recapitalisation of
institutions (“Guideline on Financial Assistance for the Direct Recapitalisation of
Institutions”).
6. Where applicable, the Board of Directors shall decide by mutual agreement, on a
proposal by the Managing Director and, after having received the report indicated in
the Guideline on Financial Assistance for the Direct Recapitalisation of Institutions,
on the disbursement of the tranches of the financial assistance subsequent to the first
tranche.

European Stability Mechanism
6a, Circuit de la Foire Internationale L-1347 Luxembourg Tel (+352) 260 962 401 Fax (+352) 260 911 400 www.esm.europa.eu

7. The ESM shall, through a Board of Governors’ Resolution to be adopted by mutual
agreement, establish, as an integral part of the instrument for the direct
recapitalisation of institutions, a subsidiary body for assisting the ESM in
implementing financial assistance in the form of direct recapitalisation of
institutions. In this respect, it shall amend the By-Laws accordingly.
Based on a general framework, to be approved by the Board of Governors, setting out
the conditions for the establishment of sub-entities for the purpose of implementing
financial assistance in the form of direct recapitalisation of institutions, and in order
to facilitate private participation, the Board of Directors or the Board of Governors, as
the case will be according to the provisions of the Treaty, might approve the
establishment of such sub-entities and their statutes or constituent documents.
The ESM, including the subsidiary body mentioned in the first sub-paragraph above,
and any sub-entity shall ensure an effective flow of information to the ESM Members.
8. This Resolution will enter into force on the day of its adoption.

Distribution:
Governors
Alternate Governors

European Stability Mechanism
6a, Circuit de la Foire Internationale L-1347 Luxembourg Tel (+352) 260 962 401 Fax (+352) 260 911 400 www.esm.europa.eu