BRUSSELS May 5 The euro zone's bailout fund, the European Stability Mechanism, could directly invest in a troubled bank next year, but only after 8 percent of the bank's total liabilities were written off, a top euro zone official said on Monday.
The bloc's leaders agreed in 2012 that the ESM must have the option of directly buying a stake in a bank to break the 'doom loop' that binds indebted governments to the unstable banks they are trying to prop up.
Jeroen Dijsselbloem, who chairs meetings of euro zone finance ministers, said that ministers agreed that the ESM should be able to invest in banks next year after the option of raising money from private investors or the government failed.
Under new EU rules, from 2016 not only a bank's shareholders but also bondholders and even large depositors would have to lose money before government or euro zone money could be used to save a bank from collapse. EU policy-makers call this a bail-in.
In 2015 alone, before the new bail-in rules take hold from 2016, the euro zone bailout fund would be allowed to buy a stake in a bank after 8 percent of its liabilities were written off, according to the ageement of ministers, Dijsselbloem said. (Reporting By Jan Strupczewski)