FACTBOX: Euro zone pledges remedies for market crisis

(Reuters) - Leaders of euro zone countries held an emergency meeting on Sunday to discuss specific and coordinated pan-European measures aimed at shoring up the banking sector to avoid more failures.

The measures draw on a 400 billion pound ($691.3 billion) package to shore up the banking system in Britain, which is not a euro zone member, by combining short and medium term remedies.

Here are the main actions they agreed to take:

UNBLOCKING THE MONEY MARKET

Banks are too afraid to lend to each other, fearing they won't get their money back. The cash central banks have injected into interbank markets is being hoarded by banks.

After coordinated rate cuts by central banks, Sunday's statement said euro zone governments hoped the central banks will continue to consider "all ways and means to react flexibly" -- a strong hint that more rate cuts would be welcomed.

The European Central Bank has agreed to see if it can make it easier to lend money to banks by widening the pool of collateral it receives from them. ECB President Jean-Claude Trichet said the bank already accepted private paper, but added it would study ways of broadening the system.

There was no clear sign that EU governments would be willing to act as guarantors for interbank lending, a provision some commentators say is key to restoring confidence.

STAKES IN BANKS

By the start of a summit of all EU leaders next Wednesday, governments will work out how much capital they could inject into their banks to stabilize them. France said many euro zone countries would announce how much money they planned to set aside for recapitalizations on Monday.

The summit agreed that states can use taxpayers money to replenish a bank's capital but it must not distort competition. It could be done by governments becoming a shareholder in the bank but a bank's other shareholders must not benefit from this injection and it must be accompanied by a restructuring.

Governments will focus their efforts on what they call systemically important banks or the ones that would cause havoc in the wider market if they failed.

HELPING WITH DEBT

To kickstart more medium term lending by banks, governments will act as guarantors in various ways until the end of 2009 for new loans of up to 5 years in maturity. This "insurance" will be paid for by the banks at commercial rates.

Allowing some "medium term" refinancing to resume under guarantee should take the pressure off the interbank market and also off groaning bank balance sheets.

MARK-TO-MARKET

Critics say an accounting rule that forces banks to say periodically how much their riskier assets are worth at market prices has exacerbated the financial crisis.

This week, the EU will take steps to ease the impact of this so-called fair value or mark-to-market rule by allowing banks to use more flexible ways of valuing financial products whose markets have dried up due to the credit crunch.

The change will come into effect by the end of October so that banks can make use of it in their third quarter reports.

NEW FOUNDATIONS FOR THE FUTURE

Oversight of banks is still largely national based despite some 44 cross border banks accounting for the bulk of deposits in the EU. At their summit on Wednesday the bloc's leaders will seek new steps to improve cross-border crisis management.

(Reporting by Huw Jones, editing by Crispian Balmer)