Eurozone finance ministers agree ESM direct bank funding

Eurozone finance ministers agreed Thursday how the single currency's rescue fund, the European Stability Mechanism, will be able to inject funds directly into failing banks so as to minimise the risk posed to the financial system. "The main guidelines of how the ESM will operate have been agreed," Irish Finance Minister Michael Noonan said. The 500-billion-euro ($665-billion) ESM was set up initially to bail out struggling member states but in June 2012 when Spain's banks looked on the point of collapse, Brussels decided to extend its scope to allow direct aid for struggling lenders. This was in turn tied to having an overall bank regulator in place and EU leaders later approved a Single Supervisory Mechanism which centralises oversight of the eurozone's largest lenders under the European Central Bank. Since then, however, progress on the SSM new regulatory body has lagged, meaning it is only likely to be fully operational in the second half of 2014. Noonan added that ministers also agreed to allow some flexibility on using the ESM to deal with "legacy assets," bad loans amassed by banks before the rescue fund was set up. Ireland had to seek a full debt bailout worth 85 billion euros when its failed banks bust the government's finances in 2010 and has since argued that the ESM should be used to help ease the burden.