6.4.6.2 The assessment of the ESM DRI

In respect of the ESM DRI, the ESM DRI Guideline provides that the financial assistance is to be provided in accordance with the ESM DRI Guideline as well as the State aid provisions under Article 107 and 108 TFEU.1

In accordance with the ESM DRI Guideline, the ESM DRI can be applied by the ESM on the request of a participating Member State of the SSM. After this request, the Commission, in liaison with the ECB and IMF (wherever appropriate), will assess whether the requesting participating Member State meets access criteria 4 and 5.2 Likewise, the ESM, in liaison with the Commission, the relevant resolution authority, and the ECB in its capacity as the supervisor, will assess whether the bank meets access criteria 1 and 2.3 Based on these assessments, the ESM Board of Governors decide whether the eligibility criteria are met and if so, may decide to grant financial assistance through the ESM DRI.4

After the decision of the ESM Board of Governors, the participating Member State of the SSM concerned has to notify the Commission of the intention to grant financial assistance through the ESM DRI. The ESM will act as an agent for the participating Member State throughout the procedure.5 The ESM has to draw up a restructuring plan to ensure the viability of the bank after recapitalisation, jointly with the bank and the participating Member State concerned, and in consultation with the ECB. This plan has to be submitted to the Commission for approval. Any direct recapitalisation will only be disbursed once the restructuring plan has been approved by the Commission.6In parallel, the ESM’s Managing Director, in liaison with the Commission and the ECB, and with the assistance of independent experts, will conduct a due diligence exercise, including a rigorous economic valuation of the assets.7 The ESM Board of Governors will adopt a financial assistance facility agreement (FFA) detailing the financial assistance following the decision from the Commission under the State aid regime for the banking sector.8

Moreover, the ESM’s Managing Director, in liaison with the Commission and the ECB, can impose additional institution-specific conditions not required under the State aid regime for the banking sector. These can include rules on the remuneration of the management and dividend policy. The institution-specific conditions are laid down in an institution-specific agreement to be established between the ESM, requesting participating Member State of the SSM, and the bank(s) concerned.9

Lastly, the Commission, in liaison with the ECB, the ESM’s Managing Director and, wherever appropriate, the IMF, can impose policy conditions related to the financial sector of the participating Member State concerned, its supervision, corporate governance of banks, and relevant domestic legislation. These policy conditions may even relate to the general economic policy of the participating Member State concerned, and will be included in the Memorandum of Understanding (MoU) attached to the financial assistance.10