Euro zone mulls caps on direct bank aid from bailout fund

BRUSSELS (REUTERS) - The euro zone is considering capping the amount of direct assistance that banks can get from the bloc's 500 billion euro (S$830 billion) bailout fund, finance ministers said on Monday, in a potential blow to some countries hoping for help for their lenders.

Euro zone leaders agreed last June that the European Stability Mechanism (ESM) bailout fund should be able to directly inject funds into banks to ease the debt burden on already struggling sovereigns.

The decision was mainly meant to help Spain, where the banking sector has been hit by the collapse of the property market and the government was struggling to regain market confidence amid a recession and record high unemployment.

"In order to preserve the ESM capacity for other instruments and the ESM's high credit rating, we agreed to explore the possibility of defining limits for the various ESM instruments," Eurogroup chair Jeroen Dijsselbloem told a news conference.