The European Parliament has approved the last elements of a new set of rules to prevent failing banks from ever again driving EU member states into bankruptcy.
With ‘banking union’ passed by a very large majority, “we now have in place a true European system to supervise the eurozone banks and deal with any future failures,” EU Financial Markets Commissioner Michel Barnier said.
MEPs passed the measures on Tuesday in the last plenary session before May elections, completing a tortuous and hard-fought process sparked by the failure of many banks at the height of the eurozone debt crisis.
Banking union comprises a new oversight system known as the Single Supervisory Mechanism which becomes operational in November under the European Central Bank.
It is complemented by a Single Resolution Mechanism which will, when advised by the European Central Bank, step in to stabilise or close down a bank before it can do any wider damage to the economy.
The banks were blamed by many for the reckless speculative lending and investments which helped drive the financial and then economic crash beginning in 2008.
Countries such as Ireland which tried to keep their failing banks afloat, were pulled down too when the extent of their debt overwhelmed the state’s finances and forced it to seek an international bailout.
Now lenders must comply with stricter rules of conduct and capital levels, designed to limit the amount of risk they can take on and to ensure that shareholders and creditors shoulder the cost of any rescue, not the taxpayer.
“The EU has lived up to its commitments,” Barnier said in a statement.
Banking union “puts and end to the era of massive bail-outs and ensures taxpayers will no longer foot the bill when banks face difficulties,” he said.