The financial crisis that hit Europe in 2009 showed that many banks were not able to bear their losses and some even had to be propped up using tax payers' money. EU leaders were keen to avoid this happening again and drew up plans for a banking union that is now slowly taking shape. On 15 April MEPs approved rules for winding up failed banks. In September 2013 they already approved a proposal to give the European Central Bank the responsibility for supervising the euro zone's biggest banks.
Under the resolution mechanism a new EU authority called the Single Resolution Board can quickly decide what to do with major banks in the euro zone that are struggling. The new system will be able to rely on a €55 billion bank-financed fund. To protect taxpayers, it has also been specified that shareholders and bondholders will be the first ones to pay when a bank is in trouble.
The banking union's first building block is the Single Supervisory Mechanism, which gives the European Central Bank (ECB) the responsibility to supervise the euro zone’s biggest banks. This means that the ECB will have to determine if a bank is in trouble. Today 128 banks are being supervised.
The Parliament also already approved putting a cap on bankers' bonuses and requiring banks to hold sufficient capital to weather financial difficulties.