(BRUSSELS) - EU member states and European Parliament negotiators reached an accord Thursday on a new regulatory system designed to prevent a failing bank from wrecking the economy.

Parliament had initially opposed an agreement reached in December by EU leaders on how to close down a bank in trouble, saying the system was too unwieldy and not fast enough.

But officials said that those differences had now been resolved after marathon overnight talks.

This is "an enormous success," Parliament head Martin Schulz said, adding that party leaders had "agreed with an overwhelming majority to endorse the compromise" and recommended approval by the full assembly.

"The elements agreed will help to ensure that the system cannot become a hostage to political power games and can deliver swift and credible decisions," a Parliament statement said.

In December, EU leaders reluctant to cede powers over their banking systems had agreed a decision-making structure which gave them the final say in any bank closure, minimising the role of the European Commission, the EU's executive arm.

This was the major sticking point for a large majority of MEPs who attacked the provision as allowing political interference which would both skew and slow down the process.

In the new accord, the European Council, which groups together the EU's member states, will only be called in if the Commission requests its help.

"The Council will be involved only at the Commission's express request. This will avoid pervasive interference in the individual resolution cases, a key concern for MEPs," the parliament statement said.

In addition, a fund worth 55 billion euros ($76 billion) to cover the cost of bank closures, which was to have been phased in over 10 years, will now be operational after eight years.

This fund will also be able to borrow on the financial markets to raise extra money if needed.

- End of 'massive bailouts' -

EU Financial Markets Commissioner Michel Barnier said the accord clears the way for the eurozone's new "banking union".

He said it spelt "the end of the era of massive (bank) bailouts" paid for by the taxpayer, which helped turn the 2008 global financial crash into a near-fatal debt crisis for the eurozone.

The centre-right European People's Party (EPP), the biggest group in parliament, welcomed the deal, saying the whole process will now go faster and so help minimise market turmoil.

"This is very good for restoring confidence in European banks," said the EPP's Corien Wortmann-Kool, one of the lead negotiators in the marathon talks with the member states.

"Problem banks should be treated within a weekend," a party statement said, and all lenders will be "treated in the same way across Europe, in whichever country they are located."

Thursday's accord now goes to the full parliament for final approval, expected in April, before the house breaks up for elections in May. After that, the EU's 28 member states will also have to endorse it formally.

The banking union system is made up of a previously agreed Single Supervisory Mechanism which becomes operational in November under the European Central Bank, plus the Single Resolution Mechanism agreed in December and which is expected to be in place next year.

"In all, setting up this new European body, endowed with extensive powers ... is a good thing," said Sylvie Goulard of the Liberal Democrat ALDE party in parliament.

"MEPs got substantial changes ... even if they too had to move from their initial positions," Goulard said.

Further information, European Parliament

Banking Union - Legislative Observatory