By Richard Johnstone | 19 December 2013

European leaders have agreed to create a €55bn rescue fund for banks in the eurozone area, as part of moves to establish a banking union for the currency zone that will remove the need for taxpayer bailouts.

The European Union’s council of ministers yesterday reached a deal to establish a ‘single resolution board’ which will develop restructuring plans for troubled banks from 2015, and a resolution fund to provide financial support.

The plan, which follows the agreement of common rules for bank support across the EU earlier this month, will now need to be approved by the European Parliament.

Under the agreed approach, the European Central Bank will notify the resolution board that a bank is failing or likely to fail. The board will then devise either a wind down or rescue plan. National central banks will be responsible for implementing the plan.

It is intended that the bailout fund will be created by a levy on banks over ten years, meaning taxpayer support will not be needed in the event of a financial crisis. Banks will only be able to claim from the ‘single resolution fund’ once an approved rescue plan is in place.

Following announcement of the plan, EU commissioner for the internal market and services Michel Barnier said it would mean ‘revolutionary changes to Europe's financial sector’ following the banking crisis.

‘Together, these laws will ensure we have a comprehensive framework for dealing with bank crises,’ he said.

‘But these rules are not only about dealing with today's crisis and avoiding a future crisis. They are also essential to create long-lasting financial stability: the pre-condition so banks can lend to the real economy.’