European Union Proposes Plan for Failing Banks

BRUSSELS — European Union officials announced an ambitious proposal on Wednesday for a uniform way to deal with failing banks in the region that would include central decision-making and an emergency fund raised from Europe’s banks.

The plan is meant to reduce the chances that struggling governments end up taking their states deeper into debt to save their banking systems, only to face high sovereign borrowing costs that would threaten the stability of the euro currency union.

“We cannot eliminate the risk of future bank failures,” José Manuel Barroso, the president of the European Commission, said in a statement. But the proposal, he said, helps ensure that “it should be banks themselves — and not European taxpayers — who should shoulder the burden of losses in the future.”

The commission, the European Union’s executive body, would assume significant new power under the system, something that makes some countries, including Germany, skeptical. The plan would require approval by a majority of European Union governments and by the European Parliament before it could go into effect.

To be sure, there would be limits to the power of the new centralized system. It could not, for example, order the closure of a bank without permission of the host government if doing so would result in that country’s taxpayers footing some of the bill. And the system would not have access to full amount of the emergency fund for more than a decade.

Even so, analysts have described the plan as one of the most significant transfers of national sovereignty to Brussels yet proposed in the name of securing the euro. The concern of Germany and other countries about giving such authority to the European Commission could bog the proposal down in months of difficult negotiations.

The proposed bank-failure program, known as the Single Resolution Mechanism, was conceived as part of a broader European banking union whose other provisions would include a single banking supervisor and an agreement to impose any losses mainly on a bank’s creditors and shareholders, rather than taxpayers.

The Single Resolution Mechanism would rely on the European Central Bank to signal when a financial institution in the euro area was facing severe difficulties.

A resolution board, supported by a staff of around 300 and made up of representatives from the central bank, the European Commission and member states of the union, would then make a recommendation on how to shut down or shrink a bank. The commission would reserve the right to make a final decision.

The board also could draw on the shared fund to help shut down or radically restructure failing lenders after creditors and shareholders have borne some losses. European Union officials want the size of the fund to be about 70 billion euros by the time it is fully financed by 2025, with money coming from levies on banks.

But the slow buildup of the fund could mean that if bank crises arise in the interim, the new system would be reliant on national funds, and possibly even public money from other euro zone countries. Tapping taxpayer money to bail out other countries’ banks is something that Germany has consented to, but only as a last resort.

On Tuesday, Wolfgang Schäuble, the German finance minister, insisted, as he has before, that changes to European Union treaties would be necessary before the Single Resolution Mechanism could go fully into force. Because treaty changes would be laborious and far from certain, Mr. Schäuble is essentially arguing for a potentially long delay to the banking effort.

But France has called for swift adoption of the plan.

During a news conference on Wednesday to present the plan, Michel Barnier, the European commissioner overseeing financial services, sought to underline the need for rules ensuring the stability of European banks, saying that the sector drove investment in a far larger proportion of the region’s economy than is the case in the United States.

“We’re not going to get diverted by lobbying,” Mr. Barnier said.