Europe unveils bank-bailout plan

By Chris Isidore @CNNMoney June 6, 2012

NEW YORK (CNNMoney) -- The European Union announced a plan Wednesday for a continent-wide banking union that would deal with future banking crises rather than leave them in the hands of already struggling national governments.

The proposal would include a single EU deposit guarantee organization covering all banks in the union, something similar to the FDIC that covers U.S. bank deposits. There would also be a common authority and a common fund that would deal with bailouts needed for the cross-border banks that are major players in the European banking system.

In addition, there would be a single EU supervisor with ultimate decision-making powers for the major banks, and a common set of banking rules.

"Today's proposal is an essential step towards banking union in the EU and will make the banking sector more responsible," said European Commission President Jose Manuel Barroso in a statement. "This will contribute to stability and confidence in the EU in the future, as we work to strengthen and further integrate our interdependent economies."

The amount of the common bank rescue fund was not disclosed

But the statement from the EU said that the various countries in the 27-nation bloc approved €4.5 trillion in emergency funding for banks between October 2008 and October 2011, an amount equal to 37% of the EU's gross domestic product.

Spain is now weighing a request from Bankia, its fourth largest bank, for a €19 billion bailout, while Spain's central bank has identified about €300 billion in problem loans across the nation's banks. On Tuesday, the Spanish finance minister said his country will need help dealing with its banking problems, putting the Spanish banking system at the epicenter of worries about European sovereign debt.

The annoucement came as the European Central Bank held a regularly scheduled meeting, with the ongoing sovereign debt and banking crisis in Europe in focus. The ECB left its key interest rate unchanged at the meeting.