A network of national funds should be introduced so the cost of bank failures are not met by the taxpayer, the EU internal market commissioner has said.
Michel Barnier said such funds would provide part of a broader system aimed at preventing future financial crises.
Banks would be required to pay a levy into the funds which would not be used to bail out failing banks, but manage failures in "an orderly way".
Mr Barnier said: "I believe in the 'polluter pays' principle."
"It is not acceptable that taxpayers should continue to bear the heavy cost of rescuing the banking sector. They should not be in the front line," he said.
And the EU report said that any levies that banks were made to pay should not be passed on to their customers in the form of higher charges.
Mr Barnier said the financial sector should pay the cost of banking crises in future.
"That is why I believe that banks should be asked to contribute to a fund designed to manage bank failure, protect financial stability and limit contagion - but which is not a bail-out fund."
He added: "Europe must take a lead in developing common approaches and providing a model for co-operation which could be applied globally."
Rather than seeking to impose a pan-European fund, the EU is backing a "harmonised set of powers and rules" which would allow regulators in each country to take measures to deal with insolvent banks.
The proceeds of funds would remain within national borders, but there are some national disagreements about whether the money should go into a special ring-fenced fund or wider national coffers.
However, the EU recognises that setting up funds could lead to "moral hazard" concerns, with banks potentially taking excess risks if they feel they are partially insulated from the consequences of their actions.
However, the EU proposal states that it would be made "clear and unambiguous" to shareholders and uninsured creditors that resolution funds would not be used as an insurance policy against bank failure.
Greengates Builders Merchants Accrington, Lancashire is curious to know what will become of all this!