The risk of further EU taxpayer-backed bailouts has been curbed by the EU.
MEPs have voted in favour of creating a new European authority which will be able to wind up or restructure failing banks.
The new rules seek to prevent crises where banks have to be bailed out at huge costs to the taxpayer.
Now creditors and shareholders will be the first to pay when a bank fails.
The reform will set up a €55bn fund, financed by bank levies, for emergency cash to aid a failing bank.
The changes are applicable to all 18 eurozone countries.
Although a lead negotiator on the package of reforms, MEP Vicky Price of the UK Conservatives said the UK would not pay into the fund or take on any liabilities.
Direct supervision of the eurozone’s largest banks will begin in November.
MEPs also strengthened the protection of all bank deposits up to €100,000 in case a bank fails.
Under the deposit guarantee scheme, customers will be able to receive the total amount guaranteed within seven working days, if a bank is in trouble.
