European lawmakers have signed off on new laws to make it easier to shut problem banks after long wrangling over rules for an industry blamed for triggering the economic crisis.

The vote in the European Parliament, shortly before it breaks up for May elections, gives the final stamp of approval to shut weak lenders in the euro zone, the last in a line of major reforms to create a banking union.

Almost seven years since German small business lender IKB became Europe's first victim of the global financial crisis, the region is still struggling to lift its economy out of the doldrums and banks are taking much of the blame for not lending.

Much of the delay was blamed on Europe's patchwork of national interests, which made it difficult to forge a united front to act quickly.

A 'union', and the clean-up of banks' books that will accompany it, is intended to help change that. It begins when the European Central Bank starts policing the sector this year.

"The EU has lived up to its commitments," said Michel Barnier, the European official in charge of regulation.

"The banking union completes the economic and monetary union, puts an end to the era of massive bail-outs and ensures taxpayers will no longer foot the bill when banks face difficulties."

Crucially, the scheme introduces new rules making it easier to shunt losses onto the bondholders and even large depositors of failing banks although the conundrum of what to do if a very large bank wobbles remains.

There will also be an obligation for countries to ensure that schemes are in place to guarantee the first €100,000 in any savings account, although no European backstop is foreseen should they fall short.

The vote represents a success for the European Parliament, which negotiated with European Union countries to reduce the scope for political meddling when deciding to shut a bank.

"From now on, taxpayers will not systematically foot the bill for bank losses," said Martin Schulz, the European Parliament's president. "Clear rules to resolve a failing bank will be in place."

But for many, Europe's response has been too slow. 

Jamie Dimon, the chief executive of JP Morgan Chase recently said that European banks lag US peers who had largely recovered from the financial crash.

Some lawmakers also point to the shortcomings of Europe's centrepiece reform, in particular the failure to tackle megabanks.

"Too big to fail banks are simply too dangerous to exist," said Philippe Lamberts, a lawmaker from Belgium’s Green party.

"As long as systemic financial institutions are allowed to exist in their current shape, taxpayers will remain exposed to paying for the follies of a runaway financial industry."

The accord nonetheless means that the ECB has the means to shut banks it decides are too weak to survive, reinforcing its role as supervisor as it prepares to run health checks on the still fragile sector.

It establishes a common €55 billion back-up fund over eight years - quicker than planned but far longer than the ECB's watchdog had hoped. Euro zone governments will not, however, club together to make it cheaper and easier to finance.

The 18 euro zone countries do not intend to cover jointly the cost of dealing with individual bank failures, a central tenet of the original plan for banking union.

The fragility and politicised nature of Europe's banks has been highlighted by ailing Austrian state lender Hypo Alpe Adria. 

Vienna will sponsor a bad bank to isolate roughly €18bn of bad loans extended by the bank after Joerg Haider, the far-right politician who governed its home province, earlier ramped up its activities.

Despite the bank's impact on national debt, many politicians feel Austria has little choice. Even if banking union were in place, the situation would be little different.