Finance ministers from the European Union reached a deal in the early hours of Thursday to set up rules about who would have to foot the bill for any future bank bailouts to avoid costs to tax payers.
According to the new rules, shareholders, bondholders and depositors with more than 100,000 euros ($132,000) could end up sharing the burden of saving a bank.
Analysts say the negotiations on how to deal with bank failures are crucial to restoring confidence in the euro zone, which has been hit hard by a debt crisis, and the deal helps pave the way towards establishing a banking union in the single-currency bloc.
"If the banks get into trouble we will now, throughout Europe, have one set of rules on who pays the bill," Dutch Finance Minister Jeroen Dijsselbloem told CNBC.
"So that's a major shift from the public means, from the taxpayer if you will, back to the financial sector which will now become for a very, very large extent, responsible for dealing with its own problems," Dijsselbloem added.
(Read More: Europe Seeks to Shield Taxpayers From Bank Collapses)
Europe's tax payers have had to pay for a number of bank rescues since the global financial crisis, sparking outrage across a region that has been hit by recession and high unemployment.
The EU spent the equivalent of a third of its economic output on saving its banks between 2008 and 2011 using taxpayer cash, Reuters reported.
But the latest deal suggests the EU is stepping towards harsher measures that shift the onus of bank bailouts from the taxpayer to depositors. A sign of that was seen earlier this year when a bailout of Cyprus forced large losses on depositors.
Under the agreement, bond holders and shareholders would be forced to absorb losses of up to 8 percent of liabilities as part of a "minimum bail-in". Thereafter, national funds can be used to help banks. But that help is capped at 5 percent of the bank's liabilities. Once a bail-in has been imposed, help can be sought from the common EU rescue fund, the European Stability Mechanism (ESM).
"There is some room for flexibility. National funds can be used if they are available, but it's only a limited amount of flexibility," Dijsselbloem said. "For the rest of it, it's going to be a bail-in mechanism which is the main instrument to save banks."
(Read More: Cyprus Parliament Votes to back EU Bailout)
One country that has insisted on more flexibility on possible bank bailouts is Sweden and it reached a separate deal to allow it to "bail-in" the first 20 percent of risk-weighted assets in return for setting aside more money for its national resolution and deposit guarantee funds.
"It's a compromise, but given that we can apply 20 percent risk with assets, given that we'll have a 3 percent pre-funded deposit insurance system, this is an acceptable compromise," Anders Borg, Sweden's Minister for Finance, told CNBC.
Putting Off Depositors?
Dijsselbloem said he did not think the new rules would discourage savers from parking their cash in certain banks.
"All deposits under 100,000 [euros] are completely exempt from this system, so they're absolutely safe. And the other depositors are right at the end of the hierarchy," he said.
(Read More: Euro Zone Officials: No Revision to Cyprus Bailout)
According to Swedish finance minister Borg: "We should really try to safeguard the depositors, particularly the household deposits concerned. There are some risks and difficulties in these kinds of proposals and therefore we think there could be further progress and trial-outs."
EU leaders pledged a year ago to set up a banking union that would give the supervision and rescue of banks to European institutions rather than leaving weak member states to deal with the problem alone.
- Reuters contributed to this story