The European Union has taken important steps in recent days regarding the bloc-wide banking union, finalizing how much banks will have to chip in to the bail-out fund and tapping a German regulator to oversee the fund.

This week the Council of the European Union announced it had reached a political agreement on rules regarding how much banks will pay to the Single Resolution Fund. The fund is a key piece of the EU’s banking union, which was designed to provide tighter oversight of the sector’s biggest banks and avoid taxpayer-funded bailouts that marked the 2008 financial collapse. Reaching an agreement on how to fund the bail-out pot was no easy feat, as member states bristled against the possibility of footing the bill for bank collapses in other member states. The agreement will be adopted without further debate once the text is finalized in all languages, which the Council said would be before the year ends.

“The implementing act on bank contributions to the Single Resolution Fund adopted today is a crucial step towards the realization of the Single Resolution Mechanism, the second building block of the banking union,” Pier Carlo Padoan, Italy’s economic and finance minister and head of the Council, said in a statement. “The Single Resolution Fund will substantially increase the resilience of the European banking sector, to the benefit of citizens and businesses.”

Known as the Bank Recovery and Resolution Directive (BRRD), the new rules require banks as of 2015 to contribute to national resolution funds, which are set on a national level and based on covered deposits. By 2016, banks will begin transitioning to contributions to the merged Single Resolution Fund (SRF).

The Council said the SRF will be built up over an 8-year period, with a target of at least1 percent of covered deposits of all credit institutions authorized in the participating member states. Banks will be required to make annual contributions, based on their liabilities, excluding own funds and covered deposits, and adjusted for risk, the Council said.

The European Commission’s delegated act laid out how to calculate individual bank’s national contributions, and the Council said the same rules will be used for the SRF. Those rules include how to account for risk and the relation between a flat-rate contribution, which all banks must pay, and a risk-adjusted rate, which will be between 0.8 to 1.5, the Council said. However, because the targets differ between national contributions and that of the Single Resolution Mechanism, banks will face different contribution levels. To mitigate the discrepancy, the EU will phase in the bloc-wide target over the same 8-year period in which the national resolution funds will be merged into a single pot for failing banks. Initially, 60 percent of the banks’ contributions will be calculated based on national targets, with that percentage decreasing each year. By the 8th year, the contributions will be based solely on the SRM target.

Last week the European Commission picked Germany’s Elke König to head up the Single Resolution Board, a six-member body that will oversee the winding down process and bail-out fund. König has served as the head of Germany’s Federal Financial Supervisory Authority (BaFin) since 2012. An article in Deutsche Welle described König as a respected economist “feared for her strong moral values.”

König came out on top from the commission’s short list of candidates, which also included Belgian Philippe Maystadt, the former president of the European Investment Bank who conducted a special review for the commission concerning International Financial Reporting Standards. Deutsche Welle said König has long been a champion of greater moral responsibility in the banking industry.

“We need a return to basic ethical values, which seem to have gone out of fashion in certain corners of the financial sector during the economic boom,” Deutsche Well quoted König as saying in a speech earlier this year.

König is expected to be confirmed by European Parliament. Her term would be for an initial three years, renewable once for an additional five years. The commission also put forward Finland’s Timo Löyttyniemi, managing director of the country’s State Pension Fund, as vice chair for a non-renewable five-year term.

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