BRUSSELS (AP) -- The European Union's executive branch proposed Wednesday a system of centralized banking regulations that would ensure that taxpayers would never again have to bail out ailing banks whose collapse would threaten the wider economy.

Under the European Commission proposal, banks that posed no systemic risk to the national or international economy would simply be allowed to fail. But those whose failure would pose too grave a threat to the stability of financial markets would be propped up in part by having unsecured creditors of the bank, such as bondholders and shareholders, take losses rather than having taxpayers give the institution rescue money.

"We don't want taxpayers to have to pay," said Michel Barnier, the European commissioner responsible for the internal market, as he outlined the proposals in Brussels on Wednesday. "We're going to break the link between banking crises and public budgets."

If he ever achieves that, however, it will be too late to alleviate the current banking crisis afflicting Europe and one of its biggest economies, Spain, where banks are sitting on huge losses that the government cannot afford to plug. It also offers no immediate guarantee that EU taxpayers are off the hook.

The complex proposal is not scheduled to take effect fully until 2018. In any event, it also needs the approval of the European Council, composed of the leaders of the 27 EU countries, and the European Parliament, and may be significantly altered in the process of gaining approval.

Barnier was at pains to emphasize that he had been working on the proposal for years, and they were not a response to the banking crisis in Spain or other recent bank bailouts.

While Barnier said the centralized rules are necessary because so many banks operate across borders, he did not propose setting up a powerful central banking authority. Instead, his proposal would strengthen the ability of national authorities to -- hopefully -- head off bank failures before they happen and to deal with them decisively when they do.

"If we're going to avoid in the future banking crises, each member state has to be equipped with the appropriate tools to take action in time, not when it's too late," Barnier said.

All the national banking authorities would be operating with the same rules _ rules that would enable them to intervene early, require banks to draw up recovery plans, and even to dismiss the bank's management.

If a bank was about to fail, national authorities would have the power to sell or merge the businesses, to create a temporary "bridge bank" to carry out essential functions, to separate good assets from bad ones, and to write down the bank's debts.

"The resolution tools will ensure that essential functions are preserved without the need to bail out the institution, and that shareholders and creditors bear an appropriate part of the losses," the commission said in an explanatory statement on the proposal.

This last part -- having the bank's unsecured creditors take losses -- is being termed a "bail-in" in contrast to a taxpayer-funded bailout.

Barnier acknowledged that the proposal would not have an immediate effect, but he said EU officials need to take both short-term and long-term actions to regain financial stability.