BRUSSELS (AFP) - The European Parliament launched "tough negotiations" with EU member states on Wednesday on enacting a new bank regulatory system meant to prevent any repetition of the financial crisis.

An agreement is needed before elections in May.

A parliamentary statement, foreseeing that the talks would be "tough", said that "positions are far apart, with MEPs insisting that the system must not be cumbersome or vulnerable to political back-room deals."

European finance ministers agreed in December what is known as a Single Resolution Mechanism, designed to step in and close down a failing bank before it can do too much damage to the economy.

The crucial issue was who would run the SRM and how it would be paid for - in the event, it is the most powerful EU states such as Germany which will likely have most say in any decision to close a bank.

Meanwhile, a back-up fund levied on the banks themselves will be phased in over 10 years until it totals 55 billion euros (S$95 billion) but this arrangement will be covered by bilateral treaties and so will be beyond Parliament's oversight.

When the deal was approved by EU leaders last month, European Parliament head Martin Schulz warned that they would face "very long negotiations" as the proposal fell "very far" from what lawmakers wanted.

He specifically complained about the complex legal basis which could slow down the SRM's work when speed is essential, and of the way the SRM fund was set up, which he judged to be "unacceptable."

Wednesday's brief statement noted that Schulz and the MEP leading the negotiations, Elisa Ferreira, had stated that the new system had to be "truly European and the decision-making process must be able to work swiftly, free from political interference." Parliamentary approval is required for the SRM which forms what is known as the "banking union" along with an already agreed new supervisory regime to be overseen by the European Central Bank.

It will be introduced from 2015 and be fully operational by 2025.