The European Union has reached an agreement on the rules governing future bank bailouts, with the 27-member bloc shifting the burden for covering the tab away from taxpayers and to financial institutions and creditors while protecting deposits.

"We have reached an agreement that is positive with three messages: very high protection for deposits, a common model for the resolution of banks and for how to deal with losses, and protection for the taxpayer's money," Spanish Economy and Competitiveness Minister Luis de Guindos said.

"This is a step in the right direction in terms of what has to happen for banking union," the Spanish minister said.

The agreement was reached after more than six hours of negotiations and just ahead of the start of the summit of EU heads of state and government.

Under the terms of the agreement, deposits of less than 100,000 euros ($130,385) will be fully insured, while the deposits of small enterprises will enjoy additional protection. EFE