FRANKFURT, July 6 Reuters The European Central Bank on Thursday backed proposed new EU rules for closing down smaller banks when they fail, but said they should be more ambitious and apply across the bloc.

Bank failures have been put in the spotlight by the recent collapses in the United States of Silicon Valley Bank and Signature Bank and the UBS rescue of Credit Suisse.

The EU39;s proposal establishes that industryfunded deposit guarantee schemes DGS take a loss earlier when a bank fails, a crucial change for midsized banks that do not have resources such as bonds that can be written down.

The ECB welcomed the changes, which aim to avoid bailouts by the taxpayer, but said they should go further and make it easier for a failing bank to be taken over.

The level of ambition of the proposed legislative package is limited in this regard, the ECB said in a legal opinion.

The ECB encourages the Union legislators to harmonise and expand … the ability for DGSs to support transfer of assets and liabilities to an acquiring credit institution.

Under current rules, the failure of a large bank in the bloc is dealt with by the Single Resolution Board SRB, but winding down the next tier down is subject to differing national practices that can end up using taxpayer money.

The ECB also reaffirmed its longstanding call for an EUwide deposit guarantee scheme and for the Stability Resolution Fund to provide funding to banks coming out of resolution, the process when authorities…