The assembly's Economic and Monetary Affairs Committee shot down Hoekmark's proposal in a May 26 vote. Mr Hoekmark, a Swedish member of the center-right European People's Party, the parliament's largest group, put the result down to an alliance of left-leaning lawmakers and "extremes" on the committee.
"The urgently needed bank-structure reform is degenerating into farce," Sven Giegold of the Green group said in a statement.
Mr Hoekmark's attempt to "force through his lobby- driven proposal was foiled by the coordinated resistance of social democrats, leftists and Greens," Mr Giegold said.
The European Commission, the EU's executive arm, presented a draft bank-structure plan more than a year ago as part of its attempts to tackle too-big-to-fail lenders. A final law would require approval by parliament and national governments.
The commission's proposal would require the bloc's biggest banks to be screened by the central bank or another agency that supervises them. Separation of investment and consumer banking would take place if the firms were found to exceed certain levels of trading and risk-taking, with some limited room for supervisors to grant an exception if the bank proves that there is no risk to financial stability.
Banks have said the plan amounts to quasi-automatic separation and would damage their ability to finance the economy.
The committee will now go back to the drawing board in search of a compromise on the legislation, said Chairman Roberto Gualtieri.
"The plan is to think about how to proceed, and we'll spend the next few days doing that," Mr Hoekmark said by telephone after the vote in Brussels.
The EU's bank-structure bid lags behind measures in individual nations, such as the Vickers rule in the UK. Other countries such as France, Germany and Belgium have also developed their own plans.
Wim Mijs, chief executive of the European Banking Federation, said breaking up "strong and now stable universal banks" would "jeopardize Europe's competitiveness and risk a further concentration of systemic investment banking."
"Europe needs its universal banks more than ever, also to revitalize long-term financing and to support a capital markets union with liquidity-generating activities," Mr Mijs said in an e- mailed statement before the vote.
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