From 2015, bankers bonuses will be capped at a maximum of double their salary, as the EU Council has pushed through the plan despite opposition from the UK.
The move will come into effect from 2014’s bonuses that are paid out at the start of 2015.
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The cap will apply to subsidiaries of EU banks anywhere in the world, so staff in US banks will be able to pay big bonuses to the best staff, when their rivals in the same city will not be able to offer top performers a similar package.
EU banking reform package was also decided upon to make lending to small firms that drive the economy easier for banks, and in turn spurring growth.
Lead MEP Othmar Karas, had said the new set of rules is the "farthest-reaching banking regulation in the EU to date", and the new single rule book for all its 8,200 banks is the foundation on which the EU banking union "must be built".
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By GlobalData"The single supervisory mechanism will be the roof. We must now add the walls: the resolution framework for banks and deposit guarantee schemes. As legislators, we do not regulate salary levels. The rules on bankers’ bonuses will instill fairness and transparency and contribute to a change in banking culture."
British politicians, bankers and regulators fear that the cap will simply drive up salaries, increasing banks fixed costs and making it difficult to cut pay and costs.
The bonus cap is also feared tp cut banks ability to claw back payouts if staff performance falls over several years, according to Bank of England regulator Andrew Bailey.
