MEPs voted to cap cash pay outs at 30 per cent with âparticularly largeâ bonuses to be capped at 20 per cent.
The parliament also agreed on deferring up to 60 per cent of bonuses for at least three years while at least half all future pay outs would be recalled first to support a financial institution experiencing difficulties.
Further regulations stated that banks will be encouraged to cut the amount paid while pension payments will also be linked to the performance of an institution.
Arlene McCarthy, Labour MEP, said: âTwo years on from the global financial crisis, these tough new rules on bonuses will transform the bonus culture and end incentives for excessive risk-taking.
âA high-risk and short-term bonus culture wrought havoc with the global economy and taxpayers paid the price. Since banks have failed to reform we are now doing the job for them.â
MEPs also voted to introduce higher standards for re-securitisations and stricter rules on capital requirements.
The new bonus regulations will be implemented in January of next year while other proposals are expected to come into effect from December of 2011.
By Jim Ottewill