MEPs have voted in favour of the Capital Requirements Directive, which will cap bankers’ bonuses at 100 percent of their annual salary or at 200 percent if shareholders approve.

CRD 4 will be effective from be effective from 1 January 2014 and will also see the EU implement the Basel III global standard. The rules require banks to own more equity capital, therefore allowing them to be more resilient in crisis situations in the hope of avoiding a repeat of the 2008 global financial crisis.

“After more than thirty rounds of negotiations, this agreement will make our banking sector more resilient and brings us in line with international standards,” said Sharon Bowles, chairman of the European Parliament’s Economic and Monetary Affairs Committee. “Realignment of the pay/bonus ratio to reasonable proportions reduces perverse incentives to risky behaviour even if total pay stays the same.”

The new regulations mean banks will have to provide more data about their profits and taxes on a country-by-country basis across the EU in an effort to increase transparency. CRD 4 also stipulates that banks should increase their portion of best quality core capital to 4.5 percent from the present two percent as well as holding a minimum total capital of 8 percent of risk-weighted assets.

While it is hoped the move will stop reckless behaviour on the behalf of bankers, George Osborne was concerned the rules would lead to a big rise in salaries, which could be just as detrimental. The Chancellor was defeated 26 to one in technical negotiations in March.

The European Commission first presented the CRD4 law in 2011, agreeing internally on its position by May 2012 before opening up negotiations with EU member states. The legislative text was formally approved by the Council on 27 March. Parliament adopted the new law on 16 April 2013.