STRASBOURG, France (AFP) - EU lawmakers voted by a wide margin on Tuesday to pass legislation that will cap bankers' bonuses that is considered hugely controversial in London, home to one of the world's biggest financial centres.
The measure will "bring to an end the greed of bling-bling traders," victorious French Socialist MEPs said.
The legislation was part of a package that will also raise banks' capital requirements so they will be better placed to cope with any new financial crisis, and introduce reforms designed to boost lending to small businesses.
The vote delivered an overwhelming 'Yes,' but it is very likely to trigger fresh concerns in Britain.
British finance minister George Osborne has warned that the cap on bonuses is impractical and counter-productive, harming a financial services industry which is needed to provide the loans and advice the struggling European economy needs.
European Commission head Jose Manuel Barroso said the issue was "simply a question of fairness."
The legislation "will ensure that banks across the EU build up the necessary capital to absorb future shocks themselves, without asking the taxpayer for help," Barroso said.
The bank bonus measure was approved by 595 votes to 40, with 76 abstentions and the new capital requirement reforms by 608 votes to 33, with 67 abstentions.
The new rules are expected to come into effect in January 2014.
The celebrating group of French Socialist MEPs said in a statement that following progress on a tax on financial services, this latest "major battle" pitting politics against finance would boost moves to clamp down on tax-fraud and money-laundering.
Likewise, it would help efforts to agree a eurozone-EU banking union with cross-border supervision and industry-funded schemes for winding up failed banks and strengthened deposit guarantees.
The so-called 'Basel III agreement' to arm the sector against future crises was termed "the most committed reform of the banking sector since the crisis," by German Socialist and Democrat Euro MP Udo Bullmann.
The vote was called on an agreement struck late March between Parliament negotiators and the European Union's current rotating chair, the government of Ireland, despite the controversy stirred in Britain.
The deal was to cap bonuses at the same amount as is paid in a fixed annual salary, or twice that sum if shareholders approve.
Osborne had told his EU colleagues last month that "we can't support the proposal currently on the table" but negotiations since then appear to have yielded few concessions.
The legislation was originally required to translate into European law internationally agreed rules to beef up banks' capital and make them better able to withstand future crises.
Parliament insisted however that the bonus cap be added to satisfy public anger over pay packages seen as exorbitant in a time of recession and massive job losses - a "revolutionary measure," according to parliament head Martin Schulz.
The Basel III regulations tighten up bank capital requirements. They were due to start to take effect this January but next year now seems the most likely.
Home to some three quarters of the EU's finance industry, London has long maintained that bonus and salary caps would make Europe's banking sector uncompetitive.
The final negotiations centred on ways to steer permissible incentives towards the longer-term, with extra safeguards enabling "clawbacks" if a banker's performance falls short.
A quarter of bonus monies should be deferred for five years, with the London-based European Banking Authority tasked with working out adjustments to take account of inflation and other risks.
With Britain's opposition, and unless there are last-minute tweaks when the final legislation comes before EU member states for final adoption, the law will likely have to rely on qualified majority voting to be approved, with London at risk of being outflanked by continental rivals on banking sector regulation.