By John O’Donnell and Claire Davenport | Reuters.com

A new cap on bankers’ bonuses agreed overnight in Brussels was hailed by its supporters as a breakthrough to rein in the financial sector, but dismissed by critics as a reckless move that would drive bankers abroad or force up their base pay.

Bankers in Europe could be barred from receiving bonuses equal to more than their base salaries as soon as next year, following agreement in Brussels on Thursday. Shareholders would be allowed to vote to raise the cap to double base pay, but no higher.

The cap has been somewhat softened by allowing banks to discount future values of shares, options, bonds or other non-cash payments paid out over a number of years, but nevertheless amounts to the toughest limit of its kind in the world.

The rules would apply to Europe-based employees of any bank, as well as to staff of European banks wherever they are based. That means a Deutsche Bank employee working in New York or Tokyo would be subject to the limits, as would a Goldman Sachs banker posted to London, although that provision may later be reviewed.

"There will be no exceptions," said Othmar Karas, the Austrian lawmaker who helped negotiate the deal. "It goes for all banks inside and outside the European Union and for all foreign banks inside the European Union."

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