As George Osborne returns empty-handed from Brussels after his attempt to persuade fellow European finance ministers to end their plans to cap bankers' bonuses, some quarters of the finance industry believe there is still hope for reform, while others fear the worst.
The proposed new rules - part of CRD IV - the Capital Requirement Directive, which introduces Basel III for Europe, aims to impose the bonus cap, set at the same level as a year's salary or a maximum of twice their pay if backed by a majority of shareholders.
The rules also aim to ensure that banks have a tighter grip on their capital and liquidity requirements.
Katja Hall, CBI chief policy director, said: 'The proposals will damage the competitiveness of the EU's financial services industry, hitting the UK particularly hard, at a time when growth should be the key priority.
'There is scope for some of the details to be negotiated further and we hope policy makers will use this opportunity to mitigate some of the most damaging aspects.'
Her comments were echoed by Simon Lewis, chief executive of the Association for Financial Markets in Europe, who said the legislation was "a threat to the competiveness of Europe".
Even though Europe's finance ministers agreed not to rubber stamp the legislation on Tuesday [5 March], Osborne has few - if any - allies. European officials strongly suggest that it will be approved later this month or in April with the legislation in place from 1 January 2014.
A City recruiter said the UK would be forced to hand over its position as a world financial centre to New York, Switzerland or Hong Kong, if the plans get the go-ahead.
Adrian Kinnersley, managing director of Twenty Recruitment said: 'This will be seen by many organisations as the final regulatory straw and encourage institutions to relocate their headquarters overseas and take talent, tax revenues and income with them. The figures speak for themselves - if we lose that tax revenue and income then our economy is finished.'
'This latest move, combined with the Tobin [Financial] transaction tax (FTT) makes running a financial services business in Europe extremely uncompetitive when compared with the US and Asia which have not gone as far.
Meanwhile, Alex Beidas, Linklaters employee incentives lawyer, said: 'The arguments as to whether or not the cap is legal are finely balanced. The problem is that there is no definition of "pay". Although on the one hand this is all about "pay", on the other hand, the Commission has structured this as a ratio between fixed pay and variable pay rather than limiting the absolute amount that can be received.'