The EU Parliament has proposed new rules to place a cap on bank bonuses not to exceed fixed salaries.

But the UK is already opposing the proposal, which has been backed by Germany, France and Ireland, for fear that it could damage stability and growth.

It is being proposed that the new rules be included in the Capital Requirements Directive IV (the EU's legislation implementing the Basel III rules). It would put a stringent cap on bank bonuses of 1:1 ratio with fixed salaries, which could be increased to 2:1 with approval from a majority of shareholders.

The latest negotiations between EU ministers, the European Parliament and the Commission on Tuesday, 19 February failed to reach an agreement on the level at which bonuses should be capped.

Those in support of the cap on bonuses argue that it will prevent the reckless risk-taking that led to the financial crisis. However, the UK is opposing the proposed new rules fearing it would prevent true reflection of pay and performance and damage stability and growth.

Katja Hall, CBI chief policy director expressed concern at the proposals, saying that a move away from variable to fixed pay is in complete contrast to what the CBI is trying to achieve, to ensure that pay properly reflects performance.

'This would take the power to hold companies to account out of investors' hands, by removing tools such as voting on pay policy and implementation, and on board member selection.

'Such a move would fly in the face of financial stability, by removing companies' ability to quickly respond to a downturn by adjusting pay.

'We are concerned that this could be the thin end of the wedge, with Europe trying to expand this legislation to apply to businesses more generally, which could damage stability and growth,' said Hall.

The negotiations are ongoing as part of the introduction of stricter capital rules for banks via Basel III.