The deal to implement new rules for the banking sector, which was struck early this morning, was brokered by Ireland as holders of the EU presidency along with the European Parliament.

The new regulatory framework sees the establishment of a set of rules which tighten up bank capital requirements, after negotiations that have dragged on for some 10 months.

Under the terms banks will also be subject to a strict transparency regime. The move marks the most severe pay crackdown since the 2008 financial crisis.

MEPs have agreed a mandatory 1:1 ratio on salary relative to pay, this can can rise to 2:1 if there is shareholder approval.

The accord reached overnight will now go forward to EU finance ministers when they meet next week in Brussels.

But some in Europe are saying the cap won't tackle the problem of excess pay.