Bankers in Europe will have one final bonus season before they are barred from awarding themselves payouts worth more than their salary, EU lawmakers agreed tonight.
The ruling paves the way for the first cap of its kind globally.
The cap is designed to address public anger at a bonus-driven culture many European politicians believe encouraged the risk-taking that led to the near-collapse of many of the region's biggest banks.
The law will be effective from January 2014 but will only apply to bonuses paid in 2015.
A special provision to recognise that bonuses are paid on the previous year's work means bankers who collect payouts next February and March will not be affected.
The new rules will make it harder to award large payouts such as the bonus worth more than £17m cashed in this week by Rich Ricci, the head of Barclays' investment bank.
The bonus talks have been emotional and divisive. Some lawmakers, thinking ahead to pan-European elections next year, demanded ever stricter rules while others tried to dilute them.
One angry lawmaker walked out of the talks, but later parliamentarians toasted the deal with champagne.
The cap has already been softened to allow banks to pay up to a quarter of a banker's bonus in share options, bonds or other non-cash payments which attract a premium after five years.
Payments made after more than five years would qualify for a bigger discount when calculating the size of the bonus.
The rules, part of a wider capital regime for banks, allow bonuses of twice bankers' salary if shareholders agree.
They represent the toughest bonus regime anywhere in the world.
The cap will be introduced despite objections from Britain.
The next step, an endorsement by EU states, is a formality.
The new rules threaten Britain's financial industry the most and raise the risk that some top bankers could relocate to financial centres outside the European Union.
The rules are also a setback for European banks, which had long argued that the curbs would put them at a disadvantage to US rivals.
"If you want to restrict bonuses we should do it on a global level," Christian Clausen, president of the European Banking Federation lobby group, said.