Finance ministers from the G20 group of developed and emerging nations will meet in London today to try to reach agreement on a set of rules limiting the amount bankers can earn.
The potentially radical reforms would be the first time that countries have acted together to put a cap on pay in the banking sector.
Sentiment is hardening over the bonus culture, which some have blamed for fuelling the financial crisis by rewarding excessive risk taking.
Chancellor Alistair Darling told the CBI in Scotland last night that a bonus “shouldn’t be guaranteed, it should be earned”.
Yesterday, Gordon Brown, French President Nicolas Sarkozy and German Chancellor Angela Merkel said in a joint letter that the G20 group must adopt “binding rules” to regulate bank behaviour.
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They said: “We should explore ways to limit total variable remuneration in a bank either to a certain proportion of total compensation or the bank’s revenues and/or profits.”
“Our citizens are deeply shocked at the revival of reprehensible practices, despite taxpayers’ money having been mobilised to support the financial sector at the height of the crisis,” the letter said.
“The abatement of financial tensions has led some financial institutions to imagine they can return to the same modes of action prevalent before the crisis. This is not an option.”
While the UK has lined up with France and Germany to call for a new regime on bankers’ pay, cracks are likely to appear between the finance ministers attending the two-day event in London, which comes before a full gathering of G20 leaders in Pittsburgh this month.
Mr Darling told the CBI that countries must work together, saying international co-operation was needed to “prevent banks playing one country off against another”.
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But America is set to resist a detailed rule book on bankers’ pay. Timothy Geithner, the US Treasury Secretary, said that he did not expect any major announcements to emerge from the London talks.
Britain has also backed away from some of the proposals on the table, such as Mr Sarkozy’s call for an absolute cap on bonuses.
The G20 finance ministers will also debate whether the global economy needs a continuing boost.
Friction is mounting over when to scale down stimulus efforts as signs of recovery emerge.
Japan, France and Germany officially out of recession and may push for the brakes to be put on spending to cut debt.
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Both the UK and US have warned that the billions of pounds pumped into the financial system by governments around the world are starting to have a positive impact and should not be cut off too early.