Labour plans to refer banks to competition authorities

Business Secretary Vince Cable would not be drawn on whether the government should reject any attempt by RBS to exceed the EU bonus cap but urged the bank to "show restraint", during an interview with ITV News.

Read: BoE Governor says UK a 'hard touch' on bankers' pay

He told Deputy Political Editor Chris Ship that the bank, which is 81% owned by the taxpayer, had not so far come forward with any propositions on bankers' bonuses.

Under EU laws, a bonus awarded to a banker that is over double their annual salary has to be approved by shareholders.

As Chancellor, Mr Osborne is effectively the bank's main shareholder.

Read: Banks, bonuses and the Big Five

Bank of England Governor Mark Carney said the UK already had a "hard touch" regime in relation to bankers' pay and criticised the EU cap on bonuses.

Mr Carney said the cap would partly reverse the changes that have been made to be able to recover bonuses from bankers.

He also denied the suggestion that regulators had "dropped the ball" over bankers' pay.

Read: Banks, bonuses and the Big Five

ITV News Deputy Political Editor Chris Ship has tweeted:

Bank of England Governor Mark Carney said that he "absolutely" agreed with the Parliamentary Commission's comments on the EU bonus cap that concluded: "We're not convinced that a crude bonus cap is the right instrument for controlling pay."

He also said that he had "no reason to disagree" with comments from the Independent Commission on Banking (ICB) that capping market share and balance sheet size "would not result in substantial improvements to competition in retail banking in the UK."

Read: Banks, bonuses and the Big Five

Cash bonuses at RBS will be limited to £2,000 next year, Prime Minister David Cameron has told MPs.

As George Osborne claimed that EU rules on bankers' pay would lead to a "Fred Goodwin-style situation", Unite said the Chancellor "must not rubber stamp the corporate greed" at RBS, as the majority taxpayer-owned bank reportedly seeks to double its cap for bonuses to senior staff.

Read: How the 'Big Five' bank bonuses compare

In a speech warning of the need for EU reform, Chancellor George Osborne said that EU rules on bankers' pay would lead to a "Fred Goodwin-style situation" in which money would not be recoverable

"These European rules will not lead to bankers being paid less," he said. "What they will lead to is a Fred Goodwin-style situation where you will not be able to get money back off bankers when things go wrong."

"That is precisely what we have been trying to get away from in Britain," the Chancellor added.

Read: Osborne: EU must reform or face economic decline