The government has outlawed bonuses for executives at taxpayer-supported banks, just as Lloyds and RBS are poised to return to the private sector.
The new rule, to take effect from July 1, was unveiled yesterday as regulators flexed their muscles again on the financial industry.
Bankers face clawback of bonuses stretching back ten years if misconduct comes to light, under the new remuneration rules.
The Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) said their latest tweaks to banking accountability aimed "to discourage irresponsible risk-taking and short-termism and to encourage more effective risk management".
The new rules apply to banks, building societies, and PRA-designated investment firms, including UK branches of non-European firms.
Bonuses will now be deferred for seven years for senior managers and three to five years for risk managers or "material risk-takers", and bonus clawback will have a potential three-year extension to ten years "where a firm or regulatory authorities have commenced inquiries into potential material failures".
There is also a new prohibition on any form of variable reward for non-executives, and the explicit rule that "no variable pay including all discretionary payments should be paid to the management of a firm in receipt of taxpayer support".
The clawback and deferral rules will apply to variable remuneration awarded for performance periods beginning on or after 1 January 2016, while other requirements will apply from 1 July.
Martin Wheatley, chief executive of the Financial Conduct Authority, said: "Today's rules are part of a wider package that is being announced over the summer to embed an accountable culture in the City.
"This is a crucial step to rebuild public trust in financial services, and allows firms and regulators to build long term decision making and effective risk management into people's pay packets."
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