Bank chiefs have warned that a new European cap on bonuses could trigger the flight of top earners to New York or Hong Kong.
The European parliament this week agreed to limit bankers' bonuses to no more than the amount they receive as salaries, alongside increased capital requirements.
The rules will be subject to a vote by European national parliaments, but could come into effect as soon as next year.
Bonuses will be capped at the same levels as salary, though they can be doubled through a shareholder vote.
The measure is intended to "make sure that pay practices do not lead to excessive risk-taking", the European Parliament said in a statement.
However, the move could damage European banks' ability to retain the best staff, said Séverin Cabbanes, the deputy chief executive of Société Générale. "There are real risks that the best talent will move out of Europe," he said.
Bank pay in Europe will come under further scrutiny this weekend when Switzerland votes on a referendum that would give shareholders a binding vote on executive pay.
Bankers' multimillion-dollar salaries have provoked huge controversy in the wake of the global financial crisis, with a consensus that banks' bonus practices added fuel to the risk-taking that brought about the near-collapse of the global economy in 2009.
Rescue measures by western governments have forced taxpayers to shoulder the costs of supporting crippled lenders, sparking a subsequent debt crisis across a number of countries in the EU.
The European parliament's measure will also force banks to provide country-by-country reporting of profits made, taxes paid and subsidies received by next year, a measure designed to prevent tax evasion.
The bonus cap added to the uncertainty over how quickly Europe's financial sector would recover from the crisis of the past few years, said Michael Tomalin, the chief executive of National Bank of Abu Dhabi.
"One of the things that worries me is we have got compensation limits coming in in Europe now," he said.
Other financial centres such as New York, Singapore and Hong Kong may now appear relatively more competitive to bank staff, Mr Tomalin added, asking: "Won't that make matters in Europe even worse?"
The agreement had been "hard won" but reflected a "well balanced" compromise, said Michael Noonan, the Irish finance minister, in a statement announcing the breakthrough deal.
"During the financial crisis, European taxpayers had to recapitalise banks. This overhaul of EU banking rules will make sure that banks in the future have enough capital, both in terms of quality and quantity, to withstand shocks," he said. "This will ensure that taxpayers across Europe are protected into the future."
For European banks seeking to grow their business in the Middle East, there are questions about how easily staff positions will be filled.
"It's a concern," said one regional bank chief, who asked not to be identified.
The impact could be seen in the UAE, where the Dubai International Financial Centre (DIFC) reported a 16 per cent rise in the number of employees working there last year. Several European financial services firms were among those setting up, the DIFC said in September as the number of companies based in the free zone increased by 6 per cent in the first half of last year. In the third quarter of last year, the DIFC said that 36 per cent of registered companies were from Europe, 11 per cent from Asia, 16 per cent from North America and 26 per cent from the Middle East.
While some lenders trimmed staff in the Arabian Gulf as mergers and acquisitions slowed in the region in the wake of the 2009 financial crisis, a return of activity has encouraged banks to hire again.
Nomura Holdings, Japan's largest investment bank, plans to revamp its Middle Eastern operations after losing several top executives in the past year, its regional head told Reuters.
However, though losing talent in a country was unfortunate, Europe had been dealing with its bankers going overseas for years, the banker said.
"The brain drain didn't start yesterday," the banker said, adding that thousands of bankers from Europe were already working in London.
But the policy is already setting the scene for a political showdown in the United Kingdom, where the London mayor Boris Johnson has lashed out at the EU measure.
"People will wonder why we stay in the EU if it persists in such transparently self-defeating policies," Mr Johnson said in a statement carried by Reuters. "Brussels cannot control the global market for banking talent, Brussels cannot set pay for bankers around the world."
The measure would likely shunt bank staff to Zurich, Singapore and New York at the EU's expense, Mr Johnson said.
"This is possibly the most deluded measure to come from Europe since Diocletian tried to fix the price of groceries across the Roman empire," he added.