Bankers' bonuses needed to be tackled on an international basis and would be discussed at a meeting of the G20 finance ministers in early September, the Chancellor said today.

RBS's decision to award a bonus worth £2.3 million to Brian Hartzer, the new head of its retail branch network, including £1 million simply for staying with the bank for two years, ignited a fresh row over compensation for bankers this week.

Alistair Darling said that looking at the issue on a global level would address the financial services industry's concerns that paying lower bonuses would drive talent abroad.

"Banks need to be responsible about pay and bonuses and one of the things that is concerning me is that, when you tackle banks about this, they say that if you do something here, the Americans, the Swiss, or the French . . . will poach our people," the Chancellor told Radio 4's Today programme.

"This is something that I think we do need to tackle overall and it will be discusssed by the G20 finance ministers in September."

The Financial Services Authority last week published a pay code which some felt was insufficient to prevent banks from awarding dizzying sums to risk-taking bankers. It moved to outlaw guaranteed bonuses but failed to define the term, creating possible loopholes for banks to continue paying multi-million pound sums.

Mr Darling acknowledged that, while using legislation was a possible route for keeping bankers' pay and incentives in check, the FSA was "the obvious vehicle to use".

"Government has got a legitimate interest in making sure that you don't encourage behaviour that is damaging, but I think that is just one part of what we need to do to get the banking system going again," he said.

"There is a generalised concern. What we need to do is make sure that we introduce legislation that actually works, that actually helps and strengthens our banking system."

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