The European Union will seek a global deal on clawing back or cancelling bankers’ bonuses at the G20 summit in Pittsburgh next week after agreement among the 27 European leaders last night.

Supervisory bodies should be given the power to “reduce compensations” for bankers if their bank performs badly, while “the major part” of bonuses should be deferred over time and “could be cancelled” in the light of poor outcomes, the EU leaders agreed at a pre-G20 summit in Brussels.

The leaders agreed a united front on bankers’ bonuses after Nicolas Sarkozy of France relaxed his call for a ceiling on bonuses in return for the tough-sounding general threat of bonus cancellation “in case of a negative development in the bank’s performance.” What this means in detail has yet to be thrashed out.

“The bonus bubble bursts tonight,” said Fredrik Reinfeldt, the Swedish Prime Minister and current holder of the EU presidency. “We particularly want to focus on the link between performance and compensation.”

Gordon Brown set out plans at the meeting to turn the Group of 20 richest nations into a new institution of global economic governance to try to prevent crashes in the financial system. “I believe we will be able to agree on the structure of how the bonuses should be examined in the future. I am confident that at Pittsburgh there is a common will to achieve action on something that has angered the populations of almost every country,” he said. “There is no going back to the bonuses of the past.”

Mr Brown told fellow EU heads of state that he wanted Europe, the US and the main emerging economies to take responsibility for setting up a “global compact” to oversee economic regulation and close the kind of loopholes that led to the financial crisis. He said that a reformed International Monetary Fund should provide the underlying analysis to the G20 to ensure that all countries shared the same broad principles in economic governance.

The Basel Committee on Banking Supervision, central bankers and regulators from around the world yesterday called for more power to intervene in failing banks. The regulators want to be able to force banks’ counterparties to continue trading with bust institutions to stop market-wide liquidity freezes.

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