David Cameron has told MPs the Government will limit Royal Bank of Scotland's (RBS) cash bonuses to £2,000 for the fourth year in a row.
At Prime Minister's Questions in the Commons, he also said he would reject any proposal by the part-nationalised lender to increase its overall pay and bonus bill.
Mr Cameron was speaking as the Government came under pressure to block an expected move by RBS to double the amount it is allowed to pay out in bonuses from 2014.
The bank, which will next month confirm its 2013 bonus arrangements, is in talks on invoking a new EU rule in 12 months' time which would allow it to pay out up to twice an employee's salary - providing shareholders approve it.
Crucially, Mr Cameron did not mention share award bonus levels when Labour leader Ed Miliband requested the Government reject any bid by the bank to raise its bonus cap this year.
Ed Miliband sees political capital in targeting bank bonuses Labour, which has tabled an opposition day motion to be debated today, argues it would be wrong to allow a loss-making, part-nationalised lender to pay such rewards at a time when the country was suffering a cost of living crisis.
The PM said: "We will continue with our plans for RBS that have seen bonuses come down by 85%, that has seen the bonus pool at one third of the level that it was under Labour."
Under the EU cap, bonuses of more than 100% of basic salary must be approved by shareholders - in RBS's case, the British taxpayer, represented by the Chancellor.
George Osborne is challenging the cap in the courts, arguing it would not lead to bankers receiving less money.
He warned on Wednesday that financial institutions could be expected to respond by paying higher basic salaries, which he said would be more difficult to claw back if things went wrong.
Mr Osborne is in a difficult position in that while he tries to protect the City, he does not want to damage RBS through the loss of key personnel to better-paying rivals.
He is also mindful of Labour's accusation he is standing up for the wrong people in the wake of the financial crisis.
Barclays has already moved to support the bigger rewards under the new cap, but the bank received no state help at the height of the financial crisis and so the Government has no means to control its bonus scheme.
RBS boss Ross McEwan is planning further job cuts Sky News learned last week that the new chief executive of RBS, Ross McEwan, was drawing up cost-cutting plans to be announced next month that could result in thousands more job losses at the bank.
It has significantly slashed its investment banking operation - traditionally employing those on the biggest bonuses - since its bailout, under orders to concentrate more on day-to-day lending in an effort to boost the UK economy.
A new round of job losses should help bring down the bonus total.
Mr Miliband is to use a speech on Friday to demand the five biggest players on the high street, HSBC, RBS, Lloyds, Barclays and Santander, be forced to sell branches in a bid to stimulate improved competition.
The banks last year accounted for 90% of bank customers and total lending.
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