A global survey of banking staff has revealed the pay of London bankers is the lowest of the major global financial centres, despite being at the top of the league table just 12 months ago.
Financial head-hunters Napier Scott Search said today the average pay and bonus package for a London banker had plummeted 62 per cent compared to this time last year.
But despite protest groups welcoming the announcement, parts of the industry voiced concerns a rapid decrease in pay and increase in regulation will cause financial institutions to relocate elsewhere.
The survey of 4,000 banking staff found bankers' salaries had dropped by an average of 55 per cent around the world.
The Middle East banking sector had fared the best, with salaries dropping by just ten per cent, but the drop in UK salaries was the biggest reduction in the eight-year history of Napier Scott's annual survey.
Shaun Springer, chief executive of Napier Scott Search, said London's reversal in fortunes was a "great surprise".
"This is encouraging, however, as it illustrates that London is taking the global financial crisis seriously and is responding by introducing more conservative remuneration packages," he said.
With bonuses making up almost two thirds of a banker's pay packet, a managing director in a London financial firm can now expect to be making £575,000 a year, compared to £695,000 in the US.
Mr Springer added: "This is an enormous polarisation between the City and Wall Street and given the current political climate in the United States, it will come as a very unpleasant surprise to the Obama administration, which is trying to rein in bankers' packages."
Protest groups involved in last week's demonstrations in central London also welcomed the news and said it was time bankers stopped being rewarded for making mistakes.
Spokeswoman for G20 Meltdown, the coordinating group behind many of last week's protests, Marina Pepper, said: "If the bankers are finally coming to realise they are living on a different planet from the rest of us that is a good thing. It is a reflection of the cut in their bonuses because they have not made their money.
"We do not object to bankers, but we do reject a capitalist system that puts the greed of a minority above the needs of the many. The manufacturing and movement of money has become a huge industry and it's causing enormous deprivation in this country and abroad."
But Mr Springer suggested the findings could indicate a worrying trend where some of the most promising and profitable companies go abroad in order to avoid regulation.
He said: "The City has already lost a great deal of talent in the past 12 months and we must not lose sight of the fact that it took 30 years for it to reach a position of financial supremacy and this status could be undone in a tenth of that time."
Spokesman for the British Bankers' Association Brian Mairs also added huge salaries and bonuses were not respresentative of the industry as a whole.
He said: "The topline findings are interesting but should be kept in perspective: for one thing, it is hardly news that performance related bonuses should fall in a downturn. For another, it should be remembered that only a very small proportion of bank staff receive anything like the headline-grabbing pay packages we often read about.
"But more importantly than all of that, it would be wrong to assume that money is the sole motivator for people working in the City. Helping people and businesses to reach their financial goals can be an enormously rewarding career."