Britain is taking legal action against the EU cap on bankers’ bonuses in a high-stakes political move to strike down the measure on the grounds that it hurts financial stability.

George Osborne, the UK chancellor, filed the case at the European Court of Justice last week, a step most banks thought would be too politically unpalatable for the Treasury to take.

A Treasury spokesperson said: “These latest EU rules on bonuses, rushed through without any assessment of their impact, will undermine all of this by pushing bankers’ fixed pay up rather than down, which will make banks themselves riskier rather than safer. In other words, as the chancellor has said, they may undermine responsibility in the banking system rather than promote it.”