The UK has withdrawn a challenge to a European Union (EU) legislation that caps bankers' bonuses, with Chancellor George Osborne conceding that the move was now “unlikely to succeed,” according to reports. The announcement comes a day after the European Court of Justice's advocate general issued a non-binding legal opinion that the challenge was invalid

The EU legislation will restrict bankers' bonuses to 100 percent of their pay, or 200 percent with shareholder approval. The legislation aims to prevent bankers from taking excessive risks of the kind that led to the 2008 financial crisis, and dealt a shattering blow to most major economies around the globe. The UK had challenged the law on six counts, including an argument that the cap actually undermined the stability of financial institutions, as it would force them to raise salaries, which could not be lowered in times of financial difficulty.

“I'm not going to spend taxpayers' money on a legal challenge now unlikely to succeed," Osborne said, according to BBC.

“The fact remains these are badly designed rules that are pushing up bankers' pay not reducing it. These rules may be legal but they are entirely self-defeating, so we need to find another way to end rewards for failure in our banks," he added, and outlined plans to change the way that bankers are paid, with a view to reducing incentives for taking major risks that might imperil the stability of financial institutions, as happened in 2008.

The UK's decision to abandon its challenge is the third defeat that Osborne has suffered over financial regulations at the hands of the European Court of Justice. Legal actions over proposed short-selling curbs and a proposed financial transaction tax were similarly dismissed by the court, according to the Financial Times

In a letter to Bank Of England Governor Mark Carney, Osborne suggested a regime whereby bankers' salaries, as well as their bonuses, could be retrospectively clawed back when errors or serious wrongdoings were found to have taken place, according to The Guardian.

The UK has the largest financial sector in Europe, and its financial hub, the City of London, houses the European headquarters of several of the world's largest banks, including Citigroup and HSBC.

In 2008, the UK government was forced to launch an $850 billion rescue package for some of the nation's banks that had been exposed to the factors that caused the worldwide financial crisis. Royal Bank Of Scotland and Lloyds Bank were among those to receive billions in government bailout funds. Although considered to be largely successful, the UK's bank bailout was also hugely unpopular with voters, who ousted the Gordon Brown-led Labour government in 2010.

The subsequent Conservative Party-led administration has had to walk a fine line between placating voters angered by bankers' excesses, and reassuring many of its major financial supporters from the world of high finance.