Under existing EU rules up to half of a bonus can be paid in cash, with the rest in shares that the employee can cash in over several years.
The new law allows other instruments like bonds to be used for the deferred portion and on Monday the European Banking Authority (EBA) proposed conditions for their use, such as when they must be written down if a bank gets into trouble.
"Instruments should provide incentives for staff to act in the long-term interest of the institution," the EBA said.
If bonds known as contingent capital or CoCos, a form of hybrid debt, are used they must be written down if a bank's total tier one capital falls below 8.5 percent of risk-weighted assets, it said.
Lower quality bonds would have an even higher wipe-out "trigger" of around 10.5 percent to help bring a bank's capital level back up to minimum levels and shield taxpayers from having to bailout out lenders, as occurred in the financial crisis.
The watchdog is also examining whether just one universal trigger - when a bank's core, top quality capital falls below the 7 percent minimum - would be simpler.