Only the most junior staff at Lloyds Banking Group will receive bonuses this year, the government has confirmed.
Treasury Minister Stephen Timms said that bank staff "earning an average of £20,000" would receive payments.
The government is to insure £260bn of the bank's toxic loans and now has a 65% stake in Lloyds.
The Conservatives said the guarantee for Lloyds' toxic assets was proof that the government's first banking bail-out, announced in October, had failed.
Shadow treasury chief secretary Philip Hammond said: "The test of it will be whether credit actually begins to flow again through our economy."
Banking stocks took a further hit in Monday trading although Lloyds shares stabilised in afternoon trade, closing up 4% following a 10% fall earlier.
Shares in Barclays closed down 5.25% amid talk that it would also have to take part in the government's scheme to insure risky assets against further losses.
RBS closed 4% lower. Last month, it said it would put £325bn of toxic assets into the scheme.
Mr Timms confirmed that only junior Lloyds staff would receive bonuses in a statement to the House of Commons.
The average bonus to be paid would be "less than £1,000", he added.
ASSET PROTECTION SCHEME
Taxpayers underwrite banks' bad debts
Essentially an insurance scheme
Banks pay a fee to take part - Lloyds will pay £15.6bn
Banks are liable for initial losses, similar to paying the excess on an insurance claim, and then for 10% of further losses
Mr Timms said that Lloyds signing up to the Banking Asset Protection Scheme would "ensure financial stability, safeguard the interests of the taxpayer and support the real economy by increasing lending".
Conservative MP John Redwood questioned how the business plan would account for any losses made by Lloyds in 2009.
Mr Timms replied: "Of course there is some uncertainty about what this arrangement is going to cost over time. The uncertainty is the reason this arrangement is necessary because that has been preventing Lloyds lending up until now."
Liberal Democrat treasury spokesman, Vince Cable, said Lloyds was in effect a nationalised bank and there was no justification for paying any bonuses.
Lloyds had earlier said that staff who received bonuses would be those earning on average £17,000.
It has insisted that executive directors will forgo their bonuses, and other senior staff will have theirs deferred until at least 2010 - with the possibility that these could be clawed back if performance misses targets.
Staff are graded in eight bands, and it is understood that employees within bands five to eight will receive bonuses in cash.
Lloyds said that most of these workers are employed in branches, and the average payout would be around £1,000.
The group added that the deal had been approved by UK Financial Investments, which manages the government's stake in financial institutions.
Unions have insisted that staff from the former Lloyds TSB deserve their bonuses as that side of the group remained in profit.
Lloyds Banking Group had to turn to the Treasury for help following its takeover of HBOS, which recently reported an annual loss of nearly £11bn.
The prime minister's spokesman has stressed that the merger was the banks' idea.
"As we have made clear consistently, the decision by Lloyds and HBOS to merge was a decision that they initiated," he said.
"They came to us in September because they needed changes in competition law in order to facilitate this merger."
Analysts welcomed the insurance deal with the government, but were surprised by the amount that the government's stake in the bank could have to rise.
"The guaranteed asset protection scheme looks to be very thorough, in terms of virtually eliminating the risk of full nationalisation... but also in terms of diluting the existing shareholders," said Bruno Paulson, analyst at Bernstein.
Lloyds will be responsible for the first £25bn of any losses from the toxic assets and a further 10% of any further losses.
The government will take on the other 90% and will be paid £15.6bn by Lloyds for doing so, although the payment will be in non-voting "B" shares.
The government's stake in Lloyds will rise from 43% to 65% if shareholders do not take up an offer to buy £4bn of the government's shares.
It would go up to 77% if the "B" shares were to be converted into ordinary shares.
The fact that Lloyds' bosses Sir Victor Blank and Eric Daniels did not want state ownership to go over 50% made the question of whether they should remain at the helm of the bank ferociously complicated, according to the BBC's business editor Robert Peston.
"For the original shareholders of Lloyds TSB, the takeover of HBOS has been an almost unmitigated disaster," our correspondent said.
"Right now, the salient fact about the deal is that it hobbled Lloyds - because of HBOS's massive losses on loans to companies and potentially big losses on its massive exposure to the mortgage market."