The ministers were sharply divided, with Britain and Sweden seeking freedom to impose tougher capital requirements than under Basel while the Franco-German bloc wants all 27 EU nations to follow the same standards for more than 8000 banks.
Osborne, whose country is home to Europe's biggest financial centre, told his colleagues during the televised debate that he was "not prepared to say something that is going to make me look like an idiot five minutes later".
German Finance Minister Wolfgang Schaeuble had voiced concern that the EU may never reach an agreement if a deal was not found, warning that such an outcome would be "disastrous".
Paris and Berlin want a "maximum harmonisation" of the rules, fearing that allowing nations to set higher thresholds would spark a race for the biggest reserves that would divert funds away from investments and lending.
The fraught discussion came in the midst of concerns about the health of the Spanish banking sector.
- AAP