Outlook: The way to end this French bank farce

THE FRENCH may have ceded control of their currency to a bunch of foreigners, but they just cannot let go of their banks. The upshot of this France fort policy as applied to the financial services industry is that long-running farce known as the BNP/SocGen/Paribas bid battle, now in its sixth great month.

Jean-Claude Trichet, the governor of the Bank of France, is supposed to pronounce today on the outcome of the tussle, but given the French love of complexity for its own sake, anyone hoping that this might actually be the end of the affair will surely be profoundly disappointed.

The story so far. Banque Nationale de Paris has won control of Paribas, the investment bank it did not want, but has failed to win a clear majority of Societe Generale. This is where it starts to get complicated. Despite having secured no more than 31.5 per cent of voting rights, Michel Pebereau, the indefatigable chairman of BNP, still argues that Soc Gen is in the bag. He claims that under French law this is enough for BNP to be able to call a shareholder meeting, force through a resolution to kick out the SocGen board and agree to merge the bank's operations with those of BNP. He would still like his opposite number at SocGen, Daniel Bouton, to come willingly. But if Mr Bouton does not accept that he has been beaten, tant pis, we'll do it the hard way.

Not surprisingly, Mr Bouton takes the rather old fashioned view that only 50.01 per cent constitutes control, and thus M Pebereau should be compelled to let the bid lapse and hand back the shares he has secured.

Enter the governor. Mr Bouton is counting on Mr Trichet to back his interpretation of what passes for French takeover rules so he can get on unmolested with the job of picking up the pieces after the failure of his attempt to merge with Paribas. Still with the plot?

BNP, on the other hand, would like the governor to save it the hassle of having to go through all these tiresome procedural hoops and just give it the go-ahead to take SocGen over anyway.

So what should Mr Trichet do? If he does nothing, there will be yet more months of wrangling as BNP seeks to force its unwanted attentions on SocGen by the back door. Mr Trichet could tweak the rules so that BNP can rebid for SocGen and win. But that is hardly an ideal solution, either.

When Dominique Strauss-Kahn, the French finance minister, blessed BNP's three-way merger proposal, he surely did not envisage the mess that has resulted. Since it was his refusal to entertain BNP's proposal to merge with Credit Lyonnais, coupled with the French government's determination not to allow foreign banks into France, which forced BNP's hand, he could end this all in very quick and easy fashion by rescinding that ban. He should grant SocGen and BNP the freedom to chose their potential partners whichever nationality they happen to be, rather than just fishing in this incestuous French pool.

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