The extraordinarily intervention, which has sparked fears that shareholder interests will once again be subordinated to the perceived interests of the French state, caused more than FFr15bn (pounds 1.5bn) to be wiped off the value of the shares of France's leading banks. It was sparked by last week's move by Societe Generale to sweeten the terms of its $21bn (pounds 13bn) merger with Paribas in a final effort to thwart the hostile counter bid for both banks from BNP.
Regulatory clearance for the raised SocGen offer has been withheld by the French banking regulator, the Comite des Etablissements de Credit and des Entreprises d'Investissement (CECI), which Mr Trichet chairs, on the grounds that it raises a number of questions, "particularly from a prudential angle".
In a statement explaining its decision yesterday, the committee said that neither the original SocGen-Paribas deal struck in February nor the hostile counterbid that BNP launched in March were " immune from posing questions regarding the healthy functioning of the banking system".
Mr Trichet, it said, was seeking to bring the chairmen of the banks together for a "working meeting as soon as possible, with a completely open mind, without preconditions, and with the sole purpose of finding a solution, different from those proposed so far, and presented jointly in a combined report from the three banks".
Yesterday's move was seen as a victory for BNP's chairman Michel Pebereau whose main concern throughout the battle has been to ensure that the bank was not left out in the cold by developments. Mr Pebereau had previously been rebuffed by the French government in attempts to takeover Credit Lyonnais as well as by both SocGen and Paribas.
The wording of yesterday's statement makes it clear that the Bank of France expects BNP to be part of any deal. Analysts said that points in the direction of either a modified version of the so-called SBP merger deal proposed by Mr Pebereau but structured in a way that the chairmen of SocGen and Paribas will not lose face, or a straightforward retail bank merger between SocGen and BNP, leaving Paribas out in the cold.
Bankers said Mr Trichet had been looking for a pretext to intervene for some time. The move nevertheless caught investors unawares, triggering sharp falls in the shares. Societe Generale, which is being temporarily suspended from the main Paris stock market index the CAC-40, fell 12.9 euros to 176.1. Paribas fell 7.5 euros to 110.5. BNP slid three euros to 83.
Of particular concern to investors is the fact that the regulator says it is seeking "a consensual solution" taking account of "the moral and financial interests of each of the financial institutions concerned". This was seen as a signal that shareholder value would now take a back seat in negotiations. One embittered advisor said: "It looks like were headed back to the smoked fill room: that in the long-term would probably do more damage to the position of the French financial market and the banks than any uncertainty caused by the bid battle."Reuse content