The national bank regulator stepped into France's battle of the banks yesterday under the watchful eye of the government as Societe Generale and Banque Nationale de Paris (BNP) both refused to admit defeat in their take-over showdown.

The banking commission, the CECEI, met to discuss what happens next after almost six months of acrimony in the bank sector ended in what most saw as a "worst case scenario" with neither BNP nor Societe Generale emerging as a clear victor.

The government was also keeping a close eye on developments and was "in contact" with the CECEI, government sources said, while insisting that the decision lay in the CECEI's hands.

BNP has ended up with a majority of Paribas, blocking plans for a two-way Paribas-SocGen merger, but has less than 40 percent of Societe Generale, which throws into doubt its plans for a three-way merger to create SBP, the world's largest bank in terms of assets.

BNP chairman, Mr Michel Pebereau yesterday reiterated that, with a claimed 39 per cent of Societe Generale, his bank could take control.

But the board of Societe Generale yesterday rejected BNP's plan for a giant three-way bank merger as "impossible" and said it was opposed to BNP holding a minority stake in the bank following a failed take-over bid.

Its chairman, Mr Daniel Bouton, told French radio that BNP should accept defeat and "leave SocGen alone to prosper and develop".

"Why insist on trying to craft a huge three-way bank which will involve considerable damage for all three establishments," Mr Bouton added.

The SocGen board said in a statement that 68.5 per cent of its shareholders had rejected BNP's bid, "rendering impossible the realisation of the SBP (three-way merger) plan". It also said that if BNP were allowed to remain as a "hostile" minority shareholder of one of its chief rivals, this would be a situation "without precedent in Europe".