The fate of two of France's biggest banks, Banque Nationale de Paris (BNP) and the Societe Generale (SocGen) was to be decided last night at a meeting of bank regulators presided over by Mr Jean-Claude Trichet, the governor of the French central bank.
The verdict of the 11-man Committee of Credit Establishments and Investment Enterprises (CECEI) is meant to end the longest and most complex hostile takeover battle in French history.
Over the past six months, BNP prevented the friendly merger of SocGen with Paribas investment bank and snatched 65 per cent of Paribas shares. BNP's chairman, Mr Michel Pebereau wanted to merge all three banks, creating SBP, which would be the first bank in the world with $1 trillion (€955 billion) in assets.
But BNP's €18 billion (£14.2 billion) bid for SocGen was inconclusive, leaving it with 37.15 per cent of SocGen shares and only 31.8 per cent of its voting rights. The CECEI must approve all transfers involving more than 10 per cent of a French bank's capital and the committee has to either endorse BNP's minority stake in SocGen or void it.
SocGen's chairman, Mr Daniel Bouton, is fighting to preserve the independence of his bank. SocGen's 58,000 staff - who hold 12 per cent of the bank's shares - also oppose the takeover bid by BNP.
If Mr Pebereau wins, SocGen employees fear mass firings. This week they picketed BNP and Banque de France outlets in several French cities.
Yesterday, most of SocGen's branches were closed as staff went on strike, and hundreds of SocGen employees demonstrated in the street outside Mr Trichet's office carrying a mock gallows for Messrs Pebereau and Trichet.
Mr Trichet and his 10 colleagues on the CECEI had three choices last night. If they force the BNP to return its SocGen shares, the whole six-month mess will have ended with a merger that no one wanted (BNP-Paribas) and SocGen could be vulnerable to a foreign predator - a situation which French authorities sought to avoid at any cost.
If, on the other hand, BNP is allowed to keep its stake in SocGen, the battle will continue as BNP tries to gobble up more SocGen shares.
Mr Trichet would be criticised for allowing Mr Pebereau to take over a rival bank with less than a third of its voting rights in pocket.
The third possible solution is a compromise which Mr Trichet has worked hard to achieve. But the banks were still far apart when last night's meeting was convened. Their respective positions showed just how little each was willing to give.
BNP said it might allow SocGen to remain legally independent for two years, during which time it would be granted seats on the BNP-Paribas board.
SocGen was willing to consider some industrial co-operation with BNP and cross-shareholdings on a small scale, but insisted that there could be no question of creating the SBP mega-bank.
Mr Trichet knows that his own future may be decided in the banking battle.
Under a compromise worked out last year, he is supposed to succeed Mr Wim Duisenberg as president of the European Central Bank in 2002.
If Mr Trichet is seen to bungle the SocGen-BNP battle, it will spoil his chances at the ECB.
